The recent Court of Appeal decision in DA ROCHA-AFODU & ANOR v MORTGAGE EXPRESS LTD & ANOR (2014) refers to the removal and disposal of items from a mortgaged property by a mortgagee in possession and clarifies the mortgagee’s duties and position subject to individual mortgage terms and conditions.

The Court of Appeal held that a mortgagee had discharged its duty as an involuntary bailee of a mortgagor’s chattels, which had remained following his eviction, where it had followed a mortgage condition stipulating that it could dispose of remaining goods after seven days. Although the condition also permitted removal and storage of the chattels, the mortgagee had not been required to take each option incrementally.

In more detail

The borrower had appealed against the dismissal of his claim against the mortgagee in possession for conversion of personal chattels. The borrower had been required to deliver vacant possession to the mortgagee following an eviction notice. He left chattels in the property and attended on three occasions to remove them. A notice was placed on the property stating that any goods remaining would be disposed of after 14 days. When the borrower later attended the site to remove the chattels, more than 14 days after his eviction, it was discovered that subcontractors had disposed of the chattels. The relevant mortgage condition provided that if the borrower had left any goods or animals on the property, the mortgagee may remove them and store them elsewhere; dispose of them, or return them to their true owner if that was not the mortgagor. It stated that those steps would only be taken if the items were not removed within seven days of receiving notice at the borrower’s new address or, if no new address had been provided, within seven days of vacating the premises. It further stated that the mortgagee would have no charge over the goods and could not keep any income from their sale. The borrower had not provided an alternative address. The district judge dismissed the borrower’s claim, holding that the mortgagee had warned the borrower that it would dispose of his chattels by writing and by notice on the property which the borrower must have seen.

The borrower submitted that:

• the condition was incremental such that the mortgagee could only dispose of the chattels after having removed and stored them elsewhere
• the judge had erred in finding that the mortgagee had discharged its duty as an involuntary bailee as the standard expected was more demanding where the evictor expected that chattels would remain, and full compliance with the condition was required.

The Court of appeal held :

• The borrower’s interpretation produced absurd results. If guard dogs had been left at the property it might have been sensible to leave them there to continue to guard the property or, if the borrower had disappeared, to dispose of them quickly rather than moving them to expensive kennels where the expenses might not be recoverable. The correct approach was to consider the condition’s purpose, which was to grant the borrower a seven-day grace period to remove its chattels. That period either ran from the mortgagee giving notice, or from the borrower vacating the premises, as it was possible that the borrower might suffer adverse effects by incurring costs or losing his property. The conditions made it clear that there would be no lien for any storage charges or other costs, for which the mortgagee would have primary responsibility and would have to recover either against the borrower, or by adding to its security if equity remained in the property. The fact that the mortgagee may take those steps meant that it could choose what to do, and the steps did not need to be in strict sequential order. It was clear that the mortgagee could dispose of the chattels after giving the required notice without first removing or storing them.
• The judge had been entitled to take into account all the circumstances when determining whether the mortgagee had discharged its duty by doing all that was right and reasonable. The condition did not define the steps to be taken. It was a framework within which the duty of care was to operate. There had been no investigation at trial as to where, how long for and how expensive it would have been to store the chattels. The mortgagee had taken all the right and reasonable steps, having given the borrower access on several occasions, providing several warnings, offering a house-sitter and providing clear notices.

The borrower’s Appeal was therefore dismissed.