MORTGAGES

A Mortgage can be defined as a form of security for the repayment of a debt. The party who
grants the mortgage over his property is called the mortgagor. The lender to whom the mortgage
is granted is called the mortgagee. The debt that is secured by the mortgage instrument is
referred to as the mortgage debt.
It should be noted that a mortgage of land may be legal or equitable. Both registered and
unregistered land may be mortgaged.
GENERAL MATTERS
The attorney acting for the mortgagee (lender) must ensure that the title that is being taken as
security is a good title. He must make careful title searches and enquires when investigating the
title to a property which is being used as security.
Generally speaking, the mortgage is usually prepared by the Attorney acting for the mortgagee
(Lender).
Usually the lender will require a valuation before approving the mortgage loan.
MORTGAGE OF UNREGISTERED LAND
A legal mortgage of unregistered land is usually created by the conveyance of the mortgagor’s
fee simple estate to the mortgagee subject to the proviso that upon redemption (i.e. repayment of
the debt) the property will be reconveyed to the mortgagor.
This is the procedure in Jamaica. That is, by the actual transfer to the lender of the fee simple
interest in the land subject to a proviso for redemption that when all monies due under the
mortgage are repaid, the lender reconvey the mortgaged property to the borrower.
The Reconveyance is done by a Deed of Reconveyance. See Section 18 of the Conveyancing
Act.
MORTGAGE OF REGISTERED LAND
A mortgage of registered land is created by way of charge. An instrument or memorandum
charging the land must be prepared executed and registered. Under Section 103 of the
Registration of Titles Act a proprietor of any land under the Act may mortgage his property as
security for a loan
REGISTRATION PROCEDURE
1. The mortgage is usually prepared by the lender’s attorney at law and executed in duplicate
copies.
2. It is then sent to the Stamp Office to be stamped with the relevant stamp duty.
3. The stamped mortgage is lodged along with the Duplicate Certificate of Title and the relevant
registration fees at the National land agency
4. The mortgage is then registered on both the Original and Duplicate Certificate of Title.
What is the Effect of Registering the Mortgage?
A mortgage does not effect as a security until it is registered.

PART A: RIGHTS OF THE MORTGAGOR

Effectively, a Mortgagor has two rights of redemption of his property; a legal right and an
equitable right.
i. The legal right to redeem

This is the contractual right to redeem his property on the date specified in the mortgage
instrument.
ii. Equitable right to redeem

The equitable right to redeem arises in a situation where after the contractual date for repayment
has passed. The mortgagor is permitted to redeem his property on his satisfying the principal
borrowed, the interest on that principle and costs and giving proper notice to the mortgagee even
when the specified date had passed.
Equity of redemption describes the estate held by the mortgagor in the mortgaged property after
he has granted the mortgage. It is type of equitable estate held by the mortgagor in the property
that can be assigned or devised.

Effect of death of the mortgagor – ‘the equity of redemption’ will fall to his estate. And if he
dies intestate, will fall to those persons entitled under the Intestate Estates and Property Charges
Act.

PART C: RIGHTS OF THE MORTGAGEE

i. RIGHT TO SUE ON A PERSONAL COVENANT

Generally, the mortgagor will covenant to repay the loan on a certain date and to pay interest on
the loan at a certain date; alternatively, the loan may be stated to be repayable by instalments
falling due on a particular day of the month. As soon as the date has passed, the mortgagee may
sue on the covenant to recover the principal sum and any arrears of interest.
ii. RIGHT TO ENTER INTO POSSESSION
Section 109 of the Registration of Titles Act
Under this section the mortgagee has the right to enter into possession if the mortgagor defaults
on payments. The mortgagee may enter into possession by receiving the rent and profits of the
land. The objective of this is to use the rent and profits of the land to settle the mortgage debt,
however the duties may be deemed onerous and as such is not a popular method.
 iii. RIGHT TO APPOINT A RECIEVER
Section 125 of the Registration of Title Act
Under this section the mortgagee has the power to appoint a receiver of income of the property.
This option becomes exercisable similarly under the same circumstances as power of sale.
The receiver is entitled to collect all the income arising from the property on behalf of the
mortgagee and from the income pay out the interest owing to the mortgagee. The receiver is
deemed to be an agent of the mortgagor and as a result the mortgagor is responsible for the
defaults of the receiver and not the mortgagee.
iv. FORECLOSURE
The right to foreclosure arises where the entire interest of the mortgagor is transferred to the
mortgagee. The mortgagee has taken the property in full settlement of the debt and can no longer
sue to recover.
The right arises from Section 119 of the Registration of Titles Act where:
1. There is a default in payments
2. Default has continues for 6 months after payment was due

The mortgage property has been offered for sale at a public auction and the auctioneer has
withdrawn it on the basis that the reserved price had not been met
PROCEDURE ON FORECLOSURE
Mortgagee applies to the Registrar in writing for an Order for foreclosure. The application is
made by way of a statutory declaration. The application should outline the details and show
evidence of the entire process from default up until the application to foreclose.
1. The application must state that the mortgagor made default in his payment of principal
and or interest under the agreement the default has continued for more than six months
after the time stipulated.
2. A valid notice of intention of intention to sell by public auction which was served on the
mortgagor must be exhibited. The method of service must also be reflected and if
application, a copy of receipts if served by post.
3. The application must also reflect that the property has been offered for sale by public
auction. The advertisement must be exhibited
4. The amount of the highest bid received must be reflected in the auction.
5. A valid notice of intention to apply for foreclosure which was served on the mortgagor
must be exhibited. The method of service must also be reflected and if applicable, a copy
of receipts if served by post. Similarly, a valid notice of intention to apply for foreclosure
served on persons having subsequent interest in mortgaged land.
6. The current value of the land must also be stated
7. The costs required to satisfy the mortgage must be stated
 8. The Auctioneer’s Certificate must also be exhibited. It must state that:
a. He is a license auctioneer;
b. The mortgaged land was put up for sale at public auction in compliance with the
requirements of the RTA
c. The date on which the auction took place
d. The highest bid, if any, was insufficient to satisfy the sums owed.
9. The Duplicate Certificate of Title and Mortgage instrument must be exhibited.

After the application is submitted and approved, the registrar will order that it be advertised for 3
consecutive weeks at least once per week in a reputable newspaper. The advertisement must
offer the land for sale and appoint a time not less than one moth from the first advertisement.
After the time has passed, the Applicant must then lodge a final declaration exhibiting the
relevant section of the newspaper stating that no sufficient amount has been obtained by the sale
of land to satisfy the principal, interest and expenses of sale and foreclosure proceedings or no
offer sufficient to satisfy sums owing on mortgage has been made and that the mortgagor to date
of the declaration has not made any tender of an amount sufficient to satisfy the sums owing.
Should the registrar be so satisfied, he will issue an order of foreclosure.
The order of foreclosure is then taken to the TAJ for payment of Stamp Duty and Transfer Tax.
This in effect operates as an instrument of transfer. The foreclosure order is then returned the
registration along with the fee for registration

PART C (V): POWER OF SALE – Rights of the Mortgagee

The most commonly used remedy. Under Section 105 of the Registration of Titles Act, to
exercise this power, the Mortgagor must:
1. Be in default of the principal, interest or whatever else is due; or
2. Breach in performance of a covenant under the mortgage AND
3. The default must be continued for one month or any time stipulated by the Agreement

The mortgagee is required to give the mortgagor notice in writing to pay the money owed and
state that he now has an intention to sell the property.
The sale can be effected by two methods:
i. Auction; or
ii. Private treaty.
The mortgagee when exercising this right is under a duty to act honestly and in good faith and to
take all reasonable steps to ensure the property is sold at the true market value. The auction must
be transparent and there is a heavier burden placed on the mortgagee when selling to connected
persons.
The Mortgagor may sue for damages where he believes that the mortgagee did not take
reasonable steps to sell at the best price possible.
The mortgagor also may seek an injunction to restrain the mortgagee from exercising this power
but it must be found on reasonable grounds such as fraud, defects in the documents, the debt
being statute barred, disputes arising under the agreement (i.e. the amount) and the same
principles as would apply to any injunction.
CHECKLIST FROM STAGE OF DEFAULT THROUGH SALE OF PROPERTY

1. MORTGAGOR IN DEFAULT
2. NOTICE TO MORTGAGOR
3. PERIOD BETWEEN NOTICE AND EXERCISE OF POWER OF SALE
4. METHOD OF SALE
5. AFTER THE SALE – THE PROCEEDS

STEP (1): MORTGAGOR IN DEFAULT

i. Where the mortgagor is in default or payment of principle/interest/annuity or any part

thereof or is in breach of performance/observance of a covenant under the instrument
whether express or implied AND
ii. The default must be continued for one month or any time stipulated in the instrument.

STEP (2): NOTICE THE MORTGAGEE

i. Notice must be in writing stating that money is owing and must state that the mortgagee
is intending to exercise his power of sale.
ii. Notice may be served personally, left on a conspicuous place on the mortgaged land or
sent through registered mail to the address appearing in the Register Book. It is not
detrimental but is good practice to state the amount due in the notice.
 A clause in the mortgage instrument may dispense with the need for notice to be
sent: See: Diane Jobson v Capital and Credit Merchant Bank SCCA 113/2002

Diane Jobson v Capital and Credit Merchant Bank (supra)

It is possible for parties to the mortgage deed to modify the statutory requirements for notice.

The parties effected an instrument of mortgage. In so doing, they covenanted that:

“the powers of sale and of distress and of appointing a receiver and all ancillary powers
conferred on mortgagees by the Act should be conferred upon and be exercisable by the
mortgagee under the instrument without any notice or demand to or consent by the mortgagor
not only on the happening of the events mentioned in the said laws but also whenever the whole
or any part of the principal sum or the whole or any part of any monthly instalment of interest
should remain unpaid for thirty days after the dates hereinbefore covenanted for payment
thereof respectively or whenever there shall be any breach or non-observance or non-
performance of any covenant or condition herein contained or implied.”

The mortgagor breached the covenant to pay monthly instalments. Owing to this, the mortgagee
sought to exercise its statutory remedy; “a power of sale”. In seeking to do so, the mortgagee
sent to the mortgagor notice. The notice outlined the mortgagor’s the breach of the covenant, a
request for the mortgagor to remedy the breach and an intention of the mortgagee to act on its
power of sale if the breach is not remedied. The mortgagor did not receive the notice. The
mortgagee sold the property by auction.

The question before the court was whether the mortgagee was entitled to give to the mortgagor
notice of the breach of the covenant.

Decision. The statutory requirement for notice (of the Registration of Titles Act) is not
mandatory. Parties to a mortgage may contract out of them. The power of sale was a power
implied into the mortgage by virtue of the Act and the parties were at liberty to modify by
express declaration in the instrument.

Food for thought: Does the ability to modify only exist where the Act implies a term? Can an
express term be modified by the Deed?

STEP (3): PERIOD BETWEEN NOTICE AND EXERCISE OF POWER OF SALE

Generally speaking, a period of 1 month must elapse after the service of the notice. However, the
Mortgage instrument may stipulate any other such period.

STEP (4): METHOD OF SALE

The mortgaged the property may be sold in two separate ways:

(a) Auction; or
(b) Private Treaty

The practice in Jamaica is that a mortgagee must first put up the mortgaged property for sale at a
public auction and only if he is unsuccessful in disposing of it there, he can proceed to sell same
by private treaty. However this is merely best practice, and under Section 106 of the
Registration of Titles Act, it is not a legal requirement to do this.

The public auction is viewed as a very transparent process open to the public at large and
demonstrating an intention on the part of the mortgagee to obtain the best price reasonable.

PART D below goes into more detail.

STEP (5) AFTER THE SALE – THE PROCEEDS

As the mortgagee is seen of the surplus sale proceeds and the legislation requires the Mortgagee
to apply the purchase money arising from the sale of the Mortgaged property in the following
way: See: Section 107 of the Registration of Titles Act
 1) Pay the expenses of and incidental to sale and consequent of the default (includes stamp
duty, transfer tax, auctioneer’s cost and cost of valuation report)
2) Payment of any outstanding mortgage debt
3) Payment of subsequent mortgages in order of their respective priority
4) Return the surplus to the mortgagor

PART D: SALE BY MORTGAGEE TO PURCHASER

Even though the mortgagee is not the registered proprietor of the property, the Act affords the
ability to convey to and vest in the purchaser the fee simple interest in the property.
The transfer by the mortgagee to a purchaser is prepared in the name of the mortgagee and is
executed by the mortgagee. The prescribed form is the TPS 1.
The effect of the sale is that the purchaser gets title freed and discharged from all liability
regarding the existing mortgage and any subsequent mortgages but subject of course to any
mortgages or charges which have priority over the mortgage that is being realised.
Section 108 of the Registration of Titles Act
108. Upon the registration of any transfer signed by a mortgagee or annuitant, or his
transferees, for the purpose of such sale as aforesaid, the estate and interest of the
mortgagor or grantor in the land therein described at the time of the registration of the
mortgage or charge, or which he was then entitled or able to transfer or dispose of under
any power of appointment or disposition, or under any power herein contained, shall pass
to and vest in the purchaser, freed and discharged from all liability on account of such
mortgage or charge, and of any mortgage, charge or incumbrance, registered
subsequently thereto, excepting a lease to which the mortgagee or annuitant., or his
transferees, shall have consented in writing; and the purchaser when registered as the
proprietor shall be deemed a transferee of such land, and shall be entitled to receive a
certificate of title to the same.

PART D (1): PROCEDURE BY AUCTION

1. OBLIGATIONS OF THE ATTORNEY

The Attorney is to search the title and find out whether mortgagee registered on title, mortgage
could be inadvertently discharged.
The Attorney is also to look at the mortgage deed to ensure that the mortgagee’s power of sale is
exercised in conformity with the law: See above. (The exercise of the power and notice
requirements)
The Attorney should also request a valuation report.
2. THE RESERVE PRICE
The attorney is to calculate the reserve price and notify the auctioneer of same.
The reserve price is the price under which the auctioneer is not entitled to accept a bid for the
property. If the auctioneer does not obtain this reserve price, the auction sale will be deemed to
have been unsuccessful. The general practice among the mortgagees is to set the reserve price at
the actual market value of the property.
3. ADVERTISEMENT OF AUCTION
The advertisement must be adequate in the sense that the number of ads published in the
newspaper prior to holding of the auction (the market practice is to advertise on 4 occasions, one
week apart, prior to the auction).
The content of the advertisement is also important. It should describe the property adequately
with sufficient detail as to what the property consist of so as to attract potential bidders to the
auction.
Accurate information pertaining to the date, time and place of the auction should also be inserted
in the advertisement.
The objective behind advertising is to bring the property to the attention of persons who may
wish to buy, they encourage persons to come and make an offer.
4. INSTRUCTING THE AUCTIONEER
The attorney needs to instruct the auctioneer to proceed with the auction of the property. The
Attorney would need to provide the auctioneer with the following:
1. Particulars and conditions of sale – the attorney will need to draft these. They set out the
terms and conditions of the sale.
2. Valuation report of the property
3. Reserve price should be sent moments before the auction is conduct
The Terms of the Sale to the Purchaser
The terms and conditions of such sale does not provide for the mortgagee to give vacant
possession. Usually the mortgagee takes no responsibility to remedy any defects in the title to the
property. The clause relating to the state of the title must be carefully drafted.
5. CONDUCT OF THE AUCTION
6. AFTER THE SALE – (SEE STEP 5 AS MENTIONED ABOVE)
 DUTY OF CARE OWED BY THE MORTGAGEE
Question: In what circumstances could the court hold a mortgagee negligent in the exercise of
his power of sale?
It should be noted that a mortgagee is only a trustee of the proceeds of sale. He is NOT a trustee
for the power of sale itself as he is entitled to exercise his own interest.
Essentially, if he wishes to sell the property whilst the market is depressed, he is under no
obligation to wait until the market price rises. Whilst that will be in the best interest for the
Mortgagor, he does not owe that duty to the mortgagor.
As was discussed in Cuckmere Brick Co v Mutual Finance Ltd [1971] EWCA Civ 9:
“… Once the [power of sale] has accrued, the mortgagee is entitled to exercise it for his own
purposes whenever he chooses to do so. It matters not that the moment may be unpropitious and
that, by waiting, a higher price could be obtained. He has the right to realize his security by
turning it into money when he likes.”
“… there is nothing to prevent a mortgagee from accepting the best bid he can get at an auction,
even though the auction is badly attended and the bidding is exceptionally low. Provided none of
those adverse factors is due to any faults of the mortgagee, he can do as he likes.”
“… his only obligation to the mortgagor is not to cheat him”
“… both on principle and authority, a mortgagee in exercising his power of sale does owe a
duty to take reasonable precautions to obtain a true market value of the mortgaged property at
the date on which he decides to sell”. No doubt in deciding whether he has fallen short of that
duty, facts must be looked at broadly…”
In this case, the mortgagee was held liable in damages for negligence because in advertising the
property for sale, it carelessly omitted to mention that planning permission had been granted for
the erection of apartments on the mortgaged land and thus obtained a lower price than could have
been obtained.
This principle was also applied in Dreckett v Rapid Vulcanizing Co. Ltd [1988] 25 JLR 130
where the appellant mortgaged his land to the respondent company. The appellant fell into
arrears and the respondent responded in exercising his power of sale. The property was sold at
auction for $6400 and nine months later was sold resold for $14,400. The Appellant claimed that
that the respondent had been negligent in failing to ascertain the current value of the property at
the time of the initial sale.
The Appellant’s case failed as he failed to prove negligence on the part of the respondent in
ascertaining the market value. It was held that the Respondent was under no duty to do a
valuation of the property prior to auction but he has the right to accept to highest bid at auction
even if that auction was poorly attended.
“Equally, the mortgagee is not obliged to obtain an independent prior valuation to determine
the market value on the basis of which to fix a reserve price when the sale is by auction. He can
properly rely on the independent competitive biddings at auction to obtain the true market value,
and even if this is obtained through poor attendance at auction and/or exceptionally low bids, he
is not on that account per se liable to his mortgagor for breach of any duty to take reasonable
precautions to obtain the true market value.
Moreover, the mortgagee could say that he had taken the reasonable precautionary steps to
protect mortgagor by having an auction which has been conducted without impropriety”
CASE LAW ON DUTY OF CARE
Cuckmere Brick Company v Mutual Finance (supra)

The mortgagee sought to exercise its power of sale over the mortgage property. The mortgagee
sold the property for $44,000. The mortgagor brought an action against the mortgagee claiming
the land would have realized more than $44,000 but for the mortgagee’s default and failure to
take reasonable precautions in relation to the sale of the property. Two issues arose in this case
for our consideration. Firstly, whether the failure of the mortgagee to include the fact that the
property had been given planning permission (which would have increased the market value of
the property) resulted in a breach of its obligation to act in good faith. Secondly, whether putting
the property in the hands of reputed auctioneers and sales agents, meant that the mortgagee
discharged its duty to act in good faith.

Legal Principle:

1. The mortgagee was not a trustee of the power of sale for the mortgagor, and where there was a
conflict of interest as between their interests, he was entitled to give preference to his own over
those of the mortgagor, in particular in deciding the timing of the sale. In exercising the duty, the
mortgagee has a duty not only to act in good faith (which involves honesty and without
reckless disregard for the mortgagor’s interest) but also to take reasonable care to obtain
whatever was the true market value of the mortgaged property at the time he chooses to sell.

2. In discharging its duty, it is not sufficient for the mortgagee to contend that it had left the sale
in the hands of competent auctioneers. Where the mortgagee or its agents misdescribed the
property and that misdescription affected the value of the property, the mortgagee had breached
its duty to the mortgagor.

Dreckett v Rapid Vulcanizing Co. Ltd (supra)

This case dealt with how the mortgagee should act in exercising a power of sale. We have
already concluded that the mortgagee should act reasonably. However, this should be balanced
with the purpose of the security.
“the whole object of taking security for a loan is to enable the lender or mortgagee to recover
his money on the borrower’s default and that the object of the mortgage was to enable this to be
done speedily and at the mortgagee’s convenience”

“The mortgagee must use his best endeavours to obtain the true market value of the mortgaged
property at the date on which he decides to sell.”

Any advertisement which is released, disclosing the circumstances of the auctioned security must
state the “roots of the condition”. If the security is a duplex house, that must be stated in the
advertisement.

Tse Kwong Lam v Wong Chit Sen and Others [1983] 3 AER 54

The mortgagee sought to exercise its power of sale. This was to be done at public auction. The
mortgagee set a reserve price without consulting auctioneers or other estate agents. The
mortgagee did the relevant advertisements but in a limited time frame of 15 days and omitted to
allow inspection of the property or a full description of the property. The advert gave only the
bare fact that the property would be auctioned. At the auction, the mortgagee stated the reserve
price and the only bid came from his wife; at the reserve price. The mortgagor disputes the sale.

Legal Principle:

1. There was no inflexible rule that a mortgagee exercising his power of sale under a
mortgage could not sell to a company in which he had an interest. However, the mortgagee
and the company had to show that the sale was made in good faith and that the mortgagee had
taken reasonable precautions to obtain the best price reasonably obtainable at the time, namely
by taking expert advice as to the method of the sale, the steps of sale, the steps which ought
reasonably to be taken to make the sale a success and the amount of the reserve. The mortgagee
was not bound to postpone the sale in the hope of obtaining a better price of to adopt a piecemeal
method of sale which could only be carried out over a substantial period or at some risk of loss,
but sale by auction did not necessarily prove the validity of a transaction, since the price
obtainable at an auction which produced only one bid might be less than the market value.

2. While the company was not barred from purchasing the auctioned property, the close
relationship between the company and the mortgagee required that the mortgagee establish that
he had taken all reasonable steps to obtain the best price reasonably obtainable. In this case, the
mortgagee had not discharged that duty. The mortgagee could have consulted estate agents about
the method of sale and about the method of securing the best price. At the very least he could
have consulted an estate agent about the level of the reserve price. The auctioneer was not
informed of the reserve price until immediately before the auction and in evidence he very
properly declined to comment on the reserve because he had not valued the property.
Lloyd Sheckleford v Mount Atlas Estate Limited Civil Appeal No 148/2000

This case shows a circumstance in which the power was exercised, and the property has been
transferred.

Legal Issues:

1. The issue was whether the court could prevent the transfer from being registered in
circumstances where the mortgagee had exercised his power sale and the purchaser was a bona
fide purchaser for value who had paid in full. Forte P accepted the following submission from
Mr Vassell QC: the effect of the amendment of section 106 of the Registration of Titles Act is
that an injunction will not lie to restrain the completion of a sale of the mortgaged property to a
bona fide purchaser for value on the basis of a complaint by the mortgagor as to the regularity
or propriety of the sale. In so doing, the learned President rejected the submission of eminent
counsel Dr Lloyd Barnett to the effect that a purchaser from mortgagee only secures the full
protection of section 106 on registration of the transfer.

2. Importantly, his Lordship, in referring to the amendment to section 106 noted that the only
remedy against the mortgagee is damages but not an injunction. Before the amendment it was
possible to argue that injunctive relief was possible in the circumstances that arose in Mount
Alas but such an argument is difficult to make in light of the amendment to the section.

3. A bona fide purchaser who entered into a contract for sale with mortgagee who exercised his
power of sale was protected. When did the protection arise? The answer must be when the
contract was executed by both parties. The payment of money is not a necessary precondition for
there to be a valid contract between the mortgagee and the purchaser unless the contract
specifically says that unless a certain sum is paid on execution then the contract is not valid. In
the absence of a clause of this nature, non-payment of money does not put the contract at an end
or prevent it coming into being. Non-payment or late payment, at best, is a breach of contract
which gives rights to the mortgagee to terminate or sue for damages depending, of course, on the
terms of the contract. The mortgagee may ignore the breach and press ahead with sale.

PART D (2): PRIVATE TREATY

The duty to obtain is harder to discharge when selling by private treaty. Before entering into a
sale by private treaty, the following guidelines are suggested –
1. Obtain a valuation report indicating current market value and reflective of the mortgaged
property in its current state and condition;
2. Expose the property to open market by adequate advertising;
3. Listing with realtors;
4. Accurate advertising in a newspaper akin to one used by auctioneers, over a reasonable
period of time
Have regard to offers procured by the mortgagor or otherwise, prior to the entry of a binding
agreement for sale.

PART E: OPTIONS OPEN TO THE MORTGAGOR

In the event that the Court holds that the mortgagee failed to take reasonable steps to obtain the
best price for the property and sold at an undervalue, the mortgagee will be liable in damages to
the mortgagor, for the difference between what the property could have been sold for if
reasonable steps had been taken and the price for which the property was actually sold.

It is also open to the mortgagor to approach the court to seek an injunction to restrain the
mortgagee from exercising his power of sale.

JMMB Merchant Bank v Mahoe Bay Company Case No. 2013CD000146

Mr Finzi, the mortgagee entered into a mortgage with CCMB. The mortgage was secured by
Mahoe Bay Company. JMMB is the new mortgagee as it acquired the rights thereof from
CCMB. JMMB is seeking to exercise its power of sale because, as they understand it, Mr. Finzi
has failed to pay off all the loan. Mr. Finzi contends that he paid the sums into JMMB. JMMB
failed to apply the monies to pay off the mortgage sum, as he had instructed. Finzi contends that
this is also a breach of their fiduciary duty to him.

Legal Principles:

1. The general rule is that any mortgagor who wishes to restrain the mortgagee from
exercising his power of sale should pay the sum alleged by the mortgagee to be owed.
a. What does this mean? This means that there is a presumption that whatever
amount stated by the mortgagee as being outstanding is the monies that are to be
paid into court to certify the injunction. The prospects of a successful
counterclaim by the mortgagor does not restrain the mortgagee’s exercise of the
power of sale. Furthermore, a dispute as to sums owing to the mortgagee does not
prevent the exercise of the power of sale.
b. Please note that this is an equitable position. As Sykes J puts it, there may be
exceptions to this seeing that equity is not as rigid as the common law

2. An exception to the equitable principle above only in highly exceptional cases, based on
very special facts, such as the existence of a fiduciary relationship between mortgagor
and mortgagee or, perhaps, in cases of forgery. These exceptions are non-exhaustive.

3. There is no presumptive fiduciary relationship between a banker and client; unlike a

lawyer and client etc. This is because a lender and the debtor from the commencement of
the relationship have two different interests. Furthermore, a lender who holds security
thereby becoming a secured lender holds the power of sale for his purposes. It is not held
on trust in order to be exercised in a manner beneficial to the debtor.
Nunes v Jamaica Redevelopment Foundation (2019) JMCA Civ 20
The facts, for me, are not that important. For that reason, I’ll go straight into looking at the legal
principles. Before that, I have copied an example of the “operative part” of the mortgage deed.
Example of an Operative Clause
“the Guarantor HEREBY GUARANTEES to the Lender the repayment of and HEREBY
UNDERTAKES to pay to the Lender all principal, interest and other monies at any time payable
by the Borrower to the Lender limited to a maximum of ONE HUNDRED THOUSAND UNITED
STATES DOLLARS (US$100,000.00), on principal with interest at such rate or rates as are
applicable to the facility or facilities in respect of which a demand is made under this Guarantee
from the date of disbursement of the facility to the date of payment by the Guarantor.”
Re-examination of the circumstances in which a judge ought to grant an injunction to restrain a
mortgagee from exercising its power of sale. On this point, the case American Cyanamid is
instructive. The test remains the same, that is:
1. Was there a serious to be tried;
2. Would damages be an adequate remedy for the applicant; and
3. Did the balance of convenience favour the granting of the injunction?

A. Serious issue to be tried in point form

i. The court is not required to conduct a detailed revision of the case;
ii. This is a relatively low threshold. All that needs to be shown here is that the applicant’s
case is neither frivolous nor vexatious;
iii. Nunes met this test. The question of whether the debt was discharged and whether the
mortgagee was allowed to convert the debt under the Agreement were serious issues.

B. Whether damages would be an adequate remedy

a. There is a general presumption in the common law that damages is not an adequate
remedy in a case concerning land;
b. This presumption may be rebutted by statute; namely, Section 106 of the RoTA. “Statute
can override the usual common law considerations.” N/B. though Section 106 exists,
forgery and fraud, as grounds to eschew the exercise, still exists. “section 106 of the RTA
incorporates a bar to the grant of an interim injunction to restrain a mortgagee’s exercise
of the power of sale which is given by the section”;
c. A distinction was made between Global Trust and Sheckleford and Paul v VMBS.
Section 106 may only be activated when there is evidence that at the time of an
application for an interim injunction the respondent had in fact exercised the power of
sale by entering into an agreement to sell the property. (Sheckleford and VMBS).
However, where no such evidence exists, Section 106 may not be activated to absolutely
bar an interim injunction (Global Trust).
C. Is this an appropriate case for an injunction
a. Should the mortgagee be deprived of his security? Here we look at whether the validity
of the mortgage is being challenged. Look at forgery vs the lawful exercise of terms in
the mortgage.
___________________________
What the majority of cases in this area show that the mortgagee has approached the Court for an
injunction on a number of grounds fraud/defects in the security documents/mortgage debts being
statute barred/disputing amount being claimed to be owing.

The courts do not like to restrain the mortgagee in the exercise of his power of sale but they will
grant injunctions where the circumstances satisfy the principles enunciated in American
Cynamid. i.e.:

i. There is evidence that there is a serious issue to be tried

ii. On a balance of convenience, damages would not be an adequate remedy

Note however that the mortgagor must provide clear strong cogent evidence capable of belief in
relation to what he is alleging.

Mention must also be made to the fact that, in these matters, when granting injunctions, a general
rule is that the Court requires the mortgagor to pay into Court, the amount claimed to be owing
by the mortgagee. There are some exceptions to this rule.

Mosquito Cove v Mutual Society Security Bank Ltd (2010) JMCA Civ 32

“The only exception to the rule as formulated by Fisher & Lightwood, is where on the face of the
mortgage, the mortgagee’s claim is excessive...”

“While other or further exceptions to the rule are no doubt to be found in the books and will also
emerge in the future, it seems to me that the kinds of instances discussed in the foregoing
paragraphs suggest that the court will only sanction departures from the general rule in highly
exceptional cases, based on very specific facts, such as the existence of a fiduciary relationship
between mortgagor and mortgagee or, perhaps, in cases of forgery. I naturally intend these as
examples only, which are by no means exhaustive. “

My Point: The exception seems to extend onto the amount of the money to be paid into Court.
For example if you fall within the above mentioned exception, the court will only reduce the
amount to be paid into court, not to alleviate the obligation all together.
 PART F: MORTGAGES OF UNREGISTERED LAND (PART 2)

This topic was briefly dealt with at the top of the outline. It should however be mentioned that
provisions dealing with this matter is very similar to that that was mentioned above in respect to
registered land in that:

1. The power in favour of the mortgagee implied in every mortgage made by deed;
2. When the power of sale can be exercised;
3. The power of the mortgagee to convey the property on sale to a purchaser
4. Application of the proceeds of sale;
5. Appointment and powers of a receiver

See: Section 22, 23, 24 and 27 of the Conveyancing Act and note the subtle differences in
procedure for sale; including but not limited to the fact that the interest under the mortgage is in
arrear an unpaid for two months after becoming due as opposed to the one month period for the
registered land.

FORECLOSURE ON UNREGISTERED LAND

At common law there is no right to foreclose. This can only be achieved through the Court. Right
to foreclose arises at any time after the mortgage debt is due.

PROCEDURE ON FORECLOSED LAND:

1. A foreclosure action is usually brought by way of a fixed date claim form and affidavit.
2. Notice of the proceedings served on all interested parties.
3. At the 1st hearing the judge gives an order nisi for the taking of accounts and provides
that if mortgagor pays money by a fixed date mortgage will be discharged.
4. At any time during the court of the proceedings, any party may apply to the Court for an
order for sale rather than foreclosure
5. At the end of the period, if the debt is not redeemed the Court will order foreclosure
6. The mortgagee takes the land free of any subsequent mortgages but subject to any prior
interests.

PART G: DISTINCTION BETWEEN LEGAL AND EQUITABLE MORTGAGE

A legal mortgage is founded upon the document (mortgage instrument) that outlines the financial
obligations of mortgagor to mortgagee and legally complies with the requirements under the
Registration of Titles Act. An equitable mortgage occurs in the absence of any duly executed
written mortgage instrument but where by the actions of the parties are of such a nature that it
can be discerned that the arrangement is that of a mortgage. Generally speaking, the Courts will
look to see if the basic elements of a mortgage have been satisfied (i.e. that there is a debt from
party for an amount significantly less than the land is worth and some promise to return the land
upon satisfaction of that debt).
There are some circumstances in which an equitable mortgage may arise:
a. Under the principle enunciated in Walsh v Lonsdale a document showing an intention to
charge the land;
b. The mortgagor only holding an equitable interest in the land that he is seeking to use as
security for the loan
c. A borrower depositing his title with a lender as security for monies advanced to him
d. A borrower depositing his title with a lender as security for monies advanced to him but
is accompanied by a memorandum of deposit which expressly refers to the deposit and
states that it is intended as security for the monies advanced.