Section 91 of the LPA: judicial restraint confirmed by the Court of Appeal

Briefing

In Fairmont Property Developers UK Ltd v Venus Bridging Ltd and others [2025] EWCA Civ 1513, the Court of Appeal upheld the High Court's decision to keep the discretion under section 91 of the Law of Property Act 1925 (LPA) narrow. The court dismissed the mortgagor’s attempt to challenge a mortgagee’s power of sale based on claims that the proposed sale was at an undervalue.

The case concerned a loan from Venus Bridging Ltd (Venus) to Fairmont Property Developers UK Limited (Fairmont), secured against a commercial property by a second-ranking charge. The facts are explored in detail in our previous article but in summary, following Fairmont's default, Venus appointed receivers who set a proposed sale price. Fairmont, believing the property was undervalued at approximately £4.75 million and that a sale at that price would be insufficient to repay its debts to Venus and Coutts, issued Part 8 proceedings seeking a section 91 order to take conduct of the sale.

The High Court initially granted an interim injunction but later dismissed Fairmont's application, discharging the injunction and permitting Venus and the receivers to proceed. Fairmont gained permission to appeal and the injunction was restored pending the appeal hearing. The grounds of appeal challenged the deputy Judge's approach on three points: (1) that the section 91 discretion should only be exercised in the mortgagor's favour in exceptional circumstances where the mortgagee is actively selling (2) that Fairmont had failed to prove unfairness or that on the balance of probabilities the proposed price would be at an undervalue and (3) that restraining the sale would prejudice Venus. Requirements as to evidence where there is a claim based on undervalue were also considered.

Key points

The Court of Appeal upheld the High Court's decision and dismissed the appeal. In arriving at its decision, the Court of Appeal considered the following points to be critical:

Section 91 orders should be granted only in exceptional circumstances where there is manifest unfairness to the mortgagor and not merely where it is a mortgagor's belief that a property is being sold at an undervalue
A routine commercial enforcement alone would not be sufficient to constitute an exceptional case, without more – the court should be reluctant to interfere with mortgagees' contractual rights when they are actively exercising their power of sale
Claims of undervalue need strong evidence – the burden of proof is on the mortgagor to establish on the balance of probabilities that the sale by the receivers is likely to be at an undervalue.

Reinforcement by the Court of Appeal of key principles

The Court of Appeal reinforced existing principles governing the use of section 91:

Judicial discretion

Section 91 gives the court the authority to order or restrain a sale, but this power will be used sparingly, especially in the commercial lending context. This statutory power exists to address clear injustice and not to second-guess enforcement strategies.

Ordinary enforcement situations do not trigger intervention

In this case, the mortgagor had defaulted, receivers were appointed, and the mortgagee was actively marketing the property. None of these facts were in question. Such common circumstances support exercising caution with regards a section 91 order. In the circumstances where Fairmont has contractually agreed that if it defaults receivers could be appointed to sell the property for the benefit of the mortgagee, it is in principle difficult to see why the court should override the well-understood contractual scheme which Fairmont has agreed to and take away the receivers right to sell.

Exceptional circumstances remains the threshold

The court stressed that intervention should only occur where exceptional facts apply. Generally, these would include unfairness or injustice that cannot be resolved by law. Simple disagreements over sale price or strategy do not meet this standard.

Evidential requirements: undervalue claims

A key part of the mortgagor’s argument was that the property was being sold at an undervalue. The court’s analysis highlights important evidential points:

The burden of proof lies on the applicant mortgagor to establish that a sale at an undervalue is likely.
Outdated valuations such as those from earlier market conditions or offers that did not lead to contracts, generally have limited value.
In this instance, current valuations and marketing feedback were preferred and indicated a materially lower value than earlier estimates. On that basis, the court could not conclude that the proposed sale was likely at an undervalue.

A mortgagor must provide current and credible evidence of undervalue, rather than wishful thinking or past valuations to convince the court to use its statutory discretion.

Risk and prejudice to the mortgagee

The court noted the potential harm a section 91 order can cause a mortgagee, especially where:

an existing purchaser may be lost
delay and additional marketing costs may be incurred
the mortgagee’s right to realise security is deferred.

These factors highlight the need to protect the secured creditors' contractual and statutory rights.

Practical takeaways

For lenders and receivers:

The ruling reinforces that standard enforcement steps such as appointing receivers and marketing a property in a challenging market, will not lead to judicial intervention under section 91 on their own. If enforcement is structured and supported by current market evidence, the chance of a successful mortgagor challenge remains low.

For borrowers:

Mortgagors looking for injunctive relief or control of a sale under section 91 must provide strong, recent evidence showing likely undervalue or other exceptional circumstances. Simple disagreements with a valuation or concerns about a debt shortfall will not be sufficient.

Concluding thoughts

Fairmont confirms a careful, case-by-case approach to section 91 orders in commercial mortgage situations. Judicial intervention remains a narrow and exceptional remedy, reserved for cases where there is clear evidence showing that enforcement could lead to injustice. The judgment highlights the high evidential standard for mortgagors seeking to restrain a mortgagee and its appointed receivers from using their statutory powers of sale.