Meretz investments NV v ACP Ltd [2007] Ch 197
MORTGAGES – SALE BY MORTGAGEE – WHETHER EXERCISE OF POWER OF SALE IMPROPER – ISSUE ESTOPPEL
Facts
The claimants (M and B) brought an action against the defendants (X, F and T) in connection with the purported sale by F to T of a long lease of a partially completed penthouse development on the roof of a block of flats. M and B were subsidiaries of the same parent company. B owned the freehold of the block of flats and M was the leaseholder of one of the flats. B had granted X a long lease of the roof so that X could develop it. X granted F, its parent company, a first charge over the development lease. F had purported to sell the lease to T, a private individual who was interested in acquiring one of the penthouses. The parties had fallen into dispute, and M and B argued, amongst other things, that F’s power of sale had been improperly exercised.
Issues
Several issues fell for determination, but the primary question was whether F had exercised its power of sale for improper purposes and, if so, whether such a claim by M and B would be barred by issue estoppel.
Decision / Outcome
F had exercised its power of sale for a proper purpose and was not in breach of any equitable duty owed to M. However, it was not an abuse of process for M and B to argue that the power of sale was exercised for improper purposes. It would be an improper exercise of a mortgagee’s power of sale if no part of his motive for exercising that power was to recover the debt secured by the mortgage. However, if a mortgagee had mixed motives for exercising that power and one of the motives was to recover the debt secured by the mortgage, his exercise of the power of sale would not be invalidated.
Updated 20 March 2026
This case summary accurately reflects the decision in Meretz Investments NV v ACP Ltd [2007] EWCA Civ 1303, [2008] Ch 244 (Court of Appeal). Readers should note that the neutral citation and law report reference given in the article ([2007] Ch 197) appears to correspond to the first-instance decision of Lewison J; the Court of Appeal upheld the outcome and the legal principles stated remain good law. The core principle — that a mortgagee’s power of sale is not invalidated merely because the mortgagee had mixed motives, provided that recovering the secured debt was at least one genuine motive — continues to represent the law in England and Wales. There have been no subsequent statutory changes or later appellate decisions that have overruled or materially qualified this principle. The article remains broadly accurate, though students should be aware that it describes the first-instance judgment and may wish to refer also to the Court of Appeal decision for the full authoritative statement of the law.
