Cheltenham & Gloucester Building Society v Norgan

Arrears — Mortgagee seeking possession — “Reasonable period” to pay sums due required by statute — Court’s jurisdiction to grant relief — Question of duration of “reasonable period” allowing borrower to bring payments up to date — Building society applying for warrant for possession against defendant’s interest arrears — Court of Appeal holding that full period of mortgage as reasonable starting point for paying off arrearsThe appellant, Mrs N, and her family lived in a period farmhouse since 1974. In 1986 her husband sold her his half-share for £90,000, which was financed by a mortgage under which the property was charged to the building society (the present respondent’s predecessors in title). Under the mortgage terms the principal sum was to be paid at the expiration of 22 years with the interest payable in monthly instalments. By 1990 arrears of interest were approximately £7,000. The building society applied for a possession order which was granted but suspended pending refinancing. There was a further variation in the suspension terms and had those conditions been fully complied with the claimed arrears (amounting by then to £16,023) would have been paid off within about three years. No payments were made and the building society obtained a warrant for possession. A further suspension of terms was obtained. Although leave was subsequently obtained to issue the warrant there was a stay pending the appeal to the judge. He held, inter alia, that while there was scant assistance from decided cases on a reasonable time within which repayment should be made, “a period of two to four years is the maximum that will ordinarily be allowed”. He went on to specify a period of four years in the case of Mrs N, who appealed. The Court of Appeal confined itself to the question of principle and did not consider the detailed particulars of the amount owing and the appellant’s ability to pay it off. The property with land was said to be worth now in the region of £225,000. Counsel for the appellant argued, inter alia, that there was a primary assumption that a reasonable period was the term of the mortgage and relied on dicta in First Middlesbrough Trading and Mortgage Co Ltd v Cunningham [1974] 28 P&CR 69, to like effect. The building society submitted that the delaying powers under section 36 of the Administration of Justice Act 1970, allowing a court to postpone delivery on mortgage default for a reasonable period, was a substantial interference with the parties’ contractual rights and the court should be even-handed in its approach to the claims of each side. Held The appeal was allowed. 1. The court would not go so far as to say that there was an “assumption” of the kind contended for by the appellant. Nevertheless, the logic and spirit of the legislation required that the court should take as its starting point the full term of the mortgage and pose at the outset the question: would it be possible for the mortgagor to maintain payment-off of the arrears by instalments over that period? 2. It was acknowledged that that approach would be liable to demand a more detailed analysis of present figures and future projections than it might have been customary for the courts to undertake until now. 3. The court should also consider, inter alia, in exercising discretion, whether it was a term mortgage so that the principal sum remained outstanding until expiry of the term and whether the period for payment would affect the security. Miles Croally (instructed by Clement Jones, of Bangor) appeared for the appellant; Malcolm Waters (instructed by Steven Crawshaw, of Chester) appeared for the building society.