Halifax Building Society v Stansfield and another

Mortgage indemnity policy — Arrears — Building society obtaining possession — Insurance policy only valid if mortgagees in possession — Defendants unsuccessfully seeking stay — Whether order for possession could be disturbed — Whether grounds for appeal — Judgment for plaintiff — Second defendant able to apply to county court for order for sale under Law of Property Act 1925, section 91In February 1988 the plaintiff building society advanced a mortgage of £70,000 to the first defendant, Mrs S, for the purchase of 81 Durban Road, Beckenham, Kent. Part of the original mortgage transaction involved an insurance policy, which was supplemental to the mortgage and provided that if the building society exercised its powers of sale, the insurers would pay the outstanding mortgage debt, if it exceeded capital value on the sale. However, the building society could not claim under the policy unless they were mortgagees in possession. Proceedings for possession were commenced in March 1990. In September the second defendant, Mr S, joined the action. He asserted that: (a) he had a beneficial interest in the property, because he had contributed to the mortgage instalments and had carried out works of repair; and (b) he had an interest in the property as the matrimonial home. At the date of the order in June 1992, arrears stood at £36,864.87 and Mrs S was made bankrupt some time after possession was granted to the building society. The defendants unsuccessfully applied for a stay for the second defendant to arrange purchase of the property from the building society. An appeal against that refusal of their application was granted. The order for possession was also stayed pending an appeal by Mr S. Held The appeal was dismissed. 1. The notice of appeal raised fresh matters, which challenged the building society’s method of dealing with the sale. It was plain that those matters could not be allowed in the appeal court. There were no grounds upon which the order could be distributed as there was nothing wrong with the basis upon which it had been made. 2. Further, no breach of duty could be shown by the building society against the second defendant, who was not a mortgagor to which it owed a duty. 3. However, Mr S was unaware of the provisions of the Law of Property Act, section 91 and they were not brought to the attention of the judge. Under section 91, inter alia, if proceedings to enforce redemption were commenced there could be a judgment for sale instead as the court — at the request either of the mortgagor or of the mortgagee — could direct a sale on such terms as it thought fit. Mr S could therefore apply to the county court directing for sale to him if he was in a position to raise the money. He might have to go out of possession temporarily so that the building society could recover under the insurance policy. 4. In the event, the building society would be in no better position by obtaining possession and selling to some one other than the second defendant, than it would be by selling it to him at the market price. Ulick Staunton (instructed by Belmont and Lowe) appeared for Halifax Building Society; the defendant/appellant appeared in person.