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Mortgage cases Cheltenham and Gloucester v Norgan 1996 1 ALL ER (CA) N had borrowed GBP 90,000 from CGB but had fallen into arrears. Although CGB's standard terms provided that if any instalment should be in arrears and unpaid they would be entitled to take possession, the Council of Mortgage Lenders, of which CGB was a member, aimed where possible to help borrowers who encountered difficulties. The warrant was initially suspended by a series of orders relating to payment of current interest instalments and paying off of arrears, but N had failed to comply with them. The AJA allows the court to exercise its discretion where it appears that the mortgagor is likely to be able to pay off all the arrears within a reasonable period. The question for the court to decide was what was a "reasonable period" within the 1970 Act s.36(1). The CA held that: (i) the starting point for a reasonable period should be the outstanding term

of the mortgage. (ii) ) the following considerations were relevant when determining a

"reasonable period": (a) how much can the mortgagor afford to pay both now and in the future? (b) how long are the mortgagor's temporary difficulties in meeting their obligations likely to last? (c) why have arrears accumulated? (d) how much of the original term is left? (e) when is the principal due to be repaid? (f) should the court exercise its power to disregard accelerated payment provisions under the 1973 Act s.8? (g) is it reasonable to expect the mortgagor to recoup the arrears of interest either over the whole of the original term, or within a shorter period, or within a longer period? Is it reasonable to expect the mortgagor to capitalise the interest? (h) does anything, affecting the security, influence the length of the period for payment? Zinda v Bank of Scotland plc 2011 EWCA Civ 706 Where a possession order had been suspended on the condition the mortgagor paid a monthly amount to clear his arrears as well as his current mortgage a judge was right to refuse an application to suspend the enforcement of the possession order when the mortgagor, who had consolidated his arrears with the outstanding balance, fell into further arrears. When suspending the possession order the court had jurisdiction, under the AJA s36 (3) to impose a condition that Z pay off his arrears. The condition comprised two elements necessary to avoid eviction; (a) Z had to pay off the arrears in monthly instalments; (b) in addition he had to pay the current mortgage

instalments. The fact the arrears were discharged in their entirety by the consolidation was not enough if Z failed to comply with the second requirement. Jameer v Paratus AMC [2012] EWCA Civ 1924 J (the appellant mortgagor) had obtained a mortgage from P in 2006. From 2008 she fell into arrears with her mortgage repayments and P commenced proceedings against her. J's income at that point was insufficient to meet the mortgage repayments. In 2011 a district judge gave judgment in favour of P for the total owing and granted a possession order in favour of P and a second mortgagee of the property (K). That warrant was suspended on an application by J on the basis that she would meet her monthly instalments and make a monthly repayment towards the accrued arrears. J failed to make payment in accordance with that order and in 2012 a further warrant was issued. A district judge refused to suspend that order and that refusal was upheld on appeal despite J's contentions that her financial and employment circumstances had improved due to an offer of partnership and new lodger agreements that were in place. The appeal judge concluded that the financial commitment was beyond her means. Permission to appeal was granted on the condition that J filed up-to-date information concerning her employment and finances. At the time of the instant appeal J's second mortgage and a buy-to-let mortgage were both in arrears which amounted to £10,000. The issue was whether in light of the further information before the appeal judge, he was right to refuse to suspend the warrant for the second time. The CA held that s36 AJA allowed the court to exercise its discretion in cases where there was evidence to show that a mortgagor could repay the sums due within a reasonable period of time. To enable the court to exercise its discretion the mortgagor had to present frankly and fully to the court information about their income and expenditure. S had not demonstrated an ability to adhere to the terms of the original suspension order and there remained too much uncertainty and obvious omissions by her in the information that she had presented about her employment and finances. On her own account she had had the ability to make the repayments but had not done so. Therefore the judge was right to refuse to suspend the warrant for a second time. Palk v Mortgage Services Funding Plc 1993 Ch 330 In 1990 A borrowed £300,000 from mortgagees, secured by a mortgage over the house owned jointly by himself and his wife, B. A's company then went into insolvent liquidation. In July 1990 and B decided to sell the house. In March 1991 a sale was negotiated for £283,000, the amount required to redeem the mortgage being £358,587. The mortgagees declined to agree to the sale as they had obtained a suspended order for possession and were intending to let the property until the housing market improved. However, the sum due under the mortgage was increasing by about £43,000 per year and letting the property was likely to produce only £13,000 to £14,000 per year. A and B applied for an order for sale.

Held: it was just and equitable to order a sale because otherwise unfairness and injustice would follow. “Mortgage Services is set upon realising its security, but in a way fraught with risks the borrowers ought not fairly to be expected to run. In the absence of a dramatic surge in house prices in the near future, Mortgage Services' preferred course will result in an increased deficit. The shortfall will increase every month. Mrs Palk is personally liable for the whole debt and she will be personally liable for the shortfall. Her personal liability for the shortfall ought not to be increased in this way when there exists a means by which a fairer result can be achieved”. Toor v State Bank of India 2010 EWHC 1097 The applicant mortgagors (T) applied for an order compelling the respondent mortgagee (B) to sell their residential property at a specified price under the LPA s91 (2). The property was subject to a mortgage in B's favour taken as collateral security for the debts of T's company which, later, went into liquidation. Since the liquidation, T had failed to pay anything towards the mortgage. B obtained a possession order on account of the outstanding arrears. It was likely that there would be a shortfall on the sale of the property. T did not vacate the property at the relevant date. B pursued the possession proceedings. It was T's proposal that the property be sold to family friends. Held: exceptional circumstances would be required before a court would compel a mortgagee to sell a mortgaged property when it did not wish to do so because of a shortfall in the mortgage. Nevertheless the court could do so if the alternative would be to cause unfair prejudice or other unfairness to the mortgagor. It was for the mortgagor to make an application and to demonstrate, by evidence that the requisite degree of prejudice or unfairness would result. Furthermore, courts should be cautious about enabling the procedure to be used in a manner which would open up the prospect of desperate applications with a view to staving off eviction in unmeritorious cases. In the instance case the evidence did not establish any prejudice or unfairness of a financial kind to T in granting B possession of the property. T wished to remain in their home, and that was a powerful factor relevant to their own considerations. However, it was a factor that would be present in every case and not one which swayed the exercise of the court's discretion to any significant degree. The court, when considering whether an application for sale were being used simply to stave off eviction, ought properly to take additional caution where the proposal to sell was a proposal effectively to sell to the mortgagors themselves or to connected parties, such as T's friends. Such proposals raised the increased possibility that the true motive of the proposal was that the mortgagors themselves should stay in occupation rather than that their financial liabilities should be minimised. Ropaigealach v Barclays Bank Plc 2000 QB 263 BB, the mortgagee of residential property mortgaged by R, made a valid demand for payment which R did not honour. BB wrote to R telling him that the property was to be put up for sale at auction and then sold the property. R, who was not residing in the property at the time, claimed he had never received the letter and, having discovered from a neighbour that the house had been sold, made an

ex parte application for an injunction restraining BB from selling the house, which was refused on the basis that the sale had already been completed. R appealed against a decision to uphold the dismissal of his originating summons to determine whether BB had been entitled to act without a court order in taking possession of his house and selling it. R submitted that the AJA s36 had clearly been enacted to protect a borrower from ejectment should the lender apply for a possession order. The court held that that s.36 had not been intended to deal with the protection of a borrower against a lender who exercised his common law right to take possession by peaceable entry without seeking a possession order. This could only be done if the borrower was not in occupation otherwise issues arise under the Criminal Law Act 1977 s6. Horsham Properties v Clark [2008] EWHC 2327 (Ch) The claimant company (H) claimed possession of a property formerly belonging to the defendants (B). B had fallen into mortgage arrears in respect of the property. Pursuant to the mortgage deed and the LPA s101 (1) (iii), the mortgagee appointed receivers over the property who contracted to sell it at auction (instead of exercising their right to obtain possession first). On sale, the property was transferred to H, who became the registered proprietor. B remained in possession of the property and H instigated the instant claim seeking their eviction as trespassers. The issue was whether the route taken by Horsham allowed them to deny the borrowers the right to make use of S36 AJA and present their case to the court. S36 can only be used if there is an application for possession. There were also issues about compatibility with Human Rights legislation. The court held that the lender had not acted improperly and that they were entitled to treat the occupiers as trespassers and recover possession in the same way that a landlord could against a tenant once the lease expired. This did not, the court said, involve an infringement of their human rights. Cuckmere Brick Co Ltd v Mutual Finance Ltd (1971) Ch 949. A mortgagee, when exercising his power of sale, owes a duty to the mortgagor to take reasonable care to obtain a proper price. C Co. charged land with planning permission for 100 flats to M Co. for £50,000. Later, permission was given to erect 35 houses. M Co.'s power of sale became exercisable, and M Co. advertised the land by reference to the planning permission for houses, but not to that for flats. On being informed of their omission M Co. refused to postpone the sale. The price obtained was £44,000. Held, (1) M Co. owed a duty to C Co. to take reasonable care to obtain a proper price, and (2) M Co. had been in breach of that duty by failing adequately to publicise the planning permission for flats, and by refusing to postpone sale. Mortgage Express v Mardner 2004 EWCA Civ 1859

The appellant company (M) appealed against a decision of a county court judge that it had not discharged its duty to obtain the best price reasonably obtainable for a property repossessed from the respondent (R). M had repossessed a property from R after he had failed to meet his mortgage repayments to M. M obtained three valuations of the property and placed the property on the market for three months. After a single offer was made but fell through, M sold the property to an associated company. M claimed against R for the shortfall between the mortgage debt and the sale price obtained. R counterclaimed on the basis that the property had been sold at an undervalue. A jointly appointed expert valued the property at a figure higher than that which M obtained. The judge found in favour of R and dismissed M's claim in its entirety. Held: (1) on a sale of a repossessed property by a mortgagee to an associated company, the evidential burden was on the mortgagee to show that it had taken all reasonable steps to comply with its duty to obtain the best price reasonably obtainable for the property. On the limited evidence before the judge, it was clear that M had not discharged its duty (2) the judge had erred in dismissing M's claim in its entirety; he should have found that the expert's valuation figure was the best price reasonably obtainable for the property. M was entitled to the difference between that figure, as reduced to reflect estate agent, mortgage interest and conveyancing savings made by the original sale, and the mortgage debt...