IN THE COUNTY COURT AT BRISTOL
CLAIM NO 9PA50382

19 November 2015
BEFORE

MS RECORDER ROWLANDS

B E T W E E N :-

	SOUTHERN PACIFIC MORTGAGE LIMITED	Claimant	
	-and-		
	JACQUELINE VERA GREEN	Defendant	

JUDGMENT

See Order at end of this judgment.

1.	By this claim, the lender, Southern Pacific Mortgage Ltd, seeks possession of 164 Claverham Road, Bristol, BS49 4LW, the home of the Defendant since 1994.  

2.	The Defendant’s defence to this claim arises out of the legislation relating to disability discrimination, initially the Disability Discrimination Act 1995 and subsequently the Equality Act 2010.  It is not in dispute between the parties that the Defendant has a protected characteristic, namely a disability, and has had at all material times.  The Defendant has been severely depressed since the death of a close friend for whom she cared in the last months of her life.  It is against that background that the issue of arrears, the Claimant’s response to those arrears, and the steps taken to recover possession of the property must be assessed.  

3.	As this is a case which raises issues of disability discrimination, I have had the assistance of an assessor, Ms Julia Cusack, to provide me with the benefit of her skill and experience.  I have also had the benefit of submissions from two counsel for the Claimant: Clifford Payton, a banking specialist, and Adrienne Morgan, a discrimination law specialist; and for the Defendant Stephen Cottle, an expert in social housing.  I have permitted, and also sought, further written submissions from each side in addition to the useful skeleton arguments presented to me.  

4.	Given the changing statutory background, and the fact that the Disability Discrimination Act 1995 and the Equality Act 2010 are in slightly different terms, the chronology of events is crucial.  I therefore append a chronology to this judgment.  

5.	It is also important to remember that this claim started as long ago as 26th March 2009 and that the events which I relate herein took place from 2006 onwards.  As far as banking practice and mortgages are concerned, that was a very different world.  The banking crash of 2007 changed a lot of the banking landscape and attitudes towards lending.  The start of these events took place against the background of a much laxer attitude towards lending.  
The central issue
6.	The essential issue between the parties is that the Defendant contends that the Claimant should have acceded to her request to change her mortgage from a repayment mortgage to an interest only one, and that the failure to do so amounted to discrimination against her.  The Claimant denies that to change the mortgage would have been a reasonable thing for them to do given that the only way the Defendant could redeem the mortgage in the end would be to sell her house and that this is too uncertain a risk for either side to see as appropriate.  
Background
7.	The Defendant, Ms Green, purchased the property in 1994.  She was a Legal Executive and worked for Wessex Water.  On 28th August 2006, she applied to the Claimant to re-mortgage the property.  At that time, she asked for a loan of £96,000.  Most of this was to pay for improvements to the property and some was to pay off credit card debt.  She self-certified income of £32,000.  It is probable that this estimate of her income was over-optimistic and it is probable that, in retrospect, the Claimant should not have agreed to lend to her on that self-certified income.  The Defendant was beginning to experience a fall-off in her income as her work as a Legal Executive began to dry up.  She lost her job with GE Capital and was working for Wessex Water on an agency basis, getting less and less work from them.  She found it difficult to find alternative work.  These difficulties probably related to the depression that she was beginning to experience, even though at that time the depression was not diagnosed and not recognised by the Defendant herself for what it was.     

8.	The Claimant agreed to lend the sum requested and the mortgage was entered into on what was described as an “almost prime” basis on 13 November 2006.  The mortgage was on a repayment basis and for a term of 20 years, thus maturing in 2026.  The interest rate was 5.59% and the property was valued at £185,000.  

9.	When she took out her mortgage, the Defendant had very sensibly taken out insurance to cover her should she be unable to make payment.  She made a claim on that insurance, initially on the basis of unemployment, then on the basis of disability. Her insurance company met the claim and for a period from 1 February 2007 to 28 April 2008, the mortgage payments were met on the basis that she was unemployed and from 29 April 2008 to 17 November 2008 on the basis that she was disabled.  Unfortunately, at that date the insurance ran out.  The Defendant was then, she says, unable to meet her full liabilities under the mortgage, which is to say a payment from the capital each month plus a payment of interest.  

10.	During this period, the Defendant’s payments were somewhat erratic, and the Claimant and the Defendant were in correspondence with each other.  I have a call log, giving brief records of what was said by each side in the period starting 6 October 2007.  There are some comments that must be noted:
a.	On 8 February 2008 the call log records that the Defendant told the Claimant that her wages would not go into her account until the 12th.  This suggests that the Defendant was not honest with the Claimant about her unemployment.  The Defendant stated that it must have been a slip of the tongue but I find that the record was accurate given the later comments that the Defendant was advised that she could get her charges refunded by the wage company, and that on 11 March 2008 the record shows that the Defendant said that her employer would be reimbursing her.  
b.	On 16 June 2008 the Defendant advised that she had been signed off sick since 14 April.  This is an important date as it is clear that from this date, the Claimant knew that the Defendant was sick and unable to work.
c.	On 15 July 2008 the Claimant decided not to refer the Defendant to a debt counsellor, as they could see that a DSS [sic] claim was going through.
d.	On 21 July 2008 the Defendant told the Claimant that she was waiting for a doctor’s appointment, without which her insurance company would not pay out.  
e.	The Claimant waited for some time but on 18 August 2008 they were told that the appointment was not until 18 September 2008.  The Defendant decided there and then to pass the case over to litigation for “FA” – further action.  
f.	On 16 September 2008 there was another conversation in which the Defendant advised that she was sick and awaiting an insurance payout.  She was told that a court hearing had been applied for “as per due course”.  
g.	On 10 October 2008 the Defendant was able to tell the Claimant that the insurance payout was coming through.  She would then be applying for DSS support and make an arrangement to pay off the arrears.
h.	On 12 November 2008 she paid £3,000.  This was not the full amount the insurance company had paid her: she chose to retain £250 to pay off other debts.  The arrears were then £1,365.97.
i.	This staved off possession proceedings but on 6 February 2009 the log records that the account was “put back into collections” and on 25 February 2009 the record reads “completed pap checklist”.  I believe that “pap” stands for “pre-action protocol”.  
j.	On 21 April 2009 the log shows that the DWP were to pay £76 per week.  
k.	On 30 April 2009 a letter arrived from the North Somerset CAB asking to adjourn the Court hearing “whilst the mortgage interest is being resolved”.  

11.	So by the time the claim was issued on 26 March 2009, the following facts can be ascertained:
a.	The Defendant had had insurance payouts on the basis of disability;
b.	The Defendant had told the Claimant this and the Claimant had held off possession proceedings for a short period;
c.	The Defendant had applied for, but had not yet been awarded, DWP payments, and had told the Claimant this. 

12.	It is therefore clear that the Claimant was aware of the Defendant’s disability by the time proceedings were issued and had chosen to proceed to Court nevertheless.  The arrears at the date the claim was issued were £4,445.62.  

13.	The Claimant had some procedures in place for avoiding proceedings.  There is reference to a debt counsellor and to the “pap”.  The pre-action protocol for possession claims came into force on 19 November 2008 – part of the reaction to the credit crunch already mentioned.  When the Claimant reviewed the Defendant’s position on that occasion, then, it should have applied the pre-action protocol in light of such information the Claimant had at that time.  

14.	The first important fact the Claimant knew by then was that the Defendant was disabled and that she could not find work.  Although the Defendant had not said in so many words to the Claimant, there was sufficient information for them to be aware of this as an issue.  It was an issue that the Claimant does not mention as being relevant in any of its contemporaneous notes.  Instead, we see references to the Claimant taking possession proceedings “as per due course”.  It is clear beyond argument that the Claimant gave no thought at all to the Defendant’s position as a disabled person and whether that should have given them pause for thought.  

15.	The second important fact is that the Claimant had applied for DWP payments.  The importance of this fact is very clear with the benefit of hindsight.  the DWP through its “Support for Mortgage Interest” scheme will meet the interest payments of a person in receipt of various benefits at a set interest rate.  This is the Standard Interest Rate which from 2004 to 2010 was based on the Bank of England base rate plus 1.58%. It is a strange quirk in this case that the rate payable by the Defendant was lower than the rate met by the DWP.  She was therefore entitled to a payment that would meet the interest payment due, and more.  Had the mortgage been changed to an interest only mortgage, the Defendant would have been able to meet the interest payments and paid off the arrears over a relatively short period of time.  She would then have had small amounts paid off the capital at least until the date of the trial.  That, as I say, is hindsight.  All that the Claimant knew before proceedings were commenced is that a DWP payment had been applied for.  They knew or should have known that it would meet interest payments and they knew or should have known that it was very likely if not certain that the Defendant would qualify. 

16.	 What no-one can say today is whether the interest payments will continue, as the DWP proposes to amend its SMI scheme as set out in paragraph 32 below.  However, this was not really foreseeable in 2009.  

17.	The crucial question is whether the Claimant should have taken into consideration the Defendant’s request to change the mortgage from repayment to interest only before starting possession proceedings. However, there is a dispute of fact, which I have to resolve, as to when that request was made.  

18.	It is clear that the request was made, at the latest, by a letter dated 29 April 2009 from the North Somerset CAB who were advising the Defendant.  However, the Claimant says that she requested it before then, in a telephone conversation in May 2008 and again in November 2008.  It is a matter of record that there were telephone conversations between the Claimant and the Defendant in May and November 2008.  However, they make no mention of any conversation about changing to interest only.  On the contrary, they suggest that the arrears will be cleared by the anticipated insurance payment.  I note that I have already rejected one account by the Defendant that differs from the record of the conversation in the call log.  On this occasion, too, I reject the suggestion that the Defendant raised the possibility of changing to an interest only mortgage in 2008.  I do bear in mind the fact that the Defendant is a literate, intelligent woman, albeit subject to the effects of depression, and I note that she was not slow to send letters later.  I can find nothing in the call log to support her evidence on this aspect of the case.  I am further supported in this finding by the fact that the tenor of the letter of 29 April 2009 is of an initial request: there is no suggestion that it is a repeat of an earlier request.  I find as a fact that that was her first request.  

19.	As the Defendant did not request transfer to an interest only mortgage before proceedings commenced, one cannot criticise the Claimant for failing to consider that request.  However, the request came shortly after proceedings were started and it is, in my view, incumbent on the lender to consider the appropriateness of proceedings at every stage.  It is evident that once the Claimant had started proceedings, they gave little, if any, thought, to the possibility of stopping and compromising, even when aware of the Defendant’s disability.  

20.	The Claimant’s position in relation to the proposed variation of the mortgage was unclear and it seems that at some stages, the Claimant was ready to consider a variation, and then at others there was a blank refusal.  

21.	Thus, on 19 June 2009 the Claimant wrote to the CAB asking for updated income and expenditure details before they could consider any modifications, but on 3 July 2009 in a terse letter, the Claimant refused to convert the mortgage to an interest only basis.  The letter says “whilst we endeavour to assist our customers where possible, we are not obliged to alter the terms of the mortgage.”  The letter does not mention the Defendant’s disability, the fact that the DWP interest was now in payment, or explain why the option to convert was “not available”.  

22.	Despite this refusal, on 27 July 2009 the Claimant asked for further information before they could consider her request to change the loan.  But on 10 August 2009 the request “to reduce your loan payments” was again refused.  This time the reason given was “you do not meet our assessment criteria”.  

23.	The Defendant complained about this in a letter of 21 July 2009 and the Claimant responded on 11 August 2009 simply maintaining the refusal.  Court proceedings continued.  On 24 November 2009 the Defendant for the first time pleaded a Defence relying on the Disability Discrimination Act 1995.  The Claimant’s response to this was to deny that the Defendant was disabled, averred that the reason for the refusal to convert the mortgage was that the Claimant was no longer lending and that the Defendant would in fact be worse off if the mortgage was converted.  She would have to pay £547 per month to meet the interest on the outstanding capital.  

24.	The Claimant’s denial that the Defendant was disabled continued into their amended Reply and Defence to counterclaim dated 10 December 2013 but was dropped by the date of hearing.  The trial bundle contains medical evidence which, given the Claimant’s concession, it is not necessary for me to review in this judgment, save to note that the evidence of Dr Partridge MB ChB (Bristol) MRCGP MRCP DRCOG DPD (Cardiff) dated 2 August 2013 is that the threat of, and prosecution of, the possession proceedings has had a significant effect on the Defendant’s mental state.  It was clear from his report that the Defendant was disabled and I am troubled by the Claimant’s continued refusal to accept that, even after the report was received.  

25.	On 22 December 2011 the Financial Services Ombudsman gave a ruling on the Claimant’s refusal to convert the mortgage to interest only.  The Ombudsman recommended that there be an interest only period of 9 months but she did not consider any discrimination issues.  The Ombudsman’s recommendation was nominally accepted by the Claimant but I cannot see that it has effectively been put in place.  The account print out does not seem to reflect it.  I found the Claimant’s evidence on this unsatisfactory.  In the context of the Ombudsman’s complaint, the Claimant wrote a letter dated 30 July 2012.  In that letter the Claimant says that “SPML believes that transferring your mortgage to interest-only would being about only very short-term benefit to you and in fact could in the long- or even medium-term be overwhelmingly disadvantageous.  This is in light of the absence of a capital repayment vehicle and also the impact on affordability if there is ever a rise in the quarterly reviewed interest rate”.  

26.	As from 5 June 2015 the DWP payments were reduced leaving a shortfall on the interest due under the mortgage.  The Defendant has not paid the difference, although she assured me that she could and would.  The financial statement she put in front of me showed that she was in a position to make partial payments towards the arrears and/or capital but she has made no payments herself since these proceedings commenced.  

27.	By the date of the hearing the Claimant claimed a figure for arrears and legal fees of £181,703.37.  Although ordered to do so by the order of HHJ Denyer QC dated 4 April 2011, the Claimant has not provided a breakdown of the legal costs.  I ordered that this be done but if it has, it has not reached me.  

28.	At a three day hearing I heard evidence from Julie Summerfield and Paul Heeley from the Claimant and the Defendant in person.  I was also presented with a two volume bundle which included background about the mortgage industry. I may also comment that it included multiple copies of various documents, which did not make my task any easier.  

29.	I propose now to summarise the evidence about the mortgage industry which provides the setting to this case, make some comments about the Claimant’ reasons for refusing the transfer from repayment to interest only, then summarise the Defendant’s case, the Claimant’s case being very straightforward, before making my findings on it.  
Background information on the mortgage industry
30.	As I have already noted the financial picture back in 2006 was much different from today.  I doubt that the Defendant would have been able to obtain this mortgage if she applied for it today on the basis of self-certification.  The global credit crunch increased the number of people in arrears on their mortgage and at risk of repossession, as set out in the House of Commons Library paper of 9 January 2014. 

31.	In December 2011 the FSA carried out a Mortgage Market Review: Proposed Package of Reforms (“MMR”).  This reflects the new spirit of prudence affecting the market.  It emphasised that a firm should only offer an interest-only loan if there was in place a repayment strategy that did not depend on a borrower selling her or his home in order to repay the mortgage.  

32.	The SMI Scheme is described in a document dated 28 May 2013 from the House of Commons Library.  SMI was introduced in January 2009 to help those affected by the economic downturn and was expected to be temporary although is still in place.  It replaced previous schemes and is being reviewed in line with the general review of credits brought in by the Conservative government.  It is currently proposed, in draft legislation, that the payments made under the SMI will be a charge against the property so the government can recover them on sale of the property.  

33.	The Claimant is a mortgage lender and a member of the Council of Mortgage Lenders (“CML”), so bound by their Code of Practice.  The CML has issued guidance on arrears and possessions in October 2011 to help the lenders comply with MCOB 13.  This guidance is no more than guidance, of course, and post-dates the commencement of proceedings in this case.  The guidance emphasises the need for firms to have regard to prudential considerations and mitigating the risk of loss and the need to act fairly to their customers, with proceedings being the last resort.  Firms should have written policies.  In certain circumstances, the firm should consider changing the loan type to interest only but this is contingent on there being plans for repayment.  

34.	MCOB stands for Mortgages: Conduct of Business.  It contains rules and guidance which apply to every firm that carries on regulated mortgage activities; this includes the Claimant.  MCOB 11 sets out standards for responsible lending.  Although generally an interest only mortgage with no repayment vehicle other than sale of the property at the end of the term would be frowned upon, it is permissible to change an existing loan to interest only on that basis.  MCOB 13 related to arrears and repossessions and requires at R13.3.4A a firm to consider changing the type of lending in terms which recall those of the pre-action protocol set out above.  

35.	The Financial Services Authority guidance on Forbearance states that forbearance based on sound principles provides for sound prudential management and that forbearance should be based on an individual assessment of the customer.  

The Claimant’s reasoning
36.	A striking feature of the case presented by the Claimant is a lack of any evidence as to the reasons for refusing the Defendant’s request to change to interest only.  I have summarised above the evidence from the documents.  The correspondence at the time demonstrates a lack of reasoning, and rather an automatic refusal.  The closest one comes to a proper explanation is the letter to the Defendant prompted by the Ombudsman complaint which is set out at paragraph 28 above.  I did not hear evidence from the actual decision maker.  I have never been told what was in the mind of those writing the letters of 3 July or 10 August 2007.  

37.	What I have had is a series of after the event attempts to rationalise the refusal.  These have been unpicked by the Defendant’s advisers one after another.  There was a suggestion that it would have been giving the Defendant an advantage that could not be offered to other clients of the Claimant because of the way the mortgage was underwritten; there was a suggestion that she did not meet the criteria, whatever criteria those may have been, and there was the pleaded case that the Claimant had stopped lending and that this would have been fresh lending.  None of those cases has stood up in court and I do not propose to waste more time on them in this judgment.  It is clear that at all material times the Claimant had the power, had it so wished, to convert the mortgage.

38.	That these explanations were ever advanced at all is poor conduct on behalf of the Claimant.  That the Claimant put up two witnesses who continued to try to justify on this ex post facto basis the decision that was made was also poor conduct.  That the Claimant has no written policy to deal with issues such as those raised by this case, far from unusual, is very poor indeed.  

39.	It seems to me to be very clear that the Claimant did not give any proper consideration to the request.  It was an automatic refusal.  They gave no consideration at all to the request that was informed by the fact that the Defendant was under a disability.  They therefore gave no consideration to the impact that such disability might have on their decision making process.  Possession proceedings were seen as “due course” and there was nothing that could turn them from that course.  
The Claimant’s case
40.	The Claimant’s case, as noted, is straightforward.  They say A mortgagee is entitled to possession as of right “before the ink is dry on the mortgage unless by a term expressly or necessarily implied in the contract he has contracted himself out of that right”: Fourmaids v Dudley Marshall Properties [1957] 1 Ch 817 at 320 per Harman J.  Given the mortgagee’s right to possession, the lender is entitled on a claim properly made to an order of the court in aid of that right.  Thus a mortgagee is entitled having established a right to possession to the benefit of a possession order, which is a final order of the court not a discretionary remedy.

41.	Thus, they say, the Defendant being in arrears, they are absolutely entitled to an order for possession subject to the Court’s power to suspend such an order pursuant to section 36 of the Administration of Justice Act 1970 if the conditions for such suspension are made out ie 
		if it appears to the court that in the event of its exercising the power the mortgagor is likely to be able within a reasonable period to pay any sums due under the mortgage …

The Defendant’s case
42.	The Defendant’s case takes the form of a multi-faceted reliance on the Disability Discrimination Act 1995 and Equality Act 2010 and is coupled with a counterclaim for damages.  

43.	The Defendant’s case is to be found in her Re-Amended Defence and Amended Counterclaim.  She asserts that:
a.	Paragraph 2A: had the mortgage been converted, the amount now owing would be less;
b.	Paragraph 2B: The failure to convert was unlawful because it amounts to unlawful discrimination within section 19(1)(b) and section 20(2) of the Disability Discrimination Act 1995 and sections 15, 19 and 21 of the Equality Act 2010; 
c.	Paragraph 7D: the Court’s powers should be read down to avoid a breach of the Defendant’s article 8 and article 1 protocol 1 rights under the European Convention on Human Rights;
d.	Paragraph 6B: any possession order should be suspended (especially in light of the fact that any sums awarded under the counterclaim may be set off against the arrears, paragraph 7A).
Human rights pursuant to the European Convention on Human Rights 
44.	I can deal with this aspect of the case quite briefly.  There are significant obstacles standing in the way of the Defendant succeeding in relying on the European Convention on Human Rights as a defence to this claim.  The most significant of them is the decision of the Court of Appeal in McDonald v McDonald [2014] EWCA Civ 1049.  In that case, the Court held that, as against a private landlord, article 8 offered no protection.  The fact that the Court was a public authority did not assist.  The same would, in my view, apply to a mortgage lender.  The mortgage lender is not a public authority.  

45.	In McDonald the Court of Appeal held that possession would be proportionate in any event.  I consider that the same would apply in this case.  There are many factors that weigh in the Defendant’s favour.  She would lose the house that she has occupied for a long time, over 20 years, and the loss of her home would clearly be distressing and stressful for her, with a concomitant exacerbation of her mental health problems.  She would also lose the chance to recover from her depression in her own home without the stress of losing that home.  The Claimant has not treated her with the consideration due to someone with a disability.  But I do consider that the right to possession of the mortgage lender is something to which the Court must give proper weight.  To seek to enforce one’s security is generally legitimate and in this case does outweigh the Defendant’s article 8 claims.  I do not consider that the article 1 protocol 1 argument has any weight.  When one enters into a mortgage, one accepts that arrears could lead to the loss of the asset.  That is the case here, and there is no breach, in my view, by enforcing that loss.   In Manchester City Council v Pinnock [2010] UKSC 45 the House of Lords held that a local authority’s right to possession could be taken as read without any need to plead particular facts; I think that the same applies to mortgage companies.  The need for a properly regulated, but at the same time widely available, mortgage market, needs no spelling out.  To accede to this defence would be to re-write the contract between the parties and would be, in my view, an unacceptable interference in the business.  

46.	I therefore dismiss the defence based on article 8.  
Disability Discrimination 
47.	In the case of disability discrimination, the Defendant has a far stronger case.  

48.	Under the Disability Discrimination Act 1995 the question arises under sections 19- 21:

“19 Discrimination in relation to goods, facilities and services
(1) It is unlawful for a provider of services [which include banking and financial services] to discriminate against a disabled person –
(a)  ………………………
(b) in failing to comply with any duty imposed on him by section 21 in circumstances in which the effect of that failure is to make it impossible or unreasonably difficult for the disabled person to make use of any such service;
…
20. Meaning of Discrimination
(1)…………………

(2) For the purpose of section 19 a provider of services also discriminates against a disabled person if-
(a) he fails to comply with a section 21 duty imposed on him in relation to the disabled person; and
(b) he cannot show that his failure to comply with that duty is justified
(3) For the purposes of this section, treatment is justified only if-
(a) in the opinion of the provider of services, one or more of the conditions mentioned in subsection (4) are satisfied; and
(b) it is reasonable, in all the circumstances of the case, for him to hold that opinion”

21.	Duty of providers of services to make adjustments

 (1)   Where a provider of services has a practice, policy or procedure which makes it impossible or unreasonably difficult for disabled persons to make use of a service which he provides, or is prepared to provide, to other members of the public, it is his duty to take such steps as it is reasonable, in all the circumstances of the case, for him to have to take in order to change that practice, policy or procedure so that it no longer has that effect. 	 

(6) Nothing in this section requires a provider of services to take any steps which would fundamentally alter the nature of the service in question or the nature of his trade profession or business.”
49.	Sections 15 and 19 of the Equality Act 2010 provide
15 Discrimination arising from disability
(1) A person (A) discriminates against a disabled person (B) if—
(a) A treats B unfavourably because of something arising in consequence of B's disability, and
(b) A cannot show that the treatment is a proportionate means of achieving a legitimate aim.
(2) Subsection (1) does not apply if A shows that A did not know, and could not reasonably have been expected to know, that B had the disability.

19 Indirect discrimination
(1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of B's.
(2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of B's if—
(a) A applies, or would apply, it to persons with whom B does not share the characteristic,
(b) it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it,
(c) it puts, or would put, B at that disadvantage, and
(d) A cannot show it to be a proportionate means of achieving a legitimate aim.

50.	In Lewisham v London Borough of Malcolm [2008] UKHL 43, a case under the Disability Discrimination Act 1995, the House of Lords held that a claim for possession to which there is otherwise no defence can be defeated where the claim is shown to be discriminatory so as to be rendered unlawful by the 1995 Act, since the courts cannot be required to give legal effect to acts proscribed as unlawful: see paragraphs 19, 101, 104, 160.  

51.	Lord Bingham of Cornhill in that case considered that it was “artificial” to break the possession procedure down into stages: paragraph 7.  However, in R (JL) v Secretary of State for Defence [2013] EWCA Civ 449 the Court of Appeal confirmed that it is open to a Defendant to raise issues of human rights even at the stage of enforcement.  I cannot see why it should be artificial to break down the procedure in the case of disability discrimination but not when considering human rights.  I consider that the question of discrimination must be considered at every stage from pre-action compliance with protocols to the decision to pursue the case to trial, and thence to possession.  The disability issues are unlikely to be the same at every stage.  Proportionality is a fluid concept.  In this case, the legislation has changed over time.  

Causation
52.	The first point is a causation one.  The Claimant denies that the Defendant’s disability is causative of the arrears.  I found this question a difficult one.  It is clear that the Defendant had lost her job before she became disabled.  She was struggling to find a new job.  This may be, as she said, because she was already depressed but had not recognised it, and did not therefore perform well in interview.  That is impossible to say on the evidence I have before me.  

53.	Nevertheless, I would resolve this issue in the Defendant’s favour.  By the time the Defendant was signed off from work in April 2009, she was prevented from working by her disability.  Up to that date, the arrears were being met by insurance.  So the lack of employment did not lead to the arrears: it was the disability that prevented her from working and prevented her from earning that led to the arrears.  From the date the insurance payout ended to now, it is unarguable that the disability is causative of the arrears.  

(1)	Reasonable adjustments

54.	The Defendant complains that there is an ongoing discrimination against her as there is an ongoing refusal to transmute her mortgage into an interest only one.  She is, in my view, right on the ongoing nature of the issue, but is she right that it is discriminatory?

55.	 It is common ground that any act of discrimination which occurred wholly before 1 October 2010, when the Equality Act 2010 came into force, must be considered under the provisions of the Disability Discrimination Act 1995; where an act continues after that date and is also unlawful under the new Act, proceedings should be brought under that Act.  However, in my view, there is no real difference in the effect of the statutes in the facts of this case.  

56.	I consider that the Defendant may rely on various acts which may be considered to be discriminatory:
a.	Bringing possession proceedings on 26 March 2009;
b.	Refusing to transfer to an interest only mortgage when requested on 29 April 2009 or thereafter;
c.	Continuing the proceedings to trial. 

a)	Decision to commence possession proceedings
57.	It is common ground that the Defendant was disabled, and that she was subjected to treatment, namely the commencement of possession proceedings.  At that date, I have found, there had been no request to transfer to an interest only mortgage.  The Claimant was aware that the Defendant was ill, although not necessarily that she was disabled as the illness was of comparatively short date.  

58.	The reason for the treatment is that the Defendant was in arrears.  That seems obvious, but it is worth stating as that finding would not hold good under the Equality Act 2010.  The reason for the treatment did not relate to her disability.  In Malcolm, the Defendant would not have sublet his flat but for his mental health problems but the Court held that the reason for taking possession proceedings was the fact of subletting.  Equally, here, the mortgage company would obviously have taken possession proceedings against anyone in arrears “as per due course”.  The Defendant was being treated no less favourably than anyone else in arrears. There was no adjustment that the Claimant was being asked to make.  There is no basis upon which I can find that the Claimant discriminated unlawfully against the Defendant when commencing possession proceedings.  
b)	Refusal to transfer to interest only
59.	Things change when I come to consider the question of transfer to an interest only mortgage. From 30 April 2009 to the door of the Court, the Defendant made it clear that her position was that she wanted to change over to an interest only mortgage.  The Defendant argues that to change to an interest only mortgage was a reasonable adjustment that the mortgage company should have made.  

60.	As this is an ongoing act, I have to consider whether it was unlawful under the old Act and under the new.  

61.	At the date the request was made, the Claimant knew that the Defendant was ill, that DWP payments were probably going to be made and what interest rate (the Standard Interest Rate) would be paid by the DWP.  

62.	There is no evidence of any reasoned decision to refuse the request.  It seems that there was a blanket policy to refuse any such request.  However, I consider that I have to make an objective assessment of what is reasonable, proportionate and necessary in this case rather than being bound by the Claimant’s thinking at the time.

63.	The question before me is whether the practice, policy or procedure  - the refusal to change to interest only - makes it impossible or unreasonably difficult for disabled persons to make use of the service – the mortgage service.  I do not consider that it does.  

64.	It seems to me that the first question to be answered here is what “service” is under consideration.  Is the “service” the use of the mortgage for that point in time, or the mortgage considered over its whole life?  It is my view that the service provided by the mortgage firm is not limited to the provision of finance.  On the one hand, it must be borne in mind that the mortgage is provided to enable the borrower to obtain a home.  On the other hand, it must also be borne in mind that the nature of a mortgage is that it is limited in time and at the end of the day the lender is entitled to be repaid.  I consider that the “service” contemplated by section 21(1) is the mortgage over the whole of its life, from offer to redemption.  One cannot look at the monthly instalments alone: one must also look at the question of redemption.  

65.	The question then becomes whether the effect of the failure to allow a switch from repayment to interest only makes it “impossible” or “unreasonably difficult” for the disabled person, by which is meant the Defendant herself, not a hypothetical person, to make use of the “services” offered, defined as being the entire life of the mortgage.  It was not impossible for the Defendant to access the service in the first place; it will be possible, all being well, for her to redeem the mortgage at the end, although that may well leave her homeless and destitute, but at present she says she cannot pay the repayment element of her instalments.  Although the switch would make it possible for the Defendant to service the mortgage repayments, it would have no impact at all on her ability to redeem the mortgage at the end of the term.  

66.	I also have one evidential difficulty with this argument.  I have been provided with certain figures.  I asked for a breakdown of the Defendant’s income and expenditure, as at the date of trial.  She stated that she had income of £1,349.02 pcm and outgoings of £847; in examination in chief she added another £80 per week of incidental expenses to that making total outgoings in the region of £1,000.  That would mean that she had over £300 spare each month.  The interest and some of the repayment element of the mortgage being met by the DWP, I do not see why it was impossible for her to make payments towards the mortgage capital.  But that was not a point taken by the Claimant, who argued the contrary.  I do not therefore decide the case on this basis. However, I would have expected to be shown figures from the start of the Defendant’s difficulties that show it was, throughout, too hard for her to make payment.  

67.	If I am wrong about that, and this was a case where it was impossible or unreasonably difficult for the Defendant to access the service, I go on to consider whether the switch is a step that the lender should take to make it possible for the Defendant to service the mortgage.  

68.	I was referred to the case of Edwards v Flamingoland Ltd [2013] EWCA Civ 801 for the question of what “adjustments to services” means in this context.  The Court of Appeal referred to the Code of Practice issued by the Disability Rights Commission and noted that paragraph 10.39 provides in a note to section 21(6) that 
‘The Act does not require a service provider to take any steps that would fundamentally alter the nature of its service, trade, profession or business. This means that a service provider does not have to comply with a duty to make reasonable adjustments in a way that would so alter the nature of its business that the service provider would effectively be providing a completely different kind of service.’

69.	The Court of Appeal said at paragraph 14
But the question what service a service provider provides is as the judge said (para [13]) a matter of interpretation. It is thus a question of law what service is provided, taking into account the primary facts found. It is a matter of categorisation and ‘providing meals’ is too broad a category to be correct or useful in the context of services provided for the purpose of the 1995 Act. One needs to know what kind of service the provider is providing and the right categorisation of service must be a matter of law.

70.	Much of the argument in this case has centred around this issue.  Is a repayment mortgage fundamentally different from an interest only one?  They have many similarities.  They both involve the advance of monies, secured on property, repayable over a period of years.  The Claimant argues that there is a fundamental difference in that there is a guarantee of repayment with a repayment mortgage; an interest only mortgage is a far chancier matter.  In Flamingoland, the Court of Appeal held that providing a takeaway food service was a fundamentally different matter from providing a sit-down service.  There is in both cases the provision of food, but the packaging and service aspects are different.  In the same way, in my view, the provision of an interest only mortgage is very different, indeed fundamentally different, from providing a repayment mortgage.  It is something that would not normally be provided by this lender, just as the Coach House at Flamingoland did not normally provide take-away meals.  It would mean imposing on the lender a riskier, more unsatisfactory repayment vehicle.

71.	A switch to an interest only mortgage is a chancy thing.  I was taken at length to the mortgage industry codes on offering interest only mortgages.  I accept that they mainly postdate the decision I am considering and that there has been a shift towards more prudent lending, and I accept that the guidance contains exceptions for existing customers.  Nevertheless, the guidance embodies good practice.  It is not good practice to lend on an interest only basis.  The repayment plan is speculative.  Over a period of nearly 20 years, which was what was contemplated in this case, much may happen.  House prices may go up or down.  SMI may be curtailed.  Whilst nothing of the kind is suggested in relation to this Defendant, another person in the same situation might trash the property.  The security is speculative and precarious.  It is, in my view, so speculative that the change to interest only was not a reasonable adjustment under section 21 when the Defendant proposed it in 2009.  

72.	The equivalent provision in relation to reasonable adjustments in the Equality Act 2010 is section 20.  This arises where a provision, criterion or practice of A’s puts a disabled person at a substantial disadvantage in relation to a relevant matter in comparison with persons who are not disabled.  Again, it is clear that there was a practice: the refusal to change to interest only.  I am prepared to accept for these purposes that the obligation to make monthly payments under the mortgage is a relevant matter for these purposes, and that the practice put the Defendant at a substantial disadvantage in relation to paying the mortgage as she was unable to work due to her disability.  But then the Act only requires such steps as are reasonable to be taken.  For the reasons I have already set out, I do not think that there was ever a time when it was a reasonable step for the lender to forgo its security, having regard to the Defendant’s disability.  The security was too speculative.  Although it is standard thinking to assume that the value of property will go up, that has not always been the case and the days of negative equity are not far away.  

73.	I would also add this.  Even for the Defendant this is not a good solution.  She runs the risk of being homeless and heavily indebted in 10 years’ time even if I grant her this relief.  She would, in my view, be better off biting the bullet now, moving to a smaller property or a rented property, and having security in that new home, than living on the edge for the next ten years.  

74.	Mr Cottle for the Defendant urged on me that the situation could be monitored with regular reviews to ensure that there was still sufficient equity in the property to protect the lender.  I cannot see any merit in that submission.  He proposed a system whereby there was a duty on the Defendant to come back to court every year or so for a review.  The Court would only be able to act on valuations, which would either be estate agent valuations and of little value, or formal valuations and therefore expensive.  The equity in the property would be eroded.  Court time would be taken up.  Further costs would be incurred.  It is not clear what sanction would be imposed if there were a breach.  

75.	I do not, in all the circumstances of the case, think that it would have been a reasonable adjustment under either statute to move the Defendant over to an interest only mortgage. 

c)	Proceeding to trial
76.	For completeness I should consider whether the Defendant can argue that the final step, proceeding to trial, when costs have reached some £100,000, is a discriminatory action.   I do not think that, having rejected the argument at the previous stage, I can accept it at this stage.  

(2)	Direct and Indirect discrimination in relation to services.  
77.	The Defendant also argues that the proceedings are discriminatory against her under section 19(1)(b) and section 20(2) of the Disability Discrimination Act 1995 and sections 15, 19 and 21 of the Equality Act 2010.  She argues that there is indirect discrimination as it is harder for disabled persons to access the services in question.  

78.	The Defendant argues that the practice of refusing to switch causes particular disadvantage to borrowers who become disabled and unable to work because they are less likely to be able to find work once unemployed; I was shown statistics that make that out.  Mr Cottle’s argument at paragraph 11 of his skeleton argument sets out his argument:
In relation to indirect discrimination the main issue is whether the Claimant’s practice of refusing to switch to interest only causes particular disadvantage to borrowers who become disabled and unable to work, such as the Defendant? If so, can the Claimant show that the practice is objectively justified for the reasons asserted in paragraph 11.1.3 that the Defendant lacks a repayment strategy other than sale when she is 65,….The more important point is whether the perceived need to guard against borrowers lacking a repayment strategy-  other than sale when the Defendant is 65 - is a proportionate means of achieving a legitimate aim thus justifying the refusal to switch the mortgage. 

79.	Assuming the first half of that proposition in the Defendant’s favour, I nonetheless consider that the answer to the second question is yes.  I consider that the practice is objectively justified. It is a legitimate aim to want to protect one’s security; the mortgage market could not survive without that aim being realised. In light of all the circumstances of this case, I consider that it was proportionate to refuse the switch.  I agree that in retrospect, it would have been the sensible thing to do, but I have to put myself in the shoes of the lender in 2007-8 and look forward.  At that time, there was no certainty that DWP payments would continue, that they would continue at the same rate, and that the house would have a value at the end of the term of the mortgage that would ensure repayment.  It is too big a gamble for the Court to compel the lender to take it on, when it is clear that they would not lend in the first place on such terms to anyone.  The Defendant argues that as long as the interest is paid, what real impact does it have on the Claimant? But one has to look at the mortgage as a whole, including redemption and whether that can be certain.  It was not, in my view, disproportionate for the lender, looking 15-18 years ahead, to think that they would be taking too big a risk.  It would not be responsible lending, having regard to the Codes set out above, and the Court should not enforce irresponsible conduct even if that is for a benign purpose as far as the Defendant is concerned.  

80.	As I have already noted, I have no evidence that that was what was in the head of the decision maker and I have heard a lot of after the event rationalisation, which I found most unhelpful.  But I have no doubt that something along these lines was at the back of the decision not to switch.  I have no doubt that it was reasonable at the time to decide not to switch.  

81.	For these reasons, I would dismiss that aspect of the defence too.  What the Defendant in effect asks me to do is to re-write the contract between the parties and this is something that a Judge should be slow to do in any case; I am not convinced that the arguments advanced by the Defendant would permit me to do it in any event.  My view is that my powers are limited to granting or refusing a possession order.  If I refused to order possession, the Defendant would still be subject to the debt.  

(3)	Can the Defendant rely on section 36 of the Administration of Justice Act 1970?
82.	Section 36 as amended extends the powers of the Court to stay or suspend execution if it appears that the mortgagor will be able within a reasonable period to pay any sums due under the mortgage.  A “reasonable period” is taken to be the term of the mortgage except in unusual circumstances: Cheltenham & Gloucester BS v Norgan [1996] 1 WLR 343.  In that case, the Court of Appeal commented that one of the issues when deciding whether to suspend was whether the mortgagee’s security was likely to be put at risk by the delay: per Evans LJ at 357B-D.

83.	The Defendant places reliance on her rights under article 8 of the European Convention on Human Rights, and on her status as a disabled person and when applying this provision, those issues should lead me to a more generous reading of the section.

84.	I invited submissions from the parties after trial on the case of Bristol & West Building Society v Ellis (1997) 29 H.L.R. 282.  The Court in that case said that 
However, that convenient starting point [sc. that in Norgan] is not available to a mortgagee who cannot discharge the arrears by periodic payments and whose only prospect of repaying the entire mortgage loan and accrued and accruing interest is from the sale of the property. In such a case the only general guidance is that the reasonableness of the period is a matter for the Court in the circumstances of the case. …
The prospect of settling the mortgage debt, including arrears of principal and/or interest, by sale of the property raises a number of questions on the reasonableness of any period which a court may consider allowing for the purpose.
The critical matters are, of course, the adequacy of the property as a security for the debt and the length of the period necessary to achieve a sale. There should be evidence, or at least some informal material (see Cheltenham & Gloucester Building Society v. Grant (1994) 26 H.L.R. 703, C.A.), before the Court of the likelihood of a sale the proceeds of which will discharge the debt and of the period within which such a sale is likely to be achieved. If the Court is satisfied on both counts and that the necessary period for sale is reasonable, it should, if it decides to suspend the order for possession, identify the period in its order. 

85.	I have no evidence that a sale is even contemplated.  The proposal, rather, is that the Defendant will remain in the property for the remainder of the term (and perhaps thereafter if a sale is imminent).  Even giving section 36 a generous interpretation, I cannot see that it entitles me to embark upon the course of conduct sought by the Defendant, which would involve a long period of uncertainty rather than the evidence of a likely sale that the Court in Ellis tells me to look for.  In addition, I note that the DWP payments have been strictly reduced recently and that the Defendant has not made up the shortfall.  Further, on the figures before me, she would struggle now to meet the interest payment element of the monthly instalment.  I feel I would be setting her up to fail.  I do not therefore consider it right to exercise the powers under section 36 to suspend, stay or adjourn.  

Counterclaim for damages
86.	The Defendant claims damages for the unlawful discrimination.  Given that I have found no discrimination, I cannot award damages against the Claimant.  I consider that their conduct towards the Defendant has been unsympathetic in the extreme, and she has found the proceedings more stressful than they needed to be.  The evidence shows that there has been a deterioration in her mental health.  Nonetheless, I cannot see any basis upon which I can award her damages.  I do note that the Ombudsman ordered compensation which I do not consider has been credited to her account and I require the Claimant to show that it has been credited.  When this matter comes back for final hearing on 19 November 2015, I direct that there be an updated mortgage statement from the Claimant showing how the Ombudsman’s ruling has been put into effect.  I expect to see a period during which interest did not run on the capital instalments as it would otherwise have done.  

Conclusion
87.	In all the circumstances, the Claimant is entitled to possession of the property and I so order.  

88.	The question of enforcement of this order is agreed to be a separate matter and will require further thought from the Claimant.  The question of costs will also have to be considered at a separate hearing when this judgment is handed down.  

CATHERINE ROWLANDS
19 November 2015

Chronology

DATE	LEGAL PROVISIONS APPLICABLE	EVENT	PAGE	
28/8/06		Defendant applies to remortgage property		
13/11/06		Mortgage entered into		
16/3/07		Mortgage payment by insurance company as Defendant unemployed	236	
26/4/07		Mortgage payment by insurance company as Defendant unemployed	239	
18/5/07		Mortgage payment by insurance company as Defendant unemployed	240	
26/6/07		Mortgage payment by insurance company as Defendant unemployed	241	
2/8/07		Mortgage payment by insurance company as Defendant unemployed	243	
30/8/07		Mortgage payment by insurance company as Defendant unemployed	244	
8/10/07		Mortgage payment by insurance company as Defendant unemployed	246	
8/11/07		Mortgage payment by insurance company as Defendant unemployed	247	
7/12/07		Mortgage payment by insurance company as Defendant unemployed	248	
5/3/08		Mortgage payment by insurance company as Defendant unemployed	250	
16/4/08		Mortgage payment by insurance company as Defendant unemployed	251	
29/4/08		Mortgage payment by insurance company as Defendant unemployed	252	
16/6/08		Defendant tells Claimant she is signed off sick	226	
4/9/08		DLA in payment	656	
2/10/08		Mortgage payment by insurance company as Defendant disabled	254	
28/10/08		Mortgage payment by insurance company as Defendant disabled	255	
12/11/08		Defendant pays £3,000 off arrears and will set up an arrangement once DWP payment sorted	226	
19/11/08		Mortgage payment by insurance company as Defendant disabled	256	
19/11/08		Pre-action protocol comes into force		
19/11/08	Pre-action protocol comes into force			
26/3/09		Claim commenced	51	
29/4/09		Letter from CAB asking to switch to interest only	634	
1/5/09		Defendant advises Claimant that she is still ill but may return to work	228	
5/5/09		Claim adjourned for D to claim interest payment from DWP	57	
19/6/09		Letter Claimant to CAB asking for updated income/expenditure details	359	
23/6/09		Defendant provides statement of means to Claimant	259	
3/7/09		Refusal to convert account	261	
21/7/09		Letter Defendant to Claimant setting out the proposals she has tried to discuss with Claimant	261	
21/7/09		Letter from Defendant to Claimant asking them to reimburse the fees, interest and costs	645	
27/7/09		Request for further information	364	
30/7/09		Defendant fills in form concluding “if you accept me onto interest only the arrears should reduce”	269	
10/8/09		Refusal to reduce loan payments	365	
11/8/09		Letter Claimant to Defendant stating that she does not meet the assessment criteria to qualify for any modifications of the mortgage	264	
17/9/09		Defence (i)	59	
24/11/09		Amended Defence – first reliance on Disability Discrimination Act 1995	65	
1/10/10	Equality Act 2010 in force			
30/8/11		Reamended Defence relying additionally on Equality Act 2010	98	
0/10/11	CML Guidance on arrears and possessions		559	
30/7/12		Letter Claimant to Defendant explaining why no transfer to interest-only at that stage	724	
26/4/14	MMR leads to prohibition on move to interest only in absence of capital repayment strategy		729	
5/6/15		DWP payments reduce from £58.18 to £50 pw	735	
12/11/26		Term of the mortgage		

Order

IN THE COUNTY COURT AT BRISTOL	Claim No 9PA50382

BEFORE Ms Recorder Rowlands

Thursday 19th November 2015

Between

SOUTHERN PACIFIC MORTGAGE LIMITED
Claimant 

— and —

JACQUELINE VERA GREEN
Defendant

Order

UPON the Trial of the Claim, and of the Counterclaim 
AND UPON hearing Clifford Payton and Adrienne Morgan, counsel for the Claimant, and Stephen Cottle, counsel for the Defendant
AND UPON the Defendant applying to the Court for a direction that an account of the mortgagee’s costs be taken
AND UPON the Court declaring that the Claimant shall be debarred from adding to the mortgage account the costs of and occasioned by the issue of the Claimant’s reasons for the refusal to change to an interest only mortgage as set out in the pleadings and the statements of (i) Zoe Hedger (ii) Rebecca Fenn (iii) Julie Summerfield save to the extent set out in the Amended Particulars of Claim and Defence to Counterclaim dated 10th December 2013;

IT IS ORDERED THAT

1	the Counterclaim be dismissed;
2	the Defendant do give to the Claimant possession of 164 Claverham Road, Bristol, BS49 4LW no later than 4 p.m. on Thursday 17th December 2015;
3	the Money Claim be adjourned generally with liberty to restore;
4	the matter be referred to a costs judge for directions for the taking of an account;
5	The costs of the account be in the account;
6	There be a stay of the order for possession and an extension of time for filing a Notice of Appeal by either party until 28 days after the judgment of the Supreme Court in the case of McDonald v McDonald UKSC 2014/0234 is handed down so long as the Defendant pays the sum due by way of interest on the mortgage from month to month and in default of such payment the Claimant shall immediately be entitled to apply for a warrant for possession;
7	Liberty to apply to both parties;
8	Permission to appeal paragraph 6 of this order is refused;
9	There be detailed assessment of the Defendant’s publicly funded costs in any event.