Neutral Citation No:  NICh 14
Judgment: approved by the Court for handing down
(subject to editorial corrections)*
(a) the Order of Master Hardstaff dated 20 December 2018 whereby he refused the defendant/appellant's application dated 3 August 2018 for a stay of a possession order granted on 26 July 2016 in respect of property situate and known as 59 Culnady Road, Upperlands, Maghera, BT46 5TN ("the property") and
(b) the Order of Master Hardstaff dated 22 July 2016 whereby he granted a possession order in respect of the property.
The property consists of a dwelling house and 0.4 acre garden.
Chronology of proceedings
a) 11 September 2015 - The respondent issued an originating summons seeking possession of the property.
b) 22 July 2016 - Court granted a possession order in respect of the property with a three month stay. Both the appellant and respondent were legally represented at the hearing.
c) 3 August 2018 - The appellant applied for a stay of the possession order.
d) 20 December 2018 - Following a hearing on 5 November 2018 the Master refused the appellant's application for a stay.
e) 14 March 2019 - The respondent gave an undertaking to refrain from enforcing the possession order pending the outcome of this appeal.
(a) Condition 8 provided that the appellant covenanted to pay the monthly account on the date appointed by the respondent and at monthly intervals thereafter until the whole of the loan and interest due thereon and the whole of or any further advances that may be made by the respondent to appellant and the interest due thereon and all other monies payable to the respondent by the appellant are fully repaid.
(b) Condition 24.1 provided that the whole of the principal monies secured by the charge shall be treated as being due one month following the date of the creation of the charge.
(c) Condition 24.2 provided that the respondent was able to give notice to require the money owed by the appellant to be repaid immediately if the appellant was more than two months late with any payment under the mortgage conditions.
(d) Condition 24.3 provided that the respondent was permitted to take possession of the property if the conditions in paragraph 24.2 had been breached and it had power to exercise its statutory power of sale provided for by Section 19(1) of the Conveyancing Act 1881.
New affidavit proposed to be filed on behalf of the appellant
Submissions by the appellant
"In any action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, notwithstanding that—
(a) any other person dissents; or
(b) the mortgagee or any person so interested does not appear in the action;
and without allowing any time for redemption or for payment of any mortgage money, may direct a sale of the mortgaged property, on such terms as it thinks fit, including the deposit in court of a reasonable sum fixed by the court to meet the expenses of sale and to secure performance of the terms."
(a) His payments of capital and interest would be reduced; (and the lender would be put back in funds).
(b) The costs of sale would be reduced or eliminated as the purchaser had been identified thereby reducing the costs burden on the borrower and
(c) A sale by a vendor in possession would, as is almost universally recognised, realise more than a repossession sale – See Northern Bank v Jeffers  NI 497 at 504.
In summary his submission was that a shortfall sale did not compromise the lender's security whereas a refusal to order such a sale would be at the borrower's expense.
a) The court lacked jurisdiction either at common law or under statute to stay proceedings on the basis of a shortfall sale. The only power of sale arose on foot of the mortgage contract and the Conveyancing Act. In both of these situations the power was given to the mortgagee only and not the mortgagor.
b) The only jurisdiction the court had to stay proceedings arose under Section 36 of the Administration of Justice Act 1970 and under its inherent jurisdiction. He submitted that Section 36 did not empower the court to suspend a possession in order to permit the mortgagor to sell the premises where the proceeds of sale would not be sufficient to discharge the mortgage debt.
c) The English cases did not apply in Northern Ireland as their jurisdiction was based on the 1925 Law of Property Act which did not apply in Northern Ireland.
d) Order 88 did not give a mortgagor a power of sale.
e) Order 31 did not give a mortgagor a power of sale as it was only an enabling provision.
f) Even if Palk applied it was distinguishable on its facts. In Palk the mortgagor was being financially prejudiced as the mortgagee had obtained possession and was then proceeding to let the property because it wanted to wait for the market to rise. In the meantime the rental payments were not sufficient to cover the interest payments due resulting in Mrs Palk facing an ever increasing debt. He submitted that the facts of this case were not on all fours with Palk as the mortgagee in this case wished to sell the property and not rent it. As noted in Krausz by Millett LJ Palk did not support the making of an order where the mortgagee is taking active steps to obtain possession and to enforce its security by sale.
g) Although in Barrett the court permitted a shortfall sale when the mortgagor wanted to sell the property he submitted this case was wrongly decided as per Millett LJ in Krausz.
h) Even if the power existed it did not extend to permitting the court to give directions regarding the mode of sale and the identity of the purchaser as the appellant sought in this case.
i) Therefore in all the circumstances he submitted that the court should dismiss the stay application.
"1. Parties have a duty to put their case properly and fully before the Master and adduce all available evidence at that stage…
2. A party seeking to adduce fresh evidence before the judge in chambers on appeal should advance a sound reason for the failure to adduce that evidence before the Master.
3. A party seeking to adduce such additional evidence carries the burden of establishing that the interests of justice would be better served by the admission of additional evidence rather than by refusing to admit it."
(a) The circumstances in which the mortgagor is entitled to an order for sale of the mortgage property.
(b) The circumstances in which the court has jurisdiction to stay an order for possession.
"…the legal mortgagee under an instalment mortgage under which, by reason of default, the whole money has become payable, is entitled to possession, the court has no jurisdiction to decline to make the order or to adjourn the hearing, whether on terms of keeping up the payments or paying arrears, if the mortgagee cannot be persuaded to agree to this course. The sole exception to this is that the application may be adjourned for a short time to afford to the mortgagee a chance of paying off the mortgage in full or otherwise satisfying him…"
"(1)Where the mortgagee under a mortgage of land which consists of or includes a dwelling-house brings an action in which he claims possession of the mortgaged property, not being an action for foreclosure in which a claim for possession of the mortgaged property is also made, the court may exercise any of the powers conferred on it by subsection (2) below 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 or to remedy a default consisting of a breach of any other obligation arising under or by virtue of the mortgage.
(a) may adjourn the proceedings, or
(b) on giving judgment, or making an order, for delivery of possession of the mortgaged property, or at any time before the execution of such judgment or order, may—
(i)stay or suspend execution of the judgment or order, or
(ii)postpone the date for delivery of possession,
for such period or periods as the court thinks reasonable.
(3)Any such adjournment, stay, suspension or postponement as is referred to in subsection (2) above may be made subject to such conditions with regard to payment by the mortgagor of any sum secured by the mortgage or the remedying of any default as the court thinks fit."
"This Order applies to any action by a mortgagee or a mortgagor or by any person who has the right to foreclose or redeem any mortgage, being an action in which there is a claim for any of the following released namely -
(a) Payment of monies secured by the mortgage,
(b) Sale of the mortgaged property.
(d) Delivery of possession to the mortgagee by the mortgagor or by another other person who is or is alleged to be in possession of the property.
(f) Conveyance of the property or its release from the security.
(g) Delivery of possession by the mortgagee.
(h) An enforcement order or time order where a regulated agreement is secured by a mortgage."
"1. Where in any cause or matter in the Chancery Division relating to any land it appears necessary or expedient for the purposes of the cause or matter that the land or any part thereof should be sold, the Court may order that land or part to be sold, and any party bound by the order and in possession of that land or part, or in receipt of the rents and profits thereof, may be compelled to deliver up such possession or receipt to the purchaser or to such other person as the Court may direct."
"(4) Rules 2 and 3 shall, so far as applicable and with the necessary modifications, apply in relation to the mortgage, exchange or petition of any land under an order of the court as they apply in relation to the sale of any land under such order."
"What this seems to say is that in any case of negative equity a mortgagor can expect the court to order a sale of the property against the mortgagee's will thereby depriving it of its status of being a secured creditor and moving it to the dubious prospect of successfully pursuing a personal action against the erstwhile mortgagor. This seems very difficult to justify."
I therefore do not consider that this court should follow Palk.
"Palk v Mortgage Services Funding Plc was a case in which the mortgagee had no wish to realise its security in the foreseeable future, whether by sale or foreclosure. It established that in such a case the mortgagor might obtain an order for sale even though the proceeds of sale would be insufficient to discharge the mortgage debt. It does not support the making of such an order where the mortgagee is taking active steps to obtain possession and enforce its security by sale. Still less does it support the giving of the conduct of the sale to the mortgagor in a case where there is negative equity, so that it is the mortgagee who is likely to have the greater incentive to obtain the best price and the quickest sales."
In the present case I am satisfied that the mortgagee is taking active steps to obtain possession to enforce its security by sale and accordingly Palk does not apply.
"It seems to me that the procedure followed and the decision reached in Barrett's case tend fundamentally to undermine the value of the mortgagee's entitlement to possession."
Similarly Millett LJ in relation to Barrett said at page 30:
"I have serious doubts whether that case was rightly decided"
I accept the criticisms made by Phillips LJ and Millett LJ in Krausz about Barrett and accordingly I consider that this court should not follow it.