England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCRTF 96/0986/H

(HIS HONOUR JUDGE MITCHELL )

Royal Courts of Justice

Strand

London WC2

Thursday 14 November 1996

B e f o r e:

LORD JUSTICE MILLETT

LORD JUSTICE POTTER

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CHELTENHAM & GLOUCESTER PLC

(FORMERLY CHELTENHAM & GLOUCESTER BUILDING SOCIETY)

Plaintiff/Applicant

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1. ROBERT CHARLES BOOKER

2. SUSAN JANE BOOKER

Defendants/Respondents

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(Computer Aided Transcript of the Palantype Notes of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

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MISS E OVEY (Instructed by Church Adams Tatham, London WC1V 6HR) appeared on behalf of the Applicant.

The Respondents were not represented and did not attend.

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J U D G M E N T

(As approved by the Court)

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©Crown Copyright

JUDGMENT

LORD JUSTICE MILLETT: This is an appeal by the Plaintiffs, the Cheltenham & Gloucester Building Society, from an order of His Honour Judge Mitchell in the Stoke-on-Trent County Court on 30 April 1996. The judge gave a full reasoned judgment for the order he had made on that date when he refused leave to appeal on 15 May 1996. Leave to appeal was subsequently given by the single Lord Justice.

The question which arises on the appeal is a question of general importance. It is whether the court has jurisdiction, and if so in what circumstances should it exercise such jurisdiction, to give conduct of a sale to a mortgagee while at the same time postponing the execution of a warrant for possession until completion of the sale.

The plaintiffs claim as mortgagee under a legal charge dated 22 June 1989, granted to secure a loan of £38,000. As at July l990 the required monthly payment was £587 and the defendants' arrears amounted to £5,212.94. A possession order was made on 13 September l990 for delivery of possession on 11 October l990. The order was suspended on terms that the current instalments be maintained and the arrears, then £4,899.94, should be paid by additional monthly instalments of £500. Mr Booker appeared in person at the hearing. The terms of the suspension were not complied with. Appointments for execution of a warrant for possession were subsequently obtained for no fewer than 14 dates between 3 May 1991 and 30 April 1996.

The earlier appointments were vacated by agreement with the plaintiff. Later appointments were vacated as a result of orders of the court made on six different occasions between 3 February 1994 and 22 February 1996 following applications by the defendants for suspension of execution of the order. Of those six applications for suspension, two were eventually dismissed on the defendants' failure to appear and one was adjourned generally with liberty to restore, but was never restored.

Following an order made on 28 March 1996 dismissing the defendants' application for further suspension, an appointment for execution of the warrant was made for 30 April 1996. On that day, following a further application by the defendants for suspension of the order, the judge made the order which is now appealed against.

The material terms of his order are:

"The warrant for possession do lie in the court office conditionally upon the plaintiffs having conduct of the sale of the property with vacant possession to be provided by the defendants upon completion, and the defendants fully cooperating with the plaintiffs in the marketing of the property."

The defendants' application for suspension of execution of the warrant was made on the grounds that they were still seeking to sell the property and were considering reducing the asking price. They offered to pay the plaintiffs £600 per month pending sale, and relied upon the fact that they had three children who were in occupation of the property, the eldest of whom was shortly to be sitting GCSE examinations. In rejecting the plaintiffs' subsequent application for leave to appeal against the judge's order that the warrant for execution should lie in the office, the judge explained that his order had been made on the footing that:

1. The defendants accepted that they were no longer in a position to maintain the mortgage payments, let alone pay off the arrears;

2. It was not right to exercise the powers under section 36 of the Administration of Justice Act 1970 or section 8 of the Administration of Justice Act 1973.

(I interpose to say that it is plain that in the circumstances the judge had no jurisdiction to exercise the statutory powers referred to.)

3. The purpose for which the plaintiffs sought possession was to realise the security at the best possible price and that this would best be done by early sale while the property was still occupied by the defendants;

4. Accordingly he provided for what he described as a temporary deferment of execution of the warrant under what he considered to be the long established practice of the county courts, supported by the notes to Section 21 of the County Courts Act 1984 in the County Court Practice under the heading "Execution".

At 1 April 1986 the defendants' monthly instalments were £562.57 together with £14.24 for property insurance; the arrears totalled £11,860.09 and the last payment of £460 had been paid on 16 January 1996. The evidence before the judge was that the property might fetch £65,000 and that the total indebtedness was then £58,395. At 4 September 1996 the arrears amounted to £14,178.94 and the total indebtedness, including interest to the end of September 1996 was £63,291.42. It is therefore apparent that at the present time, after allowing for the costs of sale, the likelihood is that there is be little, if any, equity in the property.

The appeal is said to raise the following questions of principle.

1. Where the power to suspend execution given by Section 36(2) of the Administration of Justice Act 1970 cannot be exercised because it does not appear to the court that the requirements of Section 36(1) of that Act, read in conjunction with Section 8 of the Administration of Justice Act 1973, are satisfied, or where the court decides in the exercise of its discretion that the power should not be exercised, does the county court nevertheless have a residual inherent jurisdiction to suspend execution of a warrant for possession?

2. If it has such a jurisdiction, can it be exercised so as to suspend the execution for an indeterminate period?

3. Is it in principle appropriate to suspend execution pending sale when the conduct of the sale is entrusted to the mortgagee rather than to the borrower?

I am not entirely satisfied that the second question arises since the judge did not intend to suspend execution of a warrant for an indeterminate period, but rather for a short period pending completion of a sale in the near future by the plaintiffs.

I will deal first with the question of jurisdiction. The Administration of Justice Act 1970 was enacted because it was considered by Parliament that the jurisdiction of the courts to deny mortgagees possession was too limited. It was extremely limited at common law but nevertheless it did exist. In Birmingham Citizens' Permanent Building Society v Caunt [1962] 1 Ch 883 at page 912 Russell J stated the position as follows:

"Accordingly, in my judgment, where (as here) 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 the order or to adjourn the hearing whether on terms of keeping up payments or paying arrears, if the mortgagee cannot be persuaded to agree to this course. To this the sole exception is that the application may be adjourned for a short time to afford to the mortgagor a chance of paying off the mortgage in full or otherwise satisfying him; but this should not be done if there is no reasonable prospect of this occurring. When I say the sole exception, I do not, of course, intend to exclude adjournments which in the ordinary course of procedure may be desirable in circumstances such as temporary inability of a party to attend, and so forth."

In Royal Trust Company of Canada v Markham [1975] 1 WLR 1416, Sir John Pennycuick, VC, when delivering the leading judgment of this court, cited that passage from the judgment of Russell J, with approval and continued at page 1420:

"The characteristic instance in which that sole exception is applicable is where the mortgagor has entered or is about to enter into a contract for the sale of the property at a price which will enable the mortgage to be paid off in full."

So, as the law stood before 1970 the mortgagee had an immediate right to possession, subject only to the single exception mentioned by Russell J, and it was not in the power of the court to refuse it.

In a case where the court has no jurisdiction under the 1970 and 1973 Acts to defer the order for possession, the position is as stated by Russell J and Sir John Pennycuick. There is a residual jurisdiction in the court, but a strictly limited one, to postpone the giving of possession to the mortgagee for a short period in order to enable the property to be sold by the mortgagor.

If so, it appears to me in principle difficult to deny the existence, at least in theory, of a similar jurisdiction to defer the giving of possession for a short time in order to enable the property to be sold by the mortgagee. If the court is satisfied (a) that possession will not be required by the mortgagee pending completion of the sale but only by the purchasers on completion; (b) that the presence of the mortgagor pending completion will enhance, or at least not depress, the sale price; (c) that the mortgagor will so cooperate in the sale by showing prospective purchasers round the property and so forth; and (d) that he will give possession to the purchaser on completion, it seems to me that there is no reason in principle why the court should accede to a mortgagee's insistence that immediate possession prior to the sale should be given to him.

However, while the jurisdiction exists, experience shows that these conditions are seldom likely to be satisfied. Accordingly, in my judgment, the jurisdiction should be sparingly exercised, and then exercised only with great caution. If the conditions which I have mentioned exist, the court is likely to entrust the conduct of the sale to the mortgagor. There is an inherent illogicality in entrusting conduct of the sale to the mortgagee and yet leaving the mortgagor in possession pending completion unless the mortgagee has agreed to this course. The obtaining of possession with a view to giving it to the purchaser is part of the necessary arrangements for sale. In my opinion the party having conduct of the sale ought normally to have the right to decide when it is desirable for him to obtain possession from those in occupation in order to enable the sale to be effectively carried through.

As the plaintiffs observe, in what I would wish to describe as a most impressive skeleton argument, if the contractual obligation to give vacant possession, which the mortgagee will wish to assume in order to obtain the best price reasonably obtainable, is separated from the ability to give immediate vacant possession, the mortgagee is put at risk of being in breach of contract through circumstances beyond his control. Moreover, if the conduct of the sale is given to the mortgagee, any prospective purchaser will become aware prior to exchange of contracts that the property is being sold by a mortgagee who has not yet obtained vacant possession. The risk that the borrower will not vacate the property on completion will become apparent and the purchaser may be deterred from proceeding. He will also be aware that the sale is a forced sale, the advantage of achieving a better price through continued owner occupation is unlikely to be realised.

Accordingly, while I would not wish to hold that the court has no jurisdiction in an appropriate case to make an order such as the judge made in the present case, it is hard to see the advantages of such an order and easy to see the disadvantages. I find it difficult to envisage circumstances in which such a course would be appropriate unless the mortgagee consented. It ought to be a rarity and taken only if the necessary conditions are satisfied.

In the present case the judge made the order on 30 April 1996 on the very day fixed for execution of the warrant when the bailiff was waiting to take possession. It was the ninth appointment for execution of the warrant. On the first, second and third occasions the warrant had been withdrawn by the plaintiffs; on the fourth and fifth it had been suspended on terms with which the defendants had not complied; and on the sixth and eighth it had been suspended during an adjournment of an application by the defendants upon the adjourned hearing of which they had not attended.

The history of the case shows repeated attempts by the defendants to avoid execution with no real prospect of doing so, and no object other than to postpone the evil day. The plaintiffs point to the defendants' repeated failures to meet the monthly repayments they expressed themselves as able to make; their failure to attend adjourned hearings after they had achieved their objective of obtaining a further suspension of the warrant; and the extreme lateness of the final application which was made, at least in part, on the basis of a proposal for monthly payments which Mr Booker acknowledged in court he could not make.

The judge said that he made the order because the purpose for which the plaintiffs required possession was to realise the security at the best possible price. He said that the means by which that might be done would be to effect an early sale of the property at the highest price which might be obtainable. But the evidence demonstrated that the defendants were unlikely in the extreme to cooperate with the plaintiffs. They had failed to sell the property for more than two years or even to produce evidence of serious offers. It was self-evidently unlikely that the defendants would assist the plaintiffs in achieving an early sale.

The judge assumed that in the event of non-cooperation by the defendants the plaintiffs could readily return to court and apply for immediate execution. But he overlooked a number of factors. In the first place, non-cooperation by the defendants might not be readily susceptible of proof; the plaintiffs would not easily be able to monitor what the defendants were saying to prospective purchasers; the plaintiffs would not know until the last moment whether the defendants would cooperate in giving vacant possession on completion; and, finally, even if an application was made at very short notice and was successful, immediate execution would not follow.

The plaintiffs were unable to obtain access to the property for the purpose of valuing it until the end of October. They have since received two valuations and are now at last in a position to put the property on the market. At the time of the present hearing, the defendants have not referred any potential purchaser to the plaintiffs.

I agree with the submission made on behalf of the plaintiffs that the judge's order, contrary to his expressed intention, was calculated to and did delay the sale of the property. If continued it might depress the price and create a deficiency in the net proceeds of sale.

No doubt the judge would say, and there is some truth in this, that if the plaintiffs had returned to him after the expiry of, say, three months instead of pressing ahead with the present appeal, he would have lifted his order and enabled possession to be obtained earlier than will have been achieved by a successful appeal. But such a course would only confirm the order which the judge made and encourage the lower courts to make similar orders more commonly in future.

In my judgment, on the facts of the present case, the judge was plainly wrong to have made the order he did. I would allow the appeal and direct that the warrant for execution should issue without delay.

LORD JUSTICE POTTER: I agree.

Order: Appeal allowed. Set aside order that the warrant lie in the court so it is available for immediate execution. Liberty to add costs of appeal to the security.