• In the case of Cheltenham Gloucester Building Society v Norgan [1996] 1 WLR 343, the Court of Appeal held that where the courts must determine a ‘reasonable period’ for the purposes of s36 Administration of Justice Act 1970, the starting point for such a determination is the full term of the mortgage. Following this, the most favourable period to the mortgagor is the period which must be adopted.

Facts of the case:

  • D purchased her husband’s half share of their dwelling house for £90,000 by means of a mortgage with a building society.
  • The terms were that the principal sum should be repaid at the expiration of a term of 22 years with interest payable in monthly instalments.
  • Under the building society’s standard conditions, if any monthly instalment should be in arrear and unpaid for one month after becoming due, the building society would be entitled to take possession of the property.
  • Sometime into the agreement, the repayments fell into arrears. The arrears reached £7,000 in April 1990 when the building society was taken over by C.
  • C obtained two possession orders, though both were suspended by a district judge.
  • In 1993, following the arrears remaining substantial, C applied for another possession warrant. The judge in exercising the court’s powers under s36 of the Administration of Justice Act 1970, determined that four years would be a reasonable period within which to expect the arrears to be paid off, and that since it was unlikely that the D would be able to make said repayments in four years, the warrant for possession was granted.

Issues on appeal

  • The issue in the case was what the starting point was for determining what a reasonable time frame would be to pay off the arrears under s36 of the AJA.

Court of Appeal held:

  • The CA allowed the appeal by D and remitted the case to the county court.
  • The appeal was allowed because the CA said that in the absence of unusual circumstances, the outstanding term of the mortgage was the starting point in determining how long it would be reasonable to keep a mortgagee out of possession, so as to give the mortgagor time to pay the sums due under the mortgage.
  • In the present case, the judge at first instance had erred in adopting a repayment period unrelated to the outstanding term of the mortgage.

Waite LJ

  • [353] “it does seem to me that the logic and spirit of the legislation require, especially in cases where the parties are proceeding under arrangements such as those reflected in the C.M.L. statement, that the court should take as its starting point the full term of the mortgage and pose at the outset the question: “Would it be possible for the mortgagor to maintain payment-off of the arrears by instalments over that period?”
  • [354] “It follows, for all these reasons, that in adopting for this case a period of repayment (four years) unrelated to the remaining term of the mortgage (thirteen years) the judge in my view fell into error. The fault was not his. He applied to a case which he examined with outstanding care and clarity a practice of convenience which has been developed to deal with a widely framed statutory discretion in respect of which guidance from authority has been limited.”
  • [355] “I would therefore allow the appeal and remit the case to the county court for (1) a determination of the disputed items and a finding as to what precisely is now, or (as they case may be) will at the expiry of the mortgage term be, due from the mortgagor on capital and interest instalment account respectively— including in the latter account a precise figure for the current interest in arrear”