Cheltenham & Gloucester Building Society v Norgan [1996] 1 WLR 343
Facts
Mrs Norgan mortgaged her home on terms requiring repayment over a lengthy period with monthly interest payments. Arrears developed and earlier possession orders were suspended. When the lender later sought a warrant, the judge assessed whether she could clear the arrears within four years and concluded that she could not. A considerably longer period remained under the mortgage itself. Mrs Norgan appealed, arguing that the court had chosen an unduly short repayment horizon when exercising its section 36 discretion. The dispute was about a workable arrears plan, rather than an intended immediate sale of the house.
Legal Issue
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.
Held
The Court of Appeal allowed the appeal and remitted the case for reconsideration. In the absence of unusual circumstances, the remaining mortgage term should be the starting point when assessing the reasonable period for payment of arrears. The judge’s four-year period had not been related to the substantially longer term remaining. The court still had to establish the actual arrears, the borrower’s finances and whether payments could realistically be maintained. Norgan therefore provided a framework for a sustainable repayment assessment. It did not guarantee suspension, require the most favourable conceivable period, or permit the borrower to ignore ongoing payments while spreading arrears over the term.
⭐ Legal Principle
The remaining mortgage term is ordinarily the starting point for assessing a reasonable arrears repayment period under section 36. The court must still be satisfied that the proposed payments are realistic and sustainable; the starting point is not an automatic entitlement to postponement.
Significance
Norgan discourages short, arbitrary repayment periods which make a viable arrears plan appear impossible. It is particularly important where ordinary instalments can continue alongside arrears payments. Compare Ellis and Krausz, where repayment depended on a proposed sale. The remaining mortgage term is a starting point for assessing reasonable repayment, not an automatic entitlement to the longest possible delay. Evidence of income, expenditure, the debt and future payments remains necessary to justify the exercise of discretion.
Common exam questions about this case
Does Norgan automatically give the borrower the full remaining term?
No. It supplies the ordinary starting point for the assessment, not a guaranteed result. The court must consider whether the borrower can maintain ongoing instalments and pay off arrears under a credible plan. Unusual circumstances or financial evidence may justify a different conclusion.
Why was the four-year period criticised?
It was selected without proper reference to the longer period remaining under the mortgage. That could make repayment appear impossible even though spreading arrears over the contractual horizon might be workable. The appellate court required the judge to reconsider the plan using the correct starting point.
What evidence supports a Norgan application?
A clear account of the arrears, continuing instalments, income and expenditure is needed to show that the proposed payments can be sustained. The case is about realistic repayment over time. It does not substitute sympathy for evidence or excuse repeated default under an unworkable arrangement.