Western Bank Ltd v Schindler

A legal mortgagee has an immediate right to possession, independently of arrears or default, unless the mortgage expressly or impliedly restricts that right. A postponed repayment date, or an express restriction on the powers of sale and appointment of a receiver, does not by itself support such an implication.

By a majority, the court held that Administration of Justice Act 1970, section 36, empowers the court to delay possession of a mortgaged dwelling-house whether or not the mortgagor is in default. Where arrears or default exist, the statutory condition limits the discretion. Otherwise, the court may consider all relevant circumstances when determining a reasonable period.

The defendant mortgaged his dwelling-house to the plaintiff bank. Under the unusual terms of the mortgage, neither principal nor accrued interest was payable until 4 January 1983. There were no arrears or other defaults under the mortgage, although collateral life assurance had lapsed.

Goulding J held that the bank retained its common law right to possession and that section 36 of the Administration of Justice Act 1970 applied. He ordered possession after allowing the defendant a short period to vacate.

The mortgagor appealed. He contended that the mortgage impliedly excluded possession before default and that section 36 either displaced the bank's common law right or required protection against possession where no default existed. The central questions concerned the implied terms of the mortgage and the application of section 36 to a possession claim unsupported by arrears or default.

Appeal dismissed unanimously. Buckley and Scarman LJJ formed the majority on the construction of section 36. Goff LJ reached the same disposition by a different construction of that provision.

1. Per Buckley, Scarman and Goff LJJ, a legal mortgagee's right to possession arises from the legal estate and is independent of arrears or default. The principle recognised in Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317 therefore applied. The right may be excluded expressly or by necessary implication, but it should not lightly be treated as restricted.

2. No restriction could be implied from the postponed repayment date or clause 4(A), which limited the statutory powers of sale and appointment of a receiver. Possession may protect the security against vacancy, vandalism, disrepair or waste. That function remains valuable even when the mortgagee cannot yet sell. Clause 4(A) did not display the certainty, obviousness or necessity required for the proposed implication and, if anything, its express treatment of other rights pointed against it.

3. Per Buckley and Scarman LJJ, section 36 of the Administration of Justice Act 1970 applies whenever a mortgagee seeks possession of a dwelling-house, whether or not any sum is due or any other mortgage obligation has been broken. A literal construction would irrationally protect a defaulting mortgagor while withholding protection from one who had committed no default.

4. The conditional language in section 36(1) restricts the discretion where arrears or default exist. It does not define the only circumstances in which the discretion arises. Where there is no default, the court may determine a reasonable period by reference to all relevant circumstances, including the mortgagee's reasons for seeking possession, the urgency of any risk to the security and the mortgagor's likely ability to meet future payments.

5. Goff LJ disagreed with that statutory construction. In his view, section 36 applied only where money was due or another mortgage obligation had been broken. He nevertheless agreed that, if the majority's construction were correct, the circumstances justified refusing any further indulgence.

6. The judge was entitled to consider the failure of the collateral security and the resulting inadequacy of the bank's security. The order for possession was allowed to take effect, with possession to be given within 14 days. Leave to appeal to the House of Lords was refused.

1. Court of Appeal: The appeal was dismissed unanimously. Buckley and Scarman LJJ held that section 36 of the Administration of Justice Act 1970 applied despite the absence of arrears or default. Goff LJ disagreed on that construction but agreed with the disposition. Possession was ordered within 14 days.
2. High Court: Goulding J ordered the defendant to deliver possession to the plaintiff mortgagee. He held that section 36 applied and exercised the resulting discretion by allowing only a short period before possession.