Bristol and West Building Society v Ellis & Anor

Under section 36 of the Administration of Justice Act 1970, as extended by section 8 of the Administration of Justice Act 1973, suspension of a mortgage possession order requires a reasonable prospect of payment within a reasonable period.

Where repayment depends on selling the mortgaged property, the court must assess the adequacy of the security, the likely sale proceeds, the evidence supporting the proposed sale period and the effect of delay. There is no fixed maximum period, but the order must identify the relevant period and cannot rest on an unexpressed expectation of sale. An appellate court should intervene where the lower court lacked sufficient material to exercise its discretion properly.

Bristol and West Building Society sought possession of the matrimonial home after substantial mortgage arrears accumulated. A possession warrant was suspended by the County Court on terms requiring an immediate lump-sum payment and subsequent payments of £10 per month towards the arrears. The order did not require the property to be sold.

The District Judge appears to have expected a sale within three to five years, although the stated payment terms would have taken approximately 98 years to clear the arrears. His Honour Judge McNaught upheld the order. The mortgagee appealed, raising whether the suspension satisfied the requirement in section 36 of the Administration of Justice Act 1970 that payment be possible within a reasonable period.

Disposition. Lord Justice Auld delivered the leading judgment and Lord Justice Hirst agreed. The appeal was allowed, the order below was set aside and immediate possession was ordered.

1. The order could not stand on its terms. It required payment of the arrears at a rate which would have taken about 98 years and contained no term requiring sale of the property within three to five years. The court could not rely on an unexpressed expectation of sale. Nor could the possible power of variation under section 36(4) of the Administration of Justice Act 1970 validate an order which was invalid when made.
2. Where arrears are to be paid by periodic payments, the outstanding mortgage term is ordinarily the starting point for assessing reasonableness, as recognised in Cheltenham & Gloucester Building Society v Norgan [1996] 1 All ER 449. That approach is unavailable where the only realistic prospect of repayment is sale of the property.
3. In a sale case, the court must consider the adequacy of the property as security and the period needed to achieve a sale. Evidence, or at least informal material, should address both the likelihood that the proceeds will discharge the debt and the period within which a sale is likely. If possession is suspended, the order should identify that period.
4. The word reasonable is not equivalent to short. No general maximum, including one year, can be prescribed. The question depends on the circumstances, including the extent to which the debt is secured and the effect of time on the security. This approach was consistent with National & Provincial Building Society v Lloyd [1996] 1 All ER 630.
5. Here, the evidence consisted principally of the mortgagor’s anticipated sale period and two estate-agent valuations only slightly above the redemption figure. It was insufficient to establish that the property would probably be sold for enough to discharge the debt and arrears within a reasonable period. Even a properly expressed three- or five-year suspension would not have been justified.
6. The appellate court’s usual reluctance to interfere with discretion did not prevent intervention because the lower courts lacked the material necessary for a proper exercise of the statutory discretion. The order was replaced by an order for immediate possession, with costs payable from the sale proceeds and the stated protective costs direction.

• Court of Appeal (Civil Division): allowed the appeal and ordered immediate possession, with costs here and below.
• Bristol County Court: District Judge Bolton suspended execution of the possession warrant on payment terms. His Honour Judge McNaught upheld that order, treating the expected three-to-five-year sale period as sufficient.