Zinda v Bank of Scotland Plc

A standard suspended possession order requiring payment of mortgage arrears and current instalments imposes cumulative obligations. Clearing the arrears by consolidating them into the mortgage debt does not discharge the legal charge or the possession order where the mortgage remains in force.

Under section 36(3) of the Administration of Justice Act 1970, conditions attached to a suspension may concern any sum secured by the mortgage. They are not confined to the reasonable period used to establish the court’s jurisdiction. A condition requiring payment of current instalments may therefore continue throughout the mortgage term.

The bank obtained a standard-form suspended possession order in 2005 after the borrower fell into arrears on an interest-only residential mortgage. Enforcement was suspended while he paid specified arrears by instalments and, in addition, paid current mortgage instalments.

In 2008 the bank consolidated the then arrears with the outstanding loan balance. The borrower later defaulted again. His applications to suspend enforcement of a warrant were dismissed by a district judge, and His Honour Judge Oppenheimer dismissed his appeal.

On this second appeal, permission was confined to whether the consolidation discharged the possession order and to the proper construction of its condition requiring payment of current instalments.

Appeal dismissed. Munby LJ gave the judgment, with which Hedley J and Mummery LJ agreed.

1. The 2008 consolidation cleared the existing arrears, but did not discharge or replace the mortgage deed or the security created by it. The original charge remained effective, including in respect of the consolidated debt. A temporary absence of arrears did not therefore extinguish the possession order.

2. The order was validly made under section 36 of the Administration of Justice Act 1970. The statutory jurisdiction depends on the mortgagor being likely, within a reasonable period, to pay the arrears and the instalments expected to fall due during that period. Once that threshold is met, however, section 36(3) permits conditions concerning any sum secured by the mortgage. The conditions are not limited to that reasonable period.

3. The condition in the standard order had two cumulative limbs. To prevent enforcement, the borrower had to pay both the specified arrears and, in addition, the current instalments due under the mortgage. “Current instalments” meant the continuing instalments payable until redemption of the mortgage. Payment or consolidation of the original arrears could not cure a later failure to pay those instalments.

4. The order did not rewrite the parties’ contract or create an unlawful indefinite sanction. It required the borrower to perform continuing contractual payment obligations while preserving statutory relief from immediate eviction. In principle, further protection remained available through variation or revocation of conditions under section 36(4), an application to suspend a warrant, and the requirement for permission to enforce after six years.

• Court of Appeal (Civil Division): dismissed the borrower’s second appeal on the limited construction and discharge issue.
• Court of Appeal (permission): Rix LJ granted limited permission in [2011] EWCA Civ 95.
• Brentford County Court: His Honour Judge Oppenheimer dismissed the borrower’s appeal from the district judge on 14 September 2010.
• Brentford County Court: District Judge Allen dismissed the borrower’s applications concerning suspension of enforcement on 28 May 2010.
• Brentford County Court: Deputy District Judge Ryan made the suspended possession order on 24 October 2005.