JAMES EDWARD LIDDIMENT v ANDREW WILLIAM HULL

Under Administration of Justice Act 1970, section 36, the court may exercise its possession discretion before trial where the mortgagor admits a minimum debt. It need not determine the ultimate quantum if doing so would require prejudging the unresolved dispute.

The mortgagor bears the burden of showing a likely ability to clear the debt within a reasonable period. In a defaulted commercial facility requiring immediate lump-sum repayment, conditional refinancing proposals which leave an unsupported shortfall will not satisfy that threshold. Section 36 is a discretionary protection; it is not a substantive defence to a possession claim.

The receivers, appointed over assets of the defendant following default under a loan secured by a legal charge over farmland, obtained possession of the remaining land from a Deputy Master.

The defendant appealed. He challenged the exercise of the discretion under section 36 of the Administration of Justice Act 1970. He contended that the court should await trial of his claims concerning the debt, and that refinancing evidence, including an offer from MSP Capital, justified an adjournment or suspension.

The central issue was whether the Deputy Master had erred in finding that the defendant had not shown a likely ability to pay the sums due within a reasonable period.

1. Appeal dismissed. The Deputy Master was entitled to order possession and to decline relief under section 36 of the Administration of Justice Act 1970.

2. The appellate court could interfere with the discretionary decision only if it was legally wrong, made on a wrong basis, or plainly wrong. That threshold was not met.

3. The court rejected the contention that section 36 could not be exercised until the trial determined the precise debt. Household Mortgage Corporation v Pringle [1997] 30 HLR 250 showed that the discretion may be exercised before trial without prejudging a challenge to the debt. The court may proceed on a minimum sum which the mortgagor accepts is due. Here, the Deputy Master adopted the most favourable accepted minimum figure for the defendant.

4. The facts differed materially from an instalment mortgage with a substantial remaining term. This was a defaulted commercial lending facility secured by a charge and immediately enforceable. No instalments were proposed, and there was no remaining mortgage term by reference to which repayment could be assessed.

5. Section 36 did not provide a defence to the possession claim. The material question was whether the discretion had been exercised correctly. The defendant bore the burden of establishing realistic finance sufficient to repay the debt within a reasonable period.

6. The refinancing material did not meet that burden. The MSP Capital proposal was conditional, required further steps and left a funding shortfall for which there was no evidence of available personal funds. The Deputy Master’s imprecise ex tempore wording did not establish that he had failed to consider that offer.

7. The court did not determine the scope of Hart J’s obiter observations in Barclays Bank Plc v Alcorn [2002] EWHC 498 (Ch). The Deputy Master had expressly decided the application as though those observations did not apply, so that ground was superfluous.

• High Court (Chancery Division): The appeal from the Deputy Master was dismissed. The possession order remained undisturbed.

• Deputy Master Arkush: On 13 May 2021, granted the receivers possession of the unsold land and declined to exercise the discretion under section 36 of the Administration of Justice Act 1970.