Cheltenham & Gloucester Building Society v Norgan

Cheltenham & Gloucester Building Society v Norgan
Court	Court of Appeal
Citation	[1996] 1 WLR 343
Keywords
Mortgage

Cheltenham & Gloucester Building Society v Norgan [1996] 1 WLR 343 is an English land law case, concerning mortgage.

Facts

Mrs Norgan borrowed £90,000 repayable each month over 22 years, secured on her farmhouse. When she fell behind, C&G sought possession, and this was stayed on several occasions. As they built up C&G tried again.

Judgment

Waite LJ, 353, ‘the court should take as its starting point the full term of the mortgage and pose at the outset the question: “Would it be possible for the mortgagor to maintain payment-off of the arrears by instalments over that period?”’ The courts would probably need to consider more comprehensive accounts and financial information, but that and accompanying practical difficulties ‘should not however be allowed, in my judgment, to stand in the way of giving effect to the clearly intended scheme of the legislation.’ They had been to court many times and C&G was adding the cost of its proceedings to the bill against Mrs Norgan and her husband, who were struggling along. These will ultimately have to be paid and that shows the disadvantage of multiple and continued applications to court under the Administration of Justice Act 1970 section 36.

One advantage of taking the period most favourable to the mortgagor at the outset is that, if his or her hopes of repayment prove to be ill-founded and the new instalments initially ordered as a condition of suspension are not maintained but themselves fall into arrear, the mortgagee can be heard with justice to say that the mortgagor has had his chance, and that the section 36 powers… should not be employed repeatedly to compel a lending institution which has already suffered interruption of the regular flow of interest to which it was entitled under the express terms of the mortgage to accept assurances of future payment from a borrower in whom it has lost confidence.

Evans LJ agreed.

In conclusion, a practical summary of our judgments may be helpful in future cases. Drawing on the above and on the judgment of Waite L.J., the following considerations are likely to be relevant when a “reasonable period” has to be established for the purposes of section 36 of the Act of 1970.

(a) How much can the borrower reasonably afford to pay, both now and in the future?

(b) If the borrower has a temporary difficulty in meeting his obligations, how long is the difficulty likely to last?

(c) What was the reason for the arrears which have accumulated?

(d) How much remains of the original term?

(e) What are relevant contractual terms, and what type of mortgage is it, i.e. when is the principal due to be repaid?

(f) Is it a case where the court should exercise its power to disregard accelerated payment provisions (section 8 of the Act of 1973)?

(g) Is it reasonable to expect the lender, in the circumstances of the particular case, to recoup the arrears of interest

(1) over the whole of the original term, or

(2) within a shorter period, or even

(3) within a longer period, i.e. by extending the repayment period? Is it reasonable to expect the lender to capitalise the interest or not?

(h) Are there any reasons affecting the security which should influence the length of the period for payment?

In the light of the answers to the above, the court can proceed to exercise its overall discretion, taking account also of any further factors which may arise in the particular case.

See also

• English land law
• English trusts law
• English property law

External links

• In The Independent