Cheltenham & Gloucester BS v Norgan [1996] 1 WLR 343

Facts

• Mrs. Norgan, a mortgagor, fell into arrears on her mortgage repayments with Cheltenham & Gloucester Building Society.
• The lender initiated possession proceedings, seeking to repossess the property.
• Mrs. Norgan argued that she could repay the arrears over the remaining term of the mortgage, which was approximately 13 years.
• The lender contended that there was no realistic prospect of repayment within a reasonable timeframe.
• The key question arose under Section 36 of the Administration of Justice Act 1970 regarding whether courts could permit the repayment of arrears over a period longer than the short-term approaches typically adopted.

Issues

1. Whether the court had discretion under Section 36 of the Administration of Justice Act 1970 to allow repayment of mortgage arrears over the remaining term of the mortgage.
2. What criteria should be used to determine what constitutes a "reasonable period" for repayment of arrears in possession proceedings.
3. How courts should balance the interests of lenders and borrowers in such circumstances.

Decision

• The Court of Appeal held that courts have discretion to allow repayment of arrears over the remaining term of the mortgage if the borrower can show a realistic prospect of doing so.
• The court rejected the prior narrow interpretation limiting the "reasonable period" to short-term arrangements or only a few years.
• It was determined that a comprehensive assessment of the borrower's finances, including income and expenditure, should inform the court’s assessment.
• Factors such as the amount of arrears, borrower's ability to pay, the term of the mortgage, and any relevant changes in financial circumstances should be considered.
• The court found that Mrs. Norgan demonstrated a reasonable prospect of clearing arrears over the remaining term, and the lender had not provided sufficient evidence to the contrary.

Legal Principles

• Courts exercising powers under Section 36 of the Administration of Justice Act 1970 must assess the borrower's ability to clear arrears within a "reasonable period" based on the facts of each case.
• The "reasonable period" may extend to the full remaining term of the mortgage if repayment is feasible.
• The decision should rest on a careful evaluation of the borrower's financial circumstances, including income, expenditure, and potential changes.
• Lenders seeking possession must provide clear and accurate financial information relevant to the borrower's situation.
• Early action and open communication between lenders and borrowers are important in preventing possession and enabling mutually acceptable arrangements where possible.

Conclusion

Cheltenham & Gloucester BS v Norgan established that courts may permit mortgage arrears to be repaid over the full remaining term if supported by the borrower’s finances, ensuring possession orders are not granted prematurely and that both lender and borrower interests are properly balanced.