All England Law Reports/1999/Volume 4 /Ropaigealach v Barclays Bank plc – [1999] 4 All ER 235
[1999] 4 All ER 235Ropaigealach v Barclays Bank plc
COURT OF APPEAL, CIVIL DIVISION
HENRY, CHADWICK AND CLARKE LJJ
26, 27 OCTOBER, 18 DECEMBER 1998
Mortgage – Possession of mortgaged property – Mortgagee’s right to recover possession – Mortgagee taking possession of mortgaged property unoccupied by mortgagor and exercising power of sale – Mortgagee not first obtaining possession order – Whether mortgagee entitled to take possession without first obtaining order of court – Administration of Justice Act 1970, s 36.
Section 36a of the Administration of Justice Act 1970, which affords protection to mortgagors of dwelling houses in cases where the mortgagee seeks an order for possession from the court, has not abrogated the mortgagee’s common law right to take possession by virtue of his estate. Accordingly, the mortgagee is enti-tled to exercise his common law right to possession by entering the mortgaged property without first obtain-ing an order of the court (see p 239 e f, p 241 a, p 243 d to h, p 249 e, p 251 f to j, p 252 d, p 253 b to f, p 255 d to g j, p 256 a to c, post).
a Section 36, so far as material, is set out at p 241 b to f, post
Western Bank Ltd v Schindler [1976] 2 All ER 393 considered.
Remon v City of London Real Property Co Ltd [1921] 1 KB 49 and Cruise v Terrell [1922] All ER Rep 130 distinguished.
Notes
For a mortgagee’s right to possession of the mortgaged property, see 32 Halsbury’s Laws (4th edn reissue) paras 603-617
For the Administration of Justice Act 1970, s 36, see 37 Halsbury’s Statutes (4th edn) (1998 reissue) 561.
Cases referred to in judgments
Bank of Scotland v Grimes [1985] 2 All ER 254, [1985] QB 1179, [1985] 3 WLR 294, CA.
Birmingham Citizens Permanent Building Society v Caunt [1962] 1 All ER 163, [1962] Ch 883, [1962] 2 WLR 323.
Cheltenham and Gloucester plc v Krausz [1997] 1 All ER 21, [1997] 1 WLR 1558, CA.
Cruise v Terrell [1922] 1 KB 664, [1922] All ER Rep 130, CA.
Fourmaids Ltd v Dudley Marshall (Properties) Ltd [1957] 2 All ER 35, [1957] Ch 317, [1957] 2 WLR 931.
Hemmings v Stoke Poges Golf Club Ltd [1920] 1 KB 720, [1918-19] All ER Rep 798, CA.
Lavender v Betts [1942] 2 All ER 72.
Luke v IRC [1963] 1 All ER 655, [1963] AC 557, [1963] 2 WLR 559, HL.
Maryon-Wilson’s Will Trusts, Re [1967] 3 All ER 636, [1968] Ch 268, [1967] 3 WLR 1476.
National and Provincial Building Society v Ahmed [1995] 2 EGLR 127, CA.
Pepper (Inspector of Taxes) v Hart [1993] 1 All ER 42, [1993] AC 593, [1992] 3 WLR 1032, HL. at 236
Remon v City of London Real Property Co Ltd [1921] 1 KB 49, CA.
Western Bank Ltd v Schindler [1976] 2 All ER 393, [1977] Ch 1, [1976] 3 WLR 341, CA.
Appeal
The plaintiff, Seoirse Trebhar Ropaigealach, appealed with leave of the Court of Appeal (Ward and Mantell LJJ) given on 11 December 1997 from the decision of Longmore J on 30 July 1997, dis-missing the plaintiff’s appeal from the decision of Deputy District Judge Ellis on 1 May 1997 whereby he dismissed the plaintiff’s summons seeking the determination of the court on whether the defendant, Barclays Bank plc, had been entitled to take possession of the mortgaged property, 16 Windsor Esplanade, Butetown, Cardiff, and subsequently sell it at auction, without having first obtained an order of the court. The facts are set out in the judgment of Chadwick LJ.
Anthony Scrivener QC and Norman Joss (instructed by Phoenix Walters, Cardiff) for the plaintiff.
Elizabeth Gloster QC and Michael Sullivan (instructed by Eversheds, Cardiff) for the bank.
Cur adv vult
18 December 1998. The following judgments were delivered.
CHADWICK LJ
(giving the first judgment at the invitation of Henry LJ).
1. This is an appeal from the order made on 30 July 1997 by Longmore J, in the Cardiff District Registry, dismissing Mr Ropaigealach’s appeal from a decision of the district judge to dismiss these proceedings. The appeal raises a point of some general importance as to the effect (if any) of s 36 of the Administration of Jus-tice Act 1970 in a case where a mortgagee has taken possession of the mortgaged property by peaceable entry and without first obtaining an order of the court.
The facts
2. The proceedings concern a dwelling house known as 16 Windsor Esplanade, Butetown, Cardiff. The property is registered at HM Land Registry under title number WA 175003. On 30 September 1988 Seoirse Trebahr Ropaigealach and his wife, Melini Savuciri Ropaigealach, as registered owners of the property, exe-cuted a legal charge to secure their indebtedness to Barclays Bank plc. The legal charge contained, in cl 1, a covenant by Mr and Mrs Ropaigealach that they would, on demand in writing, pay to the bank all moneys which should from time to time be owing by them to the bank. Clause 5 excluded the provisions of s 103 of the Law of Property Act 1925. That clause went on to provide that, as between the bank and a purchaser from the bank, the statutory power of sale should arise on and be exercisable at any time after the execution of the legal charge; but that, as between the bank and the mortgagor, the bank should not exercise its power of sale until payment of the moneys secured by the legal charge had been demanded. The legal charge made no express provision for the mortgagor to be or remain in possession of the property. at 237
3. Demand for repayment was made by letter dated 27 September 1995 addressed to Mr Ropaigealach at 16 Windsor Esplanade. The demand was for payment of £63,873•4341. It is not in dispute that that was a valid demand under the legal charge; nor that Mr and Mrs Ropaigealach have not repaid the sum demanded, or any other sum, since the demand was made.
4. On 8 October 1996 the bank informed Mr Ropaigealach by letter that it was taking steps to realise its se-curity. A letter in the same terms was sent to Mrs Ropaigealach at a different address. The bank wrote again, on 7 November 1996, to Mr and Mrs Ropaigealach at 16 Windsor Esplanade:
‘Please note that as we have not received your proposals for repayment of your liabilities to Barclays Bank plc, we are now taking steps to realise our security and sell 16 Windsor Esplanade under our power of sale. The property will be entered for sale in Crown & Co’s forthcoming auction which is due to be held on the 26 November 1996.’
Mr and Mrs Ropaigealach were not living at 16 Windsor Esplanade at that time. It is said that the property was undergoing repair or refurbishment; and that, for that purpose, it was empty. In any event they each deny having received the letter of 7 November 1996.
5. The auction took place on 26 November 1996. The property was listed as lot 65. The special conditions of sale, incorporated in the auction particulars, provided for a contractual completion date of 17 December 1996. Special condition 4 made it clear that the sale was a sale by a mortgagee:
‘The seller will transfer the property in exercise of the power given to it by section 101 of the Law of Property Act 1925 and in exercise of the power conferred on the seller by the legal mortgage. A copy of the legal mortgage together with evidence of the title to the property having been made available to the buyer or solicitors for the buyer prior to the date hereof, the buyer shall be deemed to have full knowledge of the contents of the same and shall not be entitled to raise any requisitions or make any objection with regard thereto.’
Special condition 5 expressly excluded the covenants for title on the part of the seller—thereby excluding the limited title guarantee that would otherwise have been implied under s 3(3) of the Law of Property (Miscella-neous Provisions) Act 1994. It is clear that the bank was giving no warranty that the purchaser would obtain vacant possession or that he would take free from whatever rights of possession or occupation Mr and Mrs Ropaigealach, as mortgagors, might enjoy.
6. The property sold at auction at a price of £77,000. Completion took place on or about 17 December 1996 in accordance with the special conditions. No covenants for title were given in the transfer to the purchaser. On 31 December 1996 the bank wrote to Mr Ropaigealach at a different address, 1 Bute Esplanade, Cardiff, in the following terms:
‘This property [16 Windsor Esplanade] was sold by Barclays Bank plc at auction on the 26 November 1996. Title to the property was conveyed under the power of sale conferred upon Barclays Bank plc by virtue of the legal charge exe-cuted by you over the property. The power of sale arose immediately formal demand for repayment of your borrowings was served upon you on 27 September 1995. The sale of the property has now been
These proceedings
7. In the meantime, Mr Ropaigealach had discovered from a neighbour that the property had been sold. He confirmed this with the auctioneers. He consulted solicitors. On 30 December 1996 he swore an affidavit in support of an application ex parte for an injunction restraining the bank from proceeding with the sale. That application was refused; no doubt because it was too late for the relief sought by Mr Ropaigealach to be of any use. The sale had already been completed.
8. On 6 January 1997 Mr Ropaigealach issued an originating summons in the Queen’s Bench Division, Car-diff District Registry, to which the bank was made respondent. The summons was reissued in an amended form on 15 January 1997. By the amended summons Mr Ropaigealach sought the determination of the court on the following question:
‘Whether the defendant as mortgagee of the property named in this matter, or otherwise, was entitled by law (particu-larly, having regard to the provisions of section 126 and other provisions of the Consumer Credit Act 1974, and regula-tions made thereunder, and to the provisions of section 36 of the Administration of Justice Act 1970 as amended by (or affected by) section 8 of the Administration of Justice Act 1973) to take possession of the property, on a date unknown, and sell it by auction, to persons unknown, on or about 27 November 1996, without first having sought and obtained the order of the appropriate court.’
The hearing of the summons was fixed for 1 May 1997 before the district judge. On 17 March 1997 Mr Ropaigealach gave notice of his intention to apply for directions; including an order for discovery and ‘such other orders or directions under RSC Ord 27, r 4(2) as the court may deem appropriate having regard to the fact that the action is not yet ready for final hearing or trial’.
9. The district judge took the view that the matter could be dealt with summarily. On 1 May 1997 he dis-missed the application of 17 March 1997; dismissed the originating summons of 15 January 1997; and or-dered that Mr Ropaigealach pay all the costs. Mr Ropaigealach appealed to the judge. The appeal came be-fore Longmore J on 30 July 1997 in Swansea. He dismissed the appeal and refused leave to appeal.
10. Mr Ropaigealach sought leave to appeal from this court. He was still acting in person. Leave was granted on 12 December 1997. In granting leave Mantell LJ said:
‘For my own part, I am unable to find any flaw in the reasoning contained in the judgment of Longmore J, but it is ap-parent that this is a question the answer to which is not universally agreed. Longmore J has the Law Commission on his side, but it does appear from an article written by Miss or Mrs Alison Clarke “Further implications of section 36 of the Administration of Justice Act 1970” and published in the Conveyancer and Property Lawyer [1983] Conv 293 that, by necessary implication, the effect of s 36 of the Administration of Justice Act 1970 is that a mortgagee must first ob-tain the leave of the court before proceeding to enforce its right to possession or its
The question for decision on this appeal
11. So it is that the appeal comes before us. Mr Ropaigealach now has the benefit of legal representation and his notice of appeal has been resettled by counsel. There is now no reliance on the provisions of the Consumer Credit Act 1974. The grounds relied upon in the notice of appeal are (i) that the judge was wrong to uphold the decision of the district judge to dismiss the originating summons summarily and without a full hearing and (ii) that the judge ought to have held that the provisions of s 36(1) and (2) of the 1970 Act im-pose a restriction upon the powers of a mortgagee of residential property ‘whereby the mortgagee must ap-ply to the county court for an order for possession before exercising its power of sale and/or right of posses-sion’ with the consequence that the bank, not having applied to the court for any order for possession (as is common ground), did not at the time of sale of the property at auction have the right to exercise the power of sale or to take possession under the mortgage.
12. The question raised by the originating summons (in so far as now material) might have been thought to incorporate two distinct questions: (i) was the bank entitled to take possession of the mortgaged property without having obtained an order from the court; and (ii) was the bank entitled to sell and transfer the mort-gaged property without first having obtained an order for possession or (in the alternative) an order for sale. In the event the second question was not pursued on this appeal. It was Mr Ropaigealach’s case at the hear-ing that the only issue for determination was that identified in para 1 of the skeleton argument lodged on his behalf:
‘… whether the bank as mortgagee of the dwelling house of which the plaintiff was mortgagor was entitled to take pos-session of the property without obtaining a court order despite section 36 of the Administration of Justice Act 1970 as extended by section 8 of the Administration of Justice Act 1973.’
13. So framed, the issue presents two difficulties for this court. First, it was not the question which the judge thought that he was being asked to determine. That appears from the following passage in his judgment:
‘The second matter (on which, speaking for myself I have had more difficulty) is that Mr Ropaigealach claims that the law of England and Wales is that before a bank can exercise its rights of sale against a mortgagee of a dwelling house in default, they must first obtain an order for possession.’
The judge answered that question in the negative:
‘… it does not appear to me on the material with which I have been provided that it is a requirement of section [36] of the Administration of Justice Act 1970 or indeed of any other statute, that a bank which seeks to sell property at auction must first obtain a court order for possession. It therefore seems to me that the originating summons can only be an-swered in this respect by saying that the bank was not so bound.’
Secondly, the bank denies strenuously that it did go into possession of the mortgaged property either before the auction on 26 November 1996 or thereafter. On the basis upon which the matter was presented to the judge, that was not a question which needed to be decided. It was common ground that the bank had not obtained an order for possession. It was immaterial, in the context of the question which the judge thought that he was being asked to determine, whether or not the bank had gone into possession without a court or-der. But, of course, the question is central to the issue as presented to us. If the bank never went into pos-session of the mortgaged property at all, then the issue as formulated in para 1 of the appellant’s skeleton argument simply does not arise.
14. These difficulties are, perhaps, compounded by the judge’s observation that, after examining documents which he had required the bank to produce in the course of the hearing before him, he would have been pre-pared to infer as a matter of fact (if it had been necessary) that the bank did not in any event go into posses-sion and that the originating summons, in so far as it asserted that the bank did take possession of the prop-erty, was based on a factual misconception.
15. Encouraged by those observations, Miss Gloster QC, who appeared for the bank on this appeal, urged us to dismiss the appeal in limine. We took the view that that course was not open to us. It seemed to us reasonably clear that the matter was argued before the district judge on the basis that it could be disposed of in the bank’s favour without the need to investigate the question—which was plainly a question of fact—whether the bank did go into possession of the property. It is clear that the judge himself approached the ap-peal on that basis. It is also clear that, if it were necessary to decide the question whether the bank did go into possession of the property, the matter could not be disposed of summarily. At the least Mr Ropaigealach would be entitled to discovery and to have the opportunity to test the bank’s evidence by cross-examination. It is understandable that, in a case in which the appellant was in person, the judge thought it appropriate to make the informal investigation which led to the observations which he made; but it is clear that he could not have thought that he was engaged in the trial of a contested issue of fact. As he pointed out, on the view which he took on the law and having regard to the question which (as he thought) was actually before him, it was unnecessary for him to decide whether the bank did, in fact, go into possession. We must approach this appeal on the basis that that question of fact has not been resolved. If we are to decide the question of law which is now posed in the argument presented to us, it must be on the hypothesis (which might well prove to be unfounded) that the bank did take possession of the property.
16. We have considered whether we should decide the question of law which is now posed—notwithstanding the unsatisfactory way in which it has eventually emerged—or whether we should decline to do so on the ground that it is wholly academic or hypothetical. For my part, I am satisfied that it is right to decide the ques-tion. I am satisfied that the exercise is not wholly academic. If, as Mr Ropaigealach contends, the bank was not entitled to take possession of 16 Windsor Esplanade without obtaining a court order—and if (on the hy-pothesis to be adopted) it did so—then, as it seems to me, it could be argued that the bank was in possession as a trespasser against Mr Ropaigealach and could, in principle, be liable to damages. It is true that the originating summons, in its present form, is not an obvious vehicle on which to bring an action for trespass; but it was made clear to us in argument that such a claim would be added by amendment if we were to de-cide the question of law in the appellant’s favour. Having formed a at 241
clear view on the question of law, I think it would be wrong to put the parties to the expense and inconven-ience of a trial on the facts.
17. I turn, therefore, to examine the issue raised in para 1 of the appellant’s skeleton argument: whether the bank as mortgagee was entitled to take possession of the property without obtaining a court order.
Section 36 of the 1970 Act
18. The appellant relies on s 36 of the 1970 Act. The section is in these terms, in so far as material:
‘(1) Where the mortgagee under a mortgage of land which consists of or includes a dwelling-house brings an action in which he claims possession of the mortgaged property, not being an action for foreclosure in which a claim for posses-sion of the mortgaged property is also made, the court may exercise any of the powers conferred on it by subsection (2) below if it appears to the court that in the event of its exercising the power the mortgagor is likely to be able within a reasonable period to pay any sums due under the mortgage or to remedy a default consisting of a breach of any other obligation arising under or by virtue of the mortgage.
(2) The court—(a) may adjourn the proceedings, or (b) on giving judgment, or making an order, for delivery of posses-sion of the mortgaged property, or at any time before the execution of such judgment or order, may—(i) stay or suspend execution of the judgment or order, or (ii) postpone the date for delivery for possession, for such period or periods as the court thinks reasonable.
(3) Any such adjournment, stay, suspension or postponement as is referred to in subsection (2) above may be made subject to such conditions with regard to payment by the mortgagor of any sum secured by the mortgage or the reme-dying of any default as the court thinks fit …’
For the purposes of those provisions ‘dwelling-house’ includes any building or part thereof which is used as a dwelling; and ‘mortgagor’ and ‘mortgagee’ includes any person having title under the original mortgagor or mortgagee—see s 39(1) of the 1970 Act.
19. The section is expressed to apply where a mortgagee brings an action in which he claims possession of the mortgaged property. Where the conditions in sub-s (1) are satisfied the court is given powers, by sub-s (2), which may fairly be described as procedural—in the sense that they are only capable of being exercised in the context of existing proceedings in which a claim for possession is made. But, it is said, Parliament could not have intended that the protection against ejectment which the section was plainly intended to give to mortgagors in respect of their homes should be capable of being circumvented by a mortgagee who re-sorted to self-help; that is to say, by a mortgagee who obtained possession by entry without the assistance of the court. Accordingly, so it is contended, the section must be construed in such a way as to make it unlawful for a mortgagee to take possession of a dwelling house except under an order of the court. It never became clear in argument how, by any interpretation of the words actually used, that result could be achieved; but that objection was brushed aside as unduly technical. What mattered, it was said, was that the court should give effect to the purpose for which the section was plainly enacted. at 242
The statutory purpose
20. The genesis of s 36 of the 1970 Act is not in dispute. Since 1925 a mortgage of freehold land has taken effect as a demise for a term of years absolute, subject to proviso for redemption—see s 85 of the Law of Property Act 1925. A charge by deed expressed to be by way of legal mortgage takes effect as if a mortgage term of 3,000 years had been created in favour of the mortgagee—see s 87(1) of that Act and, where the land is registered land, s 27(1) of the Land Registration Act 1925. The effect, as a matter of legal analysis, is that the mortgagor demises his immediate estate to the mortgagee; who thereupon becomes entitled to posses-sion by virtue of the estate which he has acquired. The position is described in 32 Halsbury’s Laws (4th edn) para 672:
‘Where a legal [mortgage] has been created, whether by demise or by legal charge, and no provision is made for reten-tion of possession by the mortgagor, the mortgagee is entitled to immediate possession or receipt of the rents and prof-its at any time after the execution of the mortgage, and equity does not interfere, notwithstanding that there has been no default on the mortgagor’s part …’
See, also, the comparable passage in Fisher and Lightwood’s Law of Mortgage (10th edn, 1988) p 331, and the observations of Harman J in Fourmaids Ltd v Dudley Marshall (Properties) Ltd [1957] 2 All ER 35 at 37, [1957] Ch 317 at 321-322, and of Russell J in Birmingham Citizens Permanent Building Society v Caunt [1962] 1 All ER 163 at 166, [1962] Ch 883 at 887.
21. It was held, in those cases, that the necessary consequence of the legal foundation upon which a mort-gage was based was that the court had no power to refuse, or to suspend, an order for possession sought by a mortgagee who was otherwise entitled to enter by virtue of his estate. Russell J, in Birmingham Citizens Permanent Building Society v Caunt, expressed the position in these terms (1962 1 All ER 163 at 182, [1962] Ch 883 at 912):
‘… where, as here, the legal mortgagee under an instalment mortgage under which, by reason of default, the whole money has become payable, is entitled to possession, the court has no jurisdiction to decline to make the order or to adjourn the hearing, whether on terms of keeping up payments or paying arrears, if the mortgagee cannot be per-suaded to agree to this course. The sole exception to this is that the application may be adjourned for a short time to afford to the mortgagor the chance of paying off the mortgagee in full or otherwise satisfying him; but this should not be done if there is no reasonable prospect of this occurring.’ (Russell J’s emphasis.)
22. The decision in Birmingham Citizens Permanent Building Society v Caunt put an end to a practice, which had been developed by the Chancery masters since the introduction, in 1936, of what was then Ord 55, r 5A (now Ord 88, r 2), under which mortgage possession summonses were adjourned to give the mortgagor an opportunity to pay by instalments. Following the introduction of new Rules of the Supreme Court in 1965, the matter was considered by the Committee on the Enforcement of Judgment Debts under the chairmanship of Payne J. The Payne Committee recommended at para 1390 of its Report (Cmnd 3909), dated 21 November 1968, that:
‘… when possession is sought under a mortgage of a dwelling house having a rateable value which would bring it within the protection of the
23. Section 36 of the 1970 Act does, of course, go rather further than the Payne Committee had recom-mended; for it does not restrict the court’s powers to adjourn or suspend orders for possession to cases in which the rateable value of the dwelling house would bring it within the protection of the Rent Acts. Be that as it may, it is plain enough that the section was enacted in order to deal with the problem which had arisen following Birmingham Citizens Permanent Building Society v Caunt; and which had been the subject of ex-amination and recommendation by the Payne Committee—see the observation of Scarman LJ in Western Bank Ltd v Schindler [1976] 2 All ER 393 at 402-403, [1977] Ch 1 at 17. There is nothing in the circum-stances leading to the enactment of s 36 of the 1970 Act which provides any foundation for a submission that it was intended to deal with a different problem—not then identified—arising from entry without an order of the court.
24. Nor is there anything in the language of the section itself which lends support to that submission. If the section had been intended to deal with the problem arising from entry without an order of the court, it is (to my mind) inconceivable that the section would have been enacted in the form in which it was:
‘(1) Where the mortgagee … brings an action in which he claims possession … the court may …
(2) … (a) … adjourn the proceedings, or (b) on giving judgment, or making an order, for delivery of possession of the mortgaged property … (i) stay or suspend execution of the judgment or order …’
The Law Commission Report
25. The language of the section, as well as the circumstances in which it was enacted, lend strong support to the view expressed in the Law Commission Working Paper No 99 on Land Mortgages (1986) p 103, para 3.69:
‘(a) The Court can exercise its discretion [under s 36 of the 1970 Act] only if the mortgagee applies to it for a posses-sion order: technically, therefore, the mortgagee can deprive the mortgagor of protection by electing to seek some other means of enforcement.’
There is a passage to the same effect in the report which followed that working paper: Transfer of Land—Land Mortgages (Law Com No 204) (1991) p 38, para 6.16:
‘One of the consequences of the relationship created by the mortgage by demise and by the charge by way of legal mortgage is that it is the mortgagee and not the mortgagor who is entitled to possession of the
Academic commentary
26. The view that the protection which s 36 affords to mortgagors of dwelling houses is limited to cases in which the mortgagee seeks an order for possession from the court was criticised in the article ‘Further Impli-cations of Section 36 of the Administration of Justice 1970’ [1983] Conv 293 to which Mantell LJ referred when giving leave for this appeal. The article, which may well have provided the inspiration for much of the argument advanced on behalf of Mr Ropaigealach on this appeal, contains a careful and scholarly analysis of the circumstances in which s 36 was enacted. The author recognised the force of the arguments in favour of what may be stigmatised as the literal construction of the section. But she went on to say (pp 295-296):
‘The courts would therefore be faced with a difficult task in interpreting section 36 as removing the mortgagee’s right to take possession peacefully. Arguably, it is a task they should refuse to undertake: reading words into a statute in order to restrict a common law property right is not usually regarded as justifiable, and one would expect the courts to be par-ticularly reluctant to do so where, as here, it is not at all clear either what the words should be or where in the section they should be inserted. In spite of all this, however, it is submitted that the common sense view must prevail. It is anomalous and undesirable to protect mortgagors against eviction by court process yet leave them open to eviction by self-help, particularly if—as apparently would be the case—the mortgagee’s right to use self-help continued notwith-standing that he had applied to the court for immediate possession and been refused.’
A purposive construction?
27. In support of the contention that the court should give what he described as a purposive construction to s 36 of the 1970 Act, Mr Scrivener QC, counsel for Mr Ropaigealach, relied on two decisions of this court on the effect of a comparable provision in s 5 of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920: Remon v City of London Real Property Co Ltd [1921] 1 KB 49 and Cruise v Terrell [1922] 1 KB 664, [1922] All ER Rep 130. The 1920 Act was enacted shortly after the conclusion of the 1914-18 war for the purpose of consolidating and amending the law ‘with respect to the increase of rent and recovery of posses-sion of premises in certain cases, and the increase of the rate of interest on, and the calling in of securities on such premises’. The 1920 Act applied to houses of low rateable value let as a separate dwelling. It was, of course, an early example of the social housing legislation which was to be developed and re-enacted in sub-sequent Rent Acts and in the Housing Acts. Section 5 of the 1920 Act precluded the court from making an order for at 245
possession of any dwelling house to which the 1920 Act applied unless one or more of a now familiar list of conditions were satisfied:
‘(1) No order or judgment for the recovery of possession of any dwelling-house to which this Act applies, or for the ejectment of a tenant therefrom, shall be made or given unless … and in any such case as aforesaid, the court consid-ers it reasonable to make such an order or give such judgment …’
It was held by this court, in the two cases to which I have referred, that the effect of the 1920 Act was to make it unlawful, in circumstances in which a former contractual tenant remained in occupation after the de-termination of the term, for a landlord to re-enter premises to which the 1920 Act applied without first obtain-ing an order for possession. So, it was argued, the same effect should be given to s 36 of the 1970 Act. That submission overlooks, as it seems to me, the basis upon which this court reached its decision in those two cases.
28. The question for decision in Remon’s case [1921] 1 KB 49 was whether the plaintiff, a tenant of rooms to which (once enacted) the 1920 Act applied and who had been excluded from possession by the landlord’s re-entry on the day that the 1920 Act came into force following service of a notice to quit, was entitled to an injunction restraining the landlord from interfering with his quiet enjoyment of the premises. It is pertinent to keep in mind that re-entry had been obtained forcibly, by the landlord breaking the locks. It was held that, although the contractual tenancy had come to an end with expiry of the notice to quit, nevertheless, at the time of the re-entry, the plaintiff was to be treated as a tenant who by virtue of the provisions of the 1920 Act had retained possession for the purposes of s 15(1); and so was a person entitled to the benefit of the im-plied covenant for quiet enjoyment under that subsection. Section 15(1) was in these terms (so far as mate-rial).
‘A tenant who by virtue of the provisions of this Act retains possession of any dwelling-house to which this Act applies shall, so long as he retains possession, observe and be entitled to the benefit of all the terms and conditions of the original contract of tenancy, so far as the same are consistent with the provisions of this Act …’
29. Scrutton LJ identified the problem in these terms (at 56):
‘The question is whether, his tenancy by agreement having expired at a time when no Rent Restriction Act gave him any right to stay on, and the landlords having got into the premises without any assistance from the Court, he can claim any right to stay on or to ask the Court to restrain the landlords from interfering with his possession.’
He went on to say (at 57):
‘The object of the various Rent Restrictions Acts is clear. It was intended to prevent the tenant from having his rent raised against him, or from being turned out, though his tenancy by agreement had expired, so long as he was willing to pay the rent authorized by statute. He was originally presented by Parliament with a statutory tenancy at the will of the tenant for so long as he liked and no longer. But Parliament did not in terms say that though his tenancy by agree-ment has expired, he had a statutory right to stay in on specified terms; it provided that no order for recovery of pos-session should be made, and omitted expressly to provide what sort of legal interest the
Scrutton LJ then compared the provisions recently enacted in the 1920 Act with those in earlier Rent Restric-tions Acts. He pointed out that s 15 of the 1920 Act was plainly intended to define the terms under which a person who had remained in possession after the determination of his contractual tenancy was to continue in possession ‘under the new statutory tenancy’. The difficulty which he found in construing s 15(1) of the 1920 Act was that the identification, in the opening words of the subsection, of the person who was to have the benefit of its provisions as ‘a tenant’ was not an apt description of a former tenant whose contractual tenancy had determined and who was holding over against the will of his landlord. He addressed that difficulty in a passage on which Mr Scrivener relies strongly (at 58-59):
‘Yet I think it is clear Parliament has intended to confirm these people in a statutory tenancy and speak of their position as a “letting.” Mr. Romer [counsel for the landlords] argued very forcibly to us that though the policy were clear yet the Courts ought not to give effect to it unless they could find words apt in their ordinary meaning to justify them in so do-ing, and that the case of a landlord getting into possession of premises which under the agreement of tenancy he had a right to enter had not been dealt with by Parliament. I do not think it has expressly; and I feel that I am straining lan-guage in speaking of a person whose tenancy has expired, and who stays in against the active protest of the landlord as a “tenant,” and of the landlord’s relation to him as “letting”; but such a person appears to be within the clear intention of the Legislature, and where the statute has forbidden any process of Court to be used to eject him, I think it must have intended and be taken to forbid ejection by the private action of the landlord without the aid of the Court.’ (My em-phasis.)
30. Bankes LJ dealt with the matter on a somewhat narrower basis. He accepted that in no ordinary sense of the word was the respondent a tenant of the premises on the coming into force of the 1920 Act. But he went on (at 54):
‘It is however clear that in all the Rent Restrictions Acts the expression “tenant” has been used in a special, a peculiar sense, and as including a person who might be described as an ex-tenant, someone whose occupation had com-menced as a tenant and who had continued in occupation without any legal right to do so except possibly such as the Acts themselves conferred upon him. The respondent therefore on the coming into operation of the new Act was a ten-ant within the meaning of that expression in the Act …’
On that basis Bankes LJ was able to hold that the plaintiff had the protection of s 15. He said (at 55):
‘Sect. 15 is intended to supply something that was wanting in the previous Acts, namely, an indication as to the legal position of a person who continued in occupation of premises merely by reason of the protection afforded by those Acts. The opening words of s. 15 are words of description of the person to whom the conditions of the statutory tenancy apply. He is described as a tenant who by virtue of the provisions of the Act retains
Atkin LJ agreed with both judgments.
31. On a proper analysis of the passages which I have set out, the basis of the decision in Remon’s case can be seen to be this: (i) a person holding over after the determination of a contractual tenancy to which the 1920 Act applied was protected by s 5 of the 1920 Act from eviction by legal process; (ii) it followed that he was a person who, by virtue of the provisions of the 1920 Act, retained possession of the dwelling house which had formerly been let to him; (iii) accordingly, he was a person to whom the provisions of s 15 of the 1920 Act were plainly intended to apply; (iv) so it was permissible, as a matter of construction, to treat him as a ‘tenant’ for the purposes of s 15; (v) if he were a tenant for those purposes, he had the benefit of the land-lord’s covenant for quiet enjoyment; and (vi) ejection by forcible re-entry was in breach of the covenant for quiet enjoyment and could be restrained by injunction. The plaintiff was able to bring himself within that analysis because re-entry had not been made before the day on which the 1920 Act came into force. The court (at 59) was able to reach the conclusion that the Act ‘must have intended and be taken to forbid ejec-tion by the private action of the landlord without the aid of the Court’ because, giving the word ‘tenant’ a meaning for the purposes of s 15 which was wide enough to include a former contractual tenant holding over against the will of his landlord, ‘ejection’ following forcible re-entry would constitute a breach of the covenant for quiet enjoyment to which, by virtue of that section, the ‘tenant’ was entitled.
32. The point was before this court again, some 18 months later, in Cruise v Terrell [1922] 1 KB 664, [1922] All ER Rep 130. The plaintiffs were ‘weekenders’ to whom a cottage had been let for a fixed term of one year. The contractual term determined on 25 March 1921 and was not renewed. On 7 April, in the absence of the plaintiffs, the defendant sent the local blacksmith to the cottage, who broke into the premises and put a new lock upon the door and locked it. The plaintiffs sued in trespass. The defendant pleaded by way of de-fence that the tenancy had determined by effluxion of time; in the alternative he counterclaimed for posses-sion of the cottage on one of the statutory grounds. The trial judge awarded damages for trespass, but made an order for possession on the counterclaim. The defendant appealed. After rejecting the contention that the 1920 Act had no application to a tenancy for a term certain, the court went on to consider whether the effect of the 1920 Act was that the defendant’s forcible re-entry constituted a trespass. Lord Sterndale MR said (1922 1 KB 664 at 669, [1922] All ER Rep 130 at 131):
‘The next point is that assuming the Act does apply and that the plaintiffs are statutory tenants, the Act does not pre-vent a landlord from exercising a right of re-entry where he is entitled to an immediate order for possession under s. 5 of the Act, which order it is contended when obtained relates back
33. Warrington LJ took the same view. He said (1922 1 KB 664 at 671-672, [1922] All ER Rep 130 at 132):
‘The second point, that on the date when the defendant entered the plaintiffs were mere trespassers, has been dis-posed of by the decision in Remon v. City of London Real Property Co. There the landlords went into possession with-out an order in the same way as the landlord did in this case and the action was brought for an injunction to restrain them, and it is clear that there would have been no right of action unless the tenant were a statutory tenant under s. 15.’
Warrington LJ then set out the passage from the judgment of Bankes LJ in Remon’s case, to which I have already referred, and went on (1922 1 KB 664 at 672, [1922] All ER Rep 130 at 133): ‘That decision is bind-ing upon this Court, but even without it I would have taken the same view. It is quite clear that a person hold-ing over is not to be treated as a trespasser.’ Scrutton LJ, the third member of the court, agreed. He said (1922 1 KB 664 at 673, [1922] All ER Rep 130 at 133):
‘As to the second point it was said that the Act did not destroy the common law right of the landlord to enter. It will not help him to enter, but if he gets in peaceably he is in his right. It is that argument that as a member of the Court in Re-mon v. City of London Real Property Co. I listened to from Mr. Romer, and in my view we decided against it. It is true that in that case the landlord had not obtained an order for possession under s. 5 of the Act, as he did here, but in my view the object of the Act was to fetter landlords and to take away their common law rights, and until an order was ob-tained against him, a tenant stayed on, not as a trespasser, but as a statutory tenant—even against the will of the land-lord. If the words of Bankes L.J. and myself in Remon’s Case which cover this point were obiter, they are now affirmed.’
34. It is clear that Warrington LJ, at least, took the view, in Cruise’s case, that the tenants’ right of action de-pended on s 15 of the 1920 Act. As I have sought to explain, the true analysis of the decision in Remon’s case is not that s 5 of the 1920 Act took away the landlord’s common law rights; the true analysis is that s 15(1) extended the landlord’s obligation to afford quiet enjoyment of the premises to his tenant (an obligation formerly subsisting under the contractual tenancy) to the period of holding over under the new statutory ten-ancy—so that re-entry, in the circumstances in which it was effected in both Remon’s case and Cruise’s case, was in breach of that covenant. I do not, myself, think that Scrutton LJ intended his observations to have any wider application than that.
35. The view which I have expressed as to the true basis for the decisions in Remon v City of London Real Property Co Ltd [1921] 1 KB 49 and Cruise v Terrell [1922] 1 KB 664, [1922] All ER Rep 130 finds support in the decision of Atkinson J in Lavender v Betts [1942] 2 All ER 72. The landlord, having served a notice to quit, obtained entry to the property without force and removed the doors and at 249
windows so that it could no longer be used as a dwelling. The plaintiff brought an action for trespass. After referring to the landlord’s right, at common law, to retake possession of the demised premises peaceably after the determination of the tenancy, Atkinson J pointed out that, following the enactment of the 1920 Act, the position was regulated by s 15(1). He set out the provisions of that subsection—which he described as ‘quite clear’—and went on to say (at 73):
‘A statutory tenancy is created, and the terms of the statutory tenancy are to be the same as those which have pre-vailed during the contractual tenancy. At the expiration of the notice the plaintiffs were in possession. They retained possession, and they were there on the terms of their original tenancy. They were under a legal obligation to carry out the obligations which had rested on them, and the landlord was under the same obligation; and the plaintiffs had the benefit of any terms and conditions which formed part of the contract of tenancy. No one disputes that one of the obli-gations resting on the landlord, of which the plaintiffs had the benefit, was an undertaking for quiet enjoyment. It is per-fectly clear from the two cases which have been cited to me—Remon v. City of London Real Property Co., Ltd. and Cruise v. Terrell—that the effect of the section is that a statutory tenancy is created on the terms which I have stated. The statutory tenant has the same rights and is subject to the same obligations as prevailed during the tenancy. There-fore a landlord has no conceivable right to interfere with their possession or to trespass upon the premises occupied by them, unless he obtains an order giving him possession of the premises.’
36. For the reasons which I have set out, I am satisfied that the early decisions on the 1920 Act provide no support for Mr Scrivener’s contention that s 36 of the 1970 Act should be given a construction which, on the language used, it cannot bear. Remon’s case and Cruise’s case, properly understood, provide examples of the court construing statutory provisions to give effect to a clearly identifiable purpose by a legitimate process of interpretation. It was legitimate to consider whether the clear purpose of the 1920 Act could be served by restricting the meaning of the word ‘tenant’ in s 15(1) to its ordinary sense. To restrict the meaning of that word would, as the court held, be to frustrate the objective which the 1920 Act was clearly intended to achieve. So it was necessary to give a wider meaning to that word; but subject to the constraint that that wider meaning must be one which the word was capable of bearing in the context in which it fell to be con-strued. There is no comparable process of construction by which the words used by the legislature in s 36 of the 1970 Act can be held to have the effect for which Mr Scrivener contends.
37. Mr Scrivener sought, also, to rely on Western Bank Ltd v Schindler [1976] 2 All ER 393, [1977] Ch 1. In that case this court found it possible to construe s 36 of the 1970 Act in such a way as to avoid what the court perceived would be an obvious lacuna if the words were given a literal meaning. The mortgagee sought possession in circumstances in which the mortgagor had allowed a life policy, taken as collateral security, to lapse; but where there had been no default under the mortgage itself. The question arose whether the court could exercise the powers conferred by s 36(2) of the 1970 Act in a case where—no sums being due under the mortgage and there being no default—it was argued that the condition in sub-s (1) could not be satisfied. As it was put by Buckley LJ (1976 2 All ER 393 at 398, [1977] Ch 1 at 12):
at 250
‘If sub-s (1) [of s 36] is read literally, the conditional clause introduced by the words “if it appears to the court” (which I shall refer to as “the conditional clause”) appears to restrict the operation of the section to cases in which some sum is due or some default has taken place and remains unremedied when the application comes before the court. This, how-ever, seems to me to lead to a ridiculous result.’
After explaining why the result to which he would be led by a literal reading of the words used would be so unfair and irrational that it could not have been intended by Parliament, Buckley LJ directed himself that he ‘must therefore investigate whether the section is capable of some other construction’. He found that it was. The conditional clause could be read as if the words were these: ‘… but, if any sum is due under the mort-gage or the mortgagor is in default in respect of any other obligation arising under or by virtue of the mort-gage, only if it appears to the court …’ So construed the section—
‘applies to any case in which a mortgagee seeks possession, whether the mortgagor be in arrear or otherwise in default under the mortgage or not, but, where the mortgagor is in arrear or in default, the discretion is limited by the conditional clause.’ (See [1976] 2 All ER 393 at 399, [1977] Ch 1 at 13.)
Buckley LJ rejected the submission that s 36 must be taken to have abrogated the mortgagee’s right to pos-session where there is no sum due and no subsisting default. He said (1976 2 All ER 393 at 398, [1977] Ch 1 at 12):
‘Section 36 is an enabling section which empowers the court to inhibit the mortgagee’s right to take possession. It con-fers a discretionary power on the court to achieve this result. It is, in my judgment, impossible to spell out of it a positive abrogation of an important property right, and, moreover, an abrogation of it only in particular circumstances.’
38. Scarman LJ identified three courses which the court might adopt (1976 2 All ER 393 at 403, [1977] Ch 1 at 18):
‘The first is to treat the section as having a “casus omissus”, which only Parliament can fill. The second … is to treat the section as excluding the common law right to possession from mortgages of dwelling-houses. The third is to treat the section as giving the court a discretion to delay making an order in all cases where, upon whatever ground, a mort-gagee is seeking possession of a mortgaged dwelling-house.’
He went on (1976 2 All ER 393 at 403-404, [1977] Ch 1 at 18-19):
‘Judicial legislation is not an option open to an English judge. Our courts are not required, as are, for instance, the Swiss courts (see the Swiss Civil Code, arts 1 and 2), to declare and insert into legislation rules which the judge would have put there, had he been the legislator. But our courts do have the duty of giving effect to the intention of Parlia-ment, if it be possible, even though the process requires a strained construction of the language used or the insertion of some words in order to do so: see Luke v IRC [1963] 1 All ER 655 at 664, [1963] AC 557 at 577 per Lord Reid. The line between judicial legislation, which our law does not permit, and judicial interpretation in a way best designed to give ef-fect to the intention of Parliament is not an easy one to draw. Suffice it to say that before our courts can imply words into an Act the statutory intention must be plain and the
It would be going too far, in my judgment, to adopt the second course. It would, indeed, be judicial legislation to read a section conferring discretionary powers on the court as abrogating a common law right. I am not prepared to go that far in an attempt to make sense. If one had to go that far, then it would be for the legislature, not the courts, to take the step.’
39. Goff LJ agreed that s 36 could not be held, by a side wind, to have abrogated the mortgagee’s proprie-tary right to take possession—as he put it:
‘This would not, I think, be applying the principle of liberal construction to avoid absurdity stated by Lord Reid in Luke v IRC [1963] 1 All ER 655 at 664, [1963] AC 557 at 577, but disregarding the Act or overriding it, which, as Ungoed-Thomas J pointed out in Re Maryon-Wilson’s Will Trusts [1967] 3 All ER 636 at 642, [1968] Ch 268 at 282, and in my judgment rightly pointed out, is what the court is not allowed to do.’ (See [1976] 2 All ER 393 at 409, [1977] Ch 1 at 25.)
He agreed that there were only two courses open to the court: to construe the section as conferring a discre-tion in all cases; or to construe the section literally and face whatever anomalies or absurdities that pro-duced. He preferred the latter; on the ground that he could not see how any sensible effect could be given to the powers in sub-s (2) if there was nothing to be done by the mortgagor which an adjournment, stay, sus-pension or postponement would enable to be done within a time which the court was required to decide was a reasonable time.
40. In my view, Mr Scrivener can derive no assistance from Western Bank Ltd v Schindler. It provides clear authority for the proposition that s 36 of the 1970 Act has not abrogated the mortgagee’s common law right to take possession by virtue of his estate. It provides, also, a very good illustration of the principles on which the court acts when faced with the problem that a literal construction of the words used by the legislature would give rise to an obvious lacuna or absurdity. An English judge is not to indulge in judicial legislation. Before he can imply words into an Act, the statutory intention must be plain and the insertion not too big, or too much at variance with the language in fact used by the legislature. The case provides no support for a contention that Parliament must have intended that the mortgagee’s right to take possession should be exercisable only with the assistance of the court.
Conclusion
41. I find it impossible to be satisfied that Parliament must have intended, when enacting s 36 of the 1970 Act, that the mortgagee’s common law right to take possession by virtue of his estate should only be exercis-able with the assistance of the court. In my view, the only conclusion as to parliamentary intention that this court can properly reach is that which can be derived from the circumstances in which the section was en-acted, the statutory context in which it appears and the language which was used. All point in the same di-rection. Parliament was concerned with the problem which had arisen following the at 252
decision in Birmingham Citizens Permanent Building Society v Caunt [1962] 1 All ER 163, [1962] Ch 883; it intended to restore the position to what it had been thought to be before that decision; and it did not address its mind to the question whether the mortgagor required protection against the mortgagee who took posses-sion without the assistance of the court. It is impossible to be sure what course Parliament would have thought it appropriate to adopt, in 1970, if it had identified and addressed that question. It is impossible to be sure that Parliament did not intend (or would not have intended, if it had addressed its mind to the question) to leave the position as it was in that regard. It is not irrelevant that, at the date at which the 1970 Act was enacted, the mortgagor who was in occupation had the protection—subsequently replaced in a different and, perhaps, more limited form by s 6 of the Criminal Law Act 1977—afforded by the Forcible Entry Acts 1381-1623. It is because it is impossible to be sure that Parliament cannot have intended to leave the position as it was—but must have intended that the mortgagee should only be entitled to exercise his common law right to possession with the assistance of the court—that it cannot be appropriate to embark on an investigation whether the words which have been used are capable of some other construction than that which they natu-rally bear. For these reasons I would dismiss this appeal.
CLARKE LJ.
I agree, although I must confess that I do so with considerable reluctance. The effect of construing s 36 of the Administration of Justice Act 1970 (as extended by section 8 of the Administration of Justice Act 1973) in the manner proposed is that there is what appears to me to be a curious anomaly in the powers of the court to afford relief to mortgagors against mortgagees who wish to take possession of mortgaged dwelling houses. It is not in dispute that, where a mortgagee takes proceedings for possession, the court has power under s 36 in some circumstances to stop the mortgagee from taking possession. Those circumstances are where it appears to the court that if it exercises its power the mortgagor is likely within a reasonable period to pay the sums due under the mortgage or to remedy a relevant default under the mortgage, as the case might be.
Chadwick LJ has explained the circumstances in which s 36 came to be enacted, namely as a result of rec-ommendations of the Payne Committee on the Enforcement of Judgment Debts (Cmnd 3909) which were made in order to deal with the problem which had arisen following the decision of this court in Birmingham Citizens Permanent Building Society v Caunt [1962] 1 All ER 163, [1962] Ch 883. In that case the court was considering the powers of the court where the mortgagee brought an action for possession. Both the Payne Committee and subsequently Parliament took the view that mortgagors should be afforded limited protection in such a case. The nature of that protection was considered by this court in Cheltenham and Gloucester plc v Krausz [1997] 1 All ER 21, [1997] 1 WLR 1558. That decision shows that the protection is limited, but it is nevertheless of considerable value to mortgagors who are in default.
It is true to say that neither this court in Birmingham Citizens Permanent Building Society v Caunt nor the Payne Committee was considering whether the court should have similar powers in cases in which the mort-gagee chooses not to take proceedings for possession but simply takes possession or perhaps sells the property under his power of sale and the purchaser takes possession. In these circumstances I agree that it cannot readily be inferred that Parliament intended to give protection to mortgagors in such a case. It does however strike me as very at 253
curious that mortgagors should only have protection in the case where the mortgagee chooses to take legal proceedings and not in the case where he chooses simply to enter the property. As Alison Clarke put it in her illuminating article ‘Further Implications of Section 36 of the Administration of Justice 1970’ [1983] Conv 293 to which Chadwick LJ has referred, it is anomalous and undesirable to protect mortgagors against eviction by court process yet leave them open to eviction by self-help.
We were referred to two cases which seem to me to highlight the problem. The first is Hemmings v Stoke Poges Golf Club Ltd [1920] 1 KB 720, [1918-19] All ER Rep 798 where the defendant landlord entered the demised property, in which the plaintiff and his wife were living, and removed them and their furniture, using no more force than was reasonably necessary to do so. The landlord had an immediate right to possession because the tenant’s right to live in the property depended upon his continuing to work for the landlord, which he no longer did. It was held by this court that the plaintiff had no right of action against the defendant even if the actions of the landlord were a crime under the Forcible Entry Act 1381.
So far as I can see the position is the same in the case of a mortgagee entitled to possession. As Chadwick LJ has pointed out, and as is made clear on p 38, para 6.16 of the Law Commission report Transfer of Land—Land Mortgages (Law Com No 204), (1991) which he has quoted, in the absence of a provision to the con-trary in the mortgage, a mortgagee has a right of immediate possession (as the ink dries on the document). Although I suspect that many mortgagors would be astonished to discover that a bank which had lent them money to buy a property for them to live in could take possession of it the next day, Mr Scrivener QC (as I understand it) accepts that in the absence of an express provision in the mortgage and subject to his argu-ment as to the true construction of s 36 of the 1970 Act, that is the position. Thus a mortgagee has an imme-diate right of possession just like the defendant landlord in Hemmings v Stoke Poges Golf Club Ltd. So far as I can see it follows from that decision that, subject to any relevant statutory provisions, if a mortgagee chooses to take possession and moreover to do so by using reasonable force to remove the mortgagor there is nothing that the mortgagor can do about it.
The only statutory provision which might assist a mortgagor in such a case if s 36 of the 1970 Act does not do so is s 126 of the Consumer Credit Act 1974, which provides: ‘A land mortgage securing a regulated agreement is enforceable (so far as provided in relation to the agreement) on an order of the court only.’ As the judge held, this is not a case to which s 126 applies because it only applies to a ‘regulated agreement’, which must be ‘a consumer credit agreement’, which by s 8(2) must in turn be a personal credit agreement by which the creditor provides the debtor with credit not exceeding £15,000. Like many house mortgages, this is not such a case.
It may be noted in passing that the crime of using or threatening violence to secure entry into occupied prop-erty is expressed in narrow terms in s 6 of the Criminal Law Act 1977, as amended. As I see it, it would af-ford no protection to a mortgagor in circumstances such as occurred in Hemmings v Stoke Poges Golf Club Ltd.
The second case which seems to me to highlight the potential problems is the decision of this court in Na-tional and Provincial Building Society v Ahmed [1995] 2 EGLR 127 where it was held that the mortgagor’s equity of redemption is extinguished when the mortgagee, in the exercise of his power of sale, enters into at 254
a contract of sale of the mortgaged property. In the course of his judgment (with which Russell and Rose LJJ agreed) Millett LJ said (at 129):
‘The purpose of making an order under section 36 of the Administration Act 1970 is to enable a mortgagor who has fallen into arrears with the payment of the mortgage instalments to resume his payments and to pay off the arrears with a view to the ultimate redemption of the mortgage by instalments in the ordinary way. But that result can no longer be achieved once the mortgagor’s equity of redemption has been extinguished by the exchange of contracts for the sale of the mortgaged property by the mortgagee to a purchaser. Of course, if the order for possession had not been executed so that the court still retained jurisdiction to suspend it, and the mortgagor or his tenants were in possession at the date of the contract for sale so that the purchaser had notice of the mortgagor’s rights, the mortgagee would be unable to rely on the contract to defeat the mortgagor’s application. But that is not the present case.’
The way in which s 36 might operate, as envisaged by Millett LJ in the second part of that passage, is un-doubtedly desirable, although it is not easy to see how it works if the effect of the contract for sale is to extin-guish the mortgagor’s equity of redemption. In a Law Commission Working Paper No 99 on Land Mortgages (1986), which was produced before the report and was expressly stated not to represent the final views of the Commission, the position was put thus with regard to the court’s discretion under s 36 (p 103, para 3.69):
‘(b) The discretion is to delay or withhold the possession order only, not any other remedy. In practice this usually pre-vents enforcement, but in theory it is still open to the mortgagee to proceed to exercise its power of sale notwithstand-ing the court’s refusal to make a possession order. Since such a sale terminates the mortgagor’s interest in the prop-erty, the purchaser presumably would have no difficulty in obtaining a possession order against the mortgagor after completion.’
In a written note sent to us after the conclusion of the hearing Miss Gloster QC says that the respondent mortgagee would not go so far as to submit that that view is correct. Miss Gloster correctly adds that this kind of issue does not to fall for determination on this appeal, and I express no view upon the solution to such problems, but such considerations do highlight the potential problems. Such problems would not arise (or would be much reduced) if it were held that the effect of s 36 were (as Mr Scrivener submits) to give the court the same power to inhibit the exercise by the mortgagee of its right to possession at common law whether it were exercised by simply entering possession or by doing so pursuant to an order of the court. Mr Scrivener submits that in the case of a sale the court would have the same power to prevent the purchaser from actually taking possession as it has to prevent the mortgagee himself from taking possession because by s 39(1) of the 1970 Act ‘mortgagee’ includes ‘any person deriving title under the original … mortgagee’.
As Chadwick LJ has pointed out, the majority of this court in Western Bank Ltd v Schindler [1976] 2 All ER 393, [1977] Ch 1 rejected the submission that the effect of s 36 was to abrogate the mortgagee’s right of possession. However, as appears from the passage from the judgment of Buckley LJ (1976 2 All ER 393 at 398, [1977] Ch 1 at 12) which he has quoted, s 36 is an enabling section which empowers the court to inhibit the mortgagee’s right to take possession. He might have added that it also inhibits the right of any person deriving title from at 255
the mortgagee to do so. As I see it, the question is whether the section can be construed so as to inhibit the mortgagee’s right to take possession by self-help.
It is submitted that it can because of the underlying purpose of the section, as for example stated by Millett LJ in the passage from National and Provincial Building Society v Ahmed quoted above and as stated by Griffiths LJ in Bank of Scotland v Grimes [1985] 2 All ER 254 at 259, [1985] QB 1179 at 1190 where he said of s 36 of the 1970 Act and s 8 of the Administration of Justice Act 1973:
‘It is the intention of both sections to give a measure of relief to those people who find themselves in temporary financial difficulties, unable to meet their commitments under their mortgages and in danger of losing their homes.’
It seems to me that if a mortgagor needs that relief he needs it whether the mortgagee chooses to exercise his right of possession by entering into possession with or without an order of the court. Indeed he also needs it if instead of doing either the mortgagee sells the property to a purchaser leaving the purchaser to take possession.
I recognise that Miss Gloster says that responsible mortgagees do not in practice take possession of prop-erty in which the mortgagor and his family are living without an order of the court, and I accept that that is so, but in my judgment the problem should be approached by reference to the legal rights of the mortgagee and to the legitimate interests of the mortgagor in the light of the purpose of the 1970 Act. In these circum-stances, if it were possible to construe s 36 by affording mortgagors protection whether or not the mortgagee chose to obtain possession by self-help or legal action, I for my part would do so. I have however been per-suaded that it is not possible.
I agree that the section should be given a purposive construction: see eg Pepper (Inspector of Taxes) v Hart [1993] 1 All ER 42 at 50, [1993] AC 593 at 617 per Lord Griffiths. But the process remains one of construc-tion and I have reluctantly reached the conclusion that where a section gives the court powers ‘where the mortgagee … brings an action in which he claims possession of the mortgaged property’ it is not permissible to hold that the effect of the section is to give the court such powers whether or not the mortgagee brings such an action.
The appellant’s submission amounts to saying that the effect of the section is that a mortgagee is not entitled to take possession of mortgaged property save by order of the court. The problem is that the section does not say so. If Parliament had wished so to provide there is no reason why it should not have done so ex-pressly, as it has in related circumstances. Thus it introduced legislation to protect tenants from eviction by landlords entitled to possession save by order of the court. Section 2 of the Protection from Eviction Act 1977 provides:
‘Where any premises are let as a dwelling on a lease which is subject to a right of re-entry or forfeiture it shall not be lawful to enforce that right otherwise than by proceedings in the court while any person is lawfully residing in the prem-ises or any part of them.’
Chadwick LJ has also referred to various provisions of the Rent Acts to which we were referred in argument. Moreover Parliament has considered in what circumstances it should restrict the exercise of a mortgagee’s right of possession. It did so in a very limited form in s 126 of the 1974 Act which is quoted above. It could have so provided in the case of all mortgages of dwelling houses, but it did not.
In all the circumstances I respectfully agree with Chadwick LJ, essentially for the reasons which he gives. I accept Miss Gloster’s submission that the question what, if any, restrictions to impose upon the exercise of a mortgagee’s right of at 256
possession is essentially a matter of policy. In order to answer the question it would no doubt be necessary to consider what, if any, such restrictions should be imposed (a) in circumstances in which mortgaged prop-erty has been vacated by the mortgagor (which appears to be the case in the vast majority of cases in which mortgagees take possession without an order of the court) and (b) in circumstances in which the mortgagor is residing in the property. In these circumstances, although consideration of the policy behind s 36 supports the appellant’s submissions, I do not feel able to accede to them as a matter of construction of the section. I have only added some observations of my own because of my reluctance to reach that conclusion. However, in the result I agree that the appeal must be dismissed.
HENRY LJ.
I agree, for the reasons given by Chadwick LJ, that this appeal must be dismissed.
Clarke LJ has drawn attention to the curious anomaly that mortgagors should have the protection afforded by s 36 of the Administration of Justice Act 1970 in cases in which the mortgagee chooses to take proceedings to enforce his right to possession but should have no such protection where he chooses (and is able) to en-ter without first obtaining an order from the court. He has pointed out, also, the problem which may exist if the court is asked to exercise the power conferred by s 36 in a case where the mortgagee has already exer-cised his power of sale, without having taken possession as against the mortgagor. But this anomaly, and this problem, are not identified for the first time in the present case. They have been the subject of academic comment in the past. Perhaps more pertinently, they were considered by the Law Commission in the Work-ing Paper No 99 on Land Mortgages (1986) and the report Transfer of Land—Land Mortgages (Law Com No 204) (1991) to which Chadwick and Clarke LJJ have referred. The Law Commission has made proposals to reform the law in this field. It is for Parliament to decide whether to accept those or other proposals.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Kate O’Hanlon Barrister.
