The extent of court's discretion to stay an order for possession in mortgage arrears cases

The Northern Ireland High Court of Justice decision in The Woolwich v Boyd [2015] NICh 16 , issued by Mr Justice Deeny in the High Court Chancery Division, deals with the issue of the extent of the discretion of the court in an application for a stay on an order for possession of a home; and how this discretion is exercised.

Mr & Mrs Boyd originally purchased their home in 2000, assisted by a mortgage from The Woolwich. They remortgaged the property in 2006, borrowing a higher amount from The Woolwich. This mortgage was arranged on an interest only basis.  The borrowers eventually fell behind on their account payments and the lender commenced possession proceedings in 2009.

A Possession Order was granted in 2010. Crucially, it was suspended on the basis that the borrowers pay an extra £500 per month in addition to their contractual monthly instalment. However, the borrowers stopped making payments in June 2011.

In and around the time payments ceased Mr Boyd became concerned about the physical condition of the property. Mr Boyd was concerned that there was an underlying defect in relation to the property, which he was not made aware of at the time of purchase or the remortgage. With the assistance of an ombudsman, Mr Boyd obtained a copy of the survey carried out for The Woolwich.  On receipt of the survey report, it was Mr Boyd’s position that the fourth page of this report had not been sent to him at the time he purchased the property in 2000. The report indicated that there was evidence of differential movement in the property, internally and externally and that a structural engineers report should be obtained.

Mr Boyd did not take any active steps following receipt of this information, nor were payments made to the Woolwich.

In June 2014 the lender initiated proceedings seeking to lift the suspended order and gain possession of the property. The presiding Chancery Master granted liberty to enforce the Order in September 2014. The granting of this Order was subsequently appealed, and it is this appeal which Justice Deeny has considered. Mr & Mrs Boyd had eventually issued proceedings against The Woolwich and the surveyor in respect of alleged negligence in provision of the survey report at the time of purchase. It was these pending proceedings upon which Mr & Mrs Boyd sought to rely as a basis for possession action to be further stayed. 

Legislative discretion

When a borrower is in breach of their mortgage conditions, the lender will have a right to possession. However, this has certain statutory qualifications and the court has some discretion to stay proceedings.

The Administration of Justice Act 1970 section 36, as amended by Administration of Justice 1973 section 8, provides the court with discretion to adjourn, stay or make a suspended order for possession on terms that the borrowers pay the arrears within a defined period of time that the court regards as reasonable.  Mr & Mrs Boyd were not in a position to make a payment that would address the mortgage and the arrears, and as a consequence could not seek to rely upon section 36 of the Administrative of Justice Act 1970.

In this instance, the borrowers sought to rely upon alternative legislative discretion. The borrowers submitted that the court retained a further discretion to stay possession proceedings under Section 86 (3) of the Judicature Act (NI) 1978, which states;

“Without prejudice to any other powers exercisable by it, a court, acting on equitable grounds, may stay any proceedings or the execution of any of its process subject to such conditions as it thinks fit.”

As noted, Mr & Mrs Boyd had now commenced proceedings against the bank and the surveyor. They were seeking to protect their legal right to sue, and their position was that a stay on possession proceedings could properly be granted for that purpose.

The argument proffered by the borrowers was that their action against the bank and its surveyor would potentially result in a successful financial pay out and relieve them completely of their mortgage debt owed.

Invoking Section 8 of the Judicature Act (NI) 1978

The court found that there is indeed discretion under section 86 to stay proceedings on equitable grounds, which must of course be given due consideration.

Justice Deeny noted;

“It seems to be me that, particularly in the context of a repossession action for a dwelling house, where the right to family life of a party may come into effect, that the discretion under Section 86 of the 1978 Act should not be confined solely to the instances where it would be unconscionable not to do otherwise.” [para 26]

However, the court’s finding was that such discretion should only be exercised in ‘rare and compelling circumstances.’

“One might, however, consider that one such circumstance might be where the mortgagor had a clear and strong case against either the mortgagee or, perhaps, a third party, which made it likely that the mortgagor would recover compensation greater in extent that the sums overdue to the mortgagor, and that that compensation would be forthcoming in a reasonable period to address the arrears.” [para 26]

It was acknowledged that such circumstances end up being very close to the statutory discretion already provided under section 36 of the Administrative of Justice Act 1970.

A rare and compelling case?

Mr & Mrs Boyd issued proceedings against The Woolwich, Eakin Surveyors and Northern Ireland Water Limited on 1st December 2014. They sought damages for loss and damage sustained due to the negligence of the parties during the valuation and surveying of their home.

In considering whether the discretion provided by section 86 of the Judicature Act should be invoked by the court, it was essential to examine whether the Boyd’s cause of action was a good one. Due to the delay in bringing proceedings, it was particularly relevant, whether or not their claim was likely to be found statute barred.

When assessing the merits of the Boyd’s claim Justice Deeny found significant shortcomings and difficulties. Justice Deeny raised concerns as to whether Mr Boyd had taken all the steps that would be regarded as reasonable when he became aware, or should have become aware, of problems with the survey. Justice Deeny surmises;

“What is clear to the court on examination of this matter is that there is considerable doubt over whether the plaintiff or its servants or agents were guilty of any tortious omission. There is also considerable doubt as to whether the belated claim of the Boyds is in time.” [para 40]

Justice Deeny proceeded to find;

“The defendants have not established that this is one of those rare cases where the court should exercise an equitable discretion pursuant to s.86 of the Judicature Act to deny a mortgagee possession of property.” [para 40]

The court refused to grant a stay on proceedings.

The case provides an important and accessible review of the scope of the court's discretion in circumstances when possession proceedings against the family home are brought. It is apparent that significant protection remains to borrowers under section 36 of the Administrative of Justice Act when there is affordability, while the court is not unwilling to consider further discretion under section 86 of the Judicature Act (NI) 1978, however this discretion will not be invoked unconscientiously.

Any borrower seeking to rely on this discretion must be in a position to illustrate that their case is compelling, with a likelihood of success being of paramount importance. The judgment provides an important restatement to those advising borrowers, that any claim or counterclaim must be progressed expeditiously if seeking to rely upon the discretion of the court.

Assistance in mortgage possession proceedings

Housing Rights has provided assistance to hundreds of borrowers who face repossession.  We can provide advice, advocacy and representation at court if you are at risk of losing your home due to mortgage arrears.