Cheltenham
& Gloucester Building Society v Christina Norgan
Court of Appeal 5 December 1995
Arrears on an agreement can be repaid over the full
period of that agreement, a court not being obliged to set a shorter period.
Mrs Norgan had title to the family home in Wiltshire, and
mortgaged it with the Guardian Building Society (since absorbed into the
Cheltenham & Gloucester Building Society). By 1990, she had fallen into
arrears of £7,216, which gave the building society the right to take possession
of the property. The building society took her to the County Court where the
judge made a possession order with arrears then at £14,744, but suspended it on
the basis that Mrs Norgan was attempting to re‑finance the loan. No
re-financing took place and further hearings took place over the next two years,
with only a few payments made. By the end of 1992, arrears stood at £15,000.
The Benefits Agency started making Mrs Norgan's interest payments from June
1992.
The building society then gained leave from the County
Court to seek a warrant to execute the possession order, subject to Mrs Norgan's
appeal to the judge. That appeal was not completed until May 1994, with the
hearing taking into account mainly the dispute between the parties over the
period over which the arrears should be repaid. The Administration of Justice
Act 1973 provided that repayment should be allowed over a "reasonable
period", and custom within the courts was to allow only around two to four
years. In addition, reference was made to the guidelines of the Council of
Mortgage Lenders (of which the society was a member), which recommend members to
allow a reasonable period to sort out arrears. The judge rejected the
defendant's case for allowing the remainder of the mortgage term for arrears to
be cleared, and dismissed her appeal.
Mrs Norgan appealed from this decision, and it was held
that, where it would be practicable for the arrears to be paid off over the
remainder of the mortgage period, the Administration of Justice Acts required
that this should be the basis for County Court decisions, and that previous
lower court practice did not take account of the Acts' requirements.
NOTE Although this case involved
an unregulated mortgage agreement, the same principles would apply to arrears on
any regulated agreement secured on land.