Birmingham Citizens Permanent BS v Caunt [1962] Ch 883

Key points

  • The right to possession of a mortgagee is exercisable at any time, without the need for default by the borrower
  • But the court may recognise an implied term limiting possession to the event of default under the common law

Facts

  • The district registrar had granted an adjournment to proceedings for possession by the mortgagee (C) against the mortgagor (D), who had defaulted
  • C appealed

Held (High Court)

  • Appeal allowed, order for possession granted
  • D had not committed to repaying the mortgagee in a short period of adjournment, thus there was no jurisdiction to adjourn the proceedings

Russell J

Mortgagee’s right to possession

  • The mortgagee has a right to possession as of right, without the need for default by the mortgag0r, unless the mortgagee has expressly or impliedly contracted himself out of that right: p. 889 – 890
  • Here, there is an implied term of the mortgage that the mortgagee would not take possession unless and until the mortgagors were in default

Postponement of possession under common law

  • Under the common law the court has no jurisdiction to grant relief to a mortgagor in default
  • The sole exception is that the court may adjourn the application for a short time to afford the mortgagor a chance of paying off the mortgagee in full or otherwise satisfying the mortgagee, but this should not be done if there is no reasonable prospect of it occurring: p. 921

Commentary

  • A legal mortgagee has a right to go into possession of the mortgaged property ‘before the ink is dry on the mortgage’: Harman J in Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317, 320
  • This case showcased the harshness of the common law approach, where possession could be postponed if the outstanding loan could not be repaid in a short time, prior to the introduction of s36 Administration of Justice Act 1970