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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Western Bank Ltd. v Schindler [1976] EWCA Civ 5 (05 March 1976) URL: http://www.bailii.org/ew/cases/EWCA/Civ/1976/5.html Cite as: [1976] EWCA Civ 5, [1977] Ch 1

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
CIVIL DIVISION
On appeal from Order of Mr Justice Goulding.

		Royal Courts of Justice,
		Friday, 5th March, 1976.

LORD JUSTICE BUCKLEY: This is an appeal from a judgment of Mr Justice Goulding delivered on the 23rd May, 1975. The Order was not perfected until the 18th June, 1975, which date it hears. The Defendant was ordered to deliver possession of a dwellinghouse, 56 Queen's Gate Mews, Kensington, to the Plaintiff mortgagee on or before the 23rd June, 1975, allowing the Defendant one month from the date of judgment to get out. The facts of the case are very clearly set out in the judgment of the learned Judge and I do not propose to recapitulate them. On the 23rd May, 1975 the Defendant issued a summons asking for an extension of time to vacate the property. This came before the Master of the 11th June, 1975, when he stood the summons over for cross-examination of the Defendant to take place on the 23rd June, 1975. On the last mentioned date the Defendant applied to Mr Justice Goulding for a stay of the Order, pending an appeal. The appointment before the Master was consequently vacated. The Judge made no Order upon the application for stay, the Plaintiff undertaking not to enforce the judgment for seven days, i.e., before the 30th June, 1975. On the 30th June, 1975, the Defendant applied to this Court for a stay of execution of the Order.

The Defendant had in the meantime effected a new policy of insurance upon his life in substitution for the original collateral security which had been the subject-mat of what the learned Judge called the policy charge, which had lapsed before the Plaintiff issued the Originating Summons for possession. The Court of Appeal granted a stay on the Defendant's undertaking to keep the new policy on foot. The premium under that policy was £399 a month. The Defendant made default in paying the premium which fell due on the 1st October, 1975, and again defaulted on the 1st November, 1975. The new policy lapsed on the 1st November, 1975. Consequently, on the 10th November, 1975, the Plaintiff applied for the removal of the stay. This Court made no Order on that application, but expedited the appeal. It came on for hearing on the 17th November, 1975, and was heard on that and the following day, but there was not then enough time to complete the argument. Unfortunately, for reasons which I need not go into, it was not found possible to continue the case until the 2nd February, 1976. In the meantime, as I shall explain later, certain further information became available to the Plaintiff.

The Judge held that the mortgage superseded the loan contract and that accordingly the obligation of the mortgagor as to payment of interest was to be ascertained from the mortgage alone. Upon the construction of the mortgage he held that the mortgagor was under no obligation to pay any interest until the contractual date for repayment of the principal sum, namely the 4th January 1983, when interest would be payable as from the date of the loan. In fact three instalments of interest have been paid, but thereafter the Defendant made no further payments of interest. Upon the Judge's finding he was under no obligation to do so. This has not been disputed on this appeal.

The Judge then considered the Plaintiff's right to possession in these circumstances. It was common ground before him, as it has been in this Court, that a legal mortgagee, which the Plaintiff is, has a right to possession at any time, irrespective of default on the mortgagor's part, unless the parties have agreed otherwise: see Four-Maids Limited v. Dudley Marshall (Properties) Limited, 1957 Chancery, 317. Before Mr Justice Goulding the argument turned on the effect of the Administration of Justice Act, 1970, Section 36. It was not suggested "below that the parties had restricted the mortgagee's right to possession "by any contractual term. The learned Judge concluded that the section applied and in the exercise of his discretion he declined to assist the Defendant except to the very limited extent indicated by the Order. In this Court Mr Lightman has taken a new point, viz., that a term should "be implied in the mortgage that the mortgagee should not be entitled to possession except on a default under the mortgage by the mortgagor. He points out that taking possession has been said to amount to a demand for payment (Boville v. Endle, 1896 1 Chancery, 648, at 651) and that to permit this would conflict with the term of the mortgage providing for payment on the 4th January, 1983. Moreover, Mr Lightman contends that, since clause 4(A) of the mortgage stipulates that the statutory powers of sale and of appointing a receiver shall only be exercisable in the events there stated, which include failure to make payment in full on the date for the payment, the right to take possession, which he says is a lesser remedy, must by implication be similarly restricted.

Mr Bromley for the Plaintiff has objected to this new point being taken. He says on the authority of Friend v. Simmonds, 1971 1 Weekly Law Reports, 1381, that the mortgage must be construed in the light of the factual background known to the parties at the time of its execution and of its genesis and purpose objectively viewed, aspects to which, he says, the evidence has not been fully directed or deployed. We have, however, heard able arguments on the new point and I am prepared to treat it as open to the appellant, whether it is strictly so or not. In my judgment, there is no ground in this case for implying the suggested term. A legal mortgagee's right to possession is a common law right which is an incident of his estate in the land. It should not, in my opinion, be lightly treated as abrogated or restricted. Although it is perhaps most commonly exercised as a preliminary step to an exercise of the mortgagee's power of sale, so that the sale may be made with vacant possession, this is not its only value to the mortgagee. The mortgagee may wish to protect his security: (see Ex parte Wickens, 1898 1 Queen's Bench, 543, at 547 and 549). If for instance, the mortgagor were to vacate the property, the mortgagee might wish to take possession to protect the place from vandalism. He might wish to take possession for the purpose of carrying out repairs or to prevent waste. Where the contractual date for repayment is so unusually long delayed as it was in this case, a power of this nature to protect his security might well be regarded as of particular value to the mortgagee. Mr Lightman has argued that a term excluding the right of a mortgagee to enter into possession should normally be implied if and for so long as the terms of the mortgage preclude the mortgagee from making immediate demand for payment or otherwise immediately enforcing his security. He drew our attention to Esso Petroleum Company Limited v. Alstonbridge Properties Limited, 1975 1 Weekly Law Reports, 1474, and in particular to what was said by Mr Justice Walton at pages 1483 and 1484. The learned Judge there said that he accepted that the Court would be ready to find such an implied term in an instalment mortgage, but that there must be something in the mortgage upon which to hang such a conclusion other than the mere fact that it is an instalment mortgage. In other words, he accepted that the fact that the mortgage was an instalment mortgage might make the inference easier to draw but would not in itself be a sufficient ground. With this I am disposed to agree. In my judgment, the proposition in the wide form in which Mr Lightman propounds it cannot be accepted. The conventional form of mortgage invariably fixes a contractual redemption date at some time in the future -very often six months after the date of the mortgage. An instalment mortgage ex hypothesi postpones payment of the instalments to dates after the date of the mortgage. If Mr Lightman were right in his submission, in none of these cases could the mortgagee be entitled to demand possession immediately after the execution of the mortgage, and yet by common consent that is his right at law, graphically described by Mr Justice Harman in the Four-Maids case as a right to go into possession before the ink is dry on the mortgage.

Taking possession may be tantamount to demanding payment in the context of the question whether the mortgagee can thereafter insist on notice to redeem, which was the question in Boville v. Endle. It would be an obvious inequity if the mortgagor could be turned out without an immediate right to resist this or to recover possession by redemption. By way of contrast, for reasons already indicated, a right to possession does not seem to me to be inconsistent with a postponed redemption date, particularly when that date is long postponed; and I see no equitable grounds for thinking that such a right would bear unfairly on the mortgagor if, as in this case, possession cannot be used as a mere stepping stone to a sale with vacant possession unless and until some event has occurred which makes the power of sale available to the mortgagee. Until such event occurs, the right to possession can only be exorcised to protect the security, not as a means of enforcing it. As soon as his power of sale becomes available to him, the mortgagee should certainly be free to exercise his right to possession unless he has most clearly bound himself not to do so. In the present case the availability of the power of sale does not depend only upon some default under the mortgage. It could arise upon any one of a number of contingencies (see clause 4(A) of the mortgage) outside the mortgagor's control which could happen at any time before the contractual date for redemption.

We were referred to what was said by Lord Pearson in Trollope v. North West Metropolitan Hospital Board, 1973 1 Weekly Law Reports, 601, at 609, on the law relating to implied terms. In my judgment, it is impossible to find in the mortgage in this case any indications possessing the required degree of certainty which would justify us in implying any term in the mortgage restricting the Plaintiff's right to possession. On the contrary, the presence in the mortgage of clause 4(A), in my opinion, points the other way on the basis of the principle expressio unius exclusio alterius. Accordingly, I reject this contention.

The Administration of Justice Act, 1970, Section 36, provides as follows: "(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 possession 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 possession 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 of 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 remedying of any default as the court thinks fit. (4) The court may from time to time vary or revoke any condition imposed by virtue of this section".

Mr Justice Goulding held that this section applied in the present case, and that he accordingly had a discretion to allow the Plaintiff to exercise its common law right to possession or to postpone the exercise of that right. Mr Lightman, on the other hand, contends that, the mortgagor not being in default, the Court is by implication positively required by that section to prevent the Plaintiff from taking possession, since the only relevant considerations are the existence of some default and its likelihood of being remedied. Alternatively he submits that by inference the section abrogates a mortgagee's right to possession except when some sum is due under the mortgage or the mortgagor is guilty of some other default under the mortgage.

In the present case, notwithstanding the loan contract, the mortgage and the policy charge must be treated as independent transactions. It is not disputed that the failure of the mortgagor to keep up the original policy, although it was of course a default under the policy charge, was not a default under the mortgage. So, on the evidence before the learned Judge, there was no sum due and no outstanding default under the mortgage.

I have been very much puzzled during the argument about the proper interpretation of Section 36. If subsection (1) 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, however, seems to me to lead to a ridiculous result. If a mortgagee applies to the Court for a possession Order while the mortgagor is in default, the Court may keep the matter in abeyance under subsection (2) for a reasonable period to permit the mortgagor to remedy the default: the mortgagor may do so within the time afforded to him by the Court: upon the construction of the section now under consideration, if there were no other subsisting default, the mortgagee could thereupon seek an immediate possession Order which the Court would have no power to refuse or to delay, "because no sum would then remain due and there would "be no outstanding default. A defaulting mortgagor would therefore he in a better position than one not in default. He could obtain a respite and, having done so, it would be in his interest to remain in default until the last moment of the period of respite. I cannot believe that Parliament can have intended this irrational and unfair result. I must therefore investigate whether the section is capable of some other construction.

Mr Lightman, in the course of his ingenious and helpful argument, has suggested that Section 36 by inference abrogates a mortgagee's right to possession when there is no sum due and no subsisting default on the part of the mortgagor under the mortgage. I feel unable to accept this suggestion. Section 36 is an enabling section which empowers the Court to inhibit the mortgagee's right to take possession. It confers 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.

I think, however, that the section is capable of interpretation in a way which makes it applicable to a case in which a mortgagee seeks possession when no sum is duo and no other default is subsisting under the mortgage. I can see no reason why the legislature should confer the discretionary power on the Court when the mortgagor is in default, but should not do so when he is not in default. The manifest unfairness, as I think, of such a position seems to me a strong ground for "believing that it must have been Parliament's intention to confer the power, default or no default, notwithstanding the ineptness of the language of the section to achieve this result. The only part of the section which appears to contradict such an intention is the conditional clause. This can only apply when the mortgagor is in arrear with some payment or is otherwise in default. It would be very natural for Parliament to provide that, where the mortgagor is in arrear or otherwise in default, the discretionary power should not be used to prevent the mortgagee from taking immediate possession unless the Court were satisfied that there was a genuine likelihood of the mortgagor being able to put himself right within a reasonable time. On this approach, the conditional clause operates as a restriction on the Court's free exercise of discretion. This would have been clear, had the conditional clause been framed in some such terms as these:

"but, if any sum is due under the mortgage or the mortgagor is in default in respect of any other obligation arising under or by virtue of the mortgage, only 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 such sum or to remedy any such default".

Although the language of the section is certainly inartistic to achieve this result and interpreting it in this way may involve some violence to the language (not, in my view, very great), nevertheless I think that, when the section is read as a whole in the context of the subject-matter and particularly having regard to the arbitrary unfairness of the literal construction, it is possible to spell this meaning out of the words used. Since I do not think that this Court should attribute to Parliament so irrational an intention as the literal construction would involve, I feel justified in adopting, and, in my judgment, we should adopt, the more liberal construction. Accordingly, in my judgment, on the true construction of the section, it 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.

For construing the section in this way I place reliance upon what was said by Lord Reid in Luke v. Inland Revenue Commissioners, 1963 Appeal Cases, 557, at 577:

"To apply the words literally is to defeat the obvious intention of the legislature and to produce a wholly unreasonable result. To achieve the obvious intention and produce a reasonable result we must do some violence to the words. This is not a new problem, though our standard of drafting is such that it rarely emerges. The general principle is well settled. It is only where the words are absolutely incapable of a construction which will accord with the apparent intention of the provision and will avoid the wholly unreasonable result that the words of the enactment must prevail".

The point was well put by Mr Justice Ungoed-Thomas in Re Maryon-Wilson's Will Trusts, 1968 Chancery, 268, at 282, where he said:

"If the court is to avoid a statutory result that flouts common sense and justice it must do so not by disregarding the statute or overriding it, but by interpreting it in accordance with the judicially presumed Parliamentary concern for common sense and justice".

In my judgment, the language of Section 36(1) is not incapable of bearing the construction which I favour, and consequently I adopt it as according with what I conceive to have been the true intention of Parliament.

Under Section 36(2), the Court can hold the matter in abeyance for a "reasonable period". I was at one stage of the argument impressed by the view that the word "reasonable" here related back to the conditional clause in subsection (1), and that this indicated that the discretion was one designed to be exercised only in cases falling within the conditional clause. On consideration, I have reached the conclusion that this is not so. When the mortgagor is in arrear or otherwise in default, a reasonable time for the purpose of subsection (2) must, I think, be measured by what is reasonable for the purposes indicated in the conditional clause in subsection (1). Where the mortgagor is not in arrear or in default, the Court will, upon the construction of the section which I favour, be at large in deciding what is reasonable for the purposes of subsection (2). I see nothing unlikely in supposing that Parliament meant this to be so. What would be reasonable must depend upon the circumstances of the case. Ihis may involve, amongst other things, considering why the mortgagee is anxious to obtain possession and what degree of urgency may exist in relation to any particular aspect of the case. It might, perhaps, also involve consideration of whether the mortgagor is likely to be able to pay sums accruing due from time to time under the mortgage punctually as and when they should become due.

In Royal Trust Co. v. Markham, 1975 1 Weekly Law Reports, 1416, this Court expressed the opinion that an adjournment, suspension or postponement under Section 36 must "be for a defined or ascertainable period. The Court was not then concerned with how the section might; operate in a case in which there was no sum due or other subsisting default under the mortgage. If on the true interpretation of the section the period must he defined or ascertainable, the Court might, if it thought it reasonable to do so, keep control of the matter by holding it in abeyance for a specified period with liberty to apply in the meantime, and reconsider the situation at the end of that period or upon an earlier application by either party. In a suitable case the specified period might even be the whole remaining prospective life of the mortgage. I would not myself dissent from the view that the Court could, if it thought it reasonable to do so, grant an adjournment, suspension or postponement for an indefinite period (e.g. until further Order) with liberty for either party to apply. If the discretion can be regarded as being as wide as this, as in my opinion it can, I see no reason why the Court should not be able to decide what period is reasonable in any particular case.

I appreciate that to construe Section 36 in this way is in effect no convert the mortgagee's right to possession, which at common law is an absolute right, into a right which is exercisable only with the permission of the Court on good cause being shown. I do not, however, regard this as a surprising result of a statutory provision which on any view is aimed at preventing an arbitrary use by the mortgagee of his legal right. It is a construction which, in my opinion, is to be preferred to holding that Parliament has either (1) sub silentio abrogated the mortgagee's right to possession, except when the mortgagor is in arrear or otherwise in default under the mortgage, by a section which in terms only confers a discretionary judicial power to control the exercise of that right, or (2) produced an irrational and unfair position by overlooking or misunderstanding the character of the mortgagee's right to possession at common law and consequently enacting the section in a form which leaves a lacuna which defeats the purpose of the section.

I think, therefore, that the Judge was right in holding that the section applied in the present case and that it conferred a discretion upon him. In the exercise of that discretion I think he was entitled to take into account all relevant surrounding circumstances and was not confined to consideration of matters directly arising out of the mortgage. In particular he was, in my opinion, fully entitled to take into account that as a result of the failure of the collateral security provided "by the policy charge the debt is now almost certainly inadequately secured. In my judgment, the learned Judge was entitled to make the Order which he did upon the grounds which he stated. I would therefore dismiss this appeal.

When the argument was resumed in this Court on the 2nd February, Mr Bromley asked leave to adduce new evidence of facts which had come to the Plaintiff's knowledge only since the 18th November, when the appeal was last previously before us. We gave leave and permitted Mr Lightman to call the Defendant to give oral evidence in answer. This new evidence indicates that an execution was levied against the Defendant in the Southampton County Court in April, 1974, and that since the learned Judge gave Judgment a further execution was issued against the Defendant in the High Court in October, 1975. The Defendant denied any knowledge of these executions and insisted that his Solicitors had no authority to submit to judgment in the High Court action as they did.

Under clause 4(A)(iv) of the mortgage the statutory power of sale becomes exercisable upon an execution being issued against the Defendant "so that the whole monies hereby secured shall notwithstanding anything herein contained be deemed to become due immediately upon the execution hereof". So, if an execution was in fact levied against the Defendant in April, 1974, the statutory power of sale then became exercisable upon that footing. I do not regard the suffering of an execution as constituting a default under the mortgage, nor do I think that the effect of the sub-clause is to render the mortgage monies actually due; but the issue of an execution would have, in my judgment, a most important bearing upon the exercise of the discretion under Section 36, assuming that section to be applicable hero. Once the power of sale has become exercisable, the right to possession must be regarded as an adjunct of the greatest importance. Very cogent reasons would, I think, be required in these circumstances to justify the Court in refusing the mortgagee an unrestricted right to possession. But, having regard to the very late stage at which this evidence was admitted and to the fact that the Defendant has not had a satisfactory opportunity of answering it, I think it would be wrong if this appeal should be decided upon the basis of this new evidence. Accordingly, I do not found my decision upon it.

I would dismiss this appeal and allow the Order for possession to take effect. I should be disposed to allow the Defendant 14 days from today for the purpose of moving out, but I would be prepared to hear any submissions that Counsel might now wish to make in this respect.

LORD JUSTICE SCARMAN: I agree. This is an appeal by the mortgagor of a dwelling-house against an Order for possession within 28 days made by Mr Justice Goulding in an action brought by the mortgagee. Owing to the strange but absolutely clear terms of the legal charge, the mortgagee was driven to base his claim for possession on the common law right which he enjoys by virtue of his legal estate: for he could allege no default, no arrears. Mr Lightman, for the mortgagor, has put forward the case that, in the absence of a default by the mortgagor upon an obligation under the charge, or of arrears owed by him, the mortgagee has no right to possession; alternatively, that, if he has, the Court has a discretion to postpone an Order under Section 36 of the Administration of Justice Act, 1970, and should have exercised its discretion in favour of the mortgagor.

Mr Lightman's argument for the appellant - presented, if I may respectfully say so, forcefully and cogently - falls into two parts. First, he submits that there should be implied into the terms of the legal charge a further term excluding the mortgagor's right to possession in the absence of arrears or default by the mortgagor. It is, he contends, a mortgage under which the mortgagee has expressly agreed to wait ten years for repayment of his capital and for payment of interest (which, though it accrues from year to year, is not payable under this instrument until the date of repayment of capital): it is, therefore, - he argues - consistent with the tenor of the parties' agreement to imply a term excluding the mortgagee's right to possession at least until that date, unless, of course, the mortgagor has defaulted upon any of his obligations. And there has been no such default. The second part of his argument raises an important question. He submits that, upon its true construction, Section 36(1) of the Administration of Justice Act, 1970, (which applies only to mortgages of dwelling-houses) excludes the common law right of the mortgagee to possession irrespective of default or arrears - a right which, in the absence of an agreement excluding it, a mortgagee enjoys by virtue of his estate: see Fisher and Lightwood, Law of Mortgage, 8th Edition, page 269.

If this construction of the subsection be not possible, he submits in the alternative that the subsection confers power upon the Court by adjournment, or otherwise as specified in subsection (2), to delay the making or enforcement of an Order for possession not only in cases of default or arrears, where the subsection expressly applies, but also in the case, not expressly mentioned in the subsection, where a mortgagee is relying on his common law right alone.

Mr Lightman argues that, unless one or other of these constructions is placed upon the subsection, the section fails to provide the mortgagor of a dwelling-house with the protection against eviction which Parliament plainly intended him to have.

I now deal with the argument based on contract. I do not think it possible to imply into this legal charge a term excluding the mortgagee's common law right to possession. The right was, until recently, rarely exercised – perhaps because a mortgagee in possession is strictly controlled and accountable: see Fisher and Lightwood, supra, pages 293-294-. Since, at any rate until recently, no-one expected that a mortgagee would wish to take possession in the absence of a default or arrears or some event conferring upon him a power of sale, mortgagors, or their advisers, appear not to have been concerned to seek by agreement the exclusion of the right. General practice does not;, therefore, really support the implication for which he contends. But there is a more specific reason against this implication. Mr Lightman's contention that the postponement in this mortgage of the date of repayment for ten years shows that the mortgagee, in the absence of default, could not have intended to retain the right to re-enter is, in my judgment, the precise opposite of what a detached by-stander would expect. A mortgagee is concerned to preserve the value of his security. When, as in this case, he cannot recover capital or interest for a period of ten years, the preservation of the value of his security during that period is of vital importance to him. If the mortgagee should think that the mortgagor, either by absence from the property or by his standards of management, care and maintenance (which, without amounting to waste or breach of covenant, may yet not be as high as the mortgagee thinks desirable), is not doing all he, the mortgagee, would wish to see done, his common law right of possession is a valuable instrument of self-help. The present case is a good illustration. The loan, made on the 4th January 1973, was of £32,000. A conservative estimate - more likely it is an under-estimate - of the rate of interest is 10 per cent per annum, i.e. £3,200 a year. In ten years time, therefore, the debt owed to the mortgagee will be, in purely financial terms, doubled. So far from implying a term excluding the common law right, I would expect, as a matter of business efficacy, that the mortgagee would in these circumstances require its retention. I am, therefore, unable to accept the appellant's argument based on contract.

I now turn to the argument based on statute. One may suppose that the section was passed to protect the mortgagors of dwelling-houses from the full rigour of the decision in the Four-Maids case and Birmingham Citizens Permanent Building Society v. Gaunt, (1962) 1 Chancery, 883. If the section neither abrogates the common law right nor subjects it to the power of delay admittedly conferred upon the Court in cases of default or arrears, the section fails in its purpose. The critical subsections are (1) and (2): "(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 possession 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 possession 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 of possession, for such period or periods as the court thinks reasonable".

Upon a first reading of these two subsections, I confess I thought it obvious that the powers conferred upon the Court are exercisable only if it appears to the Court that the mortgagor will be able within a reasonable time to pay off the arrears or remedy his default. In other words, there must be a default or arrears before the Court can intervene. I thought so not only because of the wording of subsection (1) but because the powers of adjournment, suspension and postponement conferred by subsection (2) appear to be appropriate only to cases where there are arrears to be met or a default to be remedied. Subsection (2) does not, in terms, confer a power to adjourn generally or sine die, which is the sort of power needed to give effective protection against the unreasonable exercise of a mortgagee's common law right of possession, independent, as it is, of default or arrears. Mr Lightman has, however, convinced me that it would be making a nonsense of the law so to read the two subsections. It would mean that a mortgagee could be prevented from taking possession when there was a default or arrears, but could not be so prevented if there were neither default nor arrears. Parliament cannot have intended so foolish a result.

Three courses are open to the Court. The first is to treat the section as having a "casus omissus", which only Parliament can fill. The second, and that for which Mr Lightman principally contends (since it would give him victory outright), 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 mortgagee is seeking possession of a mortgaged dwelling-house.

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, Articles 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 Parliament, 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. Inland Revenue Commissioners, (1963) Appeal Cases, 557, per Lord Reid at page 577. The line between judicial legislation, which our law does not permit, and judicial interpretation in a way best designed to give effect to the intention of Parliament is not an easy one to draw. Suffice it to say that before our Courts can imply words into a statute 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 Courts will strain against having to take the first of the three courses I mentioned; that is to say, leaving unfilled the "casus omissus". In the case of this section, is there an acceptable reading which would enable us to give effect to Parliament's intention within the principle which I think governs the problem?

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 upon 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.

If the second course is not open, can we adopt the third course? Though it is straining the language, I find no great difficulty in construing subsection (1) so that it confers a power of delay upon the Court in whatever circumstances the mortgagee of a dwelling-house is seeking to obtain possession. It entails reading the conditional clause in the subsection as applicable only where there are arrears or default, and not as cutting down the width of the power conferred. The greater difficulty, I think, is in the wording of subsection (2) which requires that the limit of a reasonable period be set upon the delaying power of the Court: see, for illustration, Royal Trust Co. of Canada v. Markham, reported in (1975) 1 Weekly Law Reports, 1416. It is appropriate to set such a limit when the problem is whether the mortgagor can find the necessary money or remedy the default. Nevertheless, though it is difficult, it is not impossible to envisage circumstances in which it would be appropriate to impose a time limit upon a mortgagee seeking possession by virtue only of his common law right. The danger to the security, which would be the reason for the mortgagee's application, might appear less imminent to the Court than to the mortgagee; or the mortgagor might make proposals which the Court would think ought to be given a chance. In either case it could be appropriate to adjourn proceedings for a period in order to see whether the mortgagee's fears were justified. For myself, I doubt whether the subsection empowers the Court to adjourn a mortgagee's proceedings sine die or generally. But, upon the assumption that it does not, there is still sense, for the reasons given, in applying subsection (2) to cases where the mortgagee relies only on his estate and alleges no arrears or default.

Accordingly, I think that, within the general principle, it is open to the Court to take the third course: and, in my opinion, the wording of the two subsections is not so difficult as to make it impossible to give effect to what was plainly the intention of Parliament, namely, to give the Courts power, in their discretion, to protect the mortgagor of a dwelling-house for a reasonable period against eviction by his mortgagee. I would therefore hold that the section applies as well where the mortgagee asserts his common law right as where he relies on arrears or default. Upon whatever ground the mortgagee of a dwelling-house seeks possession, the Court has, in my judgment, the discretion conferred by the section.

It follows, therefore, that the Judge had the discretion which he believed he had. In ordering immediate or almost immediate possession, he cannot be shown to have exercised his discretion wrongly. I am not impressed with Mr Lightman's ingenious argument that the risk to the security arises not from anything that has happened to the security but from the mortgagee's own acceptance of a date of repayment ten years ahead.

For these reasons, I would dismiss the appeal.

LORD JUSTICE GOFF: At the trial in the Court below this case proceeded on the basis that no act or event within clause 4(A) of the legal charge had occurred, and there was no evidence to the contrary. When this appeal was opened the position was still the same, hut the case had to be adjourned and during the interval the Respondents discovered, or believed they had, that execution had issued even before the commencement of these proceedings on a County Court judgment against the Appellant, and subsequently also on a High Court judgment.

At the resumed hearing, the Respondents sought leave, which we granted, to adduce further affidavit evidence to prove those facts. It was not however strictly proved, and although we gave the Appellant leave to deal with the position by giving evidence before us, he had little time to instruct his Counsel, and no access to any papers to which he might wish to refer. This being so, my brethren and I are agreed that it would not be fair or safe to rely on the further evidence, and this appeal must be decided on the same basis of fact as that on which it was conducted below. That is, of course, without prejudice to anything the Respondents may be able to prove, and the consequences, in fresh proceedings, should they bring any, and without prejudice to any remedies they may seek to exercise on the footing of the execution as issued. To save repetition, this must be understood throughout this judgment whenever I say that no act or event within clause 4(A) has occurred.

It has for a very long time been established law that a mortgagee has a proprietary right at common law as owner of the legal estate to go into possession of the mortgaged property: see Coote on Mortgages, 9th Edition (published 1927), Volume 2, page 821. This right has been unequivocally recognised in a number of modern cases: see, for example, Four-Maids Ltd. v. Dudley Marshall (Properties) Ltd., 1957 Chancery, 317, and Birmingham Citizens Permanent Building Society v. Caunt, 1962 1 Chancery, 883. It has nothing to do with default: see per Mr Justice Harman (as he then was) in the Four-Maids case at page 320. As he there expressed it, "The mortgagee may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted himself out of that right".

This the Appellant accepts, and it is in any case incontrovertible. Prima facie, therefore, the Respondents were entitled to an Order for possession which the learned Judge granted, although in exercise of the discretion which he supposed himself to have under Section 36 of the Administration of Justice Act, 1970, he gave time to enable the Appellant to remedy his breaches of covenant in respect of the collateral security under the endowment policy. The concluding words of his judgment show that he thought that discretion would enable the Court ultimately to refuse possession if the harm done by the lapse of the policy could be substantially and permanently repaired, but otherwise to allow the Order for possession to be enforced. For reasons which will appear later, I do not think he had any such discretion on the facts of this case.

I will return to that later, because the Appellant relies first upon a question on the construction of the legal charge, which is quite independent of Section 36.

The cases show that a mortgagee may contract out of his common law right to take possession and this, as has been observed, he may do by implication as well as expressly: see Four-Maids Ltd. v. Dudley Marshall (Properties) Ltd., supra. There is clearly no such provision expressed in this legal charge, but the Appellant argues that one ought to "be implied. Now, even if that be right, it must clearly "be only until the 4th January, 1983, or until the earlier happening of some act or event specified in clause 4(A), "but that would he sufficient to enable the Appellant to succeed on this appeal, no such act or event having occurred.

Ought then such implication to be made? The Appellant answers yes because, the Respondents having agreed subject to clause 4(A) to wait for their money until the 4th January, 1983, it would be harsh and unconscionable for them to place the Appellant in the position of being forced either to yield up possession of his house or to pay before, and indeed long before, that date. I am not at all sure that it can be said to be so on the facts of this case, since in considering whether conduct is harsh or unconscionable one must look at all the circumstances, not the least of which is the Appellant's lamentable performance with respect to his obligations under the collateral security.

I will, however, assume, without deciding, that it would be. Still that is not a ground for implying a term in the contract. It is a straight claim to relief in equity, and immediately it brings the Appellant up against an insurmountable hurdle that, as Mr Justice Cross (as he then was) said in Braithwaite v. Winwood, I960 1 Weekly Law Reports, at page 1263, under "an ordinary mortgage where the legal estate in fee simple was given to the mortgagee the mortgagee could at once take possession if he wished to do so, and (this is the important point) the Court of Chancery would never grant an injunction restraining him from doing so. Of course the Court of Chancery had its own weapon which it used against a mortgagee who did take possession. He would have to account strictly for his receipts in any redemption proceedings; but equity never intervened by injunction to prevent the mortgagee exercising his legal right to take possession".

In the Four-Maids case (1957 Chancery at page 321) Mr Justice Harman, dealing with the 1936 practice direction concerning Rules of the Supreme Court, Order 55, rule 5A, said this:

"I have always been of opinion, and I remain of that opinion, that this practice is limited to what are by far the most frequent forms of mortgages, those whereby the principal, as well as the interest, are repaid by the mortgagor by commuted weekly or quarterly sums, and whereby the mortgagee precludes himself, so long as those weekly or other periodical sums are punctually paid, from going into possession. That is the way most people occupy their houses nowadays. Building societies are not desirous of going into possession, nor would they do business if they were able to go into possession whenever they liked. The whole object of building societies is to maintain the householder in possession of his house so long as he pays the instalments to the society, and these practice directions are directed to that matter. But in an old-fashioned type of mortgage, such as that in the present case, none of those considerations applies at all. The mortgagee can go into possession whenever he chooses, whether there are arrears or not, whether there is default or not".

It has been doubted whether he was right in limiting the practice note to instalment mortgages, but that does not matter for present purposes. The point is that these words might be read as if he thought that a term limiting the right to take possession must he implied from the mere fact of the mortgage being an instalment mortgage. I do not think, however, that can have been what he meant, and it would be inconsistent with the whole premise of his judgment that the right to take possession is independent of default. As that is so, an agreement not to exercise it cannot be implied from the mere fact that the payment is to be by instalments so that there is no default so long as the payments are kept up.

I agree, however, as Mr Justice Walton said in Esso Petroleum v. Alstonbridge Properties, 1975 1 Weekly Law Reports at page 1484, that the Court will be ready to find an implied term limiting the right to possession in an instalment mortgage. In the passage cited from the judgment of Mr Justice Harman he drew a distinction between an instalment mortgage and what he described as "an old-fashioned type of mortgage". The present instance is certainly not an instalment mortgage, but I doubt whether it is an example of what his Lordship had in mind as an old-fashioned type. That would normally have a contractual date for legal redemption after a short interval, usually six months, not ten years. I think that in this dichotomy the present case may very possibly fall to be considered rather as an instalment mortgage, and perhaps a fortiori. Even so, however ready the Court may be to imply a term, still, as Mr Justice Walton also said in the Esso Petroleum case at page 1484, "there must be something upon which to hang such a conclusion".

What then, if anything, is there? Mr Lightman relied on clause 4(A), and I see nothing else which can possibly help him. I did not understand the deferment of interest as well as principal to be relied upon save in support of the harsh and unconscionable argument, of which I have already disposed. If, however, it were, I could not accept it.

The argument on clause 4(A) was that the Respondents having by that clause expressly agreed not to exercise the greater remedy of sale before the 4th January, 1983, save upon the happening of any of the acts or events there specified, it must be assumed that the lesser right of taking possession was similarly fettered. Indeed, he went so far as to suggest it might be a fortiori. In my judgment, however, that is a non sequitur.

I should point out that the clause deals also with the statutory power to appoint a Receiver, which is perhaps more akin to taking possession, but that was a power devised, and now implied by statute, to enable a mortgagee to get some of the advantages of taking possession without incurring liability to account on the footing of wilful default.

The parties may, of course, have failed to direct their minds to the question, or the Appellant, whilst insisting upon protection against the power of sale and the power of appointing a Receiver against which he otherwise would have no shield, may have been content to rely, so far as the right to take possession is concerned, upon the protection afforded by the equitable rule of accountability on the footing of wilful default, and it is interesting to note that the passage in Coote on Mortgages, 9th Edition, page 821, says this:

"It was formerly usual to insert in mortgage deeds an express proviso to the effect that it should be lawful for the mortgagor to retain possession, and receive the rents and profits, until default in payment of the principal and interest on the day fixed. But such provisos, are now generally omitted, for, having regard to the disadvantages attending the position of a mortgagee in possession, and as, apparently, the entry will entitle the mortgagor to redeem at once without notice or interest in lieu of notice, it is generally considered that the risk of a mortgagee entering within the period before default can be made, which is usually six months from the date of the deed, is one which, in practice, it is not necessary to guard against".

Again, the Respondents, whilst willing to qualify their statutory powers, may not have been willing to contract out of their common law right to take possession. Moreover, where, as here, there is a long postponement of the date for repayment, the Respondents might well visualise the need to take possession before that date and before the happening of any act or event within clause 4(A). Mr Lightman says they could protect themselves against the property being left vacant and suffering from vandalism or squatters by the mortgagor's liability for waste, but in my view that is not a sufficient answer. Taking possession may be a much better protection.

In short, it seems to me that clause 4(A) is at most neutral in this respect. It does not, in my judgment, show that obviousness or necessity which are required before a contractual term can be implied. Indeed, the argument may cut the other way. Clause 4(A) is dealing with statutory remedies. Taking possession is not a remedy but a right: see per Mr Justice Walton in the Esso Petroleum case at page 1484, line H. Accordingly, it may be said expressio unius exclusio alterius.

Finally, in this connection Mr Lightman argues that if the Respondents could take possession, they would be bound after paying outgoings to account, I suppose annually, to the Appellant for any surplus and, therefore, it would be a bootless exercise. In my judgment, however, that is not right. They could retain that surplus, and add it to their security, because a mortgagee in possession receives the rents and profits as owner, and it is only on redemption that he becomes liable to account. Indeed, subject always to that liability if and when the Appellant brings it home by redemption, the Respondents could, I conceive, occupy the property for their own use, for example by allowing one of their employees to live there rent-free. If equity could not stop a mortgagee from taking possession, and it is plain it could not, then it could not call on him to account save in a redemption action, but then it would impose not only liability on the footing of wilful default but also yearly rests. This conclusion appears to me to be plainly right on principle and see the extract from Professor Maitland's Lectures on Equity cited in Birmingham Citizens Permanent Building Society v. Caunt, 1962 1 Chancery at page 888. See also the passage cited from the judgment of Mr Justice Cross in Braithwaite v. Winwood, I960 1 Weekly Law Reports at page 1263, where he said

"He would have to account strictly for his receipts in any redemption proceedings".

In my judgment, therefore, the suggested term cannot be implied, and this ground of appeal fails.

I turn to the alternative case for the Appellant which, he based on Section 36 of the Administration of Justice Act, 1970, and which may be summarised in the following propositions. First, that section applies where there is no money due and unpaid and no default consisting of a breach of any other obligation arising under or by virtue of the mortgage. Secondly, that the failure of the Appellant to keep up the original policy and the substituted policy, however much it might be a breach of his obligations under the assignment of the policy, was not a breach of any obligation arising under or by virtue of the mortgage, for the Respondents, for reasons good or bad, kept them separate. Thirdly, it follows on the Judge's construction of the mortgage, and on the basis on which this case has proceeded, as no act or event within clause 4(A) has occurred, that this is a case within the first proposition. Fourthly, that in such a case Section 36 either abrogates the mortgagee's common law right to take possession unless and until there be default in payment of money or a breach, of any other obligation under the mortgage, or the Court is bound to exercise its discretion in favour of the mortgagor, I suppose by granting an adjournment sine die.

In my judgment, the second proposition is right, and the third does follow, and the questions we have to decide are, therefore, whether the first, and either way of putting the fourth, be right, in which case the appeal must succeed, or whether both or either of the first and fourth propositions are wrong, in which case it fails.

In order to decide these questions, one must in my judgment consider first the purpose and effect of Section 36 in the case to which it indubitably applies, namely, where there is default either in payment of money or otherwise.

In my judgment, the words in subsection (1), to which my Lord has referred as the conditional clause, "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", make it clear that the purpose of the section is to enable the Court in any of the ways specified in subsection (2) to grant a limited time, which may of course in a proper case be extended by a further exercise of the statutory powers, within which the mortgagor may put the matter right.

If that were in doubt, and in my view it is not, the legislature has itself removed the doubt by the Administration of Justice Act, 1973. This was passed to remedy a defect in the earlier Act, under which in the case of an instalment mortgage with a provision that on default the whole should become due the Court could only grant relief on the terms that the mortgagor do pay off the whole principal sum and not merely the instalments in arrear. This remedial Act by its very nature emphasises the purpose of the earlier Act, but it goes further, because in Section 8, subsection (1), it actually describes the purpose of the 1970 Act in these terms: "under which a court has power to delay giving a mortgagee possession of the mortgaged property so as to allow the mortgagor a reasonable time to pay any sums due under the mortgage".

This being so, it is argued that the first proposition must be right, both because that is the natural meaning of the words of the section, and because if it be not so a mortgagor who is not in default will be in a worse position than one who is, and it is further argued that the fourth proposition must be right in one or other form, since otherwise the section produces a result which is preposterously absurd. If, so the argument runs, all the Court can do is to grant time to enable a mortgagor to pay what is due or to remedy any other default under the mortgage, and when that has been done the mortgagee is left with his absolute proprietary right to take possession, then, save where the money due is the whole amount under the mortgage and the case is not one within Section 8 of the 1973 Act, it is idle to grant the mortgagor time to pay the money or remedy the default.

I feel the force of these arguments, but I am not able to accede to them. I am satisfied that Section 36 of the 1970 Act cannot be held, as it were by a side wind, to have wholly abrogated the mortgagee's proprietary right to take possession, even when there is no default. This would not, I think, be applying the principle of liberal construction to avoid absurdity stated by Lord Reid in Luke v. Inland Revenue Commissioners, 1963 Appeal Cases at page 577, but disregarding the statute or overriding it, which, as Mr Justice Ungoed-Thomas pointed out in Re Maryon Wilson's Will Trusts, 1968 Chancery at page 282, and in my Judgment rightly pointed out, is what the Court is not allowed to do. Nor, in my judgment, by parity of reasoning, can it be said that the Court has a discretion but is bound to exercise it against the mortgagee where there is no money due or other default under the mortgage. Apart from the illogicality of saying that the Court has a discretion, but is bound to exercise it in a particular way, this would really come back to abrogating the right.

It seems to me that there are only two courses open to the Court; the one preferred by my brethren to construe the clause as conferring a discretion in all cases, reading the conditional clause merely as a qualification on that discretion in the case of unpaid money due or other default; the other to construe the section literally and face whatever anomalies or absurdities that produces. For my part, with all respect, I think the latter is the correct course. It is, in my judgment, inescapable that the result of their construction is that the section operates as a positive enactment disentitling the mortgagee to exercise his proprietary right to take possession save on showing some cause other than the mere existence of his right as legal owner. That is perhaps less startling than saying that the right is wholly abrogated save upon default, but in my view it comes very near to it. Further, I find it very difficult to see how this section can be held to give the Court power to adjourn, whether sine die or for a fixed period, where there is no money due which ought to be paid, or other default to be remedied, or by what criterion it could determine what should be a reasonable period. It is one thing to grant an adjournment to enable something specific to be done, such as is contemplated by the conditional clause. It is altogether different to grant an adjournment to see if some act, event or failure may occur which will entitle the mortgagee to exercise a right which at the time of the adjournment he does not possess, since ex hypothesi he is not entitled to exercise his proprietary right save on due cause "being shown.

On the other hand, the anomalies and absurdities said to flow from the literal construction may be more apparent than real, because of the equitable liability to account on the footing of wilful default. Where there has never been any default, or where the Court has allowed time for it to be remedied, which has been done, the mortgagee will not ordinarily be in a position to exercise any power of sale, and, therefore, will generally not wish to go on and got possession, unless indeed there is some reason apart from default in payment or other obligation, for example if the premises have been left vacant, in which case there is nothing anomalous, unjust or ridiculous in allowing him to do so.

It may be that the Legislature overlooked the fact that the mortgagee's right is not dependent on default, or, more probably I think, it was concerned only to give a defaulting mortgagor a chance to make good his default, leaving everything else, that is to say his position on doing so, and the case where there has been no default to the protection of the equitable doctrine of accountability which has sufficed well in the past.

Be that as it may, in my judgment, Section 36 does not apply where there is no money due, and no other default, and, therefore, this appeal fails. If that be wrong, however, then in my judgment the construction my brethren have adopted must be right, and in that case I respectfully entirely agree both with them and with the learned Judge below that it would not be right, in the circumstances of this case, to exercise the Court's discretion under Section 36 so as to grant any indulgence or further indulgence to the Appellant, and I respectfully agree with the Order my Lord has proposed.

Order:- Appeal dismissed with costs against the Appellant up to the date of his Legal Aid Certificate; costs of the appeal from the date of the Legal Aid certificate to be paid out of the Legal Aid Fund, that Order not to be proceeded upon for three weeks, to give the Law Society an opportunity to make representations. Possession to be given within 14 days. Legal Aid taxation for the Appellant. Leave to appeal to the House of Lords refused.