Zinda v Bank of Scotland [2011] EWCA Civ 706
In short, as you all know, the combined effect of ss.36 and 8, Administration of Justice Acts 1970 and 1973 is to allow a court hearing a claim for possession based on mortgage arrears, to, amongst other things, make suspended possession orders. The usual form of order is usually expressed as “CMI plus £x per month”, so as to ensure that the current monthly installments are paid, together with a sum to pay off the arrears over time.
The actual form of order is an N31. That provides that the order is suspended so long as the occupier pays £X off the arrears (e.g. £10 pcm) “in addition” to any future instalments under the mortgage. In Zinda, an SPO had been made in 2005, and provided, in the usual way, for the arrears to be paid off by instalments over a 9.5 year period, together with the CMI. In 2008, the bank capitalised the arrears which, in practical terms, had the effect of wiping them out (since, obviously, if they’ve been consolidated into the main debt, they’re not arrears any more). Sadly, however, in due course, Mr Zinda then failed to make other payments due under the mortgage (i.e. missed his CMI) and the bank issued a warrant.
Mr Zinda sought to stay the warrant on the basis that, in effect, by capitalising the arrears (and wiping them out) the original possession order had somehow become unenforceable. His argument failed before the DJ and on appeal to the CJ, both of whom pointed out that, for the suspension to remain in force, he had to pay both the arrears AND the CMI. The failure to pay the latter meant that, even though the former was now irrelevant, the suspension had lapsed.
Undeterred, Mr Zinda appealed to the Court of Appeal, who dismissed his appeal, essentially for the same reasons that the county court judges had given. A form N31 order requires both the CMI and the arrears instalments to be paid, otherwise the suspension ceased.
The reference to exquisite irony? See para. 39. Mr Zinda argued that the effect of this judgment was to re-write his mortgage and interfere with his freedom of contract, which is the cornerstone of free market libertarianism. His authority for this proposition was Lochner v New York (1905) 198 US 45 (a rather controversial, and largely now superseded, US Supreme Court decision in which it was held that a law regulating the working hours of bakers was unconstitional as an unnecessary interference with freedom of contract: see here. For those who are really keen, buy and read this book). Of course, as Munby LJ pointed out, applying such an approach, the Administration of Justice Acts would be unconstitutional and Mr Zinda would have no right to remain in occupation at all.