Santander (UK) Plc v McAtamney and other cases [2013] NIMaster 15 is, as the neutral citation should reveal, a case from Northern Ireland, decided by a Chancery Master. It is not, therefore, a binding authority on the law of England and Wales. Nevertheless, it is very interesting and, as we’ll see, highly persuasive.
The claimant mortgage companies had previously obtained suspended possession orders and were applying for leave to enforce the same. Now, I interpose here to explain that in NI, as in England and Wales, the Administration of Justice Acts 1970 and 1973 (s.36 and s.8, respectively) operate, so as to permit the court to suspend (or further suspend) orders or warrants for possession, so long as the borrower can pay the regular monthly installments and discharge the arrears within a reasonable period of time (as to which, see generally, Cheltenham & Gloucester Building Society v Norgan [1995] EWCA Civ 11).
This requires the court to identify what the arrears are in any given case. This is not as straight-forward as it might otherwise seem. Most mortgages provide for payments of capital and interest, and, you’d have thought, that the arrears are made up of any such missed payments (or, in the case of an interest-only mortgage, the missed interest payments). That is true as far as it goes, but most mortgages then also go on to provide for a range of other fees, e.g. administration fees (for the cost of administering an account which is in arrears), debt-advice fees (where the bank sends someone to see you – at your cost – to tell you that you’re in debt), additional interest, etc. These can easily amount to several hundred pounds a month and can often have the effect of making the mortgage unaffordable.
There is a real doubt as to whether or not these additional charges should be taken into account for these purposes. In England, at least, practice varies. Some lenders treat them as part of the sum to be taken into account when calculating arrears. Others do not. There is nothing definitive (yet) on this. There is a very good article by District Judge Parmiter (Law Society Gazette, April 29, 1992, pg.17) to the extent that these charges should be left out of account. There is further (albeit tacit) judicial support for that argument in Bank of Scotland v Grimes [1985] 2 All ER 254, at 258; Centrax Trustees Ltd v Ross [1979] 2 All ER 952 at 955 and, most clearly, Habib Bank Ltd v Tailor [1982] 1 WLR 1218 at 1223, where Oliver LJ said that:
“… one can see that the intent [of s.8] was, in the case of installment mortgages, to enable the court to defer possession if it was satisfied that there was a reasonable prospect of the mortgagor paying off… the outstanding installments.” (emphasis added)
So, back to the case. The mortgage companies had applied to enforce their suspended possession orders. They contended that the arrears included additional interest which was charged to the borrowers as a result of them being in arrears, in effect, to cover the projected future costs of servicing an account which was in arrears.
Master Ellision held that, notwithstanding an apparent contractual right to this money, it fell to be disregarded for the purposes of s.36 and s.8, i.e. the arrears are only the current arrears on the capital/installment payments. Not only did that interpretation emerge clearly from the statute and the English case-law (relying on Habib, but he could have also relied on the other cases I cited above), but (a) it was also an interpretation which was most compatible with Art.8, ECHR; and, (b) it was compatible with the Mortgage Conditions of Business which have the effect of making possession a last resort.
Directions were given for the production of updated – and correct – evidence as to the true arrears, in accordance with this judgment.
Comment
There is a lot to be excited about in this judgment. First, we finally have some judicial authority for the argument that DJ Parmiter advanced almost 20 years ago. In my experience of defending mortgage possession proceedings (in England), the practice of lenders is far from uniform; some (mostly “sub-prime” sic) lump all charges and costs in with the arrears whilst others tend not to. But it’s something worth watching out for and arguing against. It can make a huge difference to whether or not the court can make an SPO.
Secondly, the casual acceptance that art.8 would apply in the present case is also interesting. It’s not the central point of the case, nor is it clear to what extent the contrary was argued, but, in the light of Malik, it is further evidence of which way the wind is blowing (indeed, the mortgage companies attempt to rely on their own A1/P1 rights).
Thirdly, and by far the least important part, there is a salutory lesson in the importance of complying with directions. The Master had ordered Santander to provide details of their arrears management policies (something they are obliged to have by virtue of MCOB). They hadn’t provided these. Rather, a day before the hearing, someone had delivered a letter containing two photocopy documents which purported to deal with this point. They were said to be commercially sensitive and were only to be read by the Master. The Master not only refused to read them (quite rightly, may I add; imagine the natural justice issues!) but the documents had then been lost and he had “no intention of initiating a search for them.”