by Linda Johnston

In a recent case at the High Court of Justice in Northern Ireland’s Chancery Division, Judge McBride considered a customer’s appeal against the refusal to suspend a possession order that had been granted in 2018. The judge permitted new evidence to be heard as part of the appeal.

The customer, Liam McAlary, took out a mortgage for £215,000 in 2008, over a 25 year mortgage term. By 2016, the customer owed £230,044 and did not dispute the level of arrears, so a possession order was granted.  By August 2019, the mortgage balance outstanding was £218,488, but two independent valuers valued the property at just £125,000, a drop in value which will be familiar to many lenders operating in Northern Ireland. The customer had a buyer at £125,000 to whom he wished to sell.

The customer’s lawyer argued that the property should not be repossessed and that the customer should be allowed to sell the property privately at the estimated market value which would not prejudice the Lender. This argument was run under reference to Order 88 Rule 1 (i) and Order 31 (1) of the Rules of the Supreme Court of Judicature (Northern Ireland) 1980.

The customer’s lawyer also relied on the well-known English cases of Palk v Mortgage Services Funding plc [1993] and Barrett v Halifax Building Society [1995] in which the English courts permitted customers to effect shortfall sales - though of course, these cases were based on the Law of Property Act 1925, which does not apply in Northern Ireland.

These arguments were resisted by the lender, and the court declined to agree that the legislation allowed the customer to sell the property at a shortfall.

The Judge decided not to follow the Palk and Barrett decisions, noting that as far back as 1997, the English Court of Appeal (in the case of Cheltenham and Gloucester plc v Krausz) had doubted that the Barrett case was correctly decided.

The Judge concluded that there was only once piece of law that would allow the court to stop the possession order – Section 36 of the Administration of Justice Act.

Under Section 36, a customer needs to demonstrate that they can pay what they owe within a reasonable timeframe. As in this case, the customer accepted that they could not do this, the Stay was therefore refused by the Judge.

If you would like any further information on this case, please get in touch with me on 02890243901.