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Possession Of Mortgaged Land (Emergency Provisions) Bill

Volume 351: debated on Wednesday 20 September 1939

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Order for Second Reading read.

6.47 p.m.

I beg to move, "That the Bill be now read a Second time."

This Bill is frankly designed to close a loophole that was left in the Courts (Emergency Powers) Act, which went through all its stages on 3rd September. That Act prevented the execution or enforcement of judgment for the recovery of sums of money due under pre-war contracts, without the leave of the court, subject to certain exceptions. In that Act we provided, among other things, that a person cannot retake possession of property on the ground of non-payment of rent without obtaining the leave of the court. For reasons with which I will not weary the House, it was thought that the framework of the Act was sufficient to cover what is almost as common as tenancy contracts in these days, namely, the position of mortgagor and mortgagee, which arises, for example, under building society contracts. The only object of this Bill is to stop up that gap and to assimilate the relief which that Act affords against the execution in a case of landlord and tenant with the relief which a mortgagor should enjoy against his mortgagee.

As usual, an object which is as simple as that is not quite so simply done when you come to translate it into the terms of an Act of Parliament, and it has been necessary to produce this Bill, which I am afraid that hon. Members may find very complicated. The effect of it is to do no more than what I have just outlined. It achieves that end in this way. It was first necessary to make an alteration in the general law of real property because, as some hon. Members may hear with surprise for the first time, a mortgagee is entitled to walk into the possession of his property whether there has been a default or not. The mortgagee is the owner of the property and he does not need to wait until the mortgagor fails. He can just walk in and take possession. Therefore, it was no good merely presenting a Bill which only provided for a default on the part of the mortgagee. We had to alter the general law of mortgages. That is done in the first Sub-section of the Bill, under which a mortgagee will not be entitled to walk into possession unless there has been a default either in the payment of mortgage money or of interest or in fulfilment of one of the covenants of the mortgage.

Sub-section (2) is purely technical and deals with this case. As hon. Members who are skilled in the law know, the form that most mortgages take is that the mortgage money is repayable either on demand or at the end of a certain period of time, usually six months. Neither mortgagor nor mortgagee ever imagines for one moment that the money will be repaid at the end of six months, that is not the intention of the transaction at all, but, technically speaking, in law there is a default at the end of six months in the case of the ordinary standard mortgage. We have, therefore, put in Sub-section (2), which prevents that failure to pay on the automatic effuxion of time from being in itself a default and requires a period of three months' notice.

Sub-section (3) provides that the Bill does not apply to the case of a mortgagee in possession. No one would expect that any measure of this kind should be retrospective to that extent and undo a completed execution, but, subject to that, it applies the provisions of the Bill to all proceedings whether begun before or after the passage of this Measure. That is to meet the case of, say, a building society which may have begun proceedings for possession before this Measure came into being and would be enabled by this loophole—or would have been if we did not put in these words —to proceed to execution. There again we have had to put in an equitable safeguard. While we make the Bill apply to all proceedings, if in any unforsceable circumstances that would result in there being an unfairness in the conception of the situation, that is to say, in conceiving the situation as being one of default, either mortgagor or mortgagee can go to court and make it clear to the court that the order for the possession or the application for possession was not obtained on the ground of a default.

Having, therefore, cleared the ground and made an alteration in the law of real property, the really operative Sub-section, Sub-section (2), then proceeds to assimilate the situation of the mortgagor and mortgagee to the position of landlord and tenant under the Courts (Emergency Powers) Act. The effect, therefore, of this Bill will be that in a case where a mortgagor fails in his payment of interest or of capital money on the due date the mortgagee will not be able to enforce possession of the mortgaged property except by proceeding to the court for leave, and the court, by Section 1, Subsection (4) of the Courts (Emergency Powers) Act of 1st September, will not grant leave except after reviewing the circumstances, and must take account of any circumstances directly or indirectly attributable to the war which prevents the mortgagor from fulfilling his contract.

Those are the aims of the Bill. As I told the House, it looks more extensive than in fact it is, but the subject-matter is complicated. For that very reason I must apologise to the House for having to say that even since the Bill has been in print we have discovered one or two defects in it, and as we wish to make it completely watertight this time I shall move in Committee one or two manuscript Amendments to deal with technical weaknesses which possibly the Bill still has.

6.55 p.m.

The Solicitor-General has made a very clear exposition of what is rather a complicated Bill. I think the intention and purpose of the Bill is a sound one and I imagine our party will offer no opposition to it, but I should like to ask one question. With regard to Clause 1, which he says is an alteration of the general law, is it intended that that shall be a permanent alteration? I imagine that most of these Bills are emergency legislation which will probably be repealed when the emergency is over, but Clause 1 seems, offhand, to be an amendment of the existing law which would be beneficial not merely in the emergency but in ordinary times. I should like to know whether it is the intention— it can only be an intention, I am not asking for a pledge—to preserve this Clause of the new Bill even when the emergency has passed away.

6.56 p.m.

Had we been living in normal times I should have been inclined to reprimand the hon. and learned Gentleman for his neglect in not including this particular matter in the Courts (Emergency Powers) Act, but I feel bound to say that I have very little but praise for the way in which he and those acting with him have dealt with these emergency matters. It must be a great satisfaction to the people of this country to see that, in so far as it is possible for emergency legislation to relieve and protect them, action has been taken very promptly on all the matters which could affect the ordinary man and woman in the street. At the same time I think one has to keep a fair balance in these matters. I am all for protecting the small man, the borrower and the person who gets things on hire-purchase, but in all these things one must preserve a fair balance. I am not saying that a fair balance has not been preserved in this Bill. It does, of course, make a very drastic alteration in the present law. Fortunately, or unfortunately, I was in the Army during the whole of the first Great War, and am not really very well posted in how much of this legislation operated at that time. But this Bill does make a complete alteration in the existing law in that it will not now be possible to obtain possession of land, property and so on unless the conditions set out in this Bill have been complied with. I am not sure how far that was the case 20 odd years ago.

It is, of course, desirable—I approve the suggestion of my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence — that consideration might be given to an alteration of the law which, as it exists, permits mortgagees to obtain possession of land, which I suppose in theory is their land, without default necessarily having been made. It may well be a good thing to consider whether the principle set out in the first Clause of the Bill should not be incorporated in our general law when we are through the present emergency.

There are one or two minor points which perhaps the hon. and learned Gentleman might clear up for us. I think I am right in saying that six months' notice is required for the payment off of a mortgage. Here Sub-section (2) provides that default shall not be deemed to have been made unless a written demand for payment has been served and a period of three months has elapsed. I take it that that does not mean that where at present six months' notice is required, because of this Bill only three months' notice will be required. I take it that if the parties have agreed that six months' notice is necessary that notwithstanding this Bill six months' notice will still be necessary. A second point is that the Sub-section provides that it shall not apply where the mortgage money is repayable by instalments. Take the case of a building society mortgage. I presume that is repayable by instalments. Does this Bill mean, therefore, that in the case of a building society mortgage the usual consequences will follow without the necessity of a written demand or the passing of three months. I am merely inquiring for information with regard to that point.

In general terms we must approve of these Acts, but I would just say again that I hope the Government have an open mind in regard to amending any or all of them if the necessity arises. Perhaps the hon. and learned Gentleman will assure us on that point, because I am concerned whether, in regard to some of the Acts, we may not be going too far in one direction and overlooking something which is in the other direction. We all know that there were great hardships among tenants during the last war, but there were also hardships among mortgagees or small trusts which might have lent money and were not enabled to obtain repayment of that money or to increase their interest. One has to recognise that, in the majority of cases, the hardship among tenants and mortgagors is greater, but let us keep a fair balance in these matters. I hope that the Government will at all times be ready to receive representations in regard to any Amendment, in the same spirit in which they have brought these Measures before the House.

7.2 p.m.

By leave of the House I would like to say that I am much obliged to the House for accepting so generously my explanation of the Bill. I would also thank the hon. Gentleman for the references he made to those who work in close association with the Law Officers, the Parliamentary Counsel. A tribute is due to them for their patient accuracy and the way in which they have brought to fruition a mass of emergency legislation, some of which is of incredible complexity. So far as this Bill and any other Bill are concerned, let it be clearly understood— I am not suggesting that responsibility should not be where it rests—the responsibility is that of the Minister who brings it forward not having seen a loophole, and that responsibility in this case is mine. In answer to the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) let me point out that the Bill, by reason of Clause 3 (2), will die with the ordinary war legislation. I agree with him that there is a good deal to be said for reviewing the general law in regard to the power of a mortgagee going into possession of property, but the manner of it is not quite so baldly harsh as it might seem from the bare statement. The courts of equity have erected very formidable barriers between the mortgagee and his prey, and any mortgagee who tried to get possession would, in the end, find that he had lost very heavily by trying to make such an unconscionable use of his powers. It will be very valuable to see how this Bill works out in this matter, and later on it will be a matter for consideration whether some permanent alteration in the law ought or ought not to be made.

In regard to the point made by the hon. and gallant Member for South-East Leeds (Major Milner) I can give the assurance that Sub-section (2) does not in any way shorten any period fixed by the mortgage. The provision is far less formidable than it looks, and is solely and purely to deal with what I described a moment ago when I said that some such default might occur in the case of every mortgage where there was a fixed period. This provision does not cut down the fixed period, but gives it an expansion, so that, within the time stated, there will be notice of the desire of the mortgagee to treat the non-payment as a default. In the case of payment by instalments, the parties have agreed upon the due date for taking their instalments. Therefore, as each date occurs and compliance is not made with the terms of the mortgage, there is an actual and not an artificial default. The hon. and gallant Member is right in saying that in the case of the ordinary normal building society, direct default will occur if non-payment of the due instalment takes place, and from that date the mortgagee would have power to enforce what rights he has. under the mortgage, subject to the Courts (Emergency Powers) Act and to the view of the court as to the need, in relation to war conditions directly or indirectly affecting the payment of the money.

Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read a Second time.

Motion made, and Question, "That this House will immediately resolve itself into the Committee on the Bill," put, and agreed to.—[ Lieut.-Colonel Harvie Watt.]

Bill accordingly considered in Committee.