When the Hastings defaulted, Mrs Bhasin found herself facing proceedings for possession, as an occupier of the property.

The case raised two important points. First, what was Mrs Bhasin's status in the property vis-a-vis the lenders? Could she take advantage of the discretion afforded to the court by Part 36 Administration Act 1970, which is normally reserved for borrowers only? If so, secondly, on what basis should the court exercise that discretion?

The first point was easily dealt with as Cheval Bridging Finance Limited were prepared to allow Mrs Bhasin to be treated as a mortgagor, especially as a trust had been created in her favour by the Hastings. In any event, even if she was not a mortgagor, the court still had a general discretion under Rule 3.1 of the Civil Procedure Rules to grant relief.

The second point was much more instructive because it gave the court the opportunity to show what kind of relief would be considered for borrowers who were in default with a bridging loan as opposed to a full loan, where the 'lifetime of the mortgage' is usually the yardstick for the granting of relief. This had been a nine-month bridging facility. The judge at first instance had approached it from the point of view that “if there was strong and convincing evidence that the whole sum might be repaid in, say, three months or -- at a stretch -- six months, the court might grant a stay or a suspension”. However, there was no evidence on which a court could find that the outstanding sum could be repaid within a reasonable period of time.” The Court of Appeal reluctantly agreed that there was nothing wrong with the judge's approach. The unfortunate Mrs Bhasin lost her appeal.

So it would appear that, while courts are prepared to allow some latitude, in months rather than years, this is only likely to be a possibility if there is some sign that the whole of the loan is going to be repaid within a relatively short period. Instalments over several years is simply not an option.

Stephen Gerlis