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Mortgages - Coggle Diagram

- - - - Multiservice Bookbinding Ltd v Marden [1979] Ch. 84: agreement upheld even though annual interest equivalent approx 25% above normally charged on mortgage loans at time. Parties agreed to index-link loan to Swiss franc rather than UK inflation rate. Mortgagors ended up charged a much higher rate of interest than they would have been charged had the interest been linked to sterling.
        Significance attached to fact parties were business-people (commercial actors - ask what is relationship between actors). Per Browne-Wilkinson J: “plaintiffs [mortgagors], businessmen, went into [the bargain] with their eyes open, with benefit of independent advice, without any compelling necessity to accept a loan on these terms and without any sharp practice by defendant”.
      - Falco Finance v Gough [1999] CCLR 16: 9% interest rate moving to 19.5% on default found to be unfair.
      - Compare Davies v Directloans [1986] 2 All ER 783: mortgage lender raised interest rate to 22% on a 10-year mortgage (standard repayment interest rate was 6%). Held: not exorbitant under the CCA.
      - Paragon Finance v Nash [2001] EWCA Civ 1466: base rate of interest dropped but PF kept its interest rate high. CA held: a) mortgage lenders can’t alter or maintain interest rates unreasonably, but also b) PF wasn’t unreasonable in maintaining interest rate charged to N. (Also Paragon Finance: interest rate rise leading borrower to take out a further loan not unreasonable.)
- - - - Bristol & West BS v Ellis (1996) 73 P&CR 158: on a credible repayment plan it would have taken mortgagor approx 98 years to pay off mortgage. Mortgagor asked for postponement of sale for 5 years, during which her son could finish school. CA rejected request, because over those 5 years mortgagor’s debt to mortgagee would have risen substantially.
      - Not about luck or speculation - courts are looking for proof, no credible financial plan for deferring sale. Still good case law but now supplemented by the Code.
- - - - Mortgagor can’t meet the repayments.
      - Mortgagor wants to pay off (redeem) the mortgage before redemption (completion) date.
      - Mortgagor’s partner complains mortgagor obtained her consent through undue influence.
- - - - Both categories of presumed undue influence treat A and B as the only relevant parties. But in Royal Bank of Scotland v Etridge (No 2), held that M also has a role to play. M is one exerting undue influence over B. Presumption is still that A is the wrongdoer.
      - HL decided mortgages sometimes should be set aside because M should have foreseen risk of A unduly influencing B and should have taken steps to ensure B freely consented.
      - HL said the key to understanding presumed undue influence is, after all, category 2A.
      - B, as potential mortgage-signer/surety provider, is dependent on M’s expertise and authority: M has the capacity, and so in Etridge was held to have a duty, to provide B with some protection from A.
      - So, what’s the nature of M’s duty?
        
        In Etridge, HL held that in future, if the contract between the mortgage lender and the complainant – M and B – is to be valid, M must take steps to ensure:
        
        B was aware of the risks involved in the assenting to mortgage agreement, and
        
        B knew that they ought to take independent legal advice (i.e., advice independent of M and A) before signing it.
        
        (The HL didn’t apply this test to existing mortgage arrangements, as doing this would have meant creating a new rule altering the legal status of actions taken before the rule came into existence.)
        
        In Etridge, Lord Nicholls provides guidance on what M meant to do: includes requiring B to provide her legal advisor’s contact details, ensuring advisor receives the information necessary for providing B with independent advice, and refusing to proceed with the mortgage until the advisor confirms that B has received advice. The guidance has been finessed in subsequent case law (e.g., HSBC v Brown [2015] EWHC 359 (Ch)).
        
        Obvious conclusion = significant burden is placed on M. But it also provides M defence.
        
        If M impresses on B the importance of seeking independent legal advice and can then show that B didn’t take advice, or took it but ignored it, or sought advice from someone who wasn’t independent, B won’t be entitled to have the mortgage set aside.
        
        M only has to ensure that B is in a position to receive independent advice. If B is inadequately advised, B has a claim against her advisor rather than M.