In June 2016, The Court of Appeal in a group action by buy to let landlords, headed by Mark Alexander (Borrowers) against West Bromwich Mortgage Company (Lender) held that the group are entitled to a refund of mortgage overpayments.
buytoletThe dispute arose as a result of an inconsistency between the mortgage offer granted by the Lender to the Borrowers specifying that their mortgage rate would be fixed at 6.29% until 30 June 2010 and thereafter would be at a variable rate of 1.99% above the Bank of England base rate (commonly known as a “tracker mortgage”) and the lender’s mortgage standard conditions. The standard conditions stated that the rate of interest specified in the mortgage offer could be varied by the Lender. The Borrowers had been requested by the Lender to pay a rate of interest that was not tracked to the Bank of England base rate and they claimed that overpayment of mortgage in the Courts.
The Court of Appeal had to deal with an inconsistency between the mortgage offer and the Lender’s standard mortgage conditions. The Court held that in cases of inconsistency of contract, the Court will look at whether the clauses can be fairly and sensibly read together with due regard to considerations of reasonableness and business common sense. In this particular case, a specific product namely a tracker mortgage was being provided in the mortgage offer document and printed standard mortgage conditions, which entitle the Lender to substitute a different product that was wholly inconsistent with that purpose or object. In the Court’s words “that is negation not modification or qualification”.
Accordingly, the Lender had not been entitled to charge a variable rate that was not tracked to the Bank of England base rate and Borrowers succeeded in Court.
It is interesting to note that the Courts will strive to try and give economic sense to clauses that are inconsistent, but will not allow inconsistent clauses to stand if they negate the main purpose of the product being offered in the contract.
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