Alexander (as representative of the “Property118 Action Group”) v West Bromwich Mortgage Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Hamblen,Sharp LJ |
| Judgment Date | 08 June 2016 |
| Neutral Citation | [2016] EWCA Civ 496 |
| Docket Number | Case No: A3/2015/0561 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 June 2016 |
[2016] EWCA Civ 496
THE PRESIDENT OF THE QUEEN'S BENCH DIVISION
The Right Honourable Lady Justice Sharp DBE
and
The Right Honourable Lord Justice Hamblen
Case No: A3/2015/0561
Claim No: 2014 Folio 538
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE TEARE
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Ashcroft QC and Mark Smith (instructed by Cotswold Barristers) for the Appellant
Raymond Cox QC and Chloe Carpenter (instructed by Addleshaw Goddard LLP) for the Respondent
Hearing date: 28 April 2016
Approved Judgment
Introduction
This appeal concerns the proper construction of the contractual documentation relating to a "buy to let" interest only mortgage provided to the appellant, Mr Alexander ("the Borrower"), by the respondent, West Bromwich Mortgage Company Ltd ("the Lender").
The mortgage offer stated that the term of the mortgage would be 25 years, that the interest rate would be fixed at 6.29% until 30 June 2010 and that thereafter it would be at a variable rate of 1.99% above the Bank of England Base Rate. This type of mortgage is commonly known as a "tracker" mortgage.
The Lender's Mortgage Conditions state that the rate of interest specified in the mortgage offer (other than a fixed rate) may be varied by the Lender. They also state that the loan may be repayable in full on the giving of one month's notice by the Lender.
The Borrower contends that these Conditions are inconsistent with the terms of the mortgage offer and are accordingly not incorporated into the contract. The Judge held that they were not inconsistent, were incorporated and so could be relied upon by the Lender. The Borrower appeals against that decision.
The contractual documentation
The Borrower signed an Application Form on 1 May 2008 for a buy to let mortgage from the Lender.
The Lender sent the Borrower an Offer of Loan Letter dated 6 June 2008. With the Offer of Loan Letter was an Offer Document, which set out "the costs, features, terms and conditions of the Loan". Also included were Special Conditions of Offer and the Lender's Mortgage Booklet. This included General Information at Section A, Standard Conditions of Offer at Section B and Mortgage Conditions at Section C. In addition there was an Acceptance of Offer letter which the Borrower signed.
The Borrower entered into the mortgage contract with the Lender by Mortgage Deed on 15 July 2008. The Mortgage Deed specifically incorporated the terms of the offer of mortgage, including those contained in the Special Conditions, the Standard Conditions and the Mortgage Conditions.
The Offer of Loan Letter provided as follows:
"We are pleased to make the attached Offer of Loan, to be secured on the Property to be mortgaged, on the terms set out in this letter. Attached to this letter you will find some important information about your loan. A copy of our booklet "Information you need to know about your Mortgage" is enclosed. It contains important information about your loan, including the Standard Conditions of Offer and the Mortgage Conditions 2006 (Daily Interest) applicable to your loan ……..
Please note that except during the period of any specified fixed rate of interest all rates of interest are liable to change both before and after completion and that monthly payments will vary with the interest rate."
Box 3 of the Offer Document stated that the loan amount was £90,299 and the "Term of Mortgage 25 years".
Box 4 headed "Description of the Mortgage" stated the "Product Description" to be:
"Buy To Let 6.29% fixed until 30.06.2010 (115% cover). Any applicable change in the Bank of England Base Rate will be applied to your account on the first day of the month following the change…"
The repayment method was described as "interest-only" and the interest rate payable was said to be 6.29%. It then added:
"After 30 June 2010 your loan reverts to a variable rate which is the same as the Bank of England Base Rate, currently 5%, with a premium of 1.99%, until the term end, giving a current rate payable of 6.99%. Any applicable change in the Bank of England Base Rate will be applied to your account on the first day of the month following the change, unless the change is made after the 13th of the month in which case it will be applied on the 1st. day of the second month following the change."
Box 6, entitled "What you need to pay each month", provided that the mortgage would start on 1 July 2008 and that there would be 22 payments at a fixed rate, currently 6.29%, of £480.68. It then continued:
"After 22 payments, your fixed rate ends and assuming that interest rates do not change your new payment on your loan will be £534.17.
This new payment will continue for 277 payments at a variable rate which is the same as the Bank of England Base Rate, currently 5%, with a premium of 1.99% until the term end, giving a current rate payable of 6.99%. Any applicable change in the Bank of England Base Rate will be applied to your account on the first day of the month following the change, unless the change is made after the 13th of the month in which case it will be applied on the 1st day of the second month following the change. "
Under the heading "Cost of repaying the mortgage" it provided:
"You will still owe £91,703.48 at the end of the mortgage term. You will need to make separate arrangements to repay this. When comparing the payments on this mortgage with a repayment mortgage, remember to add any money that you may need to pay into a separate savings plan to build up a lump sum to repay this amount."
Box 7 was entitled "Are you comfortable with the risks ?" and provided:
"What if interest rates go up?
The Monthly payments shown in this illustration for your loan could be considerably different if interest rates change. After the fixed rate ends on 30 June 2010 then for one per cent increase in the initial variable rate, your Monthly payment would increase by around £76.42.
RATES MAY INCREASE BY MUCH MORE THAN THIS SO MAKE SURE YOU CAN AFFORD THE MONTHLY PAYMENTS."
Box 8 set out fees payable by the Borrower, including TT Fee, Arrangement Fee, Release of charge, Legal fees and Valuation fee. These were all non-refundable.
It was common ground that the Special Conditions of Offer contained no provisions of relevance to the issues on this appeal.
Section A of the Booklet (General Information) provided:
"Interest Only Loans
If you select an Interest Only Loan, any Payment that you make to us will cover only interest and not the capital borrowed…It is therefore extremely important to ensure that you have, or will have, the means to repay the Loan (including all capital) at the end of the Mortgage Term…
Whatever arrangements you put in place to repay the Loan, you are reminded that it is generally a long term commitment…it is also important to check regularly the performance of your investment plan to see whether it is likely to be adequate to repay the capital at the end of the Mortgage Term.
….
Interest on your loan
You will be required to pay interest on the amount of the Loan each month. The amount of these monthly payments is detailed in your Offer of Loan Letter.
The rate of interest charged may be varied by us from time to time, except during periods when the Loan is expressed to be at a fixed rate of interest. We will notify you of any variations in the interest rate."
It also referred to "Benefits of Portability" as including "You keep your current fixed, discounted, tracker or capped product".
Section B of the Booklet, the Standard Conditions of Offer provided:
"3. Mortgage Terms
You have been provided with a letter (your "Offer of Loan Letter") in which we offer to make the Loan and which contains an offer document setting out the costs, features, terms and conditions of the Loan. Please read the offer document carefully. Part of this booklet contains our Mortgage Conditions 2006 (Daily Interest). These Conditions will apply to your Loan. Please also read them carefully".
11. Payments
All payments which comprise or include interest are subject to variation in accordance with the terms of our Mortgage Conditions (except during periods where Loans are expressed to be at a fixed rate of interest). We may vary our method of calculating interest and monthly payments.
The Mortgage Conditions in Section C of the Booklet set out definitions in clause 1 which included:
""Mortgage Deed" means the contract that you will sign before your loan can be completed.
"Mortgage Term" means the length of time that you are given by the Company to pay off the Loan as specified in your Offer of Loan Letter.
"Offer of Loan Letter" means the letter sent to you in which we offer to make the Loan and which contains an offer document.
"Offer of Loan" means the offer of Loan made by us to you consisting of the Offer of Loan Letter, the Special Conditions of Offer and our Standard Conditions of Offer and including any matters that may have been specifically alerted by us in writing to you."
Clause 1 further provided:
"These Mortgage Conditions incorporate any terms contained in the Offer of Loan. If there are any inconsistencies between the terms in the Mortgage Conditions and those contained in the Offer of Loan then the terms contained in the Offer of Loan will prevail. "
Clause 5 dealt with interest and provided:
"5.1 Interest is payable by you…at the rate or rates specified in your Offer of Loan Letter which, except during any period in which interest is expressed to be at a fixed rate, may be varied by the [Lender] at any time for any of the...
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