Digest

Case-law Digest

BREACH OF CONTRACT
E-mail exchange insufficient to form business contract
Jas Financial Products LLP v (1) ICAP plc (2) ICAP Securities Ltd
[2016] EWHC 591 (Comm); [2016] All ER (D) 163 (Mar)

The Commercial Court dismissed a claim regarding an alleged agreement between two businesses under which one business was to provide services to the other. On the evidence, no legally binding contract had been made between the parties either orally or in writing. The court denied that a contract had been inferred from a proposal sent by e-mail setting out the services to be provided and the price.

Comment: No note was made of what was said or agreed at the critical meeting. The prudent course would have been to have written up something shortly after the return to the oÿce , and then to circulate and agree those notes. The parties cannot have plausibly thought that a discussion of a proposal in a wine bar followed by handshake would be all that it would take to get a contract: they must have been expecting to see a contract to sign.

By the time this case came to trial, the judge was trying to piece together what had happened nearly eight years ago. Inevitably, memories had faded, and the focus in such a case shifts inevitably to contemporaneous documents which, here, were few.

CHEQUES
Bank not obliged to accept worthless cheques
Evans v Santander UK Central London CC
(2016) 6 April, unreported

WeRe Bank was a UK-based venture which purported to be a people’s bank and appeared to have created its own currency, the RE. Members of the Re-Movement were required to issue a promissory note to WeRe Bank to the sum of £150,000, which was payable ‘within a ten-year anniversary’ from the time of joining. WeRe Bank stated that it would not need to call this in. Members were then able to buy RE cheque books.

WeRe Bank stated that its cheques could be used to pay all public liabilities (such as council tax demands, utility payments, tax) and private payments between consenting parties (including mortgages). Its website claimed that, under Bills of Exchange Act 1882 ss42 and 43, if payment was refused, the payee was acting in dishonour and liability for the payment ceased. The sort code and account number on the cheque book was invalid, and was the same number that WeRe Bank issued to everyone who signed up.

Evans issued three cheques totaling £640,000 payable to Santander UK to discharge his liability under buy-to-let mortgages he had with the lender. The lender refused to present the WeRe bank cheques. Evans brought a claim for a declaration that his liability had been discharged. The lender applied for summary judgment. A recorder dismissed Evans’ claim, and ruled that the lender was under no obligation to accept the worthless cheques issued by WeRe Bank.

MORTGAGES
Bank not liable for loss in ‘sale-and-rent-back ’ scheme
Mortgage Express v Lambert
[2016] EWCA Civ 555

A homeowner in financial difficulties sold her home at an undervalue and was allowed to stay there under a lease. The transaction was presented to the lender as a sale. When the lender found out what had really happened, the homeowner claimed an overriding interest. The Court of Appeal ruled that the loss could not be laid at the door of the lender, and held that the homeowner did not have an overriding interest.

Comment: The Supreme Court handed down its judgment in Scott v Southern Pacific Mortgages Ltd; Mortgage Express v Wilkinson and Mortgage Business plc (intervener) [2014] UKSC 52 known as the ‘North east property buyers litigation’ , which also concerned a sale-and-rentback scheme. However, despite the Scott judgment, this issue has not gone away because the way all the schemes are set up varies. Here, there was a bridging loan that was not secured by mortgage, which the homeowner’s lawyers claimed unsuccessfully made a difference to Scott. Lambert’s solicitor says that he wants to ask for permission for a final appeal.

Unfair to raise margin by 2% on tracker mortgages
Alexander (as representative of ‘Property118 Action Group) v West Bromwich Mortgage Company Ltd
[2016] EWCA Civ 496

Condition 5 of the lender’s standard mortgage terms mentioned the right to vary interest rates in this way, but the lender’s mortgage offer did not. The court allowed an appeal, and held that what was in the mortgage offer took precedence. Accordingly, the Court of Appeal ruled that a lender was prevented from increasing its margin on a tracker mortgage by 2% to business buy-to-let investors.

Comment: The lender has said that it will not appeal this case further. The mortgage contained a term allowing it to be terminated on notice by the lender, even where the borrower was not in breach. The future of these sorts of terms must now be in serious doubt. A feature article concerning the issues raised in this ruling will be published in a subsequent issue of CILExJ.

Burden of proof for mortgagee selling repossessed property
PK Airfinance SARL; GE Capital Aviation Services Ltd v Alpstream AG; Alpstream Aviation Malta Ltd; CIS Interfincom AG; and Alphastream Ltd
[2015] EWCA Civ 1318; [2016] All ER (D) 05 (Jan)

The Court of Appeal held that a mortgagee could bid for or buy repossessed property, and there was no absolute bar on it doing so. However, a mortgagee continued to owe a duty to obtain the best price reasonably possible, and in a sale to self the burden of proof was reversed.

Comment: The circumstances of this case are unusual. It will be rare that where there is a retail mortgage used to buy residential property, a mortgagee in possession will be able to sell that property to itself. Such a sale can only be made by a court, and even then such a prospective purchaser will need to obtain the permission of the court to bid at an auction.

PAYMENT PROTECTION INSURANCE
Remediation not limited to commission
Plevin v Paragon Personal Finance Ltd
[2016] CCLR 6

A judge, in determining the amount of remediation in an unfair relationship case, is not limited to looking at the amount of commission received by a lender. However, the cost of obtaining alternative insurance cover was not raised before the judge below. The judge below did not treat as axiomatic that the question of remediation should be tied to the quantum of the payment protection insurance premium.

Comment: The Department of Trade and Industry white paper Fair, clear and competitive: the consumer credit market in the 21st century, Cm 6040, said this about unfair credit costs: ‘However, it is important to note that high costs alone would not necessarily render the agreement unfair. Transaction costs are not ‘high’ or ‘low’ in the abstract, but must be considered in the light of the nature and type of the agreement and circumstances in which it was made or how the lender has acted subsequently’ (pp55 and 56).*

UNFAIR CONTRACT TERMS
19% interest rate on consumer mortgage unfair
Ibercaja Banco SAU v Cortés González
Case C-613 /15

The Court of Justice of the European Union (CJEU) has ruled that a clause in a consumer mortgage contract which, in the event of default or non-payment , permitted the lender to increase the interest rate payable to 19% was an unfair contract term. The case has been remitted back to the lower court in Madrid, so it can apply the CJEU’s ruling in contested possession proceedings and deal with any outstanding findings of facts. Comment: The judgment is only available in French and Spanish. Assessment of compensation in unfair contract terms case Tomášová v Slovenská republika — Ministerstvo spravodlivosti SR, Pohotovos›, sro Case C-168 /15 This case under the Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts was referred to the CJEU by a Slovakian court. The referred questions included asking for a ruling on whether, in the case of a serious breach, the government of an EU member state can be held liable for damages for losses suffered as a result of a contract’s unfair terms. The CJEU has also been asked to rule on whether debt collecting amounts to unjust enrichment by a creditor. Advocate-General Nils Wahl gave his opinion on 14 April 2016, in which he says that a government does not have liability for these losses; however, the judgment has not been translated into English.

Comment: It remains to be seen if the CJEU will endorse everything its Advocate-General has said.

* Available at: http:// tinyurl.com/zqddqul