June 27, 2016

The Court of Appeal has overturned a High Court ruling that a lender was entitled to vary the interest rate on a 25-year buy-to-let mortgage and require re-payment of the loan on one month’s notice.

Lord Justice Hamblen, giving the lead judgment, said that where inconsistency between specially agreed terms and the printed standard terms of the contract is alleged, and the contract contains an inconsistency clause, guidance as to the correct approach was provided by the Court of Appeal in Pagnan SpA v Tradax [1987] 3 All ER 565.  As that case made clear, inconsistency is not limited to cases where clauses cannot literally be read together, but extends to cases where clauses cannot “fairly” or “sensibly” be read together.

In this case, on the basis that the printed standard terms, allowing variation of the interest rate and repayment on a month’s notice, were indeed inconsistent with the terms of the contract set out in the mortgage offer, they were not incorporated into the contract by virtue of an inconsistency clause which provided that the terms of the mortgage offer should prevail (Mark Robert Alexander (as representative of the “Property 118 Action Group”) v West Bromwich Mortgage Company Ltd [2016] EWCA Civ 496 (8 June 2016) – to read the judgment click here).