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Case No: CHANF 1990/0345/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(N A L DAVIS ESQ QC (sitting as a Deputy Judge
of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday, 28 January 2000
B e f o r e :
LORD JUSTICE SWINTON THOMAS
LORD JUSTICE ROBERT WALKER
and
LORD JUSTICE LAWS
|
|
(1)
LADJADJ
(2) HAYA TAL
|
Appellant
|
|
-
v -
|
|
|
THE
GOVERNOR & CO OF THE BANK OF
SCOTLAND
|
Respondent
|
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
Mr D Macpherson (instructed by Johnson Sillett Bloom) appeared on behalf of
the Appellants.
Mr J Ridd (instructed by Underwood & Co) appeared on behalf of the
Respondent.
Judgment
As Approved by the Court
Crown Copyright ©
Friday, 28 January 2000
JUDGMENT
LORD JUSTICE LAWS:
This is a defendants' appeal against an order made on 17 December 1998 by Mr
Nigel Davis QC sitting as a High Court Judge in the Chancery Division when he
dismissed the first defendant's appeal from an order for possession of a
dwelling-house made by Deputy Master Hoffman on 6 August 1998.
The proceedings were brought by the claimant bank as mortgagees, seeking
possession by reason of arrears of payments due under the mortgage by the
defendant mortgagors, who are husband and wife. The appeal is brought with
permission granted by this court (Otton and Ward LJJ) on 24 March 1999.
The defendants entered into a legal charge with the claimant on 24 January
1990 in respect of their home, 91 Old Oak Road, Acton, London W3. The loan
thereby advanced and charged against the property was in the sum of
£157,674. The term of the loan was one of 23 years, and so it has some 13
years yet to run. The documentation shows that an endowment mortgage had been
intended, but we understand that any life policy taken out to support it is no
longer in existence.
For the appellants Mr Macpherson submits that the appeal turns upon a short
point of construction of the mortgage contract. I shall explain the point in
due course. For the respondents Mr Ridd submits not only that the point of
construction is not well taken by the appellants, but that it is anyway
immaterial to the proper outcome of the proceedings
since it has no bearing on the basis upon which arrears due under the mortgage
had been calculated in the evidence placed before the Deputy Judge. Before
dealing with these issues I should supply a brief outline of the history of the
matter.
By 14 May 1990 the appellants had fallen into arrears, and on that date the
respondents as mortgagee demanded repayment of the entire sum due. That was by
no means forthcoming and on 23 August 1990 the respondent issued an originating
summons in the High Court seeking possession. Master Gowers made such an order
in December 1990. However, at that stage the parties agreed terms, and by
consent that order was not then enforced. There followed a long history in
which further arrears accrued and further compromises were agreed between the
parties from time to time. I should mention an order made by Master Gowers on
25 May 1995, because it figures in the Notice of Appeal and in the appellants'
skeleton argument. On that day the Master ordered that the respondents be not
at liberty to enforce the possession order (which had earlier been made)
provided that the appellants paid £407.44 forthwith and the current
monthly instalment on 23rd of each month. However, the appellants defaulted -
or it is said that they defaulted - and so it came about that Deputy Master
Hoffman made his order on 6 August 1998 to the effect that the respondents
should have possession in 28 days. As I have said that order was appealed to
the Deputy Judge who dismissed the appeal. In essence he held that the current
arrears were, as at 11 December 1998, £82,032; this was as against the
appellants' contention that the arrears stood at no more than about
£40,000. The Deputy Judge held also that there was "no realistic
prospect
whatsoever on the evidence.... that Mr Ladjadj can be expected to pay up any
of the arrears either within a reasonable time from today's date or indeed...
by the end of the term of the mortgage" (judgment transcript, 10F-G). On
that footing there was no basis upon which, under s.36 of the Administration of
Justice Act 1970, the court might give any relief to the appellants against the
mortgagees' claim for possession.
In this court, when granting permission to appeal, Ward LJ expressed some
anxiety as to the very large discrepancy between the rival figures -
£80,000 and £40,000 - put forward as representing the accrued
arrears. At that stage the draft Notice of Appeal before the court was one
prepared by the first defendant in person; but counsel has since been
instructed and a substitute notice of appeal drafted by Mr Macpherson is with
the papers. There are also skeleton arguments from both sides.
In order to understand the rival arguments, it is necessary to go to the
texts which constitute the contract between the parties. First among them is
the mortgage offer letter. That included a Loan Schedule which contained these
provisions (there is no contest but that this was part of the contract):
"Interest will accrue on the Principal Sum at the rate of £14.8 per
centum per annum (the `STABILISED CHARGING RATE') and will be subject to
alteration from time to time.
HOWEVER your monthly payments for the three years from the date of drawdown
will be calculated at the SELECTED PAYMENT RATE of £10.50 per
centum per annum effecting a
gross monthly instalment of interest on £1,454.18. [That figure is
altered because the principal sum was adjusted after the letter was typed.]
The difference between the amount calculated at the STABILISED CHARGING RATE
and the SELECTED PAYMENT RATE will be placed, monthly, to a separate account as
more particularly detailed in the aforementioned General Conditions and Terms
together with the supplementary Stabilised Mortgage Plan Notes for Guidance
attached hereto".
The respondents have supplied the court with a copy of their "Notes
for Guidance", and this is the second contractual document. However the copy
supplied is dated December 1992, which, of course, was all but three years
after this mortgage was entered into. We were told by Mr Ridd on instructions
that the Notes for Guidance effective in January 1990 would have been in the
same or substantially the same form. With some misgivings I am prepared to
proceed on that basis. The document we have, which (or whose predecessor)
again was part of the contract, contains these provisions:
"1. BASIC CONCEPT
The basic concept of the scheme is to enable you to stabilise your monthly
mortgage payments for an indefinite period. This may result in the payments
which you make each month being less than the interest which has actually
accrued against the loan balance, in which case the difference between the two
amounts may serve to increase your overall mortgage debt.
It is important that you understand that the scheme is not a `low-start' or
`discount rate' mortgage, but a plan designed to regularise your monthly
outgoings and to assist you with your cash budgeting calculations.
2. INTEREST
There are two different rates of interest charged on your loan. The first,
which will have been selected by yourself, is known as the `SELECTED PAYMENT
RATE', and the second which may be varied is known as the `STABILISED CHARGING
RATE'.
In the event that the STABILISED CHARGING RATE is varied by the Bank a
formal notice will accordingly be issued by the Bank detailing fully such
amendment to the STABILISED CHARGING RATE as has been determined by the Bank.
The SELECTED PAYMENT RATE must be set at a level no lower than 2% below the
STABILISED CHARGING RATE at time of application. [This reference to 2% is
unlikely to have been in the 1990 notes for guidance, since (as the offer
letter shows) the gap between the two rates at the start of the mortgage term
was over 4%.]
3. MONTHLY PAYMENTS
In most cases there will be a difference each month between interest
calculated at the SELECTED PAYMENT RATE and interest calculated at the
STABILISED CHARGING RATE. The entry passing through your normal Bank Account
each month will be interest calculated at the SELECTED PAYMENT RATE.
4. ACCOUNTING
When your loan is drawn, two accounts will be opened at this office. The
first will be known as the Mortgage Account and the second will be known as the
Deferred Account.
The Mortgage Account will reflect the original mortgage granted to yourself.
Interest will accrue on this account at the STABILISED CHARGING RATE.
Any difference between the STABILISED CHARGING RATE and the SELECTED PAYMENT
RATE will be placed, each month, into the Deferred Account. Interest will
accrue on any
balance in the Deferred Account at the STABILISED CHARGING RATE. Your total
outstanding obligation to the Bank at any given time will be, therefore, the
balance in both the Mortgage Account and the Deferred Account, together with
any interest which has accrued. Statements, detailing the balances of each
account, will be sent to you on a six-monthly basis.
The Bank will carry out an annual review of the overall position and may, at
time of review, adjust the SELECTED PAYMENT RATE to ensure that it remains
within the parameters as detailed in 2. above.
5. REPAYMENT
There is no requirement to repay the balance in the Deferred Account until
the Mortgage Account is repaid, which may be either at expiry of the loan or on
early repayment..."
The third contractual document is headed "STABILISED MORTGAGE PLAN LOAN
FACILITIES - SPECIAL CONDITIONS". I think it was attached to the offer
letter, but again there is no dispute but that it formed part of the contract.
The special Conditions provided as follows:
"Subject to the Stabilised Mortgage Plan Loan Facilities more particularly
detailed in the Bank's General Terms and Conditions together with the
supplementary Stabilised Mortgage Plan Notes for Guidance the following
conditions will further apply to the offer of loan. The said General Terms and
Conditions will however subsist in all other respects.
(1) You have the right to exercise an option to have the "SELECTED PAYMENT
RATE" varied within 0.5% steps, subject to a minimum rate of 10.5%. This option
may be exercised only once during each 12 month period of the loan. The initial
12 month period will commence when the loan has been drawn down.
The new SELECTED PAYMENT RATE will become effective as aforesaid on the
appropriate monthly interest payment date following notice to the Bank of
exercise of the option.
(2) The SELECTED PAYMENT RATE together with the interest rate bands will be
reviewed at the end of the three year period and you will be advised of the new
SELECTED PAYMENT RATE and interest rate bands together with payments for the
ensuing period of three years."
Lastly, there are the respondents' General Conditions. They include these
following provisions:
"Stabilised Mortgage Plan Loan Facilities
You have the right to exercise an option to have payments calculated at the
chargeable rate. Such option may be exercised only once during the term of the
loan.
...
The Mortgage Account will for accounting purposes be sub-divided into a
Capital Account and a Current Account.
The Principal Sum will be debited to the Capital Account element of your
Mortgage Account.
Where Tax Relief on the Loan is available for deduction at source -
(1) The net chargeable amount will be the monthly interest amount at the
Chargeable Rate on your Mortgage Account net of MIRAS.
(2) The net fixed amount will be the Fixed Payment amount net of
MIRAS.
(3) The difference between the net chargeable amount and the net fixed
amount will be either debited to or credited to your Current Account.
Your obligations to the Bank will be the sum of the Capital and Current
Account balances of the Mortgage Account together with interest due and unpaid
on the said balances which
obligations will be due for repayment as more particularly detailed in this
Appendix.
The Fixed Rate will be reviewed at the end of the three year period and you
will be advised of the new Fixed Rate and payments for the ensuing period of
three years."
The point of construction urged by Mr Macpherson for the appellants may be
summarised thus. He submits that upon the true interpretation of the contract
and on the facts the appellants have since 24 January 1996 been liable to pay
interest only at the "Stabilised Charging Rate". He points to the option
provided for in the General Conditions, which "may be exercised only once
during the term of the mortgage". He says that those words suggest that the
option was "for a fixed length", that is, the effect of its being
exercised would run for a fixed period. (There is also an entirely different
and unrelated option, provided for in the Special Conditions which I have set
out, enabling the borrower once in each 12 month period of the loan to have the
Selected Payment Rate varied up or down by 0.5% subject to a minimum rate of
10.5%. The appellants' Selected Payment Rate was of course set at 10.5%, and
this separate option plays no part in this case.)
Then Mr Macpherson draws attention to the provision, appearing (in slightly
different words) both in the General Conditions and the Special Conditions, for
review of the Selected Payment Rate, or Fixed Rate, "at the end of the three
year period" - that, says Mr Macpherson, must be a reference to the first
three year period of the term - and notification to the borrower of the new
Fixed Rate "for the ensuing period of three years". From all this Mr
Macpherson seeks to
derive the following conclusion set out at para 14 of his skeleton argument:
"It is clear from the above terms that the Defendants had an option to pay
interest at the Selected Payment Rate. They exercised this option on drawdown
of the loan on 24th January 1990. This option was for a fixed term and the term
must have been 2 periods of 3 years. If there is any ambiguity, the mortgage
should be construed against the Plaintiffs, which proffered it."
Six years from 24 January 1990 gives, of course, an end to the "fixed term"
contended for at 24 January 1996.
It is undisputed on the facts that the Stabilised Charging Rate, although of
course it has shifted from time to time reflecting no doubt changes in base
rate, has consistently stood at under 10.5% as after June 1992 and at least
until 1 October 1999. As I understand it the appellants have in fact maintained
payments at 10.5% since January or February 1996, although there were three
late payments in mid-1998. Mr Macpherson says that on these facts and upon his
construction of the contract his clients have been paying above the contractual
rate since 1996 and in consequence such arrears as had arisen before 1996 have
been progressively reduced. Accordingly he submits that, given that the
mortgage still has thirteen years to run, the court should have refused
possession in light of s.36 of the Administration of Justice Act 1970 and s.8
of the Administration of Justice Act 1973 (which I need not set out): there was
every prospect that such arrears as remained outstanding when the judge was
dealing with the matter would be discharged, with due interest fully paid,
within the term.
Mr Ridd submits, first, that on the proper interpretation of the contract and
on the facts of the case, the appellants have throughout remained liable to pay
at the selected payment rate of 10.5%. He points to the words in the General
Conditions conferring the option to which Mr Macpherson referred. It is an
option "to have payments calculated at the chargeable rate". Although it
is nowhere so stated, "chargeable rate" must, says Mr Ridd, mean the
"Stabilised Charging Rate" referred to in the Loan Schedule and Notes for
Guidance; but Mr Macpherson's argument requires it to mean the "Selected
Payment Rate". If the subject-matter of the option is to switch to the
Stabilised Charging Rate, then, very obviously, the borrower's contractual
obligation is to pay at the Selected Payment Rate until and unless the option
is exercised. Moreover, Mr Ridd would not accept that the option (whichever of
the two rates is its reference) is for a "fixed term".
I should state at this stage, and I do so emphatically, that in my judgment
the respondents' documentation is disgracefully sloppy and well capable of
creating confusion. The expression "chargeable rate" in the option provision is
nowhere defined; so it is a matter of inference to what it refers. It is not
stated what is meant by "the three year period" mentioned both in the General
and the Special Conditions, though it may be it makes little sense unless it
means the first three years of the term, as Mr Macpherson submitted, and a
cross-reference to the Loan Schedule ("the three years from the date of
drawdown") strongly suggests that that is right. But the very fact that
there are four separate contractual documents is bad enough. At some points
they are by no means easy to reconcile one with another. What a lay person
would be supposed to
make of them I cannot begin to imagine. In such a situation I consider that the
contra proferentem rule of construction possesses special force. I
regard it as nothing short of scandalous that a major lending institution
should foist this jigsaw puzzle of a contract on the borrowing public.
Despite all these strictures I have concluded that Mr Ridd's approach to the
construction issue is right. The words "chargeable rate" in the option
provision must be a reference to the Stabilised Charging Rate. In the same
section of the General Conditions the expressions "net chargeable amount" and
"Chargeable Rate" are contrasted with "net fixed amount" and "Fixed Payment" in
the paragraph dealing with tax relief: the former plainly contemplate the
Stabilised Charging Rate and the latter the Fixed Payment Rate. The reference
to review "at the end of the three year period" is to the Fixed Rate,
implying that, the option aside, that is what is being paid during that period.
Moreover the context of this part of the General Conditions, headed as it is
"Stabilised Mortgage Plan Loan Facilities", implies that the borrower
has obliged himself to pay at the Fixed Payment Rate - that, of course, is the
very premise of the scheme. The option allows him to make a one-off decision
not to do so after all.
Nor do I perceive any basis for the proposition that the option (whichever of
the two rates is its reference) would run, once exercised, for a "fixed term".
I am wholly unable to see how such a conclusion may be derived from the
provision that it may be exercised once only. Indeed the very words of that
provision suggest the contrary: "Such option may be exercised only once
during the term of the loan"
(my emphasis). The implication is that it may be exercised, albeit it once
only, at any stage during the term, and that is not I think consistent with its
having effect for a specific fixed period. Moreover the "fixed term" argument
is also contradicted by the first sentence under the heading "BASIC
CONCEPT" in the Notes for Guidance: "The basic concept of the scheme is
to enable you to stabilise your monthly mortgage payments for an indefinite
period".
The consequence is that a borrower whose loan is subject to the terms of the
respondents' Stabilised Mortgage Plan is obliged to make payments at the
Selected Payment Rate throughout the term of the mortgage unless he opts to pay
at the Stabilised Charging Rate, which he may do at any time once only during
the term (and subject to the Selected Payment Rate being varied pursuant to the
different option contained in the Special Conditions).
Mr Ridd submitted that there was no evidence that the appellants ever
exercised the option. In response to Mr Ridd's argument Mr Macpherson has since
the hearing before us put in a further written argument, which of course I
assume has been delivered to Mr Ridd who has not, however, (and this is no
criticism) chosen to respond to it. In this new document Mr Macpherson submits,
as he submitted in reply at the hearing, that a term should be implied into the
mortgage contract that the respondents would "at appropriate times" (it
is far from clear what that means) notify the borrowers/appellants of their
right to exercise the option to pay at the Stabilised Charging Rate. He refers
to the Code of Mortgage Lending Practice issued by the Council of Mortgage
Lenders,
one of whose "Key Commitments", undertaken by subscribers to the Code is to
"help you understand how your mortgage account works".
Whatever the defects in the respondents' documents - I will not repeat my
criticisms - there is nothing whatever in this point. It amounts to the
proposition that a term may be implied by law into a contract to the effect
that one party owes a duty to remind the other of an express term which the
contract includes. The English law of contract is not subject to any such
abject paternalism.
In his further written argument Mr Macpherson seeks to make another point,
which is more troubling. He calls into question Mr Ridd's submission that the
appellants had never exercised the option to pay at the Stabilised Charging
Rate by reference to certain letters, which were not produced below nor even to
us at the hearing in this court, which he says demonstrate that on dates in
1997 and 1998 the appellants expressly sought the respondents' agreement that
they should pay at the Stabilised Charging Rate. There is a handwritten letter
of 5 January 1997 from the first appellant which refers to an earlier letter
said to have been written by him on 10 January 1996 (which has not been
traced), and then proceeds: "Will you please charge my account at the
variable rate..." Then in a later letter of 27 April 1998 solicitors
instructed by the appellants said this: "Our instructions are that currently
the DSS pays approximately £900 per month towards the mortgage giving a
shortfall of £407.54... Our client would be obliged if you would consider
reducing the interest payment rate from 10.5% to the
normal rate of 8.99%. Such an arrangement would cover the shortfall which
clearly would be of great assistance to our client."
These letters were not, so far as I can see, introduced in evidence below and
in the ordinary way there would plainly be no proper basis for their being
adduced in this court on conventional Ladd v Marshall principles. But Mr
Macpherson in his further written argument submits with some acerbity that Mr
Ridd's argument to the effect that the Selected Payment Rate operated
throughout, subject to the one-off option, had not been raised below or at any
time before the hearing in this court; and if it had been this evidence
contained in the letters would have been brought forward.
So far as I can see, however, the fact is that neither of the rival
constructions of this mortgage put forward before us was canvassed below. The
learned judge gives a brief description of the scheme of the mortgage at p.4 of
the transcript, but none of it is alive to any fine point of construction. Then
at 6B ff there is this passage:
"There has been some debate before me as to what the quantum of interest
arrears is and indeed it appears that the affidavit evidence put in on behalf
of the Bank has not in all respects corresponded with what they stated the
interest arrears to be in certain letters written by them. This is...
essentially because of the rather complicated nature of the legal charge taken
out. I am satisfied, and indeed there is no evidence challenging it although Mr
Quinn [then appearing for the appellants/defendants] did proffer some
criticism of the material but the evidence of the Bank is unchallenged and I
accept it, that the interest arrears at that time exceeded £80,000. In a
recent affidavit sworn on 11th December 1998 on behalf of the Bank the interest
arrears were put at that date at
£82,032. Mr Ladjadj, through his counsel, has suggested that in truth
the arrears are much nearer to the figure of £40,000, but there has been
no evidence before me to justify that assertion."
It seems tolerably clear that the judge considered the quantum of interest
arrears to be no more than a matter of factual calculation or ascertainment:
and thus not to depend upon a discrete point as to the construction of the
mortgage contract. There is every reason to conclude that Mr Macpherson's
construction was simply not addressed below; nor, therefore, were Mr Ridd's
responses to it. I should say that neither Mr Macpherson nor Mr Ridd appeared
at first instance.
Before considering what course to take in this thoroughly unsatisfactory
state of affairs, I must confront Mr Ridd's further submission, that these
issues of construction are nothing to the point because they do not bear on the
quantum of the arrears owed: he says that the interest actually due has
been consistently calculated at the Stabilised Charging Rate. It is difficult
to ascertain the true position, partly because (through no fault of the judge)
there are no helpful findings or reasoning below, and partly because the
respondents' evidence about it before us is opaque, and at least in one respect
obviously wrong. Doing the best I can the position appears to be as follows on
the figures as at 1 October 1998 (I take this from the Statement of Account
exhibited to the affidavit of the respondents' Assistant Manager, Mr Fraser,
sworn on 22 October 1998). (1) There was an "arrears balance" of
£45,561.90. This figure represents, as I understand it, the difference
between the aggregate of the amounts which should have been paid, month
by month, over the whole period from the inception of the mortgage until 1
October 1998 and the amounts in fact so paid: and it assumes a liability
to pay at 10.5%. The sum or balance thus described had gradually been reduced,
from £58,299.10 which was the balance at 1 May 1995. It includes no
element of interest upon (unpaid) interest; that is catered for in (2): what is
called the "current balance". As at 1 October 1998 this stood at
£245,938.64. The calculation of this figure starts with the original
capital advance of £157,674. There is then added what Mr Fraser describes
as "total interest charges since start of loan" - £184,898.49. From
that is subtracted "Tax relief credited since start of loan" -
£3.905.52, and "Payments received" - £99,498.15. After these
deductions from the "total interest charges" (the £184,898.49
figure) there remains by way of "Total Interest Arrears on mortgage" the
sum of £81,494.82. To this figure £5,079.78 is then added by way of
"Costs Charges and Disbursements", and also £1,690.04 by way of
"House Buildings Insurance Premiums".
Within this arithmetical maze the two important figures are the sums of
£45,561.90 ((1) above) and £81,494.82 (the "total interest arrears"
figure in (2) above). These following comments fall to be made. (a) The simple
arrears figure of £45,561.90 assumes, as I have said, a liability to pay
at 10.5%. (b) The £81,494.82 figure would be nil if there were no arrears
and so represents, as I understand it, interest upon unpaid interest. (c)
This same figure - £81,494.82 - has been calculated by reference to
the Stabilised Charging Rate from time to time; and this is the source of Mr
Ridd's submission that the interest actually due has been consistently
calculated at the Stabilised Charging Rate. (d)
However the £81,494.82 figure also appears to have been arrived at
on a compound interest basis. I have not seen anything in the contract which
would entitle the respondents to charge compound interest, but we have heard no
argument on that question.
Those were the figures which the respondents gave for 1 October 1998. They
have produced some evidence of the position at later dates. Their solicitor
Jane Armstrong swore an affidavit on 19 March 1999, in which the earlier
£184,898.49 figure had swelled to £195,425.62 and the earlier
£81,494.82 figure had swelled to £83,095.73. The figure for payments
received since the loan's commencement had also risen, to £108,324.20.
This last figure is of particular interest because of the figure given by Miss
Armstrong under the same head - "Payments made" - in a yet further
affidavit, sworn in this court on 12 November 1999. There, the payments made by
the appellants are said to amount to £105,655.73: £3,000 odd less
than the analogous figure given by Miss Armstrong in March 1999. One of the
two figures must be wrong. The mistake is like the thirteenth chime of the
clock: it casts into doubt everything that has gone before.
In my judgment the decision of the learned judge below cannot stand, for
these reasons. First, it is at least possible that the appellants validly
exercised the option to pay at the Stabilised Charging Rate at some date
between 1996 and 1998. In the ordinary way, of course, an appellant raising a
new point of this kind for the first time in the Court of Appeal might expect
to receive short shrift. But I do not think that would be the right approach
here. The whole question how this
badly written contract should be interpreted has only been gone into in this
court, and for that the appellants are no more to blame than the respondents.
Secondly, the judge below treated the evidence as to the arrears (I emphasise,
through no fault on his part) as going all one way. But the true extent of
arrears will depend at least upon (a) whether the option was exercised; (b)
whether there has been an unauthorised charge of compound interest; and (c)
what is the right figure for the amount repaid by the appellants.
For all these reasons I would allow the appeal, and subject of course to my
Lords' views would hear argument as to what orders it is appropriate to make.
The simplest course may be to direct a re-trial, at which (it goes without
saying) the judge would deal with the case consistently with this court's
conclusions as to the proper construction of the contract. It would be much
better still if the parties even now proceeded to attempt to square their
differences by mediation: a course which the appellants say was earlier blankly
refused by the respondents. If that is right, it is in this case's
circumstances wholly lamentable.
LORD JUSTICE ROBERT WALKER:
I agree with the judgment of Laws, LJ and with his conclusion that, in the
exceptional circumstances of this case, we should take the exceptional course
of directing a rehearing, unless (as is to be hoped) the parties can agree on
an alternative means of resolving their differences.
My Lord has used strong language to describe the mortgage documents, but to my
mind that language is justified. It is deplorable that the defendants' right
to their home should depend on the interpretation and combined effect of no
fewer than four contractual documents, which do not use, as they should, a
clear and consistent terminology.
The problem of establishing the true state of affairs as between the parties
is exacerbated by the confused evidence put in by the bank as to the mortgage
account. Mr. Neil Fraser, an Assistant Manager employed by the bank, made an
affidavit on 22 October 1998 which in effect contradicted the bank's own
accounting records, and (in paragraph 8) relied on the inadequacy of the bank's
own computer system, and the complexity of the bank's own stablised mortgage
plan, to excuse or explain the contradiction. Neither his affidavit nor the
later evidence of Miss Jane Armstrong has managed to provide a satisfactory
explanation. The letters of 5 January 1997 and 27 April 1998, copies of which
are annexed to Mr. Macpherson's further written submissions, will (if proved
and admitted as evidence) raise a further issue as to the true state of the
mortgage account.
LORD JUSTICE SWINTON THOMAS:
I agree with both judgments.
Order: Appeal allowed; Respondents to pay Applicant's costs of
the appeal. Costs of retrial (if to occur) will follow the event.
(Order does not form part of approved judgment).
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