Contra proferentem mortgage conditions

by Mark Alexander

15:13 PM, 9th October 2013
About 7 years ago

Contra proferentem mortgage conditions

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Contra proferentem mortgage conditions

Unless you are a qualified contracts lawyer who has also studied Latin you will probably not have a clue as to how contra proferentem mortgage conditions affect you. I have spent the last two weeks getting my head around it as it was a key point in the barristers opinion for the Bank of Ireland Tracker Mortgage Class Action which has stalled due to all funds raised for that campaign having been exhausted. Therefore, for the benefit of everybody with a tracker mortgage who may be affected by a hike in their tracker mortgage margin at some point, and in particular to those affected by the decisions of West Bromwich Mortgage Company and the Bank of Ireland I offer this laymans interpretation and my thoughts on how we should progress.

Very simply, the contra proferentum law is created to enable judges to decide which conditions apply if contractual conditions are in conflict. In other words, if the contract has two or more conditions and they don’t all say the same thing one of the conditions will apply and the others will not.

The relevance of this is that West Bromwich and Bank of Ireland have conditions in their mortgage documentation and some conditions contradict others.

The law goes on to say that the judges interpretation of what the contract means will be the condition(s) which are in favour of the person to whom the contract was presented. To put it another way, if your mortgage conditions were presented by West Bromwich or Bank of Ireland the judge will rule against them because they wrote the contract and the most favourable of the conditions will be applied to you. 🙂

There are, of course, several more legal arguments our lawyers could throw at the enemy, however, in my opinion the contra preferentem argument is without any shadow of doubt our best shot

Other legal arguments will only suit some of our Class Action Group. For example, there appears to be no legal definitions of a sophisticated landlord but West Bromwich think it is anybody with more than three properties. Let’s say we win that battle and the Court decides it’s six – anybody with seven or more isn’t going be too happy are they? I will be one of them! Also, what good would that do for those affected by Bank of Ireland or by any other lender who tries this on? Remember, Bank of Ireland has a different criteria and is not using the sophisticated borrower argument. Other lenders will no doubt make up their own excuses too. What we need is a win which will affect ALL mortgage lenders.

Many people are arguing that they didn’t receive the Mortgage Conditions from their lenders. Well sorry folks, maybe you did, maybe you didn’t, but I can assure you that you signed a piece of paper before your mortgage completed to say that you did. The Mortgage Deed I signed for my West Bromwich mortgage states “By signing this Mortgage you confirm the terms of the Standard Conditions of Offer, the Special Conditions and the Mortgage Conditions”.

There are many more arguments which I could play devils advocate with which have been raised on our forums. With a bit of thought I reckon I could win most of the arguments and I’m not even a qualified solicitor. I am, however, in the same boat as you so please don’t shoot the messenger. I’m also affected by these increases and I’m doing everything I can to make sure we win this fight. In my case that’s been 18 hour working days for the last three weeks and a lot more time on the Bank of Ireland case since it reared its ugly head earlier this year.

That’s why I would like Justin and the barrister to lead with what I believe is our best shot – contra proferentem mortgage conditions.

If we ask our lawyers to look into every legal argument we have presented on our forums we will run out of money before we get to first base. What I would prefer is that we fight the one universal truth which is that our mortgage terms are contra proferentem. If we lose and we still have some money left there’s nothing to stop us appealing on other grounds as well.

For the above reasons, do you agree that we should ask our legal advisers to focus on contra proferentem mortgage conditions?

There are lots of other things we can do as a group to be a thorn in the side of these lenders in the meantime. For example, I love the PR campaigns and lobbying we are sharing ideas on. We must continue to win the hearts and minds of the media and every centre of influence we can think of. I also applaud the tactics being used to make these lenders lives a misery, for example the Subject Access Requests. Perhaps the most important thing we can do whilst we wait for the legal bods to advise us is to spread the word. We need to get every borrower we can find with a tracker mortgage to sign up. There are also plenty of other landlord groups who can help us to do this and it’s in all of our interests to put as much pressure on them as possible to get involved and spread the word amongst their members.

Contra proferentum mortgage conditions as I see it

I owned a substantial number of buy to let properties at the time of my mortgage application and still do. The chances of me proving that I was not a sophisticated landlord are very slim but I do have an argument to suggest that property investment was not my line of business at the time I took the mortgage. All of my properties were professionally managed in order to allow me to focus on my career as a commercial finance broker. I did not consider myself to be a professional investor at the time I took out this mortgage, the purpose of investing into a property portfolio was to provide for my retirement. I don’t want Justin or the barrister to push that angle though, I think it’s a waste of money as everybody’s situation will be very different.

Neither my mortgage broker nor my solicitor were aware of the rights of West Bromwich Mortgage Company to increase the premium they charge on my tracker mortgage rate. I did read the Mortgage Conditions brochure at the time  and at the time I sincerely believed that section 5 of the Mortgage Conditions was not applicable. Note that I am also a qualified mortgage adviser and IFA. I believed that section 5 of the mortgage conditions booklet was only relevant to mortgages written on the building society’s standard variable rates, which do not track the Bank of England base rate. This was supported by the marketing materials being used by the West Bromwich to promote their tracker mortgages. Also, there was no mention of such a vital clause in either their KFI document or their offer letter. Clearly my solicitor was mislead too. I suspect everybody who was affected by the Bank of Ireland rate hike would also say the same thing.Contra proferentem mortgage conditions

So having established that I read the booklet and I signed to agree to all of their terms, including those in their Mortgage Condition booklet, what makes me believe West Bromwich are still in the wrong?

  1. Their website said, and to this day still continues to say “Tracker mortgages give you the certainty of knowing that the rate you pay will move in line with Bank Base Rates.”
  2. My offer letters states “After 30th 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”

Logic tells me the above are in conflict with Section 5 of the Mortgage Conditions booklet which I signed and received. On the basis that West Bromwich produced the booklet, their website, and the Mortgage Deed I believe there is a clear case of conflicting conditions and ambiguity, hence the conditions they are relying upon are contra proferentem. On that basis, a judge MUST rule against West Bromwich as they are the originators of the documentation. It’s not like we are asking for the mortgages to be written off, all we want is the terms and conditions we believed we had signed up for.

We MUST win a Court Case before even more lenders follow suit.



Comments

stephen trelfas

22:53 PM, 9th October 2013
About 7 years ago

Reply to the comment left by "Gary Nock" at "09/10/2013 - 20:34":

Interesting reading and i fully agree with the specific approach.

As an interpretation "contra proferentum" from my insurance exams is "any ambiguity is construed against the drafter" so the onus is therefore on WB to prove there is complete clarity of their tracker related wording and the wider mortgage wording too.

In its most simplistic terms the layman would presumably interpret the word tracker as a following on of (in this case) where the base rate leads us.

WB letter of Sept refers to "duty to manage the business prudently in all market conditions" .This may be the case but it does not in my opinion give them grounds to unravel the essence and interpretation of the tracker deal

The multiple landlord targettting is completely irrelevent.

ian

22:57 PM, 9th October 2013
About 7 years ago

Mark
Are we going to join forces in a Court Action ? if we are going for "Contra Proferentum on both counts,or will that be to complicated.

Ed Atkinson

23:35 PM, 9th October 2013
About 7 years ago

Reply to the comment left by "Tony McVey" at "09/10/2013 - 20:24":

Tony, I can interpret your "wish you luck" comment in one of 2 ways:

1. "I'm supporting you in this"

2. "without an awful lot of luck you're doomed to fail"

As you are a lawyer and you know your stuuf, I'd be keen to know which interpretation to take.

Cheers and thanks

Ed

Mark Alexander

7:36 AM, 10th October 2013
About 7 years ago

Reply to the comment left by "Ed Atkinson" at "09/10/2013 - 23:35":

I would also like to understand Tony's opinion, despite 50% of solicitors and barristers losing Court cases every day of course 🙂
.

Mark Alexander

7:47 AM, 10th October 2013
About 7 years ago

Reply to the comment left by "ian " at "09/10/2013 - 22:57":

I can't see how we can join forces Ian. It we get an injunction against West Brom it will help create a precedent but will not affect the BoI directly.
.

Mick Roberts

7:55 AM, 10th October 2013
About 7 years ago

Brilliant job, glad someone's putting the hours in. If Govt had any common sense, they should have stepped in.

Addicted to fighting the WBBS

8:47 AM, 10th October 2013
About 7 years ago

Reply to the comment left by "Mark Alexander" at "10/10/2013 - 07:36":

Notwithstanding the name of one of the parties in this case (i.e. WBBS who lost), I think the following link and the area of Purpose and Context of Contract Law is also relevant to our issues with WBBS and also supports the Contra Proferentem angle.

the full article can be viewed at http://en.wikipedia.org/wiki/Investors_Compensation_Scheme_Ltd_v_West_Bromwich_Building_Society

Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28 is the most cited English contract law case, and one of the most cited contract cases today. It laid down that a contextual approach must be taken to the interpretation of contracts. Lord Hoffmann set out five principles for interpreting contracts.
1. the reasonable person having all the background knowledge
2. background ‘matrix of fact’ it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
3. The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification, reasons of practical policy
4. the meaning of words is not a literal meaning, but the one reasonably understood from the context
5. words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents.

Gary Nock

9:03 AM, 10th October 2013
About 7 years ago

If we think contra preferentum is a runner do we all write to FOS adding this as part of the argument or do we keep it back for the Class Action or County Court?

Mark Alexander

9:09 AM, 10th October 2013
About 7 years ago

Reply to the comment left by "Gary Nock" at "10/10/2013 - 09:03":

The barristers opinion on the BoI case and Justin's submission to the FOS and the FCA included contra proferentum as one of many legal arguments, hence my comments on other thread about the FCA response being a "whitewash".
.

Mark Alexander

12:59 PM, 10th October 2013
About 7 years ago

Hello All

I need some help please.

I have a list of all Landlords Association in the UK.

They all need to be contacted by telephone with a request for their help. What we want them to do is email their entire membership telling them about our campaigns.

Below is a list of all Landlords association, each is linked to their website where you can obtain their contact details.

Below that list I have created a template email for them to send to all of their members.

I have run out of time as I'm off to the French Riviera now to celebrate my first wedding anniversary. I also desperately need to take a break!

I need a few volunteers to tackle this project in my absence. There may be some overlap but this could be a good thing as the Landlords Associations will see the importance of the campaigns if they receive multiple telephone calls.

Any takers?

Suggested email template for Landlords Associations to send to their members.

Dear Member

Was it your understanding that interest rates on lifetime tracker mortgages or reversion tracker rates can only vary when the base rates moves?

There are now plenty of angry borrowers out there, 6,700 in clients of the West Bromwich Building Society and a further 12,200 clients of Bank of Ireland are already affected as these lenders have decided to increase their profit margin by increasing the interest rates regardless of the fact that the Bank of England base rate has not changed. They are relying on ambiguous small print in their contracts which are also contra proferentem in that promotional materials and contractual conditions are conflicting.

Which lenders will be next to follow suit?

Do you agree this unethical practice must be stopped before other lenders cotton on to this?

We are writing to you to let you know that a Class Action group has formed via the Property118 online forum to fight back.

For more information please visit http://property118.com
.

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