UK: Finance Litigation: The Latest Cases And Issues - May 2018

Gowling WLG's finance litigation experts bring you the latest on the cases and issues affecting the lending industry

THE COURT OF APPEAL CONSIDERS 'REASONABLE ADJUSTMENT' IN THE CONTEXT OF POSSESSION PROCEEDINGS

The first case in which the Equalities legislation has been raised as a defence to a mortgagee's claim for possession has recently been before the Court of Appeal.

In Southern Pacific Mortgage Ltd v Green, Green appealed against a possession order on the basis that the claimant lender had discriminated against her under s19(1)(b) and s21(1) of the Disability Discrimination Act 1995 (DDA). She asserted that by failing to make reasonable adjustments to its practice or policy in providing its services, the claimant had made it impossible or unreasonably difficult for her as a disabled person (a person suffering from depression) to use the claimant's financial services which it provided to other members of the public.

Green had entered into a fixed term repayment mortgage with the claimant but having got into repayment difficulties requested it be converted to an interest-only mortgage which the claimant refused to agree to. Green's insurance policy and then DWP payments had been sufficient to cover the monthly interest. However, it was the claimant's policy not to allow any borrowers to convert repayment mortgages to interest-only accounts whether on a temporary or permanent basis (the no-conversion policy).

It was the lender's refusal to accede to her request that Green alleged was in breach of the DDA. She argued that the request to change to an interest-only mortgage was a reasonable adjustment to the claimant's policy which the claimant should have made. Its refusal to do so made it impossible or unreasonably difficult for disabled persons to make use of the (mortgage) service.

The Court of Appeal, upholding the decision at first instance, disagreed. It held that the service to which the provisions of the DDA applied should not be broadly defined as 'the provision of all possible kinds of mortgage' but should be defined more narrowly as 'the provision of a particular type of mortgage, namely a repayment mortgage'. Green had been able to access that service. The provision of an interest-only mortgage would have been a different service, with a different loan and a different and uncertain security. The two types of lending had different commercial and regulatory considerations.

The court also found that, in any event, the claimant's no-conversion policy applied to existing repayment mortgagors, whoever they were, whether disabled or not, and so it was no more impossible or unreasonably difficult for disabled people to access it when compared to the access offered to other members of the public. There was therefore no need to make any adjustment to bring about an equality of result as the policy applied to all.

Further, the court held that it would not have been reasonable to require the claimant to adjust the no-conversion policy to offer disabled persons an interest-only mortgage. This would impose a riskier, more unsatisfactory repayment vehicle and a lesser form of security in circumstances where that was not the way in which the claimant conducted its business. It would have fundamentally altered the nature of the service provided.

Things to consider

Although this case was argued by reference to the provisions of the DDA, there is no meaningful difference between the relevant provisions of the DDA and those of the Equality Act 2010. It is a useful case for lenders as it provides some clarification as to the extent of the steps that need to be taken to make a 'reasonable adjustment'.

BASIS CLAUSES AND UNFAIR RELATIONSHIP CLAIMS

The High Court has recently considered whether basis clauses, i.e. those defining the scope of the contractual relationship between the parties, were exclusion clauses or gave rise to an unfair relationship.

In Carney and others v N M Rothschild & Sons Ltd, the defendant bank entered into loan agreements with the claimants to enable them to invest in a fund designed to avoid the Spanish equivalent of inheritance tax. The claimants engaged an independent financial adviser (IFA) who advised on the fund. The loan agreements were headed with an 'important notice' advising the claimants to seek independent legal and tax advice. The agreements also provided that the offer was being made on the basis that the bank made no recommendations as to the suitability, quality or future performance of the investments, that the lender acted as provider of finance only, had not provided any advice as to legal, investment or tax matters and that no reliance had been placed on any representations made by either party (the basis clauses).

The investments underperformed and the claimants issued proceedings under ss140 A and 140 B of the Consumer Credit Act 1974 (CCA) claiming an unfair relationship had arisen out of the loan agreements. They alleged that the bank had given negligent advice as to the suitability and risks of the investment and made serious misrepresentations about the investments and their tax implications. They also argued that the basis clauses also gave rise to an unfair relationship and so could not be relied on by the bank. They sought to be released from the loans and for the security they had given to be discharged.

The High Court found there had been no unfair relationship or actionable representations. The court found that the bank had given no material advice, had not assumed the role of adviser and had not been paid any commission for any advice. The claimants had had an IFA whose role it had been to advise on the scheme and who had received commission. The basis clauses delineated the scope, or basis, of the parties' relationship and gave rise to contractual estoppels as the parties had agreed that no advice had been given or representations made.

The language of the basis clauses in this case made them distinguishable from exclusion clauses as they were not seeking to exclude liability that may exist but were providing that no advice was being given that could give rise to any liability. They were not, therefore, subject to the test of reasonableness under the Unfair Contract Terms Act 1977 (UCTA) (now replaced by the Consumer Rights Act 2015 (CRA) as far as consumers are concerned). The court considered that, even had the clauses been exclusion clauses, they would have been manifestly reasonable. Even though the clauses were outside UCTA, they could still be considered under s140 CCA and give rise to an unfair relationship but there was no reason to conclude that they were unfair in this instance.

Things to consider

It is understood that this is the first time the issue of basis clauses has been considered in the context of an unfair relationship claim. The ability to distinguish between a basis clause and an exclusion clause (and so whether it is caught by UCTA or the CRA) may not always be easy and will depend on the wording used and other evidence available to show the true contractual relationship.

JUDGMENT CREDITOR'S RIGHT TO ENFORCE HELD TO BE PARAMOUNT

The Court of Appeal has upheld a High Court decision to set aside an order to pay a judgment creditor's costs by instalments. The debtor had not provided a realistic repayment schedule and the creditor could not expect to recover the principal and any interest within a reasonable period of time.

In Loson v Stack and another, following a dispute over a parking ticket, the claimant was ordered to pay legal costs. The defendant sought to enforce that order by issuing a statutory demand and then a bankruptcy petition which the claimant unsuccessfully applied to set aside. The claimant applied for an order under Rule 40.9A of the Civil Procedure Rules (CPR 40.9A), that she pay the costs ordered against her (by this stage £8,000) by instalments of £50 per month. The district judge, in granting the order, erroneously considered that that order would not prevent the defendant from continuing bankruptcy proceedings.

The defendant applied to set aside the instalment order as payments at the level ordered would not discharge the statutory interest accruing on the costs, let alone the costs themselves, and the order had effectively rendered the bankruptcy petition debt no longer due and payable. The High Court considered that the district judge had failed to properly balance the interests of the judgment creditor against those of the judgment debtor. The instalment order was set aside. The claimant appealed.

The Court of Appeal dismissed the appeal. It held that the effect of the instalment order (if kept to) was that the petition debt was no longer due and payable which meant a bankruptcy order on the existing petition would not be made. The district judge had exercised his discretion incorrectly under CPR 40.9A. The creditor's rights had to be respected where the debtor could not really pay anything and the creditor could not therefore expect to receive repayment of the principal and interest within a reasonable time. The creditor's right to seek enforcement by whatever means available to it should not be interfered with in such circumstances.

Things to consider

Judgment sums are generally payable within 14 days. For a debtor to obtain the benefit of an instalment order the court must be presented with a realistic repayment schedule backed up by evidence that the creditor can be expected to receive the principal amount and interest within a reasonable time. To that extent, the interests of the creditor are paramount. What is a reasonable time will depend on the circumstances of the particular case. In a commercial context that time may be shorter, particularly if the creditor has its own cash-flow requirements to consider.

RISK OF EXTRADITION TAKES SECOND PLACE TO NEED TO GIVE PRACTICAL EFFECT TO A FREEZING ORDER

The Court of Appeal has found that a debtor's fears of extradition did not obviate the need for him to be cross-examined in person as to his assets under a worldwide freezing injunction.

In Khrapunov v JSC BTA Bank, Khrapunov (K) was subject to a worldwide freezing order obliging him to provide full information about his assets and assets controlled by him in accordance with his father-in-law's instruction. His father-in-law, Ablayzov, had been the bank's former manager and the bank had obtained judgments against him exceeding US$4 billion in respect of his fraud. The freezing injunction had been obtained against K as part of that litigation.

K had been ordered to attend the High Court to be cross-examined as to his assets. K resided in Switzerland and unsuccessfully applied to either adjourn the cross-examination or to be cross-examined via video link on the basis there was a real risk he would be arrested and/or extradited to face criminal proceedings in Kazakhstan and elsewhere if he travelled to England.

At first instance, the court refused the application. K had unreasonably and unjustifiably failed to comply with his obligations under the asset disclosure order and had delayed, without good reason, in making the current application which was issued only three days before the date of the originally scheduled cross-examination. The court considered that the bank would not be able to question K effectively through video link. It also considered the likelihood of arrest was non-existent. K unsuccessfully appealed.

Fresh evidence then came to light that K had been placed on the Ukraine's and Interpol's 'wanted' list and that the Ukraine could now make a request to the UK to arrest and extradite him. On the basis of this fresh evidence, K sought to re-open the appeal and vary the order to permit him to give evidence from Switzerland.

The Court of Appeal refused. The earlier decision was a case management decision that the court had properly made and was neither irregular, wrong nor unjust. The fresh evidence showed there was an increased risk of extradition proceedings but that did not undermine the judge's primary reasoning for refusing the application being the unwarranted and unexplained delay. It was of paramount importance for the court to give practical effect to the freezing order which had been made. The just result was to continue to require K to attend for cross-examination at the High Court. The alternative proposed in Switzerland, conducted under Swiss law, would differ radically from cross-examination in front of a High Court judge, and was unlikely to be an effective means of obtaining useful information to assist with the enforcement of the freezing order.

Things to consider

The bank had made out a strong case against K that he had been involved in a massive international fraud and was concealing evidence about relevant assets. The public interest in the court giving maximum practical effect to the freezing order it had granted was strong.

IN CASE YOU MISSED THEM:

Supreme Court rules that a contractual term that requires modifications to be in writing is binding

This judgment has significant ramifications for all contracts which are governed by English law.

In this article, we report on this pivotal decision and its commercial consequences.

Insolvency Litigation: recent cases and issues in May 2018

In our update this month we take a look at some of the recent cases that will be of interest to those involved in insolvency litigation. These include:

  • A decision of the Chancery Court which confirms the rule against contractual penalties will not apply to the terms of a company's own voluntary arrangement;
  • Some guidance on the priority of payments in insolvency, in a case where administrators' remuneration was paid out of the company's accounts; or
  • Consideration by the Court of Appeal as to the correct approach to determining liability for breach of trust involving avoided transactions.

Our insolvency experts have reviewed the decisions and tell you what you need to know.

The Basics: What to consider when negotiating governing law and jurisdiction clauses

Where parties find themselves litigating a dispute arising under a contract, failure to have considered and agreed a governing law and jurisdiction clause when negotiating the contract can mean that the dispute is litigated in a jurisdiction a party may not have chosen and under a law that restricts its rights and remedies.

Here we look at some basic considerations for contracting parties when negotiating and drafting such clauses so as to avoid the cost and delay of litigating over where and under what law a dispute is to be determined.

The Basics: Limiting and excluding liability for breach of contract

It is not unusual for parties to include clauses in a contract that attempt to limit or exclude damages that may be claimed if a breach of contract occurs.  However, successfully excluding or limiting liability is not without its challenges.

Here we look at the basics of limitation and exclusion of liability clauses, the different types of clauses that could be used and how best to try to ensure they do what they say they will, which will result in fewer opportunities for challenge.

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions