B2/2006/1293 & 1293(Y)
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM COVENTRY COUNTY COURT
MR RECORDER MICHAEL DOUGLAS Q.C.
Strand, London, WC2A 2LL
B e f o r e :
VICE PRESIDENT OF THE COURT OF APPEAL
LORD JUSTICE TUCKEY
LORD JUSTICE JACOB
| WILSON & ANR.
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Mr Thomas SEYMOUR (instructed by Messrs Butcher Burns) for the Respondent
Hearing dates : 14 March 2007
Crown Copyright ©
Lord Justice Tuckey:
(d) The broker who assisted us in making this loan application, is acting as our agent and is not tied in any way whatsoever to the company. We have not been persuaded, pressured or induced in any way to accept this loan or to borrow more money than we require or can comfortably afford to repay together with interest. In certain circumstances this company does pay commission to brokers/agents. In as far as it is able to do so; it endeavours to insure that the Broker conducts their business activities in a fair and proper manner. We will pay monies to your broker strictly in accordance with your signed authority by the deduction from this advance; this is not a condition of the loan.
This document also said that the sum of £295 would be debited to the mortgage balance on completion of the loan.
A. NETT AMOUNT OF LOAN £7000.00
B. PROTECTION PAYMENT PLAN PREMIUM (OPTIONAL) £0
C. TOTAL LOAN INCLUSIVE OF BROKERS FEE OF £1000.00 £8000.00
D. RATE OF INTERST PER MONTH 1.29%
(Variable in accordance with Condition (4) overleaf)
E. APR (No account of any variation of the rate or 16.60%
Amount of interest payable has been taken)
F. NUMBER OF MONTHLY REPAYMENTS 240
G. AMOUNT OF MONTHLY REPAYMENTS £93.33
(Assuming no variation of the rate of interest)
Under these boxes the agreement said:
The APR at (E). is based upon a total charge for credit which includes, the total charge for credit (other than interest at clause 1.4 overleaf) inclusive of (a) the borrowers brokers arrangement fee of £1,000 which sum is not a condition of the loan imposed by the lender and (b) the lenders administrative/legal costs of £295 (which becomes due and payable upon completion of the loan). The lender may agree to defer collection of this sum to a date no later than termination of this agreement or its earlier redemption, such costs if deferred will continue to bear interest at (D) above until discharged in full.
The Consumer Credit Legislation
A term stating how the debtor is to discharge his obligations under the agreement to make the repayments, which may be expressed by reference to a combination of any of the following
(a) number of repayments;
(b) amount of repayments;
(c) frequency and timing of repayments;
(d) dates of repayments;
(e) the manner in which any of the above may be determined,
or in any other way, and any power of the creditor to vary what is payable.
Paragraph 4 requires "a term stating the rate of any interest on the credit to be provided under the agreement".
33. In my judgment the objective of Schedule 6 is to ensure that, as an inflexible condition of enforceability, certain basic minimum terms are included which the parties (with the benefit of legal advice if necessary) and/or the court can identify within the four corners of the agreement. Those minimum provisions combined with the requirement under section 61 that all the terms should be in a single document, and backed up by the provisions of section 127 (3), ensure that these core terms are expressly set out in the agreement itself: they cannot be orally agreed; they cannot be found in another document; they cannot be implied; and above all they cannot be in the slightest mis-stated. As a matter of policy, the lender is denied any room for manoeuvre in respect of them. On the other hand, they are basic provisions, and the only question for the court is whether they are, on a true construction, included in the agreement. More detailed requirements, which are designed to ensure that the debtor is made aware, so far as possible, of specified information (including information contained in the minimum terms) are to be found in Schedule 1.
I agree. The discretionary power under section 65 (1) to order enforcement of an agreement which does not comply with schedule 1 may be exercised on terms discharging the debtor from having to pay any sum payable under the agreement (section 127 (2)).
The amount of each repayment to be made under the agreement expressed as
(a) a sum of money;
(b) a specified proportion of a specified amount (including the amount outstanding from time to time);
(c) a combination of heads (a) and (b) above; or
(d) in a case where the amount of any repayment cannot be expressed in accordance with head (a), (b) or (c) above, a statement indicating the manner in which the amount will be determined.
The Consumer Credit Appeals
66. Following the sub-paragraph numbers in paragraph 5, the agreement.
(a) specifies the number of repayments: one
(d) specifies the date of the repayment: the completion of the loan or in the event of deferment, the date of termination of the agreement (5 August 2023)
(e) states the manner in which the amount of the repayment is to be determined: by adding to the sum of £295 (simple) interest over the life of the loan at the rate of 1.29% per month.
67. The combination of these three provisions amounts in my judgment to a term "stating how the debtor is to discharge his obligations under the agreement to make the repayments" within the meaning of Schedule 6 paragraph 5.
55 a term stating that there should be a single lump sum payment at the end of the term of the loan plus interest on that sum calculated over the period of the loan at a rate of 1.29% per month would satisfy paragraph 5 notwithstanding that the amount of the repayment was not expressly stated.
104 In my judgment such a statement would express the amount of the repayment as a sum of money and would fulfil the purpose of Schedule 1 by providing important information to the borrower about the repayment which he was letting himself in for on top of the monthly instalments required in the box.
He rejected the submission that the statement that the sum of £295 would attract interest at the rate of 1.29% until discharged would be an expression of a specified proportion of a specified amount because:
102 Although £295 is a specified amount, the repayment will not be a "specified proportion" of that amount. The repayment will be such figure as is produced by applying to the sum of £295 a rate of 1.29% per month for X months or Y days. That is the "rate of charge" (as referred to in Schedule 1 paragraph 10) but the repayment required on the deferred date (whenever that may be) is not a "specified proportion" of anything.
6-057. Consent of the principal is not uncommon. But it must be positively shown. The burden of proving full disclosure lies on the agent and it is not sufficient for him merely to disclose that he has an interest or to make such statements as would put the principal on inquiry: nor is it a defence to prove that had he asked for permission it would have been given.
I think this is an accurate statement of the law. Whether there has been sufficient disclosure must depend upon on the facts of each case given that the requirement is for the principal's informed consent to his agent acting with a potential conflict of interest.
where [the principal] leaves the agent to look to the other party for his remuneration or knows that he will receive something from the other party, he cannot object on the ground that he did not know the precise particulars of the amount paid. Such situations often occur in connection with usage and custom of trades and markets. Where no usage is involved, however the principal's knowledge may require to be more specific.
The cases cited support these propositions. Here I think the requirement is more special. Borrowers like the defendants coming to the non-status lending market are likely to be vulnerable and unsophisticated. A statement of the amount which their broker is to receive from the lender is, I think, necessary to bring home to such borrowers the potential conflict of interest.
. warn that the broker or other intermediary may not be in a position to give unbiased advice if they are tied to the lender or are paid a fee or commission by the lender.  The contract documentation and any customer booklet or leaflet should indicate if any commission or other payment is payable by the lender to the broker, and should explain the purpose and nature of any such commission and the basis of calculation.
and told such brokers to:
. disclose both orally and in writing at an early stage, the existence and nature of any commission or other payment payable by the lender they should explain clearly the implications of any such commission for the broker's role with regard to the borrower. This is in order that the borrower is clear as to any potential conflict of interest on the part of the broker. The Office would encourage brokers to disclose the amount or likely amount or percentage figure of the commission, since such transparency will help to reassure borrowers that they are receiving appropriate advice from the brokers. Where this is not done, the broker should disclose the factors which will determine its calculation, including whether it will be a percentage of the loan or a fixed sum and whether it is intended to reflect the actual costs incurred by the broker in arranging the loan or is linked to the total volume or value of business brought to the lender over a given period. All such disclosures should be made in writing before the borrower enters into the loan agreement and preferably before the loan application is submitted to the lender.
79. When exercising its equitable jurisdiction the court considers what fairness requires not only when addressing the question of the precise form of relief, but also when considering whether the remedy should be granted at all.
Lord Justice Jacob: I agree
Lord Justice Waller: I also agree