TSB did not breach the terms of claimants’ mortgage contracts by charging them a different standard variable rate (SVR), a judge has said.
In a ruling on a preliminary mortgage prisoner case between Harcus Parker and TSB, Judge Nicholas Thompsell said that the defendant, TSB, had not breached the express terms of the claimants’ mortgage contracts by charging interest rates based on the Whistletree SVR and not the TSB SVR.
“The Whistletree SVR should be regarded as the continuation of the original SVR originally operated by Northern Rock, and not as a new rate,” he said.
Thompsell said that a consequential hearing should be set at the “earliest convenience” of the court and the parties to “deal with any matters consequential upon this judgment, including the settling of a form of order and any application for costs”.
Around 392 former mortgage customers of Northern Rock, whose mortgages and/or loans were transferred to TSB, are taking group action against the firm, saying they were mortgage prisoners and “they are (or were) trapped into paying an unduly high variable rate on their mortgages”.
The judgment noted that there are around 2,000 mortgage customers in similar position that have “intimated claims” against the lender and are in a “standstill agreement” with the lender “pending the outcome of litigation”.
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TSB argued that there is a “substantial number” of former Northern Rock customers who have been able to remortgage or obtain lower rates and the court does “not have the evidence before it to determine whether the former Northern Rock customers are mortgage prisoners”.
This judgment is the result of a preliminary hearing in July and is not a final ruling on the case.
The preliminary trial focused on three issues in total:
- The Express Terms Issue: whether TSB has breached the express terms in claimants’ mortgage contracts by charging interest rates based on what TSB described as Whistletree SVR as opposed to TSB’s SVR.
- The Implied Term Issue: whether there is an implied term of the mortgage contracts that setting or varying interest rates should not be “exercised dishonestly, for improper purpose, capriciously” or in ways a “reasonable mortgage” would not do.
- The CCA Issue: the applicability of specific wording in the Consumer Credit Act 1974 on unfair relationships between creditors and debtors.
The second issue was agreed prior to the hearing and agrees that it is implied that mortgage contracts “should not be exercised dishonestly, for an improper purpose, capriciously, arbitrarily or in a way in which a reasonable mortgagee, acting reasonably, would do”.
On the third issue, the judge’s ruling was “mixed”, according to Harcus Parker.
Claimants ‘looking forward to progressing their claims to the next stage’
Matthew Patching, partner at Harcus Parker, said the clients were “pleased that the judge seemed to appreciate the difficulties they have faced since the collapse of Northern Rock and the purchase of their mortgages by TSB”.
“Although they are disappointed that the result of the preliminary issues trial is not to immediately determine the claims in their favour, they are looking forward to progressing their claims to the next stage and – ultimately – to a full trial,” he said.
The UK Mortgage Prisoners Action Group urged its members and claimants “not to be unduly disheartened by the outcome” and for commentators to be “aware of the vulnerability of many of our members”.
It added that this was a judgment on three preliminary questions and not the trial of the group claims against TSB Whistletree.
“The claim, yet to come to hearing, is a complex and multi-faceted one. The trial in July of this year was focused solely on the determination of three preliminary issues only and not on the substantive argument or entire basis for the mortgage prisoner claim against the bank,” it said.
The campaign group said that of the three preliminary questions, only one was unsuccessful, and while it was “disappointing”, it was “by no means the end of the legal action and there are still very significant broader issues beyond these preliminary questions yet to be determined at a full hearing, which will hopefully take place as early as possible”.
The campaign group said it was meeting with the Treasury on 1 October to discuss what potential solutions the government can provide.
Rachel Neale, lead campaigner for UK Mortgage Prisoner Action Group, said: “We will not rest until action is taken by government and the regulator. It is abhorrent that our members continue to suffer injustice 16 years on from the global financial crisis due to a lack of setting adequate protections in place upon the sales and transfers of our mortgages.
“No residential mortgage should sit in the clutches of profiteering debt collectors who offer no mortgage products”.
TSB was contacted for comment.
