Factual and Procedural Background
This is an appeal by the Appellants (392 individual borrowers) against an order made by Judge [Thompsell] on 21 January 2025 determining two preliminary issues in favour of the Defendant, Company A, the transferee of a portfolio of mortgages originally held by Company B. The mortgages (referred to in the opinion as the "Whistletree" portfolio) were originated by Company B, which was nationalised during the 2008 financial crisis and subsequently passed through a series of transfers before a portfolio was transferred to Company A in July 2016. At the point of transfer the standard variable rate (SVR) applicable to the portfolio was 4.79%, 4.29% above the Central Bank base rate; Company A has thereafter varied the SVR in line with changes to the Central Bank base rate so that the spread remained 4.29%.
The Appellants allege they are "mortgage prisoners" and bring claims including breach of contract for charging the portfolio SVR rather than Company A's advertised SVR (allegedly lower), claims in relation to regulated mortgages under FSMA and the MCOB rules, and claims by a subset of borrowers who took a linked unsecured loan ("Together Loan") and mortgage ("Together Mortgage") seeking declarations and repayment under section 140A/B of the Consumer Credit Act 1974 (CCA 1974).
Deputy Master Hansen ordered trial of three preliminary issues on 19 October 2023; the parties agreed the second issue so the court determined issues 1 and 3. Issue 1 concerned whether Company A breached the express terms of the mortgage contracts by charging the portfolio SVR rather than Company A's SVR. Issue 3 concerned whether section 140A(5) CCA 1974 precludes an order under section 140B in relation to a regulated mortgage contract (or quantified by reference to sums payable under such a contract), regardless of whether that contract is the 'credit agreement' or a 'related agreement'. The judge determined both issues in favour of Company A, and the Appellants appealed with permission.
Legal Issues Presented
- Has Company A breached the express terms of the Appellants' mortgage contracts by charging interest based on the portfolio SVR rather than Company A's SVR (i.e. correct interpretation of the General Conditions and Offer)?
- Does section 140A(5) CCA 1974 preclude an order under section 140B(1) in relation to a regulated mortgage contract, or quantified by reference to sums payable under a regulated mortgage contract, irrespective of whether that regulated mortgage contract is the "credit agreement" or a "related agreement"?
Arguments of the Parties
Appellants' Arguments
- Interpretation: The definition of "Standard Variable Mortgage Base Rate" in Condition 1.2 requires the transferee to apply its own SVR for its variable-rate mortgage loans; a transferee cannot arbitrarily apply different rates to sliced portfolios.
- Mechanics: If Company A wished to change the inherited rate it had to adopt its own SVR first (Condition 19.1), and only thereafter could it vary the rate under Condition 7; absent adoption of its own SVR, the inherited rate would be fixed and could not be varied.
- Consumer protection/contentions: Rely on contra proferentem and regulation 7(2) of the 1999 Regulations (applicable to these contracts) to construe ambiguity in favour of consumers.
Company A's Arguments
- Contractual wording: The General Conditions (Conditions 1.1, 1.2, 7 and 19.1) permit a transferee to step into the transferor's position and exercise the power under Condition 7 to vary the Standard Variable Mortgage Base Rate; Condition 19.1 permissively allows adoption of a transferee's pre-existing SVR but does not require it.
- Practical interpretation: The transferee may continue the inherited SVR or vary it under Condition 7; nothing in the wording prevents exercising Condition 7 without first adopting a pre-existing SVR under Condition 19.1.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Case A v Case B [2020] EWCA Civ 821 |
Summary of contractual interpretation principles (documentary, factual and commercial context; natural meaning; disregarding subjective evidence; commercial common sense). |
Adopted as a convenient summary of general principles guiding interpretation of the General Conditions. |
| Case C v Case D [2015] UKSC 36 |
Limits on use of subjective evidence and emphasis on natural meaning (authority cited within the summary of principles). |
Relied upon to underline interpretative boundaries (disregard subjective intent; focus on language and context). |
| Case E v Case F [2011] UKSC 50 |
Where language is unambiguous the court must apply it; commercial common sense in choosing between constructions. |
Used to support application of plain language where provisions are clear. |
| Case G v Case H [2017] UKSC 24 |
Consideration of drafting quality; sophisticated agreements interpreted primarily textually. |
Applied to assess weight to be given to textual analysis of standard form mortgage conditions. |
| AIB Group (UK) Plc v Martin [2001] UKHL 63 |
Interpretation of standard form contracts and limited relevance of factual background for standard terms. |
Discussed; court regarded principle as of limited relevance here because the dispute concerned standardized wording rather than case-specific background. |
| Re Drake Insurance plc [2001] Lloyd's Rep IR 643 |
Observations on the contra proferentem rule (particularly in insurance contexts). |
Referenced in relation to contra proferentem; court found contra proferentem of limited assistance because no real ambiguity existed. |
| Foxtons v Bicknell [2008] EWCA Civ 419 |
Approach to standard terms: lean in favour of a construction which favours the client when standard terms used against a lay client. |
Cited but court concluded it did not alter the outcome because language was clear. |
| K/S Victoria Street v House of Fraser Stores Management Ltd [2011] EWCA Civ 904 |
Observation that rules like contra proferentem are rarely decisive for commercial contracts. |
Used to temper reliance on contra proferentem for the General Conditions. |
| Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29 |
Scepticism about independent authority of contra proferentem (Lord Leggatt). |
Noted in considering the weight to be given to contra proferentem. |
| R (Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department [2022] UKSC 3 |
Modern approach to statutory interpretation — words read in context and with purpose. |
Cited as part of general statutory interpretation principles for Issue 3. |
| News Corp UK & Ireland Ltd v Commissioners for HMRC [2023] UKSC 7 |
Statutory interpretation principles (context and purpose). |
Applied as supporting authority for statutory interpretation methodology. |
| R (N3) v Secretary of State for the Home Department [2025] UKSC 6 |
Statutory interpretation methodology (context and purpose). |
Cited in the statutory interpretation discussion for Issue 3. |
| Darwall v Dartmoor National Park Authority [2025] UKSC 20 |
Statutory interpretation principles. |
Referenced alongside other Supreme Court authorities supporting the modern approach to statutory interpretation. |
| Smith v Royal Bank of Scotland [2023] UKSC 34 |
Leading guidance on sections 140A–140C CCA 1974: purposes of the unfair relationships regime and its remedial discretion. |
Treated as the leading authority for interpreting the unfair relationships provisions and framing the two-stage approach (determine unfair relationship; then choose remedy under 140B). |
| Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 |
Observation on the broad and open-ended nature of section 140A. |
Referred to when discussing the breadth of the unfair relationships provision. |
| Campbell v Conoco (UK) Ltd [2002] EWCA Civ 704 |
Phrase "in connection with" has broad scope but is context-dependent. |
Used to consider meaning and scope of "in connection with" in sections 140A and 140B. |
| Lessees and Management Company of Herons Court v Heronslea Ltd [2019] EWCA Civ 1423 |
"In connection with" must take its colour from context. |
Applied to emphasise contextual limits on the broad phrase "in connection with". |
Court's Reasoning and Analysis
Issue 1 (contractual interpretation)
The court applied established principles of contractual interpretation (text, context, commercial common sense) and analysed the Offer and General Conditions (Conditions 1.1, 1.2, 6, 7, 19.1 and Special Condition 10). The court observed:
- "We"/"our" in the General Conditions denotes the current lender, which after transfer includes the transferee (Company A).
- The defined "Standard Variable Mortgage Base Rate" is a numerical rate set by "we" for the portfolio of mortgages governed by the General Conditions and may be varied under Condition 7 (7.1 to reduce; 7.2 to increase for specified reasons).
- Condition 19.1 permits but does not oblige a transferee to adopt a pre-existing SVR; it also expressly transfers the right to set the Interest Rate to the transferee.
- There are two mechanisms: (i) Condition 7 (lender, including transferee, may vary the Standard Variable Mortgage Base Rate under its terms) and (ii) Condition 19.1 (permissive option for transferee to adopt its own pre-existing SVR, which then becomes the Standard Variable Mortgage Base Rate for that Offer and thereafter variably governed by Condition 7).
The court rejected the Appellants' interpretation that only the transferor could change the Standard Variable Mortgage Base Rate or that a transferee could not vary the inherited rate unless it first adopted one of its own pre-existing rates. That construction would render the transferred rate fixed unless the transferee opted to adopt a pre-existing rate and was inconsistent with the plain wording and commercial logic of the clauses. Secondary arguments (standard/“herd protection” expectations, contra proferentem, 1999 Regulations) did not alter the textual conclusion because the language was not genuinely ambiguous and the Appellants had conceded Company A could continue the inherited rate.
Issue 3 (statutory interpretation of CCA 1974 sections 140A–140C)
The court applied the modern approach to statutory interpretation: ascertain meaning of words in their context and purpose. It considered the text of sections 140A and 140B and the specific provision in section 140A(5) that an order under section 140B "shall not be made in connection with a credit agreement which is an exempt agreement" (including regulated mortgage contracts under the RAO). The court reasoned:
- "In connection with" should be given a broad meaning consistent across sections 140A(1), 140A(5) and 140B(1), but its scope is informed by context.
- The phrase functions not merely as a jurisdictional gateway but includes a substantive restriction: section 140A(5) categorically precludes making orders under section 140B in connection with a regulated mortgage contract.
- The Appellants' attempt to treat the unsecured Together Loan as the "credit agreement" and the Together Mortgage as a "related agreement" to obtain relief affecting a regulated mortgage would circumvent the statutory exclusion and is not permitted.
- Legislative history and transitional prior regimes do not justify reading section 140A(5) down; sections 140A–140C must be interpreted according to their wording, context and purpose (as clarified by Smith v RBS and other authorities).
Accordingly, the court held that orders under section 140B cannot be made in relation to regulated mortgage contracts (for example, repayment of sums paid under such a contract), even where the court is exercising its remedial discretion in relation to an associated unsecured credit agreement.
Holding and Implications
DISMISSED.
Holding: The appeal is dismissed. The court upheld the judge's determination that (1) Company A did not breach the express terms of the mortgage contracts by charging the portfolio SVR rather than Company A's SVR because the General Conditions permit a transferee to vary the Standard Variable Mortgage Base Rate under Condition 7 and Condition 19.1 is permissive; and (2) section 140A(5) CCA 1974 precludes the court from making an order under section 140B in relation to regulated mortgage contracts (or orders quantified by reference to sums payable under such contracts), so the Appellants cannot obtain repayment of sums under regulated mortgage contracts via the unfair relationships regime by treating an unsecured loan as the credit agreement.
Implications: The decision directly affects the parties by confirming Company A's contractual rights to vary the portfolio SVR under the General Conditions as interpreted and by confirming the statutory bar in section 140A(5) on remedies under section 140B in relation to regulated mortgage contracts. The judgment is an application of established interpretative principles rather than the creation of novel legal doctrine; it construes standard form mortgage conditions and the scope of the CCA 1974 unfair-relationships remedial powers as applied to regulated mortgage contracts.