MSE News: Mortgage blow as building society hikes SVR

sarahbennett

MarkyMarkD wrote: »

I can't believe you keep repeating things which you know are incorrect. Skipton HAVE said that they will reinstate the link when they are able to.

No. What they have said is that they might if both of the circumstances they've decided are exceptional cease to apply, provided that no other exceptional circumstances that they had not thought of previously defining, come to apply... Not quite the same thing is it? Most financial advisers are saying "don't hold your breath" on this one. Besides, what's the value of a Skipton promise these days? In this case, they are not promising anything....

MarkyMarkD wrote: »

I have previously pointed out that Skipton BS itself is losing money - a lot of money - and that this is not sustainable.

They have an awful lot more asset to go through before the losses cease to be sustainable and they become insolvent, before which point, interest rates will probably rise again, and they are not losing money on their mortgage agreements, they merely have a lower margin of profit than they previously had from these. The agreements are therefore an asset they could sell right now, if they cannot honour them, they could yet sell them to someone who can. All this is irrelevant anyway, even if someone is losing money, it doesn't give them a right to rob somebody else. Check out equitable life.

MarkyMarkD wrote: »

Surely that is "why they cannot stick to the guarantee". And they didn't "promise", they promised "subject to exceptional circumstances".

I'll have to correct you on a point here Mark. There was no dependency there, no reason to believe the guarantee was subject to exceptional circumstances, nor was it expressed as such, or even within the same clause. The guarantee operates as a fundamental term; conflicting contract wording is of subsidiary status. In order to take precedence over the guarantee, any conflicting wording would have to be expressed as having primacy if it were to override the guarantee. Conflicting, as it does, with the guarantee, the exceptional circumstances wording both under the rules of construction in English law and under Regulation 7(2) of the UTCCRs takes a subsidiary place to the language of the guarantee. Your confidence in the construction of this clause is charming. Can you think of any precedent, where a clause like this has actually worked in the drafter's favour?

MarkyMarkD wrote: »

Skipton didn't put a floor on their guarantee, because they covered that with a more general "exceptional circumstances" clause. It would be pretty bonkers to exclude all "exceptional circumstances" and then define a few specific ones as well!

In which case the entire industry with their floors and ceilings are all bonkers, as for that matter are all those who draft contracts. I'm not going to honour this statement with any detailed rebuttals (though I will if you are to continue to insist on it) beyond suggesting you read the sentence you just gave me above to a lawyer friend... Suffice to say this is not how the law works, it is in the drafters interest to be as specific as possible, even if they attempt to include a "catch all" as well. It's not "bonkers", but standard practice.

MarkyMarkD wrote: »

Perhaps Ruth would get sacked if she leaked this information? I've previously pointed out that there is absolutely, categorically, no way that the FSA would allow a lender to do something as big as this without prior discussion and acquiescence. Your belief that Skipton simply either:
(a) thought they'd try it on and see what the FSA did; or
(b) asked the FSA and then ignored what they said
is totally laughable.

Like I said, nobody has given me any reason to believe the FSA has colluded with the Skipton. They are, for what it is worth, considering violations under the UTCCRs, as well as action against David Cutter for his earlier statement claiming that the Society will stick to its promise to mortgage borrowers. Saying something is "totally laughable" is not an argument... In any event, the FSA's opinion is incidental to the issue of what will hold in court.

MarkyMarkD wrote: »

Believe, if you like, that the FSA didn't know about it, or did know and said "no" but then got ignored. But believe that and you are a fool.

Let's just wait and see what happens in court. My money is on the fool :-)

MarkyMarkD wrote: »

If the FSA had not known, or had been ignored, it would have publicly admonished Skipton as soon as it came out, as it did with Halifax who were minded to do a similar thing and then didn't - but in Halifax's case it publicly admonished it before it had even done it! The FSA's position has changed - because Skipton is a mutual, and it's too big to be allowed to fail. Halifax could be rescued - and was, by Lloyds Banking Group. Nobody is likely to rescue Skipton.

This is an interesting point Mark, you do add some interesting points, I shall look into the difference in reaction of the FSA to Halifax and Skipton, this may add something, thank you...

sarahbennett

Dan_1976 wrote: »

Is this really still going on like this!!!

I would say though if you cant afford the new hike you borrowed to much!

I agree, but that doesn't address the issue of the broken guarantee, does it?

sarahbennett

Dan_1976 wrote: »

Is this really still going on like this!!!

I would say though if you cant afford the new hike you borrowed to much!

"It does not strike you people may not accept having their own money taken from them wrongly, even if in small amounts they can absorb? Your contempt for borrowers is clear."

Dan_1976

Not at all, this thread has turned in to one upmans ship and is now very dull!

I am not with the skipton so I dont really care what happens, I did when the thread started though!

sarahbennett

Dan_1976 wrote: »

Not at all, this thread has turned in to one upmans ship and is now very dull!

I am not with the skipton so I dont really care what happens, I did when the thread started though!

Dan, nobody will miss you since you have not made any contribution to the debate, feel free to move on by all means :-) ie., if you are that bored, why are you still hanging around here?

Thrugelmir

howardtheduck wrote: »

.... Thrugelmir were facing me in court, you'd only have to open your mouths to enable me to win my case. Whilst ignorance may be no defence in law you could try pleading mental retardation or possibly even try bringing yourself within the M'Naghten Rules? Good luck with that.

You do little for the image of your choosen profession Quack Quack. So very tiresome.

I can assume that you have a considerable vested interest in the outcome. So whilst your legal skills are unquestionably good. I suspect that your financial ones aren't. In reality you have little interest in the common man either just lining your own pockets.

_Andy_

Nearly as tedious as any of the National Hunter threads.

VIGILANT22

sarahbennett wrote: »

Dan, nobody will miss you since you have not made any contribution to the debate, feel free to move on by all means :-) ie., if you are that bored, why are you still hanging around here?

sarahbennett.....Just who do you think you are with this remark?

The same with your reply to Ruth........ Quote: Can you not at least hint as to the position of the person you spoke to Ruth? (and I will investigate further)

Who has suddenly placed you in such an elevated position?
You have the audacity to describe me as “authoritative and/or dogmatic”…Your posts are becoming more neurotic and filled with egotism.
I hope other Skipton members on this thread can see you for what you are…. hanging on to every word of our “learned friend” (howardtheduck) . His gin fuelled vitriolic posts are certainly not adding to his credibility….and for you thanking him for posting “pleading mental retardation or possibly even try bringing yourself within the M'Naghten Rules”...says it all about you.....
Carry on the egotism, it is now becoming amusing..

howardtheduck

Thrugelmir, you accuse me of having little interest in the common man and just lining my own pockets. Allow me, if you will, to quote a memorable passage of the last ever judgement of the late Lord Denning MR in George Mitchell V Finney Lock Seeds [1983] 2 AC 803 that is also very relevant to the matter of Skipton's "exceptional circumstances" clause in rebuttal.

"The heyday of freedom of contract

None of you nowadays will remember the trouble we had - when I was called to the Bar - with exemption clauses. They were printed in small print on the back of tickets and order forms and invoices. They were contained in catalogues or timetables. They were held to be binding on any person who took them without objection. No one ever did object. He never read them or knew what was in them. No matter how unreasonable they were, he was bound. All this was done in the name of "freedom of contract." But the freedom was all on the side of the big concern which had the use of the printing press. No freedom for the little man who took the ticket or order form or invoice. The big concern said, "Take it or leave it." The little man had no option but to take it. The big concern could and did exempt itself from liability in its own interest without regard to the little man. It got away with it time after time. When the courts said to the big concern, "You must put it in clear words," the big concern had no hesitation in doing so. It knew well that the little man would never read the exemption clauses or understand them.
It was a bleak winter for our law of contract. It is illustrated by two cases, Thompson v London, Midland and Scottish Railway Co [1930] 1 KB 41 (in which there was exemption from liability, not on the ticket, but only in small print at the back of the timetable, and the company were held not liable) and L'Estrange v F Graucob Ltd [1934] 2 KB 394 (in which there was complete exemption in small print at the bottom of the order form, and the company were held not liable).

The secret weapon

Faced with this abuse of power - by the strong against the weak - by the use of the small print of the conditions - the judges did what they could to put a curb upon it. They still had before them the idol, "freedom of contract." They still knelt down and worshipped it, but they concealed under their cloaks a secret weapon. They used it to stab the idol in the back. This weapon was called "the true construction of the contract." They used it with great skill and ingenuity. They used it so as to depart from the natural meaning of the words of the exemption clause and to put upon them a strained and unnatural construction. In case after case, they said that the words were not strong enough to give the big concern exemption from liability; or that in the circumstances the big concern was not entitled to rely on the exemption clause. If a ship deviated from the contractual voyage, the owner could not rely on the exemption clause. If a warehouseman stored the goods in the wrong warehouse, he could not pray in aid the limitation clause. If the seller supplied goods different in kind from those contracted for, he could not rely on any exemption from liability. If a shipowner delivered goods to a person without production of the bill of lading, he could not escape responsibility by reference to an exemption clause. In short, whenever the wide words - in their natural meaning - would give rise to an unreasonable result, the judges either rejected them as repugnant to the main purpose of the contract, or else cut them down to size in order to produce a reasonable result. This is illustrated by these cases in the House of Lords: Glynn v Margetson & Co [1893] AC 351 ; London and North Western Railway Co v Neilson [1922] 2 AC 263; Cunard Steamship Co. Ltd. v Buerger [1927] AC 1 ; and by Canada Steamship Lines Ltd v The King [1952] AC 192 and Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576 in the Privy Council; and innumerable cases in the Court of Appeal, culminating in Levison v Patent Steam Carpet Cleaning Co Ltd [1978] QB 69. But when the clause was itself reasonable and gave rise to a reasonable result, the judges upheld it; at any rate, when the clause did not exclude liability entirely but only limited it to a reasonable amount. So where goods were deposited in a cloakroom or sent to a laundry for cleaning, it was quite reasonable for the company to limit their liability to a reasonable amount, having regard to the small charge made for the service. These are illustrated by Gibaud v Great Eastern Railway Co [1921] 2 KB 426; Alderslade v Hendon Laundry Ltd. [1945] KB 189 and Gillespie Bros & Co Ltd v Roy Bowles Transport Ltd [1973] QB 400. "

I have tremendous respect for the late Lord Denning MR who was a champion of 'the common man'. Indeed, it was Lord Denning's affinity for 'the common man' as you put it, that inspired me to pursue a career at the Bar (and not for a *hic* gin and tonic *hic* mind).

(IANYL)

howardtheduck

The Rules of Construction of Exclusion Clauses

The contra proferentem rule

Now, going back to matter of the “exceptional circumstances” clause of the Skipton SVR contract, the general rule which the courts apply to the interpretation of exclusion clauses is the contra proferentem rule.

The question to then ask is whether the clause in question was properly incorporated into the contract?


The easiest way to incorporate an exclusion clause is to ensure that the other party signs the contract containing the exclusion clause.

In L'Estrange v F Graucob [1934] 2 KB 394 Scrutton LJ held that “When a document containing contractual terms is signed, then, in the absence of fraud, or I will add, misrepresentation, the party signing it is bound, and it wholly immaterial if he has read the document or not.” Maugham LJ concurred, though expressing his regret at the result. He held he was bound to do so.

"There can be no dispute as to the soundness in law of the statement of Mellish LJ in Parker v South Eastern Ry Co , which has been read by my learned brother, to the effect that where a party has signed a written agreement it is immaterial to the question of his liability under it that he has not read it and does not know its contents. That is true in any case in which the agreement is held to be an agreement in writing."


However,Scrutton LJ observed that a party will not be so bound if the contract was induced by misrepresentation. This is where it gets interesting as I would argue that the contract WAS INDUCED by a misrepresentation (Skipton CEO David Cutter stating on 4th March 2009, "We have pledged our residential standard variable rate will NEVER be more than 3 per cent above base rate and, even with this at its lowest level for 315 years, we will honour our promise."
In Curtis v Chemical Cleaning and Dyeing Co Ltd [1951] 1 KB 805 an exemption clause in a signed contract could not be relied upon because the effect of the exemption clause was misrepresented. Therefore, an independent oral undertaking e.g. David Cutter’s statement on 4th March 2009, would undermine the ability of a party to rely on an exclusion clause.

The importance of precise drafting.

It is extremely important to draft an exclusion clause in clear and precise terms; the slightest ambiguity may be seized upon by a court to hold the exclusion clause inapplicable as in Suisse Atlantique Societe d'Armament Maritime v Rotterdamsche Kolen Centrale [1967] 1 AC 361 HL
There is, however, some evidence of a more relaxed and realistic approach to the interpretation of exclusion clauses as in Photo Production Ltd v Securicor Ltd [1980] AC 827 where Lord Diplock said that “the reports are full of cases in which what would appear to be very strained constructions have been placed upon exclusion clauses”. He noted that many of these cases involved consumer contracts and continued “any need for this kind of judicial distortion of the English language has been banished by Parliament's having made these kinds of contract subject to the Unfair Contract Terms Act 1977 ”.

So has there been a fundamental breach of contract in this case?


Following the House of Lords decision in Photo Production Ltd v Securicor Ltd [1980] AC 827 it has been held that the ‘Rule of Law’ doctrine established in Suisse Atlantique Societe d'Armament Maritime v Rotterdamsche Kolen Centrale [1967] 1 AC 361 HL as it applied to fundamental breach of a contract entitling the wronged party to void the contract is no longer the correct approach. Instead, the approach to be adopted is one of a strict ‘Rule of Construction’ approach whereby a fundamental breach is found only through examining the reasonable intentions of the parties at the time of the contract. The doctrine of fundamental breach simply exists as a rule of construction under which the more serious the breach, or the consequences of the breach, the less likely it is that the court will interpret the exclusion clause as applying to the breach as per Photo Production Ltd v Securicor Ltd [1980] AC 827. I would submit that the consequences of Skipton’s actions for 64,000 borrowers and the seriousness of the breach make it unlikely that a court will apply the “exceptional circumstances” exclusion clause.


So there (in conjunction with my earlier posts) you have a roundup of some of the case law in relation to exclusion clauses. The most important controls upon exclusion clauses are now contained in the Unfair Contract Terms Act 1977 (UCTA) and the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR). Although there are certain common law controls, such as misrepresentation (Curtis v Chemical Cleaning and Dyeing Co Ltd [1951] 1 KB 805) and the exclusion clause may be overridden by an express inconsistent undertaking given at or before the time of contracting (Couchman v Hill [1947] KB 554), these controls are likely to become practically insignificant. Having been overtaken in practice by UCTA and the UTCCR, nevertheless, once again, Skipton CEO David Cutter’s statement on 4th March 2009 springs to mind.

The difference between UCTA 1977 and UTCCR 1999 is as follows:


The Unfair Contract Terms Act 1977:


(1) applies to both consumer and business-to-business contracts, and also to terms and notices excluding certain liabilities in tort or delict;
(2) applies only to exclusion and limitation of liability clauses (and indemnity clauses in consumer contracts);
(3) makes certain exclusions or restrictions of no effect at all;
(4) subjects others to a reasonableness test;
(5) contains guidelines for the application of the reasonableness test;
(6) puts the burden of proving that a term within its scope is reasonable on the party seeking to rely on the clause;
(7) applies for the most part whether the terms were negotiated or were in a “standard form”;
(8) does not apply to certain types of contract, even when they are consumer contracts;
(9) has effect only between the immediate parties; and
(10) has separate provisions for Scotland.

In contrast, the Unfair Terms in Consumer Contract Regulations 1999:


(1) apply only to consumer contracts;
(2) apply to any kind of term other than the definition of the main subject matter of the contract and the price;
(3) do not make any particular type of term of no effect at all;
(4) subject the terms to a “fairness” test;
(5) do not contain detailed guidelines as to how that test should be applied, but contain a so-called “grey” list of terms which “may be regarded” as unfair;
(6) leave the burden of proof that the clause is unfair on the consumer;
(7) apply only to “non-negotiated” terms;
(8) apply to consumer contracts of all kinds;
(9) are not only effective between the parties but empower various bodies to take action to prevent the use of unfair terms; and
(10) apply to the UK as a whole.

The effect of unfair terms under the UTTCR 1999:


Under Section 8(1) of the UTTCR 1999 “An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer”.


Under Section 8(2) of the UTTCR 1999 “The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term.”

(IANYL)