VALERIE JOYCE McGINN v GRANGEWOOD SECURITIES LIMITED [2002] EWCA Civ 522

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM NORWICH COUNTY COURT

His Honour Judge Langan QC

[2002] EWCA Civ 522

Case No Case Nos: B2/2001/1077 & 1078

Venue Royal Courts of Justice, Strand,, London, WC2A 2LL

Between

VALERIE JOYCE McGINNAppellant

GRANGEWOOD SECURITIES LIMITEDRespondent

Before

Lord Justice Kennedy

Lord Justice Clarke

Lady Justice Hale

Tristram Hodgkinson (instructed by Fosters) for the Appellant

Peter Wulwik (instructed by Blatchfords) for the Respondent

Date 23 April 2002

Lord Justice Clarke:

Introduction

[1]These appeals raise a number of issues under the Consumer Credit Act 1974 (“the Act”) which has recently provided so much work for the courts. Like others, this case demonstrates the unsatisfactory state of the law at present. Simplification of a part of the law which is intended to protect consumers is surely long overdue so as to make it comprehensible to layman and lawyer alike. At present it is certainly not comprehensible to the former and is scarcely comprehensible to the latter.

[2]However that may be, this judgment is concerned with appeals or proposed appeals by Mrs Valerie McGinn (“the debtor”) from parts of two orders of His Honour Judge Langan QC dated as long ago as 6 th October and 20 th November 2000. The orders were in part made on interlocutory applications and in part made by way of determination of preliminary issues. They were made in two actions. In the first action (“the 1991 action”) Grangewood Securities Limited (“the lender”) is the claimant and the debtor is the defendant and in the second action (“the 1997 action”) the debtor is the claimant and the lender is the defendant. The actions arise out of a credit agreement and second charge dated 2 nd May 1990. The loan which is the subject of the credit agreement is secured on the debtor’s home, namely 174 Cadge Road in Norwich.

[3]In the 1991 action the lender procured a suspended possession order dated 28 th August 1991 on the ground that the debtor was in arrears with her monthly repayments under the agreement. The possession order has not been enforced and the debtor remains in her home. In order to resolve the issues in this appeal it is not necessary to set out the complex history of the two actions, which is set out by the judge in detail in his judgment. In doing so the judge said this:

“This history is at the same time a salutary illustration of how, without some sense of proportion on all sides, litigation under [the Act] can be diverted from what should be the main road down numerous by-ways, if not into cul-de-sacs.”

For my part, I entirely agree and was horrified to hear that the first hearing before the judge took eight days and that the second took over one and a half days.

[4]In short, the debtor challenged the enforceability of the credit agreement and the charge under the Act. The judge decided to determine the question whether the agreement and charge were enforceable as a preliminary issue. He decided that preliminary issue in favour of the lender and, by his order of 6 th October 2000, declared that the credit agreement and charge were not improperly executed for the purpose of the Act. He granted the debtor limited permission to appeal on three points which relate to building society arrears, legal costs and broker’s fee respectively. The judge made a number of further orders both on 6 th October and on 20 th November 2000 and subsequently refused the debtor’s application for permission to appeal against some of them.

[5]In substance the position after the various orders made by the judge is that the possession order made in the 1991 action has been set aside as a matter of discretion in order to enable the debtor to argue that the credit bargain should be re-opened under the Act. In the result all outstanding questions are to be decided in the 1997 action. In essence, the remaining questions for decision arise under sections 137 to 140 of the Act, which give the court certain powers in the case of an extortionate credit bargain. The debtor submits that this bargain should be re-opened as an extortionate credit bargain.

[6]We are not, however, concerned with that question, but only with appeals from and applications for permission to appeal from the two orders made by the judge on 6 th October and 20 th November 2000. On 30 th March 2001 Blofeld J transferred both the appeals and any renewed applications for permission to appeal to this court. It was subsequently directed by Tuckey LJ that the applications for permission to appeal be heard at the same time as the appeals with the appeals to follow if permission was granted. We have accordingly heard argument, so far as appropriate, on the issues raised by both the appeals and the various applications for permission to appeal.

[7]It seems to me that the sensible course is to consider first the three points upon which permission to appeal has been granted and to turn to the applications for permission to appeal only so far as necessary thereafter. I shall therefore adopt that course. In order to do so it is necessary to say a word first about the statutory framework, and then to identify the issues and to set out the relevant facts before considering the three issues upon which permission to appeal was given in turn. They each relate to the enforceability of the credit agreement and charge under the Act. The Statutory Framework

[8]The Act was introduced in order to assist consumers who wish to borrow money. It is unduly complicated and has given rise to a number of decisions of this court in recent times, some of which have been made since the decision of the judge in this case. They include Wilson v First County Trust Ltd

[2001] QB 407

(which I shall call “Wilson (No1)” ), Wilson v First County Trust (No 2)

[2001] EWCA Civ 633

[2001] 3 WLR 42

and Watchtower Investments Ltd v Payne

[2001] EWCA Civ 1159

, [2001] 35 LS Gaz 32. Both W ilson (No 1) and Watchtower were concerned with whether the credit agreement was unenforceable on the ground that it failed correctly to state the amount of the credit. The relevant principles were discussed in both cases. In Wilson (No 1) it was held by this court that the agreement was unenforceable, whereas in Watchtower it was held that the agreement was enforceable. The Watchtower case is perhaps of more direct relevance in this appeal because it raised a similar point to the building society arrears point taken here.

[9]Several of the cases expressly recognise that since the Act was designed for the protection of the consumer, it should be construed with that consideration in mind: see eg Huntpast Ltd v Leadbetter

[1993] CCLR 15

, per Sir Christopher Slade at page 29, Wilson (No 1) per Sir Andrew Morritt VC at paragraph 18 and, more recently, Broadwick Financial Services Ltd v Spencer

[2002] EWCA Civ 35

, per Dyson LJ, giving the judgment of the court, at paragraph 21.

[10]In the Watchtower case Peter Gibson LJ set out the relevant statutory provisions in paragraphs 15 to 29. I also tried to summarise the position in paragraph 60. Given that the relevant provisions have been extensively reviewed in that case, and indeed in Wilson (No 1) , it does not seem sensible to set them out again in such detail here. It is I think sufficient to summarise their effect, much as was done by Sir Andrew Morritt VC, giving the judgment of the court in Wilson (No 2) at paragraph 4.

[11]Section 65(1) of the Act provides that an improperly executed regulated agreement is enforceable against the debtor only by an order of the court. Section 127 sets out the powers of the court on an application for an enforcement order inter alia under section 65(1). Section 127(1) provides, subject to subsection (3), that the court shall dismiss the application if, but only if, it considers it just to do so having regard to prejudice caused to any person by the contravention in question, to the degree of culpability for it and to the powers under section 135 to impose conditions or suspend the operation of the order and under section 136 to vary the agreement and security. Section 127(2) gives the court power, if it appears just to do so, to reduce or discharge any sum payable by the debtor, so as to compensate him for any prejudice suffered as a result of the compensation in question.

[12]For present purposes the crucial provision is section 127(3), to which section 127(1) is expressly made subject. It provides:

“The court shall not make an enforcement order under section 65(1) if section 61(1)(a) (signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner).”

It follows that in a case where there is no document signed by the debtor which contains all the prescribed terms of the agreement the court has no power to make an enforcement order. In such a case the effect of sections 65(1) and 127(3) of the Act is that the agreement is not enforceable against the debtor. Nor is any security taken for the loan: see section 113 and Wilson (No 2) at paragraph 6. I did not understand Mr Wulwik to submit on behalf of the lender that, if the agreement was unenforceable under section 127(3), the same was not true of the charge.

[13]It is common ground that the credit agreement is a regulated agreement under section 8 of the Act. It is an agreement by which the lender provided the debtor with credit not exceeding £15,000 within the meaning of section 8(2) and it is not an exempt agreement specified in or under section 16. Since the date of this agreement the maximum has been increased to £25,000.

[14]What then were the prescribed terms of the agreement? By regulation 6(1) of the Consumer Credit (Agreements) Regulations 1983 (“the 1983 Regulations”), which were made under section 60(1) of the Act:

“The terms specified in Column 2 of Schedule 6 to these Regulations in relation to the type of regulated agreement referred to in Column 1 (and no other terms) are hereby prescribed for the purposes of section 61(1)(a) of the Act (the terms which must be contained in a document if a regulated agreement is not to be improperly executed) and of section 127(3) (the terms which must be contained in a document before any enforcement order can be made under section 65(1), if section 61(1)(a) was not complied with).”

It is common ground that one of the terms specified in Column 2 of Schedule 6 in relation to the class of agreement which was made in this case is “a term stating the amount of the credit”: see paragraph 3.

[15]What is meant by “the amount of the credit”? By section 9(4) of the Act an item entering into the total charge for credit shall not be treated as credit. It follows that any amount which is part of the “total charge for credit” must not be included in the amount of the credit, which must be stated in a document signed by the debtor. If it is, the amount of the credit will be wrongly stated and, by reason of section 127(3) of the Act, the agreement will be unenforceable and the court will have no discretion to make an enforcement order. As Lord Hoffmann put it in Dimond v Lovell [2000] RTR 243 at 257D, in those circumstances the agreement is “irredeemably unenforceable”.

[16]That is what occurred in Wilson . In that case the agreement specified the amount of the loan as £5,250, but that sum included a document fee of £250, which this court held to be part of the “total charge for credit”. The court further held that, by reason of section 9(4), being part of the total charge for credit, the figure of £250 should not have been included as part of the “amount of the credit”. The amount of the credit should have been shown in a document signed by the debtor as £5,000. Since there was no such document, it followed that the agreement was unenforceable and that the court had no power to make an enforcement order in favour of the lender on any terms.

[17]I note in passing that in Wilson (No2) this court made a declaration that, having regard to the terms prescribed by regulation 6(1) of and Schedule 6 to the 1983 Regulations, the provisions of section 127(3) of the Act, in so far as they prevent the court from making an enforcement order under section 65(1) of that Act unless a document containing all the prescribed terms of the agreement has been signed by the debtor or hirer, are incompatible with the rights guaranteed to the creditor or hirer by

article 6(1) of the European Convention on Human Rights

and under article 1 of the First Protocol. I think that I am right in saying that that decision is the subject of an appeal to the House of Lords. However that may be, it is not relevant to this appeal. As I understand it, the Act has not been amended so as to affect the issues in this appeal.

[18]What then is meant by the expression “total charge for credit”? It seems to me now, as it seemed to me in Watchtower (at paragraph 63), that section 20 of the Act points the way. Section 20(1) provides:

“(1) The Secretary of State shall make regulations containing such provisions as appear to him to be appropriate for determining the true cost to the debtor of the credit provided or to be provided under an actual or prospective consumer credit agreement (“the total charge for credit”), and regulations so made shall prescribe – (a) what items are to be treated as entering into the total charge for credit, and how their amount is to be ascertained; (b) the method of calculating the rate of the total charge for credit.”

[19]The Secretary of State made the Consumer Credit (Total Charge for Credit) Regulations 1980 (“the TCC Regulations”) under that section. In Watchtower Peter Gibson LJ set out the terms of regulations 1(2), 3 and 4 and referred in detail to regulation 5. For present purposes it is sufficient to note that by regulation 3 the total charge for credit is defined as the total of the amounts determined as at the date of the making of the agreement of such of the charges specified in regulation 4 as apply in relation to the agreement but excluding the amount of the charges specified in regulation 5.

[20]By regulation 4 the total charge for credit includes: “(a) the total of the interest on the credit which may be provided under the agreement; and (b) other charges at any time payable under the transaction by or on behalf of the debtor or a relative whether to the creditor or any other person.” “Transaction” is defined in regulation 1(2), as amended as at the date of the agreement and so far as relevant, as follows: ““transaction”, except … , means an agreement, any transaction which is a linked transaction by virtue of section 19(1)(a) of the Act, … any credit brokerage contract relating to the agreement and any other contract to which the debtor or a relative of his is a party and which the creditor requires to be made or maintained as a condition of the making of the agreement … .” “Agreement” is defined by the same regulation as a consumer credit agreement.

[21]In the case of each item, the question is thus whether it is one of the “other charges” referred to in regulation 4(2). If it is, no-one suggests that any of the exceptions in regulation 5 applies here. However, the expression “other charges” is not further defined.

[22]As I read the decision in Watchtower , the court held that the essential question was whether the particular item in issue was, in the words of section 20, part of the “true cost to the debtor of the credit”: see in particular paragraphs 39 - 42, 45 to 48, 52 and 55 in the judgment of Peter Gibson LJ and paragraphs 63 to 65 in my judgment. Maurice Kay J agreed with us both. I shall return to some of these paragraphs below, but it is convenient first to refer to the issues raised by the three points upon which the judge granted permission to appeal and then to set out the facts, so far as it is relevant to do so. The Issues Building Society Arrears

[23]The lender paid a first mortgagee the sum of £359.29 in respect of arrears which were (or were said to be) outstanding under the first mortgage on the property and deducted that amount from the amount which would otherwise have been paid to the debtor under the credit agreement. The appellant’s case is that that sum was part of the total charge for credit and should not have been included in the amount of the credit shown in the agreement. It is submitted that, as a result, the agreement is not enforceable under the Act. Legal Fees and Expenses

[24]The credit agreement provided that the debtor should pay legal fees and disbursements in the sum of £250 on completion of the loan, but gave the lender power to defer payment without specifying the terms upon which it could do so. Immediately after the loan was complete the lender wrote to the debtor exercising or purporting to exercise that power, but doing so on terms that the debtor pay interest at the contractual rate until payment. Over 20 years the interest would amount to a very large sum, although no calculation was included in the letter. The appellant’s case is that in these circumstances the credit agreement is unenforceable under the Act. Broker’s Fee

[25]The credit agreement provided for the payment of £1,002 in respect of a broker’s fee, which was included as part of the loan, but it expressly stated that such a fee was not a term or condition of the loan imposed by the lender. The debtor’s case is that that assertion is untrue, which renders the agreement unenforceable subject to a discretion in the court to enforce it if it is just to do so. The Facts

[26]On 16 th March 1987 the debtor bought 174 Cadge Road, under so-called ‘right to buy’ provisions in housing legislation, from Norwich Council with the assistance of the Halifax Building Society. On 13 th October 1989 she re-mortgaged the property to the Mornington Building Society (“the Mornington”), which was subsequently known as the Britannia Building Society. She borrowed about £31,000 from the Mornington. She subsequently decided to extend her house to include a dining room and wanted a loan for that purpose. She saw an advertisement in a newspaper offering what appeared to be low cost loans. According to her statement, she subsequently spoke on the telephone to a Mr Swift of Swift Financial Services, who was a broker. She gave certain information to Mr Swift which formed the basis of an application form which appears to bear Mrs McGinn’s signature and to be dated 10 th March 1990.

[27]There is an issue as to whether she in fact signed the form, which was not resolved by the judge, although it is not I think in dispute that the form, which was a broker’s standard form, was filled in by Mr Swift or perhaps by someone else at the brokers. The form described the amount required as £10,000 with repayment over 20 years and the purpose of the loan as “Extension & Refurbishing”. Mrs McGinn’s income was described as £19,000, although she says that it was somewhat lower than that. There was a box on the form entitled “Outgoings”. In that box, against “First Mortgage” was written “Approx” and £30,000 in the “Total Outstandings” column, £366 in the “Total Monthly Payments” column and “Nil” in the “Total Arrears (if any)” column. The box also stated that there was no second mortgage and that there were no HP credit sales. Against “Bank/Personal Loans” was written £1700 in the “Total Outstandings” column and £111.52 in the “Total Monthly Payments” column. The Mornington’s name and address were given, as was the debtor’s account number. There was a box for “Details of Property” in which various details were given, including the date of purchase and £14,000 as the amount paid for the property and £75,000 as its present value. In addition, in answer to a question which asked for the reason for any increase in value if purchased within the last three years, the reason given was “Modernisation and Extensions”.

[28]Although the form may not have been signed by Mrs McGinn, it sets out what in essence she was seeking, namely a loan in order to carry out an extension to and refurbishment of her house. It appears that she had told Mr Swift, or at least given him the impression, that there were no outstanding arrears owed to Mornington because he so stated on the form.

[29]There is a further document which bears the date of 10 th March 1990, which was again apparently signed by Mrs McGinn, although perhaps in fact signed by the brokers, and which was addressed to the Chief Land Registrar and authorised ‘blank’ to inspect the land register. It should be noted that the judge did not hear any oral evidence, although he had before him a number of statements including an affidavit dated 6 th June 1997 and a statement dated 27 th January 2000 each signed by the debtor. He had no evidence from the brokers, which is perhaps not surprising because, although they were acting as the debtor’s brokers, and thus as her agents, they were also receiving a commission from the lender.

[30]The lender is a tertiary or non-status lender and the debtor is said to be a non-status borrower. In paragraph 18 of the judgment in Broadwick, Dyson LJ described the difference between primary, secondary and tertiary lenders. As he put it there, tertiary lenders generally lend to those who are unable to obtain finance from primary or secondary sources. The lenders in that case, like the lender here, were tertiary lenders and indeed were lenders for whom the solicitors Brand Montague regularly acted.

[31]One of the problems in this case is that there was no oral evidence adduced by either side, although there was some affidavit and statement evidence before the judge. It has been necessary to rely to a very considerable extent upon the contemporary documents. It appears that Mr Swift sent the two forms described above to Brand Montague. It is not absolutely clear what happened then, but it appears that Brand Montague carried out what is described on an internal document disclosed by the lender as a “Non status case analysis assessment” in which the lender is described as “GWS”. The analysis was not all made at the same time, but it appears to have been based initially upon what Mr Swift told Brand Montague.

[32]It shows the loan required as £11,900, which was arrived at by taking the £10,000 which the debtor wanted to borrow and what was then the proposed brokers’ fee of £1,900, although it was subsequently reduced to 12 per cent of £11,900, namely £1,428. It appears that from about that time, if not earlier, the person at the brokers who was concerned with this loan was a Mr Peter Ross. There is also a reference on the analysis to “legals” of £350 and to the word “BACKLOAD”, which, like the judge, we were told means that the fees were to be taken out of the money advanced, and accordingly to be repayable with interest as part of the loan, but only at the end of the term of the loan or on earlier redemption. The analysis also shows (among many other things) a commission of £833, which is 7 per cent of £11,900, apparently payable by the lender to the brokers.

[33]At some stage contact was made by either the brokers or Brand Montague with the Mornington because it was asked to fill in a form, which, among other things, sought information about the first mortgage. The form was dated 22 nd March 1990 and included the following information provided by the Mornington. The current total amount outstanding was approximately £32,150, the monthly repayments were £359.29 and the amount outstanding was said to be £359.29, which was also said to be the highest amount of arrears in the past 12 months. I note in passing that there is no evidence when each instalment was due, so that it is not clear from the figures whether an instalment had become due between the time that the debtor gave the broker the information which found its way on to the application form, which it will be recalled stated that the arrears were nil, and 22 nd March. However, in answer to the question whether the account had been maintained to the Mornington’s satisfaction, it was noted that “the borrowers have had to be reminded of their obligations”. No further details were given on that score.

[34]It is reasonably clear that the form was returned to the broker and sent to Brand Montague, probably some time after 31 st March but before 18 th April. In the meantime, on 23 rd March Brand Montague applied to search the land register. There is a manuscript note, which was probably faxed by the brokers to “Eileen” at Brand Montague on 23 rd March, noting that the loan was to be £11,900 at 24 per cent over 20 years and that “our fee” was to be £1,900 and asking her to send the “copy document 58s today”. That was a reference to section 58 of the Act, which requires that a copy of the unexecuted agreement be sent to the debtor with a notice specifying his or her right to withdraw from the prospective agreement.

[35]Thus it was that on 23 rd March Brand Montague wrote both to the broker and to the debtor. Their letter to the debtor was in these terms:

“Your brokers: SWIFT FINANCIAL SERVICES Loan Application for £11,900.00 Our clients: GRANGEWOOD SECURITIES LTD We act for the above named lending company, which has approved your loan application. In accordance with the Consumer Credit Act 1974 we enclose: (a) a copy of the Credit Agreement for each borrower and (b) a copy of the Legal Charge. These copies are not capable of signature and are to be retained by yourselves. We will be sending in eight days from today the signable copies. If you have any queries you should consult SWIFT FINANCIAL SERVICES. NB. DO NOT SIGN OR RETURN THESE COPIES.”

There is no reason to think that a draft credit agreement and charge were not enclosed with that letter. There is a document in the bundle which bears the date of 24 th March 1990, which is in manuscript and is apparently signed by the debtor and which states that she would like to confirm that she was a self employed insurance and investment sales consultant earning £19,000 a year and that she had been doing so for the last nine years. She denies that she wrote or signed the letter.

[36]On 31 st March Brand Montague again wrote to the debtor. In their letter they referred to their letter of 23 rd March and continued:

“We now enclose the following documents which are required to complete your loan. As soon as you return these documents we can complete the loan. If you have any problems in completing the forms your broker SWIFT FINANCIAL SERVICES can help and even witness the document if you so wish. Their telephone number is …. 1. CREDIT AGREEMENT Would you each please sign this document in the box on page 2. Don’t forget to date it as well. 2. Extra copies of the unsigned Credit Agreement for you to keep. 3. CERTIFICATION AND CONFIRMATION LETTER TO BE FULLY COMPLETED BY ALL BORROWERS. 4. LEGAL CHARGE This must be signed ….”

There followed detailed instructions as to the signing of the charge and a further reference to the fact that the debtor could obtain further assistance from her brokers.

[37]The enclosed certification and certification letter, a copy of which had not been sent with the earlier letter, expressly provided that Mrs McGinn confirmed and certified, so far as relevant, as follows:

“2. that once my first mortgage arrears (if any) have been paid, I will be able to afford the 240 monthly repayments of £287.58 in addition to my first mortgage repayments of £366.00 per month. … 5. that I have requested you as a matter of convenience to discharge my Brokers (SWIFT FINANCIAL SERVICES) fee of £1,428.00 on completion of my loan advance from the Lender. I am aware that this is NOT a condition the Lender has imposed and that I can withdraw my authority by writing to you at any time before completion.”

It may be noted that the letter refers to first mortgage repayments of £366 per month. That figure must have come from the application form and not from the information provided by the Mornington because the Mornington put the monthly payments at £359.29. It may be also noted that, although the letter states that the debtor had requested the lender to discharge the brokers’ fee of £1,428 on completion, there is no evidence that she had in fact done so, unless it was by signing the confirmation letter and/or the credit agreement.

[38]Whether that is so or not, Mrs McGinn in fact signed the letter, the agreement and the charge and dated them 2 nd April 1990. The agreement included the following:

“D. Finance and related particulars. i) Amount of credit advanced: £10,472.00 ii) Current interest rate 2.48% per month equivalent to 34.2% per year (variable as specified below). iii) Total amount of the loan including broker’s fee is £11,900.00 repayable by 240 monthly instalments of £287.58. Other charges: Legal costs and disbursements £350. The APR is based on a total charge for credit which includes your broker’s fee of £1428.00. Such fee is not a term or condition of the loan imposed by the lender.”

The APR was stated to be 39.9%.

[39]The three documents, including the charge, which was witnessed by Peter Ross of the brokers, were sent back to Brand Montague. The lender, however decided not to proceed and did not sign the documents, with the result that no agreement came into existence on the terms of the documents signed by the debtor on 2 nd April. The reason why the lender decided not to proceed on those terms seems from a number of documents to have been as follows.

[40]On 9 th April the Mornington wrote to the brokers in response to an enquiry, apparently made by the brokers, as to the sum which would be required to redeem the first mortgage, saying that the amount required to redeem the mortgage during April would be £33,746.08. Also the lender had commissioned a valuation report, with the result that a valuer made a report dated 4 th April valuing the property at £67,000 with vacant possession on the open market but £60,000 on a forced sale basis. The surveyor stated his understanding of the purpose of the loan in these terms:

“We believe the loan is required to complete the single story extension to the front of the building internally. We have not made a retention in this respect but the applicant should give an undertaking to complete the ceilings and wall plastering.”

[41]At some stage between 31 st March and 18 th April the lender decided to reduce the amount it was willing to lend. The total was reduced from £11,900 to £8,350. The changes can be seen from what is called an “input sheet”, which seems to have originally been filled out on 23 rd March and altered on one or more occasions on or before 18 th April. The original figures on the sheet were those used in Brand Montague’s letters of 23 rd and 31 st March. The new figures were used in a further letter to the debtor dated 18 th April, which was in the same terms as the letter of 23 rd March except that the “Loan Application” was now said to be £8,350. This was a curious letter because there is no other evidence that Mrs McGinn applied for a loan in that amount. As I see it, Brand Montague simply prepared the documents on the basis of the revised figure of £8,350 which had been arrived at either by Brand Montague themselves or by the lender. It may be that, as the internal documents suggest, the reason for the reduction was the valuation of the property and the redemption figure of £33,746.08 in the letter from the Mornington dated 9 th April 1990. However that may be, the letter of 18 th April to the debtor enclosed advance copies of the proposed credit agreement and charge as before. Also on 18 th April, Brand Montague wrote both to the brokers and to the lender.

[42]On 26 th April Brand Montague again wrote to the debtor, much as they had on 31 st March, enclosing signable copies of the confirmation and certification letter, the credit agreement and the charge. Mrs McGinn signed all three documents on 27 th April. The charge shows that her signature on that document was witnessed by Mr Peter Ross. The confirmation and certification letter signed on this occasion by Mrs McGinn was in the same form as the last time, except that paragraphs 2 and 5 now confirmed and certified, as far as relevant, as follows:

“2. that once my first mortgage arrears (if any) have been paid, I will be able to afford the 240 monthly repayments of £201.79 in addition to my first mortgage repayments of £366.00 per month. … 5. that I have requested you as a matter of convenience to discharge my Brokers (SWIFT FINANCIAL SERVICES) fee of £1,002.00 on completion of my loan advance from the Lender. I am aware that this is NOT a condition the Lender has imposed and that I can withdraw my authority by writing to you at any time before completion.”

Both those paragraphs are somewhat curious. Paragraph 2 is curious because it still referred to first mortgage repayments of £366 a month, whereas by this time Brand Montague had seen a copy of the Mornington questionnaire, which stated that they were £359.29 per month. Paragraph 5 reflects a reduction in the brokers’ fee to £1,002, although Mrs McGinn says in her statement that she at no stage expressly agreed that figure, or indeed, as I understand it, any figure for brokers’ fees.

[43]The credit agreement included the following:

“D. Finance and related particulars. i) Amount of credit advanced: £7,348.00 ii) Current interest rate 2.48% per month equivalent to 34.2% per year (variable as specified below). iii) Total amount of the loan including broker’s fee is £8,350.00 repayable by 240 monthly instalments of £201.79. Other charges: Legal costs and disbursements £250. The APR is based on a total charge for credit which includes your broker’s fee of £1002.00. Such fee is not a term or condition of the loan imposed by the lender. E. The legal charges shall become due upon completion of the loan. The lender may at its discretion defer collection of the said charges (the Borrower still having the right to pay them) but will require payment no later than the date of settlement of the loan.”

The above part of the agreement is in a different format from the remainder and also states the APR as 39.9%, which seems to have been an error because it is the same figure as was stated in the earlier agreement which the debtor signed. On the basis on which the agreement was drawn up, namely that the building society arrears of £359.29 were not one of the “other charges” the APR should have been stated as 38.6%. We were told that if the arrears were treated as a charge, the appropriate figure would be 40.9%.

[44]The agreement of course contained a number of other provisions, including a power conferred upon the lender to increase, but not to reduce, the interest rate in certain circumstances which are not relevant to this appeal. It also contained detailed provisions as to payment of the instalments and as to the powers of the lender in the event of default on the part of the debtor. For example, the agreement provided: “Repayment of the Loan and interest is to be made by monthly instalments. The amount of each monthly instalment will be the amount mentioned above except that, if the interest rate has been varied, …. . TERMS OF AGREEMENT 2. You must pay to us your Total Indebtedness by consecutive monthly installments … . Your total Indebtedness will be the amount of the Loan and the total of all interest payable from time to time under this Agreement. 3. Interest will be charged on the balance of the Loan outstanding at the per cent shown overleaf or at such other rate as we may from time to time notify to you … .”.

[45]By clause 13, the agreement was to become binding when signed on behalf of the lender. It further contained the following clause, which is relevant to the building society arrears point:

“Accounts to be paid off: (a) Where this Credit Agreement is secured by a first mortgage, all existing mortgages must be discharged on or before completion of the loan. (b) Where the Credit Agreement is secured by a second mortgage, any first mortgage arrears, second mortgage and subsequent charges must be discharged on or before completion of the loan. After such payments, the balance of the loan will be paid to the Borrower(s) or as the Borrower(s) shall direct.”

[46]The charge also contained detailed provisions including a number of covenants including a covenant:

“To comply with the terms of any prior charge … . If the Borrower fails so to do the lender may do so and cost of so doing will form part of the moneys charged hereunder to which interest may be added by instalments at the rate contained in any agreements between the parties and referred to as the default APR.”

[47]The figures in the credit agreement were arrived at in this way. The “amount of credit advanced” of £7,348 was arrived at by deducting the brokers’ fee of £1,002 from the “total amount of loan including broker’s fee”, namely £8,350. The “legal costs and disbursements” of £250 was, as I understand it, simply a sum chosen by Brand Montague or the lender. In the earlier agreement it had been £350 and appears to have been reduced because the amount of the loan was reduced.

[48]On 2 nd May Brand Montague signed the contractual documents on behalf of the lender. They also wrote to the debtor enclosing signed copies of the credit agreement and charge, and said that “in accordance with your instructions” they had “disbursed your advance of £8,350” by paying the Mornington £359.29 and the brokers £1,002 and that they enclosed the balance of £6,988.71. The documents show that the Mornington received the sum of £359.29 on 4 th May and that the brokers’ commission paid by the lender was reduced from the original figure of £833 to £584, which is about 7 per cent of £8,350.

[49]The letter of 2 nd May also included the following:

“The legal costs and disbursements of £250 referred to in the credit agreement are now due and payable by you to the lender. If you wish to defer payment of these legal costs and disbursements you may do so provided payment is made no later than the date of final settlement of the loan. In this event interest will accrue on the said legal costs and disbursements until payment is made. The rate at which interest will accrue is the current rate of interest specified in the credit agreement.”

The debtor did not pay the £250 in respect of legal costs. Assuming that the last part of that letter had legal effect, the result would be that interest would accrue on that sum until the loan was discharged. It is common ground that, if the principal sum of £250 and interest accrued at the contractual rate was paid at the expiry of the 20 years of the loan, the amount due would be very large. I am not sure whether there is a dispute about the precise figure, but according to Mr Hodgkinson it is £89,340. It is, to my mind, a somewhat disturbing feature of the case that that fact was not spelled out to Mrs McGinn in the letter of 2 nd May.

[50]As already stated, the debtor subsequently had difficulty in maintaining the payments under the agreement, with the result that the lender took proceedings in 1991 and the debtor herself took proceedings in 1997 as described above. We turn to the three issues identified above. Building Society Arrears

[51]Mr Hodgkinson submits on behalf of the debtor that the sum of £359.29 was part of the true cost to the debtor of the credit, that it was therefore one of the “other charges” referred to in regulation 4(2) of the TCC Regulations and that it should therefore have been treated as part of the total charge for credit and deducted from the amount of the credit stated in the agreement, namely £7,348. He relies upon the reasoning of this court in Watchtower .

[52]In Watchtower the debtors completed an application form for a loan in which they said that they required a loan of £11,300 and expressly stated that the purpose of the loan was “to clear arrears” on a first mortgage, which they said amounted to £1,500. The credit agreement contained a similar clause to that in the instant case requiring any first mortgage arrears to be paid off on or before completion of the loan: see per Peter Gibson LJ at paragraph 3. In the event the lender paid £1,766.89 to the first mortgagee to clear the arrears. The court held that that sum was not an “other charge” and that it was not part of the true cost of the credit. It was rather part of the credit itself.

[53]Peter Gibson LJ stressed on the one hand (in paragraph 39) that an item financed by the lender may be part of the total charge for credit, in which case it must be treated as not forming part of the credit, and on the other hand (in paragraphs 42 to 45 by reference to Huntpast ) that the mere fact that a payment is required to be made under the agreement does not make it part of the total charge for credit. He recognised the difficulty in deciding where to draw the line on the facts of a particular case.

[54]Mr Wulwik relies upon extracts from paragraphs 24.144 and 29.148 of Goode on Consumer Credit Law and Practice which were quoted with approval by Peter Gibson LJ in paragraphs 39 and 41 respectively. In particular in paragraph 24.144 Goode said:

“Section 9(4) reflects the fundamental notion that credit involves financial assistance to the debtor, not charges and expenses he incurs.”

In paragraph 29.148 Goode said with regard to “other charges” that by ‘other’ is meant charges other than interest such as a commitment fee, a documentation fee or a redemption fee. Goode added:

“‘Charges’ is not defined, but in the context of the [TCC Regulations] would appear to denote as its natural meaning payments exacted for the provision of services or the grant or use of facilities related to the subject matter of the credit agreement, as opposed to the purchase price of land or goods under that agreement or amounts under some other agreement forming part of the transaction which relate solely to what is to be provided under that other agreement and are unrelated to what is being provided under the credit agreement.”

Goode then gave a number of examples such as survey fees, legal costs, insurance premiums and the like and continued:

“On the other hand, where the debtor buys goods on credit and borrows money to be applied to a particular purchase, it is obvious that the purchase price does not constitute ‘charges’ but represents the amount of the credit itself, for to treat the purchase price as forming part of the total charge for credit would lead to the absurdity of a credit agreement in which no credit is provided at all!”

[55]Mr Wulwik submits that those passages are significant because they support the proposition that a sum payable under the agreement is not part of the total charge for credit if it in truth involves financial assistance to the debtor. Thus he submits with force that if money is provided by the lender which is used (or to be used) for the purpose of discharging a pre-existing liability of the debtor to another lender it is properly to be regarded as part of the credit and not part of the cost of the credit. Moreover he submits that such a payment is quite different from the type of ‘charge’ identified by Goode or indeed in the Encyclopaedia of Consumer Credit Law to which Peter Gibson LJ refers in paragraphs 49 and 50 of Watchtower .

[56]While I see the force of those submissions, I have reached the conclusion that they cannot be accepted as applicable to the facts of every case. The question is what was the true cost of the credit advanced in the circumstances of the particular case. Thus in paragraph 52 of Watchtower Peter Gibson LJ said: In the absence of a statutory definition of a charge, I cannot pretend that it will always be easy to draw the line between an item forming part of the total charge for credit and an item forming part of the credit itself when the borrowing is for expenditure or a purpose required or authorised by the credit agreement. The court must consider all the circumstances including the documents relating to the agreement and may well have to ascertain objectively the purpose of the borrowing. For the reasons already given I reject Mr Hodgkinson’s submission that it is only permissible to look at the contractual documents. The purpose of the court’s consideration is to arrive at what in reality is the true cost to the debtor of the credit provided.”

[57]Peter Gibson LJ then considered the facts in Watchtower and concluded that the objective purpose of the loan at least included the payment of the arrears and that the payment of the arrears did not fall within the cost of the credit but was part of the credit: see paragraphs 54 and 55. My own conclusions were to the same effect: see paragraphs 63 to 65.

[58]It seems to me to be clear from the reasoning in Watchtower that it is not sufficient to say that it follows from the fact that the credit agreement requires payment of arrears to a first mortgagee that those arrears are not part of the total charge for credit. Thus it was not held in Watchtower that the mere fact that the credit agreement required repayment of the arrears under the first mortgage led to the conclusion either that such repayment was a purpose of the credit or that the cost of such repayment was part of the credit and not part of the true cost of the credit. It was held that all depends on the circumstances. On the facts of Watchtower , it was plain that the clearing of the arrears was in a real sense part of the credit and not part of the cost of the credit. The facts here are, to my mind, significantly different.

[59]In paragraph 29.148 of an issue of Goode published in December 2001 (and thus after Watchtower ) the following sentence appears after the second quotation from that paragraph set out above:

“Similarly, where an advance is made to discharge an existing indebtedness of the borrower under a previous transaction, the advance does not constitute part of the total charge for credit but is itself the credit and as a refinancing loan constitutes debtor-creditor credit within [the Act], ss 11(1)(c) and 13(b).”

There is a footnote after “but is itself the credit” referring to Watchtower .

[60]It is not perhaps absolutely clear what is meant by “where an advance is made to discharge an existing indebtedness”. However, in order to be consistent with the reasoning in Watchtower , it must I think mean where an advance is made one of the purposes of which is to discharge an existing indebtedness. In such cases, which are likely to be the vast majority of cases, the advance will be a refinancing of an existing indebtedness and will be a “restricted-use credit agreement” under section 11(1)(c) and 13(b) of the Act. However, the mere fact that the lender requires one instalment of a previous credit agreement to be paid out of the loan does not, in my opinion, lead inevitably to the conclusion that the amount of that instalment is not part of the true cost of the credit or the total charge for the credit and thus part of the credit.

[61]It seems to me that on the facts of this case the sum of £359.29 was part of the cost of the credit to the debtor and not part of the credit itself. It was no part of Mrs McGinn’s purpose that the sum of £359.29 should be borrowed in order to clear the arrears under her mortgage with the Mornington. The sole purpose of the loan was to borrow money in order to extend and refurbish her house. The most that was outstanding under the first mortgage was one instalment of £359.29 and it is far from clear when that sum became due or for how long it had remained outstanding. Indeed it appears from the application form apparently filled in by Mr Swift that she had told him that there were no moneys outstanding.

[62]The reason why the sum of £359.29 was deducted from the amount paid to the debtor by the lender was simply that the Mornington had told Brand Montague that there were arrears of £359.29 owing to it and Brand Montague or the lender decided to discharge them. The sum of £359.29 was treated in the same way as the broker’s fee of £1,002. Both sums were deducted from the amount paid to the debtor. In my judgment, on the facts here, it is artificial to treat the broker’s fee as part of the cost of the credit and thus part of the total charge for credit and to treat the sum paid to the Mornington differently. They were both part of the cost of this credit, although both were part of the sums advanced to the debtor.

[63]As far as I can see from the documents, the first time that Mrs McGinn became aware that the lender was going to deduct £359.29 from the loan and pay it to the Mornington was after the loan had been completed and when she received the letter of 2 nd May 1990 which stated that Brand Montague had disbursed that sum “in accordance with your instructions”. There is no evidence of any such instructions except the terms of the credit agreement itself, which may be said to amount to such instructions because of the provision that after payment of any first mortgage arrears “the balance of the loan will be paid” to the debtor.

[64]In all these circumstances I have reached the conclusion that, while the reasoning in Watchtower led to the conclusion that the cost of discharging the arrears there was part of the credit and not part of the total charge for credit because one of the purposes of the loan was to discharge the arrears, that reasoning leads to the conclusion that this case falls on the other side of the line. The discharge of the £359.29 was not part of the objective purpose of the loan but rather part of the true cost of it. In these circumstances it was one of the “other charges” referred to in regulation 4(b) of the TCC Regulations and was part of the total charge for credit, provided only that it was a charge “payable under the transaction” .

[65]By regulation 1(2) “transaction” means “an agreement” and “agreement” means “a consumer credit agreement”. Since the agreement here was a “consumer credit agreement” it follows that, if the payment of the arrears was a charge, it was a charge “payable under the transaction” if it was payable under the credit agreement. The question is therefore whether the sum paid to the Mornington was a sum payable under the credit agreement. In my judgment the answer is plainly yes.

[66]The agreement expressly provides that any first mortgage arrears “must be discharged on or before completion of the loan”. In these circumstances when the arrears of £359.59 were paid to the Mornington by Brand Montague (it is said on behalf of the debtor), the money was being paid under the agreement. It is true that, as the judge held, the money was also being paid under the first mortgage but, as I see it, that does not mean that it was not at the same time being paid under the agreement between the debtor and the lender.

[67]I agree with the judge that “under the transaction” is not to be equated with “required by the transaction”, as is clear from Humberclyde Finance Ltd v Thompson

[1997] CCLR 23

. However, it seems to me that, where, as here, the payment is required by the credit agreement because of the obligation to discharge arrears on or before completion of the loan, it is natural to hold that a payment discharging that obligation is made under the agreement, and thus “under the transaction” within the meaning of regulation 4(b). As I see it, the arrears were payable under the transaction in just the same way as the legal fees and the fire insurance premium were payable under the transaction in Huntpast .

[68]In these circumstances I have reached a different conclusion from the judge on this point. I accept of course that the first mortgage is a transaction distinct from the loan with which we are concerned, that it pre-dates the loan, and, as the judge put it, that the debtor was under a liability to the first mortgagee that was wholly unconnected with the loan and would have continued whether or not the loan was made. But the question is whether the arrears were “payable under the transaction”, that is under the credit agreement. In my opinion they were. The payment was made by Brand Montague in discharge of the debtor’s liability under the agreement to discharge a liability under the first mortgage.

[69]It follows that I have reached a different conclusion from the judge on the building society arrears point. While I recognise that this is a difficult area of the law, which should be much simplified, I would hold that the obligation to discharge the arrears was an obligation to incur a charge payable under the transaction within regulation 4(b) and was part of the true cost of the credit and thus not part of the credit, by reason of section 9(4) of the Act. The agreement should therefore have stated the amount of credit as £6,988.71 and not £7,348.00.

[70]Although section 127(3) of the Act may be said to work harshly against a lender, its purpose is to ensure that the amount of the credit is correctly stated in a document signed by the debtor, which involves stating the amount of the loan less such part of the loan advance as falls within the total charge for credit. This may be important in a number of respects, including the determination of the question whether the credit exceeds the relevant limit under section 8 of the Act and of the appropriate APR. For the reasons which I have given I would hold that there was here no document signed by the debtor which contains a relevant prescribed term of the credit, namely the amount of the credit and that it follows that, by reason of section 127(3) of the Act, the court has no power to make an enforcement order against the debtor under section 65(1).

[71]I would only add this. Mr Wulwik submits that very many credit agreements of this type provide for repayment of arrears under first mortgages and that the effect of a decision in the debtor’s favour on this point will or may allow debtors unjustly to avoid repaying money which on any view was lent to them. While I recognise that there may be other cases like this on the facts, it seems to me that in the vast majority of cases an application of the approach in Watchtower will lead to the conclusion that one of the purposes of the loan was to discharge arrears (as in Watchtower itself) and that in such circumstances the payment of the arrears will not be part of the true cost of the credit but part of the credit itself. All will, however, depend on the circumstances.

[72]It follows from the conclusion reached above that it is not necessary to consider various alternative ways in which Mr Hodgkinson has put this point. It is not, for example, necessary or desirable to consider the argument (upon which much time was spent before the judge and in the written material before us) that the relevant transaction here was a linked transaction within the meaning of regulation 1(2) of the TCC Regulations, namely the arrangement for the payment of the arrears. Such an argument would only be relevant if it were held that the requirement to pay the arrears was a charge within the meaning of regulation 4(b) but that it was not payable under the credit agreement. In these circumstances I say nothing further about the definition of a linked transaction.

[73]It also follows from the above that I would allow the appeal on the building society arrears point, which means that neither the legal fees point nor the broker’s fee point arises for decision. I shall therefore refer to them only very briefly. Legal Fees and Expenses

[74]As with so many other points which arise under the Act, this is a complicated issue which has been put in a number of different ways as the case has progressed. The essence of the submission is that the interest charge which the lender imposed or purported to impose on the payment of the legal fees should have been stated in the credit agreement and not hidden from the debtor as was done here.

[75]For my part, I have great sympathy with the thought underlying that submission. It appears to me to be little short of scandalous that a lender should set up a scheme which it intended should permit it to make substantial interest charges payable by the debtor without being required to make the position absolutely clear. As the judge recognised, the reference to backloading in the internal documents makes it clear that the lender always intended to exercise its discretion in the credit agreement to defer the debtor’s obligation to pay the legal fees on completion, but only on terms that the debtor paid interest at the contractual rate.

[76]Yet, there is no reference to interest in the credit agreement. Before the judge it was argued on behalf of the lender that interest was payable under the credit agreement on any part of the legal fees not paid on completion. The judge rejected that submission on the basis that the agreement provides that interest would be charged on “the balance of the loan outstanding”, and that, since the loan is described as £8,350 including the broker’s fee, it did not include legal fees. He further held that there was no basis upon which a term could be implied into the credit agreement entitling the lender to charge interest if it deferred the debtor’s obligation to pay legal fees. Mr Wulwik does not challenge those conclusions in this appeal.

[77]The lender did not rely before the judge on the attempt in the letter of 2 nd May to charge interest at the contractual rate on the ground that it was of no legal effect because it was a post-contractual document containing an offer which was not accepted by the debtor. It appears that the judge accepted that contractual analysis. He also observed that, since Mr Wulwik disclaimed reliance upon the letter, Mr Hodgkinson’s submission that the agreement was not properly executed because there was no document signed by the debtor which set out “a term stating the rate of interest on the credit to be provided under the agreement” within the meaning of paragraph 4 of Schedule 6 of the 1983 Regulations fell to the ground. The judge also rejected the submission that the letter and its effects amounted to a “linked transaction”. Mr Hodgkinson challenges those conclusions on this appeal.

[78]Mr Hodgkinson also seeks permission to rely upon a further paragraph in column 2 of Schedule 6, which sets out the prescribed terms in the case of “consumer credit agreements”, of which this is one. Paragraph 5 column 2 provides:

“A term stating how the debtor is to discharge his obligation 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.”

No reliance was placed upon that provision before the judge, but application for permission to re-amend the Particulars of Claim in order to do so was made to the judge on 6 th October 2000. That application was refused on the understandable basis that enough is enough and that, as the judge put it, some effort must be made to draw a line of finality under the hearing of the preliminary issues.

[79]Mr Hodgkinson seeks permission to rely upon that paragraph in this appeal. For my part I would if necessary permit him to do so, not on the ground that there is any basis for interfering with the exercise of the judge’s discretion, but on the ground that the point raises what is essentially a question of law arising out of the same facts as we are already considering and no prejudice would be caused to the lender by allowing the point to be taken.

[80]The arguments raised with regard to the legal fees are by no means straightforward and, since it is not necessary to resolve them in order to determine this appeal, I would only say this. Assuming the judge’s view of the construction of the credit agreement and the effect of the letter to be correct, there seems to me to be force in the submission that the effect of the last few words of paragraph 5 column 2 should be construed so as to require that a lender who proposes to defer a debtor’s obligation to make a payment on completion of the loan only on terms that interest is paid at the contract rate should specifically so state in the credit agreement.

[81]Mr Wulwik submits that the non-contractual attempt to charge interest in the letter was not the exercise of “any power in the creditor to vary what is payable”. I see the force of that submission if the words are construed literally, but it seems to me that the words should be construed having regard to the purpose of the Act and the Regulations, which is to protect consumers from unwittingly being charged monies without appreciating the true position.

[82]On the facts here, from the outset the lender had every intention of charging interest if legal fees were not paid. It intended to write to the debtor after the agreement was signed stating that it was deferring the obligation to pay, but only on terms that interest at the contractual rate was paid. I note that no calculation of the rate was set out in the letter. It no doubt seemed likely that the debtor would simply not pay the legal fees without giving thought to the potential future liability for interest. In these circumstances it seems to me that fair dealing required that, if the lender was to retain the power to defer the obligation to pay the legal fees on terms that interest would be charged at the contractual (or any other) rate, that fact should have been stated in the credit agreement signed by the debtor.

[83]In these circumstances, as at present advised, I would construe the expression “any power of the creditor to vary what is payable” as extending to any power which the lender intends to retain for itself to vary what is payable. Thus here, it is clear that the lender intended to retain the power to defer the obligation to pay the legal fees on terms that interest would be paid at the contractual rate . It seems to me that that fact should have been stated in a document signed by the debtor. So should the amount of such payments.

[84]I would only add two points on the legal fees point. The first is that it was submitted after the close of the argument that the reasoning in Broadwick leads to a different conclusion. However, as at present advised, I do not agree. The views which I have expressed relate to the expression “any power of the creditor to vary what is payable” in paragraph 5 of column 2 of Schedule 6 of the TCC Regulations, with which Broadwick was not concerned.

[85]The second point is this. Since it is not necessary finally to determine these questions in order to determine this appeal, those represent my present views. I express them because the lender’s approach to this part of the case seems to me to be far from satisfactory and might have led the debtor to pay substantial sums by way of interest without appreciating what her liability might be. Broker’s Fee

[86]In the light of the conclusions reached above, this point does not arise. Suffice to say that, having heard Mr Hodgkinson on behalf of the debtor we did not call upon Mr Wulwik with regard to it. The judge held that on the evidence before the court he could not determine this point in favour of the debtor. I agree, but need say no more about it. Other Issues

[87]The judge considered a host of other issues in a careful and painstaking judgment to which I would like to pay tribute. As indicated earlier, Mr Hodgkinson sought to argue a number of further issues before us in addition to those upon which permission to appeal was given. However, in the light of my conclusion that the appeal should be allowed on the building society arrears point, as I see it, subject to questions of costs, none of them arises for decision. As to costs, we indicated at the conclusion of the hearing that we would hear argument on costs after reaching our conclusion on the main points in the usual way.

[88]I would like to end as I began, with a plea for simplification of what has become an area of the law of extraordinary complexity, even though it is intended to protect the ordinary consumer.

Lady Justice Hale:

[89]I agree.

Lord Justice Kennedy:

[90]I also agree.

Order

As minuted. (Order does not form part of the approved judgment)