NRAM Plc v McAdam & Anor
2014
COMMERCIAL COURT
United Kingdom
CORAM
- MR JUSTICE BURTON
Areas of Law
- Contract Law
- Commercial Law
- Finance Law
2014
COMMERCIAL COURT
United Kingdom
CORAM
AI Generated Summary
Northern Rock PLC, after being nationalized, dealt with historic unsecured loans documented uniformly regardless of their regulated status under the Consumer Credit Act 1974. A court found that such documentation implied the inclusion of rights and remedies from the 1974 Act even for unregulated loans. The Claimant breached its obligations by not indemnifying the Defendants for this non-compliance. This case clarifies the obligations of lenders using static documentation for mixed agreements.
Judgment
Mr Justice Burton :
The Claimant, previously known as Northern Rock PLC, is the successor company to which Northern Rock Building Society transferred its business in 1997. It was nationalised in February 2008 and is indirectly wholly owned by HM Treasury. Since nationalisation it has not undertaken any new lending, but holds a substantial book of historic residential mortgages and unsecured lending, dating back before nationalisation. Although there has been more than one change of name, and change of ownership and entity, I shall refer throughout this judgment to the Claimant.
Between 1999 and March 2008 the Claimant entered into a large number of unsecured credit agreements, as part of a product called the ‘Together Mortgage’. This allowed borrowers to borrow up to 95% of the value of their home on a secured basis, and in addition to take out a fixed sum unsecured loan of up to 30% of the value of their home, capped at £30,000. It was an advantageous feature of the product that, for so long as the secured loan remained outstanding, interest on the unsecured loan was charged at the same rate as in respect of the secured loan.
The Defendants are two of those who borrowed on such basis, their unsecured loan being the maximum of £30,000. This action is brought against them effectively to enable the Court to resolve a dispute between the Claimant and some 41,000 other borrowers who stand in the same position as the Defendants; their legal costs are being indemnified by the Claimant. I have been greatly assisted by counsel, and am conscious that where, for ease, I refer to the leading counsel on each side, much assistance has been given by their team.
The dispute arises in this way. Prior to 6 April 2008, by virtue of s.8(2) of the Consumer Credit Act 1974 (“ the 1974 Act ”) a consumer credit agreement was regulated if the amount of credit provided under it did not exceed £25,000. Thus a regulated agreement was one where the principal loan was £25,000 or less. There were detailed provisions relating to regulated agreements, both in the 1974 Act itself and by virtue of a number of regulations, including variously the Consumer Credit (Agreements) Regulations 1983 (“the Agreements Regulations”), the Consumer Credit (Cancellation Notices and Copies of Documents) Regulations 1983 and the Consumer Credit (Disclosure of Information) Regulations 2004 . There were thus substantial rights and remedies available and protections given in respect of a regulat