Mason & Anor v Godiva Mortgages Ltd

A mortgage lender does not ordinarily owe a borrower a tortious or implied contractual duty to assess or advise on the suitability or prudence of a mortgage where an intermediary provides the advice and the lender does not assume that responsibility. A lender may, however, owe actionable duties under the Financial Services and Markets Act 2000 for breach of applicable MCOB rules. Those rules required the lender to take account of ability to repay, use self-certification only where appropriate and without reasonable grounds for doubt, and operate a written lending policy. The lender was entitled to rely on information confirmed by an authorised intermediary where reliance was reasonable. No breach was established on the evidence.

The claimants entered into a self-certified, interest-only regulated mortgage with the defendant in February 2008. They alleged that the lender should have detected that income figures entered by their intermediary were false and should not have advanced the loan.

They claimed damages for breach of a common-law duty of care, an implied contractual term, and the statutory right of action under section 150(1) of the Financial Services and Markets Act 2000 for breach of MCOB rules. The defendant denied liability and counterclaimed for the mortgage balance and possession. The central issues were whether any advisory duty arose, whether the lender complied with MCOB, and whether the claimed losses flowed from any breach.

1. Common-law and contractual duties. The claim that the lender owed a duty to assess and advise on the mortgage’s suitability failed. The lender had not offered such advice. Its offer stated that the intermediary had recommended the mortgage, and the claimants confirmed that they had received no advice from the lender. Any such implied term would also have conflicted with the express contractual allocation of responsibility. The principles in Williams and Glyn’s Bank v Barnes, as qualified by Bankers Trust International v PT Dharmala Sakti Sejahtera, applied.
2. MCOB duties. The lender was required to show that it had taken account of ability to repay, to use self-certification only where appropriate having regard to the customer’s interests and without reasonable grounds to doubt the information, and to operate a written policy addressing ability to repay. It was entitled to rely on information supplied by an authorised intermediary where that reliance was reasonable.
3. The lender complied with those duties. The application, the signed declaration, the intermediary’s checklist, the previous mortgage history, the valuation, the stated repayment resources and the lender’s underwriting policy showed that ability to repay had been considered. The income figures were not, in themselves, so implausible as to require further investigation. The lender was not required to assess in detail whether the claimants’ repayment plans were prudent or realistic where it was not giving advice and an authorised intermediary was advising them.
4. The claim was dismissed. Even if a breach had been established, the claimed losses would not have flowed from it and would not have been recoverable in the pleaded form. A copy of the judgment was directed to be sent to the Financial Conduct Authority. Further submissions were required before determination of the counterclaim.