Donna Breeze & Ors v TSB Bank PLC

A transferee mortgage lender may continue applying the original standard variable rate under the transferred mortgage conditions. A transfer does not automatically require adoption of the transferee’s rate for other mortgage customers. The contractual terms must be construed as a whole, in their commercial context, and contra proferentem principles apply only where genuine ambiguity remains.

Under section 140A(5) of the Consumer Credit Act 1974, a regulated mortgage cannot itself be the subject of an order under section 140B. However, where it is a related agreement to another credit agreement, its terms and conduct may be considered in assessing unfairness and loss. The court may grant redress affecting the credit agreement, but cannot order repayment of mortgage sums or alter the mortgage itself.

The claim involved approximately 392 former Northern Rock mortgage customers whose mortgages had been transferred to TSB and operated under its Whistletree brand. The claimants sought, among other relief, declarations and repayment relating to the interest rate charged, recognition of an implied term governing rate-setting discretion, and relief under the unfair-relationship provisions of the Consumer Credit Act 1974.

The court determined three preliminary issues: whether charging the Whistletree SVR breached the express mortgage terms; whether an implied term regulated TSB’s discretion to set or vary rates; and whether section 140A(5) prevented relief concerning a regulated mortgage that was the credit agreement or a related agreement.

1. Express terms. The Whistletree SVR was the continuation of the original Northern Rock SVR, not a new rate. The contractual definition of SVR referred to interest charged under the General Conditions, rather than rates applied by TSB under different mortgage contracts. Condition 19.1 gave the transferee separate powers: it could set the interest rate and could, but need not, substitute one of its own standard variable rates. TSB therefore did not breach the express terms by continuing the original rate and varying it under Condition 7. [2024] EWHC 2427 (Ch) [120]-[143].
2. Implied term. The parties agreed, and the court approved, an implied term that the discretion to vary interest rates must not be exercised dishonestly, for an improper purpose, capriciously, arbitrarily, or in a way in which no reasonable mortgagee acting reasonably would act. Breach of that term was reserved for a later stage. [2024] EWHC 2427 (Ch) [17]-[20], [260]-[262].
3. Section 140A(5). The provision did not prevent the court considering a regulated mortgage as a related agreement when deciding whether the relationship arising from a Together Loan, alone or taken with the mortgage, was unfair. Nor did it prevent the court assessing loss arising from the mortgage when determining redress under section 140B, provided the order itself operated on the Together Loan or the relationship rather than directly on the mortgage. [2024] EWHC 2427 (Ch) [223]-[250], [266](i)-(ii).
4. An order repaying sums paid under the regulated mortgage, reducing future mortgage liabilities, or otherwise altering the mortgage would be an order made in connection with the exempt mortgage and was prohibited by section 140A(5). The claimants could receive full compensation for unfairness through remedies directed to the Together Loan, but not mortgage-specific relief. [2024] EWHC 2427 (Ch) [251]-[257], [266](iii).
5. The preliminary issues were answered accordingly. A consequentials hearing was directed to settle the order and costs.