Donna Breeze & Ors v TSB Bank PLC

A transferee of standard-form mortgage contracts may continue to use the inherited standard variable mortgage rate and vary it under the contractual power. An optional power to adopt one of the transferee’s own rates does not restrict that power. Consumer-favourable interpretive rules do not alter clear contractual language.

Under section 140A(5) of the Consumer Credit Act 1974, the court cannot make an order affecting a regulated mortgage contract where the order is connected with that contract. This remains so where another loan is treated as the credit agreement and the mortgage as a related agreement.

The 392 Claimants held residential mortgages originally provided by Northern Rock plc and transferred to TSB in 2016. They alleged that TSB had breached the mortgage contracts by charging the Whistletree standard variable rate rather than TSB’s standard mortgage variable rate. Some Claimants also sought relief under the unfair relationship provisions of the Consumer Credit Act 1974 in respect of linked mortgage and unsecured loan arrangements.

The High Court determined the contractual interpretation issue and the statutory remedy issue in TSB’s favour: [2024] EWHC 2427 (Ch). The appeal concerned whether TSB was contractually required to use its own standard variable rate, and whether section 140A(5) prevented relief affecting a regulated mortgage contract.

1. The appeal was dismissed. Lord Justice Arnold gave the leading judgment. Lord Justice Baker and Lord Justice Newey agreed.
2. On issue 1, the General Conditions permitted the transferee to step into the original lender’s position. The transferee became included within the meaning of ‘we’, ‘us’ and ‘our’, acquired the right to set the Interest Rate, and could vary the inherited Standard Variable Mortgage Base Rate under Condition 7. Condition 19.1 supplied a separate, permissive mechanism under which the transferee could adopt one of its own standard variable mortgage rates. It did not make adoption of that rate a precondition to varying the inherited rate. TSB therefore had not breached the express terms.
3. The ordinary contractual interpretation principles summarised in Lamesa Investments Ltd v Cynergy Bank Ltd [2020] EWCA Civ 821, including the primacy of language, the contractual context and commercial common sense, supported that conclusion. There was no real doubt about the meaning of the conditions. Accordingly, neither the contra proferentem rule nor regulation 7(2) of the Unfair Terms in Consumer Contracts Regulations 1999 assisted the Claimants.
4. On issue 3, section 140A(1) of the Consumer Credit Act 1974 provides the jurisdictional gateway for relief under section 140B. Section 140A(5) is a restriction on that jurisdiction. It prevents any section 140B(1) order in connection with an exempt agreement, including a regulated mortgage contract. The phrase ‘in connection with’ has a broad but context-sensitive meaning. The statutory restriction could not be avoided by treating the unsecured Together Loan as the credit agreement and the regulated Together Mortgage as a related agreement.
5. The legislative history did not alter that conclusion. The unfair relationship regime introduced by the Consumer Credit Act 2006 had to be interpreted according to its own wording, context and purpose, rather than by reference to a transitional remedy under the earlier extortionate credit bargain regime.

• High Court of Justice, Business and Property Courts, Business List (ChD): Nicholas Thompsell, sitting as a Deputy High Court Judge, determined issues 1 and 3 in favour of TSB in a judgment dated 25 September 2024, reported at [2024] EWHC 2427 (Ch). An order was made on 21 January 2025.
• Court of Appeal (Civil Division): The appeal was dismissed. Baker LJ and Newey LJ agreed with Arnold LJ.