Plaintiffs charged business premises to defendant as
security for loan in order to purchase new premises.
Terms contained many protections for mortgagee
including index-linking value of loan to Swiss franc to protect against decline
in value of sterling.
Sterling did fall against Swiss franc and large amount
of money due.
But value of mortgaged property had more than doubled.
Held by Browne-Wilkinson J that all terms were valid.
Referring to Knightsbridge
and Cityland cases, stated that
to be free from mortgage terms plaintiff must show terms were unfair and unconscionable,
not merely unreasonable.
Here the agreement was freely negotiated.
Terms were unreasonable but not unconscionable.
Parties both businessmen with benefit of independent
advice; no compelling necessity to accept loan on those terms; no sharp practice.
Consumer Credit Act 1974,
Allows court to re-open extortionate credit bargains.
Legislation requires number of factors to be taken
into consideration including:
– capacity of borrower
– financial pressure on borrower
– risk to the lender.