Recorder Elleray QC has handed down a reserved judgment in the Manchester county court in the case of Travis v Welcome Financial Services Ltd. The lender was represented by Simon Popplewell of Gough Square.
The ‘Other Financial Information’ on the face of the credit agreement included a statement of the manner in which interest would be calculated, but in stipulating the sums upon which interest would accrue, it omitted to refer to the Mortgage Indemnity Fee (“the MIF”). Clause 1(a) of the terms and conditions made it clear that interest would be charged on the advance inclusive of the MIF. The borrower objected that clause 1(a) was inconsistent with the face of the agreement and should be rejected, making the Schedule 6 prescribed terms as to the interest rate and the amount of the repayments misstated, rendering the agreement irredeemably unenforceable.
The Recorder rejected this argument, holding that instead it was the Schedule 1 information on the manner of calculating the interest which was misstated, so that the credit agreement was not irredeemably unenforceable. As a matter of construction, it was agreed that interest would accrue on the MIF.
However, the Recorder also held that the commission paid to the broker by the lender was a ‘secret commission’. This conclusion is startling, in circumstances where no broker fee was paid by the borrower and therefore the borrower must have known the broker was being paid by some source. Moreover the borrower had been ignorant of the broker’s existence, so it is difficult to see how any fiduciary duty was owed.