Portman Building Society v Dusangh [2000] 2 All ER (Comm) 221

Key point

An unwise transaction that is not procured by morally reprehensible conduct is not avoided by unconscionable bargain

Facts

  • D was a 72-year-old man who could not read English and had a low income
  • D took out a mortgage over his home from Portman BS (C) to fund his son’s purchase of a supermarket; his son undertook repayment of the mortgage
  • When the supermarket failed and the son defaulted, C sought to enforce its charge over D’s home
  • D argued in defence that the charge was avoided by unconscionable bargain

Held (Court of Appeal)

The charge was valid and enforceable as C had not acted unconscionably

Simon Brown LJ

  • It is accepted that D is the modern equivalent of poor and ignorant and the transaction was unwise
  • However, building societies cannot be expected to police transactions of this nature to ensure that parents are wise in seeking to assist their children
  • That it was commercially unwise for C to put their trust in D and his son does not mean that it is morally culpable, the bank had not acted in a morally reprehensible manner

Commentary

  • This case affirms the ruling of the House of Lords in Boustany v Pigott, which shifted away from the application of the criteria in Fry v Lane to looking at the conduct of the party seeking to rely on the transaction
  • The Consumer Credit Act 1974, ss 140A-C, as amended by Consumer Credit Act 2006, ss 19-21 now give courts a range of remedies to undo credit agreements where the relationship between the creditor and debtor is unfair to the debtor
  • However, it would appear that D would not have the benefit of relief under the Consumer Credit Act either since the transaction does not appear to be unfair and C did not act in an unfair manner in enforcing its security or before and after making the agreement