Multiservice Book-binding v Marden [1978] 2 All ER 489

Key point

  • A mortgage term that is unreasonable but not unconscionable is not void

Facts

  • A bookbinding company took out a mortgage of £36,000
  • The interest rate of the loan was linked to the value of the Swiss Franc and 2% above bank rates
  • The devaluation of the pound mean that the company would have to pay £45,000 in interest

Held (High Court)

  • The term was valid
  • Although the term was unreasonable it was not void for being oppressive or unconscionable

Browne-Wilkinson J

Unreasonableness vs unconscionability

  • Mere unreasonableness is not enough to invalidate a term of a mortgage contract, the bargain must be unfair and unconscionable
  • The classic example of an unconscionable bargain is where advantage has been taken of a young, inexperienced or ignorant person to introduce a term which no sensible well-advised person or party would have accepted

Current case

  • There was no great inequality of bargaining power between the parties
  • C was a company and D was not a professional moneylender, C was represented by independent solicitors
  • A hard bargain was made by C, it was unreasonable that the interest was pegged to Swiss Francs and 2% above bank rates but it is not oppressive or unconscionable