Consumer Credit Act “unfair relationships”: mental health and the exercise of a mortgagee’s power of sale

Amendments to the Consumer Credit Act 1974 introducing the open-ended concept of an “unfair relationship” came into force in 2007. Subsequent case law defining or limiting this concept has been sparse. Adding to the case law, the Court of Appeal has now considered the matter in the context of the exercise of a mortgagee’s power of sale. Graves v Capital Home Loans Ltd [2014] EWCA Civ 1297 (in which I appeared for the Respondent lender) concerned a buy to let mortgage. There was a history of arrears. The mortgage conditions provided for the statutory power of sale to become exercisable if the borrower became incapable by reason of mental incapacity of managing his affairs. The borrower was compulsorily admitted to and detained in hospital pursuant to section 3 of the Mental Health Act 1983. The lender appointed a receiver and subsequently exercised its power of sale. By this time, not only had the arrears mounted but also the property was empty. The Court held that neither the mortgage condition per se nor the appointment of the receiver gave rise to an unfair relationship. In relation to the exercise of the power of sale, the Court considered the OFT guidance on irresponsible lending, the Good Practice Awareness Guidelines for Consumers with Mental Health Problems and Debt published by the Money Advice Liaison Group and the Equality Act 2010. The borrower’s appeal was dismissed. Patten LJ observed that it “would, I think, have to be an exceptional case for the Court to conclude that a mortgagee whose power of sale had become exercisable due to the non-payment of mortgage instalments was to be treated as having acted unfairly in deciding to realise its security”. The position might have been different had there been a previously unblemished record of payment.