Multiservice Bookbinding Ltd v Marden
A term in a mortgage is not invalid just because it is unreasonable, but only if it is unfair and unconscionable, and a clause linking repayments to the Swiss franc was valid.
Facts
Multiservice Bookbinding borrowed £36,000 from Mr Marden to buy business premises, secured on the premises. Mr Marden was worried about inflation, so the mortgage provided that the loan and interest would be linked to the exchange rate between the pound and the Swiss franc. The loan could not be repaid for ten years. The pound fell sharply against the Swiss franc, so the amount payable increased greatly. The company argued that the index linking clause was void.
Legal principle
Browne-Wilkinson J held that the clause was valid. He said that the test is not whether the term is reasonable, but whether it is unfair and unconscionable, meaning that one party has imposed it on the other in a morally reprehensible manner, in a way which affects his conscience. The parties were businessmen dealing at arm's length with independent legal advice, the clause was not contrary to public policy, and the lender was entitled to protect himself against inflation. Index linking is not a clog on the equity of redemption.
Related cases on mortgages
- Barclays Bank plc v O'Brien [1994] 1 AC 180
- Biggs v Hoddinott [1898] 2 Ch 307
- Cheltenham & Gloucester Building Society v Norgan [1996] 1 WLR 343
- CIBC Mortgages plc v Pitt [1994] 1 AC 200
- Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166
- Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949
- Fairclough v Swan Brewery Co Ltd [1912] AC 565
- Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317
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