Case No: CHANF 1990/0345/A3

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(N A L DAVIS ESQ QC (sitting as a Deputy Judge
of the High Court)

Royal Courts of Justice
Strand, London, WC2A 2LL

Friday, 28  January 2000

B e f o r e :

LORD JUSTICE SWINTON THOMAS
LORD JUSTICE ROBERT WALKER
and 
LORD JUSTICE LAWS

	(1)	LADJADJ
(2)	HAYA TAL	Appellant	
	- v -		
	THE GOVERNOR & CO  OF THE BANK OF
SCOTLAND	Respondent		

(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040,  Fax No:  0171 831 8838
Official Shorthand Writers to the Court)

Mr D Macpherson (instructed by Johnson Sillett Bloom) appeared on behalf of the Appellants.
Mr J Ridd (instructed by Underwood & Co) appeared on behalf of the Respondent.
Judgment
As Approved by the Court

Crown Copyright ©

Friday, 28 January 2000
JUDGMENT

Lord Justice Laws:

		This is a defendants’ appeal against an order made on 17 December 1998 by Mr Nigel Davis QC sitting as a High Court Judge in the Chancery Division when he dismissed the first defendant’s appeal from an order for possession of a dwelling-house made by Deputy Master Hoffman on 6 August 1998.  

		The proceedings were brought by the claimant bank as mortgagees, seeking possession by reason of arrears of payments due under the mortgage by the defendant mortgagors, who are husband and wife. The appeal is brought with permission granted by this court (Otton and Ward LJJ) on 24 March 1999. 

		The defendants entered into a legal charge with the claimant on 24 January 1990 in respect of their home, 91 Old Oak Road, Acton, London W3.  The loan thereby advanced and charged against the property was in the sum of £157,674.  The term of the loan was one of 23 years, and so it has some 13 years yet to run.  The documentation shows that an endowment mortgage had been intended, but we understand that any life policy taken out to support it is no longer in existence.  

		For the appellants Mr Macpherson submits that the appeal turns upon a short point of construction of the mortgage contract.  I shall explain the point in due course. For the respondents Mr Ridd submits not only that the point of construction is not well taken by the appellants, but that it is anyway immaterial to the proper outcome of the proceedings 
since it has no bearing on the basis upon which arrears due under the mortgage had been calculated in the evidence placed before the Deputy Judge.  Before dealing with these issues I should supply a brief outline of the history of the matter.

		By 14 May 1990 the appellants had fallen into arrears, and on that date the respondents as mortgagee demanded repayment of the entire sum due.  That was by no means forthcoming and on 23 August 1990 the respondent issued an originating summons in the High Court seeking possession.  Master Gowers made such an order in December 1990.  However, at that stage the parties agreed terms, and by consent that order was not then enforced.  There followed a long history in which further arrears accrued and further compromises were agreed between the parties from time to time.  I should mention an order made by Master Gowers on 25 May 1995, because it figures in the Notice of Appeal and in the appellants’ skeleton argument.  On that day the Master ordered that the respondents be not at liberty to enforce the possession order (which had earlier been made) provided that the appellants paid £407.44 forthwith and the current monthly instalment on 23rd of each month.  However, the appellants defaulted - or it is said that they defaulted - and so it came about that Deputy Master Hoffman made his order on 6 August 1998 to the effect that the respondents should have possession in 28 days.  As I have said that order was appealed to the Deputy Judge who dismissed the appeal.  In essence he held that the current arrears were, as at 11 December 1998, £82,032; this was as against the appellants’ contention that the arrears stood at no more than about £40,000.  The Deputy Judge held also that there was “no realistic prospect 

whatsoever on the evidence.... that Mr Ladjadj can be expected to pay up any of the arrears either within a reasonable time from today’s date or indeed... by the end of the term of the mortgage” (judgment transcript, 10F-G).  On that footing there was no basis upon which, under s.36 of the Administration of Justice Act 1970, the court might give any relief to the appellants against the mortgagees’ claim for possession.

		In this court, when granting permission to appeal, Ward LJ expressed some anxiety as to the very large discrepancy between the rival figures - £80,000 and £40,000 - put forward as representing the accrued arrears. At that stage the draft Notice of Appeal before the court was one prepared by the first defendant in person;  but counsel has since been instructed and a substitute notice of appeal drafted by Mr Macpherson is with the papers.  There are also skeleton arguments from both sides.  

		In order to understand the rival arguments, it is necessary to go to the texts which constitute the contract between the parties. First among them is the mortgage offer letter.  That included a Loan Schedule which contained these provisions (there is no contest but that this was part of the contract):  
“Interest will accrue on the Principal Sum at the rate of £14.8 per centum per annum (the ‘STABILISED CHARGING RATE’) and will be subject to alteration from time to time.

HOWEVER your monthly payments for the three years from the date of drawdown will be calculated at the SELECTED PAYMENT RATE of £10.50 per centum per annum effecting a 

gross monthly instalment of interest on £1,454.18. [That figure is altered because the principal sum was adjusted after the letter was typed.] 

The difference between the amount calculated at the STABILISED CHARGING RATE and the SELECTED PAYMENT RATE will be placed, monthly, to a separate account as more particularly detailed in the aforementioned General Conditions and Terms together with the supplementary Stabilised Mortgage Plan Notes for Guidance attached hereto”.

		The respondents have supplied the court with a copy of their “Notes for Guidance”, and this is the second contractual document. However the copy supplied is dated December 1992, which, of course, was all but three years after this mortgage was entered into.  We were told by Mr Ridd on instructions that the Notes for Guidance effective in January 1990 would have been in the same or substantially the same form.  With some misgivings I am prepared to proceed on that basis.  The document we have, which (or whose predecessor) again was part of the contract, contains these provisions:

“1. 	BASIC CONCEPT

The basic concept of the scheme is to enable you to stabilise your monthly mortgage payments for an indefinite period.  This may result in the payments which you make each month being less than the interest which has actually accrued against the loan balance, in which case the difference between the two amounts may serve to increase your overall mortgage debt.

It is important that you understand that the scheme is not a ‘low-start’ or ‘discount rate’ mortgage, but a plan designed to regularise your monthly outgoings and to assist you with your cash budgeting calculations.

2.	INTEREST

There are two different rates of interest charged on your loan.  The first, which will have been selected by yourself, is known as the ‘SELECTED PAYMENT RATE’, and the second which may be varied is known as the ‘STABILISED CHARGING RATE’.

In the event that the STABILISED CHARGING RATE is varied by the Bank a formal notice will accordingly be issued by the Bank detailing fully such amendment to the STABILISED CHARGING RATE as has been determined by the Bank.  The SELECTED PAYMENT RATE must be set at a level no lower than 2% below the STABILISED CHARGING RATE at time of application. [This reference to 2% is unlikely to have been in the 1990 notes for guidance, since (as the offer letter shows) the gap between the two rates at the start of the mortgage term was over 4%.]

3.	MONTHLY PAYMENTS

In most cases there will be a difference each month between interest calculated at the SELECTED PAYMENT RATE and interest calculated at the STABILISED CHARGING RATE. The entry passing through your normal Bank Account each month will be interest calculated at the SELECTED PAYMENT RATE.

4.	ACCOUNTING

When your loan is drawn, two accounts will be opened at this office.  The first will be known as the Mortgage Account and the second will be known as the Deferred Account.

The Mortgage Account will reflect the original mortgage granted to yourself.  Interest will accrue on this account at the STABILISED CHARGING RATE.

Any difference between the STABILISED CHARGING RATE and the SELECTED PAYMENT RATE will be placed, each month, into the Deferred Account.  Interest will accrue on any 

balance in the Deferred Account at the STABILISED CHARGING RATE.  Your total outstanding obligation to the Bank at any given time will be, therefore, the balance in both the Mortgage Account and the Deferred Account, together with any interest which has accrued.  Statements, detailing the balances of each account, will be sent to you on a six-monthly basis.

The Bank will carry out an annual review of the overall position and may, at time of review, adjust the SELECTED PAYMENT RATE to ensure that it remains within the parameters as detailed in 2. above.

5.	REPAYMENT

There is no requirement to repay the balance in the Deferred Account until the Mortgage Account is repaid, which may be either at expiry of the loan or on early repayment...”

		The third contractual document is headed “STABILISED MORTGAGE PLAN LOAN FACILITIES - SPECIAL CONDITIONS”. I think it was attached to the offer letter, but again there is no dispute but that it formed part of the contract. The special Conditions provided as follows:
“Subject to the Stabilised Mortgage Plan Loan Facilities more particularly detailed in the Bank’s General Terms and Conditions together with the supplementary Stabilised Mortgage Plan Notes for Guidance the following conditions will further apply to the offer of loan. The said General Terms and Conditions will however subsist in all other respects. 

(1) You have the right to exercise an option to have the “SELECTED PAYMENT RATE” varied within 0.5% steps, subject to a minimum rate of 10.5%. This option may be exercised only once during each 12 month period of the loan. The initial 12 month period will commence when the loan has been drawn down.

The new SELECTED PAYMENT RATE  will become effective as aforesaid on the appropriate monthly interest payment date following notice to the Bank of exercise of the option.

(2) The SELECTED PAYMENT RATE together with the interest rate bands will be reviewed at the end of the three year period and you will be advised of the new SELECTED PAYMENT RATE and interest rate bands together with payments for the ensuing period of three years.”

Lastly, there are the respondents’ General Conditions. They include these following provisions:
“Stabilised Mortgage Plan Loan Facilities

You have the right to exercise an option to have payments calculated at the chargeable rate. Such option may be exercised only once during the term of the loan.

...

The Mortgage Account will for accounting purposes be sub-divided into a Capital Account and a Current Account.

The Principal Sum will be debited to the Capital Account element of your Mortgage Account.

Where Tax Relief on the Loan is available for deduction at source -
(1) The net chargeable amount will be the monthly interest amount at the Chargeable Rate on your Mortgage Account net of MIRAS.
(2) The net fixed amount will be the Fixed Payment amount net of MIRAS.
(3) The difference between the net chargeable amount and the net fixed amount will be either debited to or credited to your Current Account.
  
Your obligations to the Bank will be the sum of the Capital and Current Account balances of the Mortgage Account together with interest due and unpaid on the said balances which 

obligations will be due for repayment as more particularly detailed in this Appendix.

The Fixed Rate will be reviewed at the end of the three year period and you will be advised of the new Fixed Rate and payments for the ensuing period of three years.”

		The point of construction urged by Mr Macpherson for the appellants may be summarised thus. He submits that upon the true interpretation of the contract and on the facts the appellants have since 24 January 1996 been liable to pay interest only at the “Stabilised Charging Rate”. He points to the option provided for in the General Conditions, which “may be exercised only once during the term of the mortgage”. He says that those words suggest that the option was “for a fixed length”, that is, the effect of its being exercised would run for a fixed period. (There is also an entirely different and unrelated option, provided for in the Special Conditions which I have set out, enabling the borrower once in each 12 month period of the loan to have the Selected Payment Rate varied up or down by 0.5% subject to a minimum rate of 10.5%. The appellants’ Selected Payment Rate was of course set at 10.5%, and this separate option plays no part in this case.)

		Then Mr Macpherson draws attention to the provision, appearing (in slightly different words) both in the General Conditions and the Special Conditions, for review of the Selected Payment Rate, or Fixed Rate, “at the end of the three year period” - that, says Mr Macpherson, must be a reference to the first three year period of the term - and notification to the borrower of the new Fixed Rate “for the ensuing period of three years”. From all this Mr Macpherson seeks to 

derive the following conclusion set out at para 14 of his skeleton argument:
“It is clear from the above terms that the Defendants had an option to pay interest at the Selected Payment Rate. They exercised this option on drawdown of the loan on 24th January 1990. This option was for a fixed term and the term must have been 2 periods of 3 years. If there is any ambiguity, the mortgage should be construed against the Plaintiffs, which proffered it.”

Six years from 24 January 1990 gives, of course, an end to the “fixed term” contended for at 24 January 1996.

		It is undisputed on the facts that the Stabilised Charging Rate, although of course it has shifted from time to time reflecting no doubt changes in base rate, has consistently stood at under 10.5% as after June 1992 and at least until 1 October 1999. As I understand it the appellants have in fact maintained payments at 10.5% since January or February 1996, although there were three late payments in mid-1998. Mr Macpherson says that on these facts and upon his construction of the contract his clients have been paying above the contractual rate since 1996 and in consequence such arrears as had arisen before 1996 have been progressively reduced. Accordingly he submits that, given that the mortgage still has thirteen years to run, the court should have refused possession in light of s.36 of the Administration of Justice Act 1970 and s.8 of the Administration of Justice Act 1973 (which I need not set out): there was every prospect that such arrears as remained outstanding when the judge was dealing with the matter would be discharged, with due interest fully paid, within the term.
		Mr Ridd submits, first, that on the proper interpretation of the contract and on the facts of the case, the appellants have throughout remained liable to pay at the selected payment rate of 10.5%. He points to the words in the General Conditions conferring the option to which Mr Macpherson referred. It is an option “to have payments calculated at the chargeable rate”. Although it is nowhere so stated, “chargeable rate” must, says Mr Ridd, mean the “Stabilised Charging Rate” referred to in the Loan Schedule and Notes for Guidance; but Mr Macpherson’s argument requires it to mean the “Selected Payment Rate”. If the subject-matter of the option is to switch to the Stabilised Charging Rate, then, very obviously, the borrower’s contractual obligation is to pay at the Selected Payment Rate until and unless the option is exercised. Moreover, Mr Ridd would not accept that the option (whichever of the two rates is its reference) is for a “fixed term”.

		I should state at this stage, and I do so emphatically, that in my judgment the respondents’ documentation is disgracefully sloppy and well capable of creating confusion. The expression “chargeable rate” in the option provision is nowhere defined; so it is a matter of inference to what it refers. It is not stated what is meant by “the three year period” mentioned both in the General and the Special Conditions, though it may be it makes little sense unless it means the first three years of the term, as Mr Macpherson submitted, and a cross-reference to the Loan Schedule (“the three years from the date of drawdown”) strongly suggests that that is right. But the very fact that there are four separate contractual documents is bad enough. At some points they are by no means easy to reconcile one with another. What a lay person would be supposed to 

make of them I cannot begin to imagine. In such a situation I consider that the contra proferentem rule of construction possesses special force. I regard it as nothing short of scandalous that a major lending institution should foist this jigsaw puzzle of a contract on the borrowing public.

		Despite all these strictures I have concluded that Mr Ridd’s approach to the construction issue is right. The words “chargeable rate” in the option provision must be a reference to the Stabilised Charging Rate. In the same section of the General Conditions the expressions “net chargeable amount” and “Chargeable Rate” are contrasted with “net fixed amount” and “Fixed Payment” in the paragraph dealing with tax relief: the former plainly contemplate the Stabilised Charging Rate and the latter the Fixed Payment Rate. The reference to review “at the end of the three year period” is to the Fixed Rate, implying that, the option aside, that is what is being paid during that period. Moreover the context of this part of the General Conditions, headed as it is “Stabilised Mortgage Plan Loan Facilities”, implies that the borrower has obliged himself to pay at the Fixed Payment Rate - that, of course, is the very premise of the scheme. The option allows him to make a one-off decision not to do so after all.

		Nor do I perceive any basis for the proposition that the option (whichever of the two rates is its reference) would run, once exercised, for a “fixed term”. I am wholly unable to see how such a conclusion may be derived from the provision that it may be exercised once only. Indeed the very words of that provision suggest the contrary: “Such option may be exercised only once during the term of the loan” 
(my emphasis). The implication is that it may be exercised, albeit it once only, at any stage during the term, and that is not I think consistent with its having effect for a specific fixed period. Moreover the “fixed term” argument is also contradicted by the first sentence under the heading “BASIC CONCEPT” in the Notes for Guidance: “The basic concept of the scheme is to enable you to stabilise your monthly mortgage payments for an indefinite period”.  
       		 
		The consequence is that a borrower whose loan is subject to the terms of the respondents’ Stabilised Mortgage Plan is obliged to make payments at the Selected Payment Rate throughout the term of the mortgage unless he opts to pay at the Stabilised Charging Rate, which he may do at any time once only during the term (and subject to the Selected Payment Rate being varied pursuant to the different option contained in the Special Conditions).

		Mr Ridd submitted that there was no evidence that the appellants ever exercised the option. In response to Mr Ridd’s argument Mr Macpherson has since the hearing before us put in a further written argument, which of course I assume has been delivered to Mr Ridd who has not, however, (and this is no criticism) chosen to respond to it. In this new document Mr Macpherson submits, as he submitted in reply at the hearing, that a term should be implied into the mortgage contract that the respondents would “at appropriate times” (it is far from clear what that means) notify the borrowers/appellants of their right to exercise the option to pay at the Stabilised Charging Rate. He refers to the Code of Mortgage Lending Practice issued by the Council of Mortgage Lenders, 

one of whose “Key Commitments”, undertaken by subscribers to the Code is to “help you understand how your mortgage account works”.

		Whatever the defects in the respondents’ documents - I will not repeat my criticisms - there is nothing whatever in this point. It amounts to the proposition that a term may be implied by law into a contract to the effect that one party owes a duty to remind the other of an express term which the contract includes. The English law of contract is not subject to any such abject paternalism.

		In his further written argument Mr Macpherson seeks to make another point, which is more troubling. He calls into question Mr Ridd’s submission that the appellants had never exercised the option to pay at the Stabilised Charging Rate by reference to certain letters, which were not produced below nor even to us at the hearing in this court, which he says demonstrate that on dates in 1997 and 1998 the appellants expressly sought the respondents’ agreement that they should pay at the Stabilised Charging Rate. There is a handwritten letter of 5 January 1997 from the first appellant which refers to an earlier letter said to have been written by him on 10 January 1996 (which has not been traced), and then proceeds: “Will you please charge my account at the variable rate...” Then in a later letter of 27 April 1998 solicitors instructed by the appellants said this: “Our instructions are that currently the DSS pays approximately £900 per month towards the mortgage giving a shortfall of £407.54... Our client would be obliged if you would consider reducing the interest payment rate from 10.5% to the 

normal rate of 8.99%. Such an arrangement would cover the shortfall which clearly would be of great assistance to our client.”

		These letters were not, so far as I can see, introduced in evidence below and in the ordinary way there would plainly be no proper basis for their being adduced in this court on conventional Ladd v Marshall principles. But Mr Macpherson in his further written argument submits with some acerbity that Mr Ridd’s argument to the effect that the Selected Payment Rate operated throughout, subject to the one-off option, had not been raised below or at any time before the hearing in this court; and if it had been this evidence contained in the letters would have been brought forward.  

		So far as I can see, however, the fact is that neither of the rival constructions of this mortgage put forward before us was canvassed below. The learned judge gives a brief description of the scheme of the mortgage at p.4 of the transcript, but none of it is alive to any fine point of construction. Then at 6B ff there is this passage:
“There has been some debate before me as to what the quantum of interest arrears is and indeed it appears that the affidavit evidence put in on behalf of the Bank has not in all respects corresponded with what they stated the interest arrears to be in certain letters written by them. This is... essentially because of the rather complicated nature of the legal charge taken out. I am satisfied, and indeed there is no evidence challenging it although Mr Quinn [then appearing for the appellants/defendants] did proffer some criticism of the material but the evidence of the Bank is unchallenged and I accept it, that the interest arrears at that time exceeded £80,000. In a recent affidavit sworn on 11th December 1998 on behalf of the Bank the interest arrears were put at that date at 

£82,032. Mr Ladjadj, through his counsel, has suggested that in truth the arrears are much nearer to the figure of £40,000, but there has been no evidence before me to justify that assertion.”

It seems tolerably clear that the judge considered the quantum of interest arrears to be no more than a matter of factual calculation or ascertainment: and thus not to depend upon a discrete point as to the construction of the mortgage contract. There is every reason to conclude that Mr Macpherson’s construction was simply not addressed below; nor, therefore, were Mr Ridd’s responses to it. I should say that neither Mr Macpherson nor Mr Ridd appeared at first instance. 

		Before considering what course to take in this thoroughly unsatisfactory state of affairs, I must confront Mr Ridd’s further submission, that these issues of construction are nothing to the point because they do not bear on the quantum of the arrears owed: he says that the interest actually due has been consistently calculated at the Stabilised Charging Rate. It is difficult to ascertain the true position, partly because (through no fault of the judge) there are no helpful findings or reasoning below, and partly because the respondents’ evidence about it before us is opaque, and at least in one respect obviously wrong. Doing the best I can the position appears to be as follows on the figures as at 1 October 1998 (I take this from the Statement of Account exhibited to the affidavit of the respondents’ Assistant Manager, Mr Fraser, sworn on 22 October 1998). (1) There was an “arrears balance” of £45,561.90. This figure represents, as I understand it, the difference between the aggregate of the amounts which should have been paid, month by month, over the whole period from the inception of the mortgage until 1 October 1998 and the amounts in fact so paid: and it assumes a liability to pay at 10.5%. The sum or balance thus described had gradually been reduced, from £58,299.10 which was the balance at 1 May 1995. It includes no element of interest upon (unpaid) interest; that is catered for in (2): what is called the “current balance”. As at 1 October 1998 this stood at £245,938.64. The calculation of this figure starts with the original capital advance of £157,674. There is then added what Mr Fraser describes as “total interest charges since start of loan” - £184,898.49. From that is subtracted “Tax relief credited since start of loan” - £3.905.52, and “Payments received” - £99,498.15. After these deductions from the “total interest charges” (the £184,898.49 figure) there remains by way of “Total Interest Arrears on mortgage” the sum of £81,494.82. To this figure £5,079.78 is then added by way of “Costs Charges and Disbursements”, and also £1,690.04 by way of “House Buildings Insurance Premiums”. 

		Within this arithmetical maze the two important figures are the sums of £45,561.90 ((1) above) and £81,494.82 (the “total interest arrears” figure in (2) above). These following comments fall to be made. (a) The simple arrears figure of £45,561.90 assumes, as I have said, a liability to pay at 10.5%. (b) The £81,494.82 figure would be nil if there were no arrears and so represents, as I understand it, interest upon unpaid interest. (c) This same figure - £81,494.82 - has been calculated by reference to the Stabilised Charging Rate from time to time; and this is the source of Mr Ridd’s submission that the interest actually due has been consistently calculated at the Stabilised Charging Rate. (d) 

However the £81,494.82 figure also appears to have been arrived at on a compound interest basis. I have not seen anything in the contract which would entitle the respondents to charge compound interest, but we have heard no argument on that question.

		Those were the figures which the respondents gave for 1 October 1998. They have produced some evidence of the position at later dates. Their solicitor Jane Armstrong swore an affidavit on 19 March 1999, in which the earlier £184,898.49 figure had swelled to £195,425.62 and the earlier £81,494.82 figure had swelled to £83,095.73. The figure for payments received since the loan’s commencement had also risen, to £108,324.20. This last figure is of particular interest because of the figure given by Miss Armstrong under the same head - “Payments made” - in a yet further affidavit, sworn in this court on 12 November 1999. There, the payments made by the appellants are said to amount to £105,655.73: £3,000 odd less than the analogous figure given by Miss Armstrong in March 1999. One of the two figures must be wrong. The mistake is like the thirteenth chime of the clock: it casts into doubt everything that has gone before.

		In my judgment the decision of the learned judge below cannot stand, for these reasons. First, it is at least possible that the appellants validly exercised the option to pay at the Stabilised Charging Rate at some date between 1996 and 1998. In the ordinary way, of course, an appellant raising a new point of this kind for the first time in the Court of Appeal might expect to receive short shrift. But I do not think that would be the right approach here. The whole question how this 

badly written contract should be interpreted has only been gone into in this court, and for that the appellants are no more to blame than the respondents. Secondly, the judge below treated the evidence as to the arrears (I emphasise, through no fault on his part) as going all one way. But the true extent of arrears will depend at least upon (a) whether the option was exercised; (b) whether there has been an unauthorised charge of compound interest; and (c) what is the right figure for the amount repaid by the appellants.

		For all these reasons I would allow the appeal, and subject of course to my Lords’ views would hear argument as to what orders it is appropriate to make. The simplest course may be to direct a re-trial, at which (it goes without saying) the judge would deal with the case consistently with this court’s conclusions as to the proper construction of the contract. It would be much better still if the parties even now proceeded to attempt to square their differences by mediation: a course which the appellants say was earlier blankly refused by the respondents. If that is right, it is in this case’s circumstances wholly lamentable.       

Lord Justice Robert Walker:

	I agree with the judgment of Laws, LJ and with his conclusion that, in the exceptional circumstances of this case, we should take the exceptional course of directing a rehearing, unless (as is to be hoped) the parties can agree on an alternative means of resolving their differences.

	My Lord has used strong language to describe the mortgage documents, but to my mind that language is justified.  It is deplorable that the defendants’ right to their home should depend on the interpretation and combined effect of no fewer than four contractual documents, which do not use, as they should, a clear and consistent terminology.

	The problem of establishing the true state of affairs as between the parties is exacerbated by the confused evidence put in by the bank as to the mortgage account.  Mr. Neil Fraser, an Assistant Manager employed by the bank, made an affidavit on 22 October 1998 which in effect contradicted the bank’s own accounting records, and (in paragraph 8) relied on the inadequacy of the bank’s own computer system, and the complexity of the bank’s own stablised mortgage plan, to excuse or explain the contradiction.  Neither his affidavit nor the later evidence of Miss Jane Armstrong has managed to provide a satisfactory explanation.  The letters of 5 January 1997 and 27 April 1998, copies of which are annexed to Mr. Macpherson’s further written submissions, will (if proved and admitted as evidence) raise a further issue as to the true state of the mortgage account.		                                

Lord Justice Swinton Thomas:

	I agree with both judgments.

Order:  Appeal allowed; Respondents to pay Applicant’s costs of the appeal.  Costs of retrial (if to occur) will follow the event.

(Order does not form part of approved judgment).