- Nash v Paragon Finance plc
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Paragon Finance plc v Nash Full case name Paragon Finance plc v Nash and Staunton Citation(s) [2001] EWCA Civ 1466, [2002] 1 WLR 685, [2002] 2 All ER 248 Keywords Unfair terms Paragon Finance plc v Nash [2001] EWCA Civ 1466 is an English contract law case concerning unfair contract terms.
Contents
Facts
Paragon (t/a National Home Loans Corporation plc until 1997) was claiming possession from Mr and Mrs Nash in South Norwood for late mortgage repayments. Paragon’s rate of interest was variable at its discretion. The Bank of England lowered its interest rate. Paragon did not ‘pass on’ the lower rate. Nash claimed that they were being made to pay substantially over the market rate of interest for secured loans, and were unable to find another lender because they had fallen into arrears. The Nash’s argued that the interest rates were extortionate under the Consumer Credit Act 1974, s 138 (grossly exhorbitant, grossly contravenes principles of fair trading; regard had to prevailing interest rates and risk).
Judgment
Dyson LJ held that the power to vary the interest rate at its discretion had to be exercised in a rational and honest way. This implied term was ‘necessary in order to give effect to the reasonable expectations of the parties.’ [36] and [42] However in this case the bank was acting reasonably in protecting its interests. It was not grossly exorbitant. Nor was the term unfair under UCTA s 3(2)(b)(i), because part of the ‘contractual performance’ was the discretion and its exercise was what could be reasonably expected. Thorpe LJ and Astill J concurred.
Significance
John McFall of the Treasury Select Committee said that banks are ‘defying the laws of financial arithmetic’ by not passing on the cuts in interest rates to consumers (Deborah Summers, ‘MPs demand interest rate cut is passed on to customers’ (6.11.2008) The Guardian). For instance, Barclays is still charging 14.9% on credit card repayments, while the Bank’s rate is 3%.
See also
Sources on unfair terms Unfair Terms in Consumer Contracts Directive 93/13/ECUnfair Terms in Consumer Contracts Regs 1999 SI 1999/2083Woodman v Photo Trade Processing Ltd (1981) Ex CCPhillips Products Ltd v Hyland [1984] EWCA Civ 5George Mitchell v Finney Lock Seeds [1982] EWCA Civ 5R&B Customs Ltd v United Dominions Ltd [1987] EWCA Civ 3Smith v Eric S Bush [1990] UKHL 1Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] EWCA Civ 6St Albans DC v Int Computers Ltd [1996] EWCA Civ 1296Nash v Paragon Finance plc [2001] EWCA Civ 1466DGFT v First National Bank plc [2001] UKHL 52OFT v Abbey National plc [2009] UKSC 6Unfair Contract Terms Bill (2005) Law Com 292Unfair terms in English contract law Notes
References
External links
Categories:- English contract case law
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