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Judge dismisses mortgage misselling case as client was ‘negligent’

A court has dismissed a negligent advice claim against a Savills Private Finance broker despite finding the adviser had been in breach of his duties, as the client was guilty of “contributory negligence”.

The case has lead experts to point out that mortgage misselling claims are not as straightforward as payment protection insurance.

The case related to mortgage advice that Darren Flicker, a broker with the defendant Savills Private Finance, had provided to buy-to-let landlords Martin and Anne Bateson in June and July 2005.

At a hearing in February, the Batesons alleged that Flicker’s advice resulted in them losing their seven-property portfolio and faced with a bill of £170,583 from The Mortgage Works.

Mrs Bateson had approached her bank hoping to raise £57,000 by releasing equity from her property portfolio to provide the deposit for another purchase and to help fund refurbishments. She was referred to the defendant for advice.

A remortgage was completed on 29 July 2005 with a total advance of £1,377,058, covering all of the properties. The Batesons suffered redemption penalties of £41,034 for paying back the original mortgages early and had to pay TMW £20,383 in fees.

The deal arranged was a portfolio mortgage, where a legal charge was taken on all of the Bateson’s properties.

But the Bateson’s claimed they were not aware of the redemption penalties or the fact the loan was secured against all of the mortgaged properties, despite their solicitor – whose advice they sought at the time – pointing out both of these facts and recommending that they sought independent financial advice.

When the Bateson’s business began to fail and some of their tenants missed several rental payments, the mortgage fell into arrears and the properties were eventually repossessed.

The Batesons made two complaints about the advice given. Firstly, that they were not advised on the likelihood or amount of any redemption penalties and, secondly, that they were not advised that the product recommended was an aggregate mortgage where all of the properties were secured on the loan.

Judge Gosnell found that Flicker had been in breach of duty for failing to draw the claimants’ attention to the redemption fees and the fact the loan was secured across several properties, as this was not mentioned in Flicker’s notes and the claimants did not recall this being mentioned in their meeting.

But Judge Gosnell concluded the remortgage was not to blame for the loss of the properties but ”was actually the failure to pay the instalment payments by the claimants” due to tenants arrears and their own financial difficulties.

He said that because the Batesons had not studied the mortgage terms and conditions and their solicitor’s letter “this would however mean that the court would have to find the claimants guilty of contributory negligence”.

Goldsmith Williams partner Eddie Goldsmith says: “To me this case reinforces that you will have to have a pretty black and white case to prove mortgage misselling. This is a victory for common sense. It is like somebody making a claim against an interest-only mortgages – you really cannot expect to pay just the interest and not the capital. This is reassuring for the mortgage industry.”

Association of Mortgage Intermediaries chief executive Robert Sinclair says: “While this creates good case law for broker firms to protect themselves, we need to recognise this was an unregulated buy-to-let series of contracts. Some of the debates could wash across into the regulated residential market but there are no guarantees.”

In May 2011, Savills completed the sale of Savills Private Finance to the brokerage’s senior management team, who rebranded it SPF Private Clients.

Savills declined to comment.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Dominic Thomas 1st May 2013 at 10:56 am

    Is this a sign that tide may have turned? That an adviser is not entirely responsible for all the bad things that happen in life and cannot be used as the fund of last resort?

  2. FOS take note.

  3. However, this is a BTL case heard by a judge. On a residential complaint it will be heard by the FoS who are always going to err on the side of the client. Plus, we will have to pay for the honour of someone complaining against us!!!!

  4. The ruling is an example of long awaited common sense that needs to be applied to complaints within financial services.

    Was the adviser perfect? No.
    Did his imperfection contribute to the clients losing their properties? No.
    Is it, therefore, his fault? No.

    Hallelujah!

  5. A good, fair and legal outcome.
    Perhaps we should point out to NON B2L clients that if they puruse a case like this through the FOS and get settlement contrary to legal precedent, then perhaps we shoul step outside the law with them, the FOS and all who sail in her.
    A bit inflamatory I know, but I bet you were all thinking it, just not saying it!

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