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Interest-only mis-selling claim against SPF Private Clients dismissed

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  • 27/05/2021
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Interest-only mis-selling claim against SPF Private Clients dismissed
A judge has struck out a claim against SPF Private Clients on mis-selling interest-only, ruling that the limitation period had expired and the claimants had sufficient understanding of the advice given.

 

Kennedys law firm acted on behalf of SPF Private Clients in the case last month. 

The claimants, a couple, received mortgage advice from the brokerage in 2005 when they were purchasing a house worth £400,000. 

They were advised to part exchange their current property at the time, and to take out a 20 year interest-only mortgage with Birmingham Midshires. 

They claimed a repayment mortgage would have been more affordable and said the broker did not advise them that they would need a suitable repayment vehicle in place. 

The case was heard in April, putting it outside the 15-year limitation period. However, the couple said, because they thought they were mis-sold after seeing adverts on social media in 2018, the timing was within the secondary limitation period of three years since the date of knowledge. 

SPF Private Clients successfully had the claim struck out on the basis that the couple were aware of the terms of the mortgage. 

Based on the mortgage offer, letters and mortgage statements provided by SPF Private Clients, the judge agreed that the claimants either knew, or could have been taken to have known, the terms of the interest-only mortgage as well as the fact there was no repayment vehicle in place. 

It was found the claimants had enough knowledge to understand the mortgage was unsuitable due to them not having any plan in place to make repayments on the capital. 

The claimants also wanted compensation for the difference in interest payments made through the interest-only loan, which amounted to £17,000, and the amount the capital sum would have been reduced by if they had taken a repayment mortgage instead.

This was valued at £141,000 making the total claim £158,000. 

The case was dismissed due to the limitation expiry period. However, in the summary statement, the judge added that the claim should have been reduced to £17,000, to cover the difference in the cost of borrowing on an interest-only basis and capital repayment.

Caterina Yandell, partner at Kennedys, who acted for SPF Private Clients, said: “The decision to strike out an interest-only mortgage claim on grounds of limitation could be a sizeable blow to the claimant law firms that have been flooding the market with these claims.

“The judge’s finding that the warnings provided in the mortgage offers and statements are sufficient to give the claimants constructive knowledge for the purposes of limitation is highly significant.”

She added: “The vast majority of claims against brokers for misselling interest-only mortgages are being brought well outside the primary limitation period and therefore this decision could mark a turning of the tide for defendant mortgage brokers.”

 

 

AMI welcomes court support 

The Association for Mortgage Intermediaries (AMI) said the the number of cases that had been terminated in recent months was “encouraging”. 

The association said the mortgage sector was being “attacked by a series of legal claims,” related to interest-only mortgages sold between 2004 and 2007, which were expensive for firms to defend. 

It also attributed these claims to rising professional indemnity insurance (PII) excesses and premiums. 

In a statement, AMI said it “continues to work with its members to provide information and support to ensure that these are defended, where appropriate, in a fair but robust manner.  

“All firms should ensure they engage their PI insurer early.” 

The association said the SPF Private Clients case, and the recent Pure Legal claim, supported the broker position.

Robert Sinclair, chief executive of AMI, said: “These decisions strike out the cases as being time barred. In addition, the courts in delivering their judgements have also considered many of the substantive issues under review.  

“These broadly have reduced the amounts of claim substantially, established that they have limited or no merit, set out that the costs of court time outweigh potential benefit and challenge the quality of both the claimant evidence and expert witness work.” 

Sinclair added: “AMI continues to work to inform the Financial Conduct Authority, the Financial Ombudsman Service, and the Solicitors Regulation Authority on these results. We are encouraged that firms might be able to recover their costs from claimants as the claimants mostly are insured.”  

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