Portman Building Society v Dusangh [2000] 2 All ER (Comm) 22...

Facts

• Mr. Dusangh, a 72-year-old with limited English skills and a low income, agreed to a mortgage secured on his home from Portman Building Society.
• The loan was used to finance his son's purchase of a supermarket, with the expectation that his son would repay the loan.
• The supermarket venture failed, and the son defaulted, leaving Portman Building Society to enforce its charge against Mr. Dusangh’s residence.
• Mr. Dusangh argued that the agreement was an unconscionable bargain, claiming the lender took advantage of his vulnerability.
• The lower court ruled in favour of Portman Building Society, and Mr. Dusangh appealed to the Court of Appeal.

Issues

1. Whether the mortgage agreement was unenforceable on the grounds of being an unconscionable bargain due to Mr. Dusangh’s vulnerability.
2. Whether Portman Building Society’s conduct toward Mr. Dusangh amounted to morally reprehensible behaviour sufficient to set aside the agreement.
3. Whether the provisions of the Consumer Credit Act, as amended, could provide relief for Mr. Dusangh in the circumstances.

Decision

• The Court of Appeal upheld the enforceability of the mortgage agreement.
• The Court found that, while Mr. Dusangh was vulnerable and the transaction unwise, the lender did not act in a morally reprehensible manner.
• The mere fact that a transaction is imprudent or ill-advised does not render it unconscionable.
• The Consumer Credit Act provisions were deemed not to offer relief, as there was no finding of unfair conduct by Portman Building Society.

Legal Principles

• The doctrine of unconscionable bargain requires more than poor judgment or vulnerability; morally reprehensible conduct by the stronger party must be shown.
• The focus for setting aside agreements has shifted from the status of the disadvantaged party (as in Fry v Lane) to the conduct of the advantaged party (as in Boustany v Pigott).
• Creditors are not guarantors of financial wisdom for their customers or their customers’ relatives.
• Courts will not intervene to relieve a party from an improvident bargain absent exploitative behaviour.
• Relief under the Consumer Credit Act requires unfairness in the relationship, which was not established in this case.

Conclusion

The Court of Appeal affirmed that mere vulnerability or poor financial decisions do not invalidate contracts; only morally culpable conduct by a lender will render a bargain unconscionable. Accordingly, Portman Building Society’s charge was enforceable.