The mortgage originator CTC was found liable to the funder for breaching its obligations of care under its mortgage origination deed. CTC had submitted a forged loan application and failed to verify the borrower. However owing to some confusion at trial, CTC’s claim that its liability was limited by the proportionate liability provisions under Part 4 of the Civil Liability Act 2002 was not considered however the Court of Appeal permitted the issue to be re-heard.
The Court of Appeal held that CTC could not avail itself of the proportionate liability provisions to limit its liability because an indemnity clause in the mortgage origination deed had the effect of contracted out of the proportionate liability provisions (even though these were enacted afterwards) by making CTC liable for the full amount of any loss.
This was because the indemnity was inconsistent with the apportionment legislation and contracting out is permitted in section 3A(2). The court found it was irrelevant that the deed predated the Act because the court held that no reference to the Act itself is needed to contract out of its provisions.