This case explored whether a mortgage provider had breached the duty to make reasonable adjustments by failing to accede to a request to convert a repayment mortgage to an interest-only arrangement.
The Court of Appeal determined that this would have involved a fundamental alteration to the nature of the service which went beyond what was required under equalities legislation. An interest-only mortgage was a more speculative form of security and the service provider was not required to forgo its right to possession.
Ms Green appealed a decision to give possession of her property to Southern Pacific Mortgage Limited (SPML). The defence to the possession claim relied on Ms Green's status as a disabled person, which was not disputed. Ms Green suffered from depression and argued that SPML had treated her less favourably for a reason relating to disability, without objective justification and had breached its duty to make reasonable adjustments.
The complaint was brought under the Disability Discrimination Act 1995. The Court of Appeal also considered the replacement provisions under the Equality Act 2010 (disability-related discrimination being replaced by discrimination arising from disability) and noted that it was "common ground" that there was "no meaningful difference".
Ms Green had applied to re-mortgage her property to pay for improvements and to pay off loans. The mortgage offered was a repayment mortgage with a term of 20 years. There was a fixed rate of interest until November 2008, after which point it was a variable rate at 1.35% above LIBOR.
Ms Green got into repayment difficulties within a few months of entering into the mortgage deed. She was able to continue to meet the payments for a time because she had insurance (which covered unemployment and disability) but when the insurance ran out she could no longer make the repayments. Possession proceedings began in March 2009.
Ms Green received assistance from the Citizen's Advice Bureau who wrote to SPML to ask them to convert her mortgage into an interest-only arrangement. This was refused. On one occasion, SPML said that Ms Green did not meet their assessment criteria but it was later accepted that there was no such criteria.
However, each time that SPML responded to the requests for an interest-only mortgage, SPML stated that, "whilst we endeavour to assist our customers where possible, we are not obliged to alter the terms of the loans". SPML had a practice whereby they refused to allow any borrowers to convert repayment mortgage accounts to interest-only, whether on a temporary or permanent basis. This was known as the "no conversions" policy.
At the possession hearing, the Recorder rejected the complaint that the bringing of possession proceedings amounted to disability-related discrimination because SPML "would obviously have taken possession proceedings against anyone in arrears 'as per due course'". The reasonable adjustments claim failed because the Recorder rejected the suggestion that the practice of refusal to change to interest-only made it unreasonably difficult for disabled persons to make use of the service. The service in question was the mortgage over its entire life, from offer to redemption and, Ms Green had accessed the service.
The Recorder also found that if this had been a situation where it was impossible or unreasonably difficult to access the service, an interest-only mortgage was so speculative and precarious that it would not have been a reasonable adjustment. It was never reasonable for a lender to forgo its security and a switch would have meant "imposing on the lender a riskier, more unsatisfactory repayment vehicle".
Ms Green appealed on three grounds: (i) the service should have been construed more broadly; (ii) the switch was a reasonable adjustment because the lender was required to take flexible steps to assist existing mortgagors; (iii) the proposed change to interest-only was not a fundamentally different thing to a repayment mortgage.
The Court of Appeal noted that each side sought to "characterise the service in extreme terms, which then informed their respective cases on 'reasonable adjustment'". It found that the service was a repayment mortgage which involved a single loan of a fixed sum, with the property as security and no facility to increase the amount of the loan. An interest-only mortgage would have been "a different service, with a different loan". The service should not be broadly defined to cover all possible kinds of mortgage and "was instead the provision of a particular type of mortgage, namely a repayment mortgage".
This approach may be susceptible to challenge as the legislation does not define the service so narrowly. It refers to the provision of services to the public or a section of the public rather than approaching the matter with reference to the actual service provided to the complainant.
The Court of Appeal agreed with the Recorder that the "no-conversions" policy did not make it impossible or unreasonably difficult for disabled people to access the service. The policy of "no conversions" applied to all and the Court of Appeal did not accept the suggestion that it "bit harder" on the disabled with the result that affirmative action would be required.
Having reached that finding, the Court of Appeal was prepared to consider in the alternative whether, if the policy did restrict access, there was an obligation to make reasonable adjustments to the policy. It noted that the duty to make reasonable adjustments is an anticipatory one and that once a potentially reasonable adjustment has been identified, the service provider has the burden of proving that the adjustment is not a reasonable one to make.
The Court of Appeal confirmed that it would not have been a reasonable adjustment to convert the repayment mortgage to interest-only because a critical element of a repayment mortgage was the security represented by the property and the right to its possession in the event that repayments were not made. In contrast, with an interest-only mortgage, the security was represented by the value of the property at the end of the term which would "depend on all sorts of things outside the mortgagee's control: condition, valuation, the state of the property market so far in the future".
The lender bore the risk that the property would not be adequate security for the loan at the end of the term. The Court of Appeal agreed with the Recorder's findings that the security in an interest-only arrangement was "speculative and precarious".
The regulatory regime required mortgage providers to be flexible and to consider temporary forbearance but it remained clear that interest-only mortgages represented a more significant risk than a repayment arrangement. Accordingly, it was not reasonable to require SPML to accept a lesser form of security and to give up possession.
For these reasons, the Court of Appeal also emphasised that the service provider was not required to fundamentally alter the nature of the service as part of its equality law obligations. The Equality and Human Rights Commission (intervening) argued that "fundamental difference" should be construed narrowly as an exception to the legislation.
The Court of Appeal disagreed with this approach and considered that a switch from repayment to interest-only mortgage arrangements would go to the "core of the service". If the switch had been agreed, on the Recorder's findings, Ms Green would have been "unable to pay off the loan at the end of the term, and be left homeless and destitute, whilst the respondent's security would have been chancy and uncertain. Everything guaranteed by a repayment mortgage would be absence".
There was therefore a fundamental difference between the mortgage that had been agreed and the type of mortgage being requested.
This case is helpful to service providers because it emphasises that the duty to make reasonable adjustments does not extend to making fundamental changes to the nature of the service. It drew on the findings of the Court of Appeal in Edwards v Flamingo Land where the service provider was not required to change a sit-down restaurant service to allow for the provision of take-away food.
However, it is important to recognise that the approach adopted by the Court of Appeal defines the service in narrow terms. The definition of the service could make a difference in other cases, with the service provider seeking a narrow definition and the client or prospective client favouring a broad one.
In this case, the way in which the service was defined, would not have changed the outcome because even with a broader definition of "the provision of secured loans for home purchase" (as favoured in the dissenting judgment of Lord Justice Peter Jackson), a switch to interest-only arrangements would still have amounted to a fundamental alteration within the same service.