Lord Bingham, held that it was not a core term (i.e. the adequacy of the bank’s remuneration) but ‘an ancillary provision’. [12] He said the concept of good faith under r 5(1) had an old (if hidden) English tradition, it was championed by Lord Mansfield and ‘looks to good standards of commercial morality and practice’ It is fair and open dealing, preventing unfair surprise and the absence of real choice. [17] Despite that the clause was fair.
‘There is nothing unbalanced or detrimental to the consumer in that obligation [to repay with interest]; the absence of such a term would unbalance the contract to the detriment of the lender.’
The 1991 Order and the 1974 Act’s interaction, whereby interest had been excluded, did not make the term an unfair way of circumventing legislation, because the Act had not prohibited post-judgment interest being payable.
Lord Steyn said,
‘The system of pre-emptive challenges is a more effective way of preventing the continuing use of unfair terms and changing contracting practice than ex casu actions: see Susan Bright, ‘Winning the battle against unfair contract terms’ (2000) 20 LS 331, 333-8.’
He added that he was initially persuaded by the idea that because the legislation had excluded interest, the court could not, but had then decided that because the legislation did not exclude expressly or by necessary implication that interest can accrue, the contract term was fair.
Lords Hope, Millett and Rodger concurred.