England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BIRMINGHAM CIVIL JUSTICE CENTRE
(HHJ SIMPKISS)

		Royal Courts of Justice Strand, London, WC2A 2LL
		28 March 2014

1. LORD JUSTICE CHRISTOPHER CLARKE: This is a renewed application for permission to appeal from a decision of Judge Simpkiss in the Medway County Court on 27 July 2013. This is another of the cases in which companies connected to Mr Gopee have sued borrowers to recover loans made under consumer credit agreements where those companies were not licensed to carry on such business. Two of those companies are Barons Finance Limited, which is now in liquidation and Ghana Commercial Bunks Ltd. Another company is Reddy Corporation Limited. I have heard Mr Gopee on behalf of the two companies which are not in liquidation.
2. The facts are somewhat complicated. What they boil down to is this. On 7 December 2007, Barons Finance lent Helen Sawyer, the first respondent, £17,000. She executed a legal charge in favour of Barons Finance over Flat 3 Sulby House in London and 12 Meteor Close in Sittingbourne. On 29 February 2008, Barons Finance demanded payment of some £18,749. A claim followed in the County Court and on 14 August 2008 a possession order was made in favour of Barons Finance in respect of Flat 3 Sulby House.
3. On 15 August 2008, Ghana Commercial Bunks lent to Ms Sawyer and to Mr Johnston Maito, who I understand to be her brother, £14,880. Again, there was a legal charge, this time in favour of Ghana Commercial Bunks over Flat 3 Sulby House, 12 Meteor Close, and 61 Mary Datchelor Close which I understand to have been her brother's property.
4. On 9 January 2009 Ghana Commercial Bunks demanded payment of £17,576. A claim followed in the Medway County Court and on 12 September 2009 a possession order was obtained. When each of these possession orders was obtained, the court was not informed that Barons Finance and Ghana Commercial Bunks did not have the appropriate licence under the Consumer Credit Act. At a later stage, despite the orders to which I have referred, a defence form was filed in the Barons Finance action. That form ticked question 9:

"If you have not reached an agreement with your mortgage lender, do you want the court to consider allowing you to pay the arrears by instalments?"

5. On 10 January 2011 there was an application by the solicitors for Ms Sawyer to transfer the Barons Finance proceedings in the Bromley County Court to the Medway County Court. That application was put forward on the footing that Ms Sawyer should be allowed to repay the principal sum after the charges were removed, less the total payments already made. The claim in the application was that the credit agreements failed to comply with the rules under the 1974 Act and the associated regulations and that Ms Sawyer intended to apply to the court for an order that the agreements were invalid as there was a unfair relationship between the parties under section 140A of the 1974 Act. I use the expression "agreements" because there appears to have been an earlier Credit Agreement of 20 February 2007.
6. On 28 January 2011 a review hearing took place before District Judge Liston in the Medway County Court and the two proceedings were consolidated and directions were given for trial. It is not wholly clear to me why this form of order was made when the possession orders had already been made and the next step was an appeal. Be that as it may, on 7 February 2011, a defence and counterclaim was pleaded in the now consolidated actions. That pleading alleged that neither Ghana Commercial Bunks nor Barons Finance were the holders of a credit licence under section 21 of the 1974 Act and that the agreements were unenforceable since no order had been obtained under section 40 of the Act. The pleading also alleged that Barons Finance was an unlicensed credit broker and that the agreements failed to comply with the regulations and had been improperly executed.
7. The defence denied that the claimants were entitled to any relief. There was a counterclaim which contained the contentions that the agreements were unenforceable without a court order under section 5 and that the court should not make one, and that the relationship arising out of the agreements was an unfair one. The counterclaim sought an order for the agreements to be set aside and for the defendant to repay the principal, less what had already been paid.
8. On 16 February 2011 the claimants gave notice of appeal from the order of District Judge Liston. On 18 May 2011, HHJ Simpkiss ordered a stay of the warrants of execution in both cases, although the papers appear to indicate that there may have been stays prior to that. On 6 June 2012 the defendants filed a notice of appeal from the possession orders. On 27 July 2012 there was a hearing before HHJ Simpkiss of the claimant's appeal from the order of District Judge Liston and the defendant's appeal against the original possession orders. The judge decided to deal with the latter appeal first and granted permission to appeal out of time and allowed the appeals.
9. The grounds on which he allowed the appeals were, firstly, that the agreement for a loan secured by a mortgage was a regulated agreement pursuant to section 8 of the Consumer Credit Act 1974. Secondly, he held that the claimants were not acting as agents for Reddy Corporation which did have a licence. Thirdly, he held, as was conceded that the claimants, Ghana Commercial Bunks and Barons Finance, were either unlicensed lenders or unlicensed credit brokers and, unless they obtained an order under section 65 of the Act from the court, or under section 40 of the Act from the Office of Fair Trading, the court had no power to make a possession order or a money judgment.
10. In this respect, he relied on the observations of Dyson LJ as he then was, in the case of Barons Finance and Reddy Corporation v Amir Ul Haq [2003] EWCA Civ 595. Dyson LJ in that case had distinguished a decision of Judge Birtles in the Mayor's and City of London Court when he had dismissed the claim for a possession order, but given a money judgment in favour of the unlicensed creditor. HHJ Simpkiss held that there was no argument with any real prospect of success that would enable the claimants to justify enforcing the legal charge by obtaining an order for possession or obtaining a money judgment. The result was that the possession orders of 12 March 2009 and 14 August 2008 were revoked and the claims were dismissed.
11. The Judge also declared that the agreements of 7 December 2007 and 15 August 2008, and the charges over the three properties were not enforceable and that no steps should be taken to enforce them. He also ordered, pursuant to section 106C of the 1974 Act, that the restriction and charges registered against the titles to the properties in the Land Registry should be removed forthwith. He set aside all warrants of possession and all money judgments.
12. This is a second appeal. The question is, therefore, whether or not the appeal raises some important point of principle or practice, rather than the less exacting test of whether the appeal has a realistic prospect of success. I do not regard the appeal as satisfying either test. Neither Barons Finance, nor Ghana Commercial Bunks, which is as I understand it now named Ghana Commercial Finance Limited, was licenced to carry out Consumer Credit Act business. They were, accordingly, unauthorised lenders and, under section 40, the relevant Credit Agreements, which were regulated, were not enforceable in the absence of a decision of the Office of Fair Trading under section 40 of the Consumer Credit Act 1974, which has neither been made nor sought, despite the fact that the averment that they were unlicensed lenders has been clear on the face of the pleading since at least February 2011.
13. The judge found that neither of those companies was acting as agent for Reddy Corporation, which does have a licence. That, as it seems to me, was a conclusion to which he was entitled to come and in any event raises no important question of practice or principle. It is noticeable that the agreements are headed with the names of the two companies other than Reddy Limited and the charges are made in favour of those companies. In each case, the evidence in the claimant's statement was put forward on behalf of those two companies. In reaching this conclusion, the judge followed a similar finding made on 11 June 2012 by David Mott QC, sitting in the First Tier Tribunal General Regulatory Chamber (Consumer Credit) upholding the refusal by the Office of Fair Trading to renew the Consumer Credit Act licences of Reddy Corporation or to grant such licences to Barons Bridging Finance No.1 Limited. I would observe that, in any event, if Reddy had been the principal, the other two companies were unlicensed credit brokers, and section 149 renders the agreement unenforceable unless the OFT agrees to an application for an order that the regulated agreements so made are to be treated as if the brokers had been licensed.
14. Complaint is made that the judge refused to allow an amendment to make a claim in unjust enrichment and denied any such claim. In this respect, the appellants face the difficulty pointed out by Lewison LJ in refusing leave on paper that, in the case of Dimond v Lovell [2002] 1 AC 384, where a similar argument was rejected, Lord Hoffmann, with whom the other members of the House agreed on this issue, said at page 906F:

"The real difficulty, as it seems to me, is that to treat Mrs Dimond as having been unjustly enriched would be inconsistent with the purpose of section 61(1). Parliament intended that if a consumer credit agreement was improperly executed, then subject to the enforcement powers of the court, the debtor should not have to pay. This meant that Parliament contemplated that he might be enriched and I do not see how it is open to the court to say that this consequence is unjust and should be reversed by a remedy at common law."

Dyson LJ recorded that the judge in that case had held that this decision of the House of Lords barred any claim based on unjust enrichment where the circumstances fell within sections 61(1) and 127(3) of the 1974 Act. He also recorded Mr Gopee's submission that everything had changed with the coming into force of the Human Rights Act so that, it was submitted, the decision of Dimond and Lovell, was no longer good law. He described that argument as misconceived. Such a conclusion as it seems to me applies with even greater force in a case where the agreement is not merely improperly executed but is one made with a creditor who lacks the requisite licence. In the Ul Haq case, Dyson LJ refused Barons Finance and Reddy Corporation permission to appeal.

15. In Wilson v County Trust [2003] All ER 229 the Court of Appeal declared that the provisions of section 127(3) of the 1974 Act, insofar as they prevented a court from making an enforcement order under section 75(1), unless a document containing all the prescribed terms had been signed by the debtor, were incompatible with the rights granted to a creditor by article 6(1) of the Convention and article 1(1) of the first protocol. In Ul Haq Mr Gopee had submitted to Dyson LJ that it was in the light of that decision that Dimond v Lovell was no longer good law. As I say, Dyson LJ had regarded this argument as misconceived, and added:

"In any event, as I have indicated, the declaration of incompatibility has no force (see section 4(6) of the 1998 Human Rights Act). The relevant provisions of the 1974 Act continue to have full force and effect until and unless Parliament decides to amend them."

This observation seems to me to apply with even more force, given that there has been no decision of which I am aware that section 40 of the 1974 Act is incompatible with the Act.

16. It was said in the notice of appeal as originally drafted that the result reached by the judge was procedurally irregular because of the nature of the pleadings in which it appeared to be being suggested that payment should be made of the outstanding principal. I regard that argument as misconceived for a number of reasons. Firstly, the defence denied that the claimants were entitled to any relief. The judge was entitled on the pleadings to reach that conclusion. Secondly, the fact that the defendant's counterclaim sought relief in reliance on section 65 and section 140A, which would have involved or might have involved repayment, did not affect the nature of the relief applicable if the court held, as it did, that section 40 applied. Thirdly, if the remedy of unjust enrichment was not available in law, it was not open to the court to give it to any of the claimants. Fourthly, conducting Consumer Credit Act business without a licence is a criminal offence under section 39 and agreements made in that context are unenforceable under section 40. Criminality is a point which the court should take of its own motion, whatever the pleadings say. Some reference was made to the doctrine of estoppel. It does not seem to me that the claimants, who were carrying on business without the requisite licence and acting criminally can invoke the assistance of equity to enable them to recover the monies loaned. Lastly, reliance was placed upon the decision of HHJ Birtles where he found the loan agreement to be unenforceable but, nevertheless, ordered repayment of the principal and interest. The fact that there was another decision at the same level which reached a different conclusion does not mean that it was a decision which HHJ Simpkiss was bound to follow; the question is whether that other decision was right.
17. This morning I have been invited to adjourn the hearing. The application notice invites an adjournment in order that notice should be given to the Crown because there has been a breach of the Human Rights Act. That seems to me an application without useful purpose. The real basis upon which adjournment is sought is because it is said that in the light of the contents of a letter to HHJ Mackie, who is dealing with a number of related cases, from the Office of Fair Trading of 11 December 2013, it is apparent that the law has changed and that Mr Gopee wishes in some way to avail himself of the change in the law by applying either to the court or to the OFT to allow the loan agreements and the linked security to be enforced.
18. The judgment of HHJ Mackie is dated 5 February 2014. Mr Gopee failed to provide me with a copy of the judgment but I have secured one and its neutral citation number is [2014] EWHC 138. The relevant passage in the letter is at page 16 and it reads as follows:

"It appears that trading without a CCA licence has the consequence that: a, loan agreements and any linked security entered into before 6 April 2007 where the court makes a declaration of unenforceability under section 140 of the Consumer Credit Act are rendered void; b, loan agreements and any linked security dated on or after 6 April 2007 cannot be enforced without an order of the OFT or the court (though the agreement/security continues to exist); c, unlicensed trading is (and taking enforcement proceedings without a licence may also be) a criminal offence."

19. I asked Mr Gopee what was the change of the law on 6 April 2007 to which the letter referred. He told me that he did not have the necessary material with him and that it could be produced at any adjourned hearing. This appears to be manifestly unsatisfactory. Mr Stone, who has been present on behalf of the respondent this morning, informs me that a similar reference to 6 April 2007 was made at the hearing before HHJ Simpkiss, without Mr Gopee being able to indicate what exactly it was that had happened 6 April 2007 that made the difference. It is not clear to me what it is either. I suspect that it may be the fact that at some stage subsections (3) to (5) of section 127 of the Consumer Credit Act were repealed. That that is so appears from the fact that they are omitted from the current issue of the statutes and they are said to have been repealed by the Consumer Credit Act 2006.
20. If that is so, that is not of assistance to Mr Gopee, by reason of the fact that the principal problem that lies in the way of success on the part of the two lending companies is the fact that they were unlicensed suppliers of credit carrying on business in breach of section 39 of the Act and in circumstances where section 40 of the Act applied. Those sections remain in full force and vigour. That, as it seems to me, is the end of this point.
21. Mr Gopee also complains that he was unfairly treated in that he was, as he put it, ambushed at the hearing before HHJ Simpkiss because it was not apparent to him that an order was or might be sought to the effect that the charges in relation to the properties should be removed forthwith. However, as it seems to me, in circumstances where it was plainly in issue that the agreements were invalid, both under section 40 and under section 65, it was an almost inevitable consequence that, if they were held to be invalid, the court would have to give, or it would be appropriate that it should give, the necessary relief which would include declaring that they were unenforceable and causing the now held to be unenforceable charges to be removed from the register. Otherwise the charges would sit there and could be used, although invalid, as an impediment to sale.
22. In those circumstances, it does not seem to me that there has been any unfairness, let alone such as involves an important point of principle or practice or any compelling reason such as would justify the grant of permission for a second appeal. Accordingly, for all those reasons, I decline to allow any of the companies concerned permission to appeal.