England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HIGH COURT APPEAL CENTRE
ON APPEAL FROM CHIEF REGISTRAR BAISTER
IN THE MATTER OF RUSSELL IAN PAYNE AND KATIE SUSAN PAYNF.
AND IN THE MATTER OF THE INSOLVENCY ACT 1986

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/04/2015

Mr John Male QC (Sitting as a Deputy Judge):

Introduction

1. This is an appeal by the petitioning creditor, Nigel Stretton Woolsey, against two orders made by Chief Registrar Baister in insolvency proceedings against the Respondents, Russell Ian Payne and Katie Susan Payne. Permission to appeal was granted by the Chief Registrar.
2. In the case of Mr Payne, the Chief Registrar set aside a statutory demand dated the 10th June 2013 and served on the 11th June 2013. In the case of Mrs Payne, the Chief Registrar made an order under section 282(1)(a) of the Insolvency Act 1986 ("the IA 1986") annulling a bankruptcy order made against her on the 19th September 2013. Both the statutory demand and the bankruptcy order were based upon the same loan agreement and the same alleged debt claimed by Mr Woolsey.
3. The explanation for the different procedural positions of Mr and Mrs Payne appears from paras. [16] to [18] of the judgment below and is as follows.

"[16] Compliance with the repayment terms of the loan agreement was, according to Mr Woolsey, sporadic. Notices of default were given to the borrowers in May 2013, Mr Woolsey was told that Mr and Mrs Payne were selling their house in England, and an offer was made to settle out of the proceeds of sale, but there was no sale, so Mr Woolsey decided to bring proceedings. Statutory demands were served on Mr and Mrs Payne on 11 June 2013. There was no response from Mrs Payne, so a petition was presented on 7 August 2013 and personally served. There was no response to the petition either as a result of which a bankruptcy order was made on 19 September 2013. No petition was presented against Mr Payne as one had already been issued by another creditor. That was dismissed. On 23 December 2013 (well out of time) Mr Payne applied to set aside the demand served on him.

[17] Mrs Payne's explanation for failing to deal with the statutory demand and the petition served on her is that she abdicated responsibility to her husband. He failed to deal with the petition because he got the date of the hearing wrong. In paragraph 3 of her first witness statement she says,

"[A]fter I signed the paperwork which led to the bankruptcy petition against me, my husband continued exclusively to deal with matters in relation to the financial transaction with Nigel Woolsey. I was not involved."

[18] In paragraph 9 she confirms that she did nothing about the petition after she was served: "I left matters in the hands of my husband as he said he was dealing with it". In paragraph 22 of her third witness statements she sums up her position as this:

"[A]s far as I was concerned my husband was going to sort out the debt to Mr Woolsey. It was his problem not mine. That remains my position to this day. I expect my husband to get this matter resolved"."

4. On this appeal, as below, Mr Woolsey was represented by Ms Sarah Clarke. Mr and Mrs Payne were represented by Mr Philip Flower. In the court below, Mr Flower appeared on behalf of Mrs Payne alone and Mr Payne was represented separately.
5. I was provided by Counsel with skeletons for this appeal. Mr Flower incorporated into that skeleton his skeleton from below. Ms Clarke also provided me with a copy of her skeleton below so that I could see what arguments were put to the Chief Registrar. After the hearing I was provided with supplemental skeletons addressing a point which I had raised during the course of argument. I am grateful to both Counsel for their clear and helpful oral and written submissions.

The proceedings below

6. The applications below were dealt with by the Chief Registrar on the witness statements and without cross-examination. The main witness statements before the Chief Registrar were from Mr Woolsey (dated 12th December 2013 and 3rd March 2014), Mr Payne (dated 23rd December 2013 and 8th May 2014) and Mrs Payne (dated 4th October 2013, 21st November 2013 and 9th May 2014).
7. Before the Chief Registrar Mr and Mrs Payne submitted that there was no enforceable debt so the statutory demand should be set aside and the bankruptcy order should not have been made. They raised various challenges to the enforceability of the loan agreement under the Consumer Credit Act 1974 ("the CCA 1974"). There was also an allegation of undue influence or duress by Mrs Payne against Mr Payne. All but two of the challenges failed. The two successful challenges concerned the following issues. First, whether the loan agreement was a regulated agreement or whether it fell within the exception in section 16B of the CCA 1974. Secondly, whether, even if the loan agreement was a regulated agreement, it was exempt from the provisions relied upon by Mr and Mrs Payne as being a non-commercial agreement within section 74(1)(a) of the CCA 1974.
8. Three grounds of appeal were raised by Mr Woolsey. The first is whether the Chief Registrar should have applied a different or the same test to the applications by Mr and Mrs Payne. The second concerns the Chief Registrar's decision on the application of section 16B of the CCA 1974. The third concerns his decision on the application of section 74(1)(a) of the CCA 1974. I will take these grounds in turn.

The first ground

9. The first ground only applies in the case of Mrs Payne. Her application was to annul the bankruptcy order, whereas Mr Payne's application was an application to set aside the statutory demand.
10. An application to annul is made under section 282(1)(a) of the IA 1986 which provides that:

"(1) The court may annul a bankruptcy order if it at any time appears to the Court -

(a) that, on any grounds existing at the time the order was made, the order ought not to have been made".

11. An application to set aside the statutory demand is made under rule 6.4(1) of the Insolvency Rules 1986 ("the IR") which provides that:

"The debtor may....apply to the appropriate court for an order setting the statutory demand aside."

12. Under rule 6.5(4) the Court may grant the application to set aside if, amongst other things:

"(b) the debt is disputed on grounds which appear to the court to be substantial".

13. In the case of Mr Payne's application, Counsel agree that the Chief Registrar applied the correct test in that he considered whether the points under the CCA 1974 amounted to a dispute on grounds that are substantial. However, Counsel disagree whether the Chief Registrar applied the correct test in the case of Mrs Payne's application. Ms Clarke submits that, in order to satisfy the test for annulment, it was not enough for Mrs Payne to show that the debt was arguably not enforceable at the time of the order. Instead, Mrs Payne had to show, on the balance of probabilities, that the debt was not due. Mr Flower submits that the test for annulment is the same as for an application to set aside a statutory demand.
14. There are two conflicting authorities on the test to be applied on an annulment application. They are Guinan III v. Caldwell Associates Ltd [2004] BPIR 531; [2004] EWHC 3348 (Ch) and Flett v. HMRC and Daly [2010] BPIR 1075; [2010] EWHC (Ch).
15. In Guinan Neuberger J (as he then was) held that there is no distinction between the test to be applied whether on an application to set aside a statutory demand, or on the hearing of a petition, or on an application to annul on the ground that it ought not to have been made. The test is whether there is a genuinely disputed debt.
16. Neuberger J's reasoning is at para. [16] of his judgment and is as follows:

"[16] I turn then to what at least to my mind is the central point in the case, which is whether or not Mr Caldwell has an arguable case. In this connection it is I think common ground, and consistent with what was said by Laddie J in para [60] of his judgment in Everard v The Society of Lloyd's [2003] EWHC 1890 (Ch), [2003] BPIR 1286, that:

'The court's assessment of the seriousness of the challenge should [not] differ from one stage to the other.'

In other words, if there is what he called 'a genuine triable issue' then, whether it is raised at the statutory demand stage, the petition stage or the annulment stage, it is an equally valid point. However, as I mentioned, that is not the end of the matter in this case, because, even if there is a genuine triable issue, that does not automatically mean that I should annul the bankruptcy; I still have a discretion. But, subject to that, as I think Mr De La Rosa, albeit sub silentio has accepted, the test is the same: is there a genuine dispute?"

17. In contrast, in Flett Mr Anthony Elleray QC (sitting as a deputy High Court judge) held that, on an application to annul, the burden of proof was on the debtor to demonstrate that, on the balance of probabilities, he did not owe the petition debt. It was not enough for a debtor to say at the time of an application for annulment that he had an arguable defence to the petition debt; he had to establish that he did not in fact owe the money.
18. Mr Elleray QC's reasoning is at paras [45] and [46] of his judgment and is as follows:

"[45] A debtor who challenges the making of a bankruptcy order against him on the basis that he disputes the relevant debt alleged by the creditor puts in his written evidence and the bankruptcy court decides whether or not on that evidence there is a real prospect of the debtor making out the alleged defence. If there is, its resolution is not a matter for this court but should be a matter for ordinary civil proceedings in which there will be disclosure and in due course, unless there is an application for summary judgment, a trial.

[46] In the case of an application under s.282(1), which necessarily follows after the bankruptcy order has been made, it is the bankrupt who is applying to establish in the bankruptcy court that for example under s.282(1)(a) the bankruptcy order ought not to have been made on grounds existing at the time the order was made. In context it appears to me that the court hearing the application of the debtor for annulment must be satisfied as to those grounds on the balance of probability. It may not be enough in my view for a debtor to say at the time of an application for annulment: 'I had an arguable defence to a given case'. He should be saying: 'I did not in fact owe the money for this or that reason, and it is for that reason that he now seeks the annulment of the order."

19. Ms Clarke submits that the test as stated in Flett is to be preferred. She points out that in Guinan the parties were agreed as to the test and therefore the Court did not have the benefit of argument on the point. She says that Everard (which was relied upon by Neuberger J) was dealing with a narrower point, namely, whether the test to be applied on an application to set aside a statutory demand was different to that applied to an opposed petition in circumstances where the rules and practice directions stipulated the stage at which certain disputes needed to be raised. She also pointed out that, where a debtor seeks to annul on grounds that a petition debt is disputed, the debtor relies upon grounds that could and should have been raised at the petition stage. So, she says, it is legitimate to place the onus upon an applicant to establish that the debt is not owed and to impose a more stringent test than would have applied in the event that the applicant had responded in a timely fashion. She reinforced this latter point in her oral submissions by reminding me that an order operated against the world and that this was another reason for the more stringent test because to annul it could prejudice third parties who had acted on the order. Also, she pointed out that under section 282(1)(a) the application to annul could be made "at any time" and that actual experience showed that this could be many years after the bankruptcy order when the order had been acted upon. So, again, it was appropriate to impose a more stringent test.
20. In contrast, Mr Flower submitted that I should adopt the approach of Neuberger J in Guinan. He pointed out that Guinan was not cited in Flett. Also, he submitted that the facts of Flett were significantly different as they concerned a statutory assessment by HMRC which the Court could not go behind. And, in any event, it was questionable whether what Mr. Elleray said in paragraph 46 actually went as far as Ms Clarke contended.
21. For the reasons set out below, I consider that I should adopt the approach taken by Neuberger J in Guinan.
22. First, while it does appear that the point was not argued by the parties in Guinan, so far as I can see the same applies to Flett. Secondly, neither Guinan nor Everard is referred to in the judgment of Mr. Elleray QC. Thirdly, the decision of Neuberger J drew on the reasoning of Laddie J in Everard. While I accept that Everard concerned a narrower point, it seems to me that what Laddie J said in that case in paragraph [60] was sound in principle and applies equally to the issue before me. He said "there is every reason why the height of the hurdle the debtor has to negotiate should be substantially the same at whichever stage he mounts his challenge" and there is "no reason why the debtor's challenge should have to reach a different level of substantiality when he challenges the debt...at the petition stage". I respectfully agree. Fourthly, I agree with Mr Flower that what Mr Elleray QC says is ambiguous. Mr Elleray said "It may not be enough...for a debtor to say at the time of an application for an annulment: I had an arguable defence..." I have added the emphasis because, as Mr Flower argued, Mr Elleray seems not to have been entirely sure of the position. Fifthly, the application of different tests to the different stages could, as Mr Flower argued, produce strange results. This case illustrates that very point in that the application of different tests to the same basic issue might lead to Mr. Payne succeeding in setting aside the statutory demand, but Mrs Payne failing to set aside the bankruptcy order.
23. As to Ms Clarke's points about the order operating against the world and the effect of the passage of time, in the case of an application to annul the Court has a discretion in that "The Court may annul...". If the passage of time or the operation of the order against third parties was shown in a particular case to have caused the sort of practical problems which Ms Clarke referred to in her oral argument, then that is a matter which I expect that the Court would bear in mind in exercising its discretion and which might incline the Court against making an order.
24. Finally, I struggle to see how, on what will often be a summary procedure which could raise conflicting witness statements (and I appreciate, as Ms Clarke reminded me, that an application could be made to cross-examine under rule 7.7A(2) of the IR) the Court might actually be able to decide disputed issues on the balance of probabilities.
25. For these reasons I prefer the approach of Neuberger J in Guinan to the approach of Mr. Elleray QC in Flett. It follows that the first ground of appeal fails.

The second and third grounds: preliminary matters

26. Before I consider the second and third grounds, I will do as Mr Flower and Ms Clarke asked me to do and remind myself of some preliminary matters. First, as Mr. Flower pointed out, the service of a statutory demand by a creditor can be a high risk strategy which can backfire in that all the debtor has to do is show that there is a genuinely disputed debt. Secondly, the test which the Chief Registrar had to apply is whether there was a dispute on grounds which appear to the Court to be substantial. Thirdly, however, as Ms Clarke reminded me, Mr Woolsey needs only to succeed on one of these two grounds for his appeal to succeed.

The second ground

27. Ms Clarke contends that the loan agreement was not a regulated agreement subject to the CCA 1974. Consequently, she contended, it was not improperly executed and Mr Woolsey was not required to hold a consumer credit licence in order to enter into the loan agreement.
28. Section 16B of the CCA 1974 provides as follows:

"(1) This Act does not regulate -

(a) a consumer credit agreement by which the creditor provides the debtor with credit exceeding £25,000, or

(b) a consumer hire agreement that requires the hirer to make payments exceeding £25,000,

if the agreement is entered into by the debtor or hirer wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.

(2) If an agreement includes a declaration made by the debtor or hirer to the effect that the agreement is entered into by him wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him, the agreement shall be presumed to have been entered into by him wholly or predominantly for such purposes."

(3) But that presumption does not apply if, when the agreement is entered into -

(a) the creditor or owner, or

(b) any person who has acted on his behalf in connection with the entering into of the agreement,

knows, or has reasonable cause to suspect, that the agreement is not entered into by the debtor or hirer wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him."

29. In this case the loan agreement contained a declaration which the parties agree satisfied section 16B(2). Accordingly, Mr Woolsey was entitled to rely upon the presumption created by section 16B(2) that the agreement was for business purposes and was exempt from regulation. But that presumption does not apply in the circumstances set out in section 16B(3).
30. Section 16B(3) requires the Court to consider not only the knowledge of Mr Woolsey, but also what he had reasonable cause to believe. The task for the Court is twofold. It is, first, whether Mr Woolsey knew, or, secondly, whether Mr Woolsey had reasonable cause to suspect, that the loan agreement was not entered into by the debtor wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.
31. The Chief Registrar dealt with section 16B(3) at [44] and [45] of his judgment where he said this:

"[44] I do, however, with reluctance and some misgivings, agree with Mr Flower's principal submissions that the presumption created by paragraph 4 of the loan agreement is rebutted in the sense that, even on Mr Woolsey's case, there was reasonable cause to suspect that the purpose of the loan was not wholly or predominantly for the purpose of a business carried on by Mrs Payne or intended to be carried on by her. Even if the loan was made for the purpose of propping up the Paynes' company, the business the Paynes conducted was that of the company, not their personal business. I accept Mr Flower's contention that to hold otherwise would do violence to the trite principle that a company has a legal personality which is distinct from that of its owners or directors. The facts and principles are adequately explored above so I shall not repeat them. I do not think I can sensibly find that either Mr or Mrs Payne conducted business in the sense of raising money as individuals to lend on to the company since there is no evidence of a pattern of their doing that.

[45] I accept that there is a limited parallel between the considerations that arise in this case and those that arose in Turner & Co (GB) Ltd v. Abi. Paragraph 32 of the judgment makes clear that one of the matters the court had to decide was whether in entering into the agreement in issue Mr Abi had done so as a consumer. However, (a) the facts of that case and the legal propositions considered by the court were very different in significant respects (see, for example, paragraph 4 of the judgment) and (b) the definition was, as Mr Flower submits (see above), considered in the context of different legislation. That being the case, I think this court should be slow to apply the reasoning in Turner & Co (GB) Ltd v Abi to the circumstances of this case."

32. The main thrust of Ms Clarke's challenge to this part of the Chief Registrar's decision is based on, first, the authority mentioned by him of Turner & Co (GB) Ltd v. Abi [2011] 1 CMLR 17; [2010] EWHC 2078 (QB) and, secondly, on a series of cases under the Unfair Terms in Consumer Contracts Regulations 1999 ("the Regulations"). In summary, Ms Clarke says that the Chief Registrar adopted an unnecessarily narrow interpretation of the words "a business carried on, or intended to be carried on, by him" in section 16B(3). She says that the Chief Registrar should have held that Mr Payne entered into the loan agreement for the purposes of a business carried on by him in his capacity as a director in order to facilitate or support the business of the company.
33. In response, Mr Flower says that Turner is not in point as it involves a consideration of the meaning of the term "consumer" within the context of a European Directive and for the purpose of deciding whether or not the Regulations applied. He says that the question as to whether or not the presumption under section 16B is rebutted does not depend on whether or not the Respondents fall within a definition of "consumer". He also relies upon the company law point that the company has a legal personality which is distinct from that of its owners and directors.
34. Also, on the facts Mr Flower says, and in this regard he provided me with his skeleton from below which he incorporated into his arguments before me, that Mr Woolsey must have known that Mrs Payne was not actually carrying on business in her own right. He also says that Mr Woolsey was well aware that the purpose of the loan, known to Mr Woolsey, was to meet personal obligations of Mr Payne, and to repay personal debts to Mr Payne's parents in law and others. Also, he says that there was reasonable cause for Mr Woolsey to suspect that Mrs Payne had not entered into the agreement "wholly or predominantly for the purpose of a business carried on.." by her. The same applies, he says, to Mr Woolsey's knowledge in relation to Mr Payne who borrowed the money for these personal purposes and not for his business.
35. I will start by examining the authorities relied upon by Ms Clarke to see whether the Chief Registrar erred in law as suggested by Ms Clarke.
36. Turner v. Abi was a claim for commission due on the sale of a company pursuant to an agreement between the selling agent and a director and shareholder of the company. The director claimed to rely upon the Regulations but the Court rejected his claim. Mr Richard Salter QC (sitting as a deputy judge of the Queen's Bench Division) held that:

"[42] .........Mr Abi was, in making the Agreement, acting for a business purpose within the meaning of Directive 93/13 and the 1999 Regulations. Owning and running printing companies was his business. It was how he made his living. This contract was made for the purposes of that business. This was not, to use the words of the European Court of Justice, something for his family or personal use. It was a business decision made in the course of running the business through which he earned his living. I do not think it right to import into that factual analysis concepts of English company law differentiating the business of the company from the business of its owners. I therefore reject Mr Abi's second ground of defence."

37. The issue in that case was whether the director was acting as a "consumer". Mr Flower says that the issue in that case was not on all fours with the question raised under section 16B(3). However, I note that the Court did have to consider what was involved in acting for business purposes as opposed to acting as a consumer. That being so, it seems to me that the case does provide some support for Ms Clarke's submission that the Chief Registrar took an unduly narrow view of the words "for the purposes of...by him" in section 16B(3).
38. Next, Ms Clarke relied upon a series of cases in which the Court has considered whether a director who guaranteed liabilities of his company was prevented from seeking relief under the Regulations on the grounds that he was acting in the course of his trade, business or profession. Those cases are The Governor and Company of the Bank of Scotland v. Reuben Singh (unreported), 17th June 2005, HHJ Kershaw QC ; Barclays Bank Plc v. Alfons Kufner [2008] EWHC 2319 (Comm) at paras. 30-31; and United Trust Bank Limited v. Dalmit Singh Dohil [2011] EWHC 3302 (QB) at paras. 118-132. The first case was not followed in the second and third cases where it was held that the directors entered into the guarantees for the purposes of their trade or business rather than as a consumer.
39. Again, I take the point made by Mr Flower that these cases were concerned with the meaning of a "consumer" rather than with the wording in section 16B(3). However, I note that, in considering the meaning of that word, the Court did consider when a director entered into a contract for the purposes of his trade or business. The Court's approach in the second and third cases therefore provide further support for Ms Clarke's argument.
40. Also, as Ms Clarke argued, I cannot approach the CCA 1974 on the basis that it is purely domestic law which should be interpreted without regard to European precedent. As Ms Clarke pointed out, section 16B of the CCA 1974 was enacted independently of the requirements of EC Directive 08/48 and has subsequently been amended in the light of the harmonisation provisions contained in that Directive. So, I consider that I should have regard to the approach in the above cases which draw on the Directive.
41. I also agree with Ms Clarke that a purposive approach is required to the construction of section 16B(3) and that, putting matters at their lowest, it would be odd if a company director who borrowed money for the purposes of his company would be treated as a consumer entitled to the protection of the Act, whereas a sole trader who borrowed money for the business he operated in his own name would not be.
42. Against this, Mr Flower relies, as he did below, upon the principle that the company has a legal personality which is distinct from that of its owners or directors. However, in the light of the matters discussed in paras. 36 to 41 above, I consider that to take this strict company law approach in the context of consumer created provisions would be inconsistent with the cases mentioned earlier and also with the purpose of the relevant provisions of the CCA 1974.
43. In short, I agree with Ms Clarke that the Chief Registrar adopted an unnecessarily narrow interpretation of the words "For the purposes of...by him" and that consequently he erred in the approach which he adopted in paras. [44] and [45] of his judgment.
44. As the Chief Registrar was in error I must go on and consider whether, applying the wider interpretation of section 16B(3) argued for by Ms Clarke and which I have accepted, Mr Woolsey knew, or had reasonable cause to suspect, that the loan agreement was not entered into by the debtor wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him. Here, as I understand his arguments, in addition to his company law point which I have rejected, Mr Flower also relied in his skeleton before me upon his approach in his skeleton below and argued that on the witness statements it was arguable that Mr Woolsey did know, or did have reasonable cause to suspect. The Chief Registrar's summary of the facts does not deal with all the matters dealt with in the witness statements and so I must examine those statements.
45. The loan agreement is dated the 14th December 2012. The parties to it are Mr Woolsey as "the Lender" and Mr Payne, Mrs Payne and Russell Payne & Co. Limited ("the company") as together "the Borrower". The amount of the "Advance" was £116,000.
46. I turn to the witness statements which I take chronologically. In paras. 17 to 21 of her first witness statement, Mrs Payne explains what she understood to be the purpose of that loan. In para. 21 she says that £50,000 was borrowed from Mr Woolsey for the purpose of repaying borrowing Mr Payne had obtained from Colin and Helen Palmer-Brown. She says that the only new money lent was £50,000, and of that £20,000 was used to partly repay her parents for monies which they had lent to Mr Payne. She says that the rest of the money went into the general pot of her husband's bank account. She says that he needed these large sums because he had become embroiled in a lawsuit regarding the purchase of an accountancy practice. Having set out what she says were the purposes of the loan, Mrs Payne then says in para. 22 of this statement that Mr Woolsey knew that the loan agreement was not wholly or predominantly for the purposes of the company. She refers to part of a letter sent in May 2013 by Mr Woolsey to Mr and Mrs Payne which she says confirms his knowledge.
47. In paras. 5 to 7 of her second witness statement Mrs Payne corrects the reference in her first statement to £50,000 of new money and says that the correct figure was £33,000. She then says that of the £116,000, the sum of £33,000 represented interest that Mr Woolsey claimed was owed by Mr Payne under a previous loan. That £33,000 was not, she says in para. 6, money actually advanced to her husband but "default interest" on a previous loan to her husband. She says that a further £50,000 was advanced to Mr Payne in order to repay a Mr and Mrs Palmer-Brown and £33,000 was advanced to repay a loan of £20,000 from her parents, leaving a balance of £12,000 which went into the family "pot" for domestic expenses. On this basis she says that the £50,000 and the second-mentioned £33,000 were not to go into the business, but were either to repay loans from friends and family to Mr Payne or to fund domestic expenses from the family pot. She refers again to the part of the letter from Mr Woolsey which she relies upon as showing he knew that the purpose of the loan was as she explained in her statements.
48. In paras. 8 to 22 of his first witness statement Mr Woolsey explains his earlier financial dealings with Mr Payne. In para. 23 Mr Woolsey says that he was approached by Mr Payne once again and was told that he was in dire financial straits, having borrowed money from clients of the company and from other local businessmen. He says that Mr Payne also told him he needed money to defray liabilities which had come to a head at that point to enable the business to continue. In para. 26 Mr Woolsey says that, as he believed that any money being advanced was to be used in connection with the business, it was also agreed that Mrs Payne and the company would be joined as parties to the loan agreement. In para. 26 he refers to his belief that any money advanced was going to be used in connection with the business. In para. 27 he says that, pending completion of the loan agreement, £50,000 was advanced which was to be paid direct into the company's bank account. In paras. 33 and 36 he repeats his belief that the payments made were inextricably linked with the business and were being used to enable the business to remain afloat. So, Mr Woolsey says, at the time the loan agreement was entered he confirms that he genuinely believed it was being advanced wholly or predominantly for the purposes of the company. He says in para. 35 that his view was supported by the specific requests to pay monies directly into the company's bank account. He expands on all these points in the rest of this statement at paras. 37 to 61.
49. In para. 6 of his first witness statement, Mr Payne adopts paras. 15 to 23 of his wife's witness statement.
50. In para. 12 of his second witness statement, Mr Woolsey reiterates that: (1) it was his genuine belief that the payments made under the loan agreement were being used to defray company liabilities which had come to a head at that point and that he understood that the payments were being advanced in order to assist the business; (2) it was agreed that the company should be joined to the loan agreement; (3) he was instructed to pay sums due under the loan agreement into the company's account.
51. However, in para. 16 of her third witness statement, Mrs Payne disputes that funds were paid into the company's account in relation to the loan agreement. Also, in para. 20 of that statement she disputes that the money went into the business at all, but she says that instead it went into private accounts of her husband. This is confirmed by Mr Payne in para. 27 of his second witness statement. Earlier in that statement, in para. 21, Mr Payne says that, contrary to what Mr Woolsey says, the money was not borrowed to keep the company afloat. Instead, it was borrowed to repay the Palmer-Browns and to fund litigation to which he was a party. He reiterates that point in para. 24 where he says that he needed the money to repay money borrowed from Mrs Payne's parents and for the family for Christmas. A little later, in para. 32 of the same statement, Mr Payne says that Mr Woolsey knew or had reasonable cause to suspect that the remainder of his borrowing was not for the purposes of the company. In the same paragraph Mr Payne says that he had spoken to Mr Woolsey about his (Mr Payne's) financial problems and that he (Mr Payne) had never suggested that the company had financial problems. He also says that Mr Woolsey knew that it was Mr Payne, and not the company, which was involved in an expensive law suit.
52. As I read these statements, the parties have fundamentally different recollections as to what were the purposes of the loan agreement, as to what Mr Woolsey knew, and as to what Mr Woolsey had reasonable cause to believe. It seems clear to me that there is a substantial dispute of fact between the parties as to what were the purposes of the loan agreement, what Mr Woolsey knew and what he had reasonable cause to believe. On the one hand, if Mr and Mrs Payne's recollection of events is correct then Mr Woolsey knew that, even applying the wider interpretation of section 16B(3) argued for by Ms Clarke and which I have accepted, the purposes of the loan agreement were not wholly or predominantly for the purposes of a business carried on, or intended to be carried on by Mr Payne. Instead, the loan agreement was to deal with Mr Payne's parlous personal finances. And, on Mr and Mrs Payne's evidence, Mr Woolsey knew these were the purposes. On this basis, Ms Clarke's wider interpretation of section 16B(3) will be of no assistance to Mr Woolsey. On the other hand, if Mr Woolsey's recollection of events is correct then the purposes of the loan agreement were to deal with the business in the wider sense argued for by Ms Clarke. In the yet further alternative if, as could happen at trial, parts of each side's recollection of events are correct, then it may or may not be the case that Mr Woolsey knew or had reasonable cause to suspect that the purposes of the loan agreement were not wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by Mr Payne.
53. On summary applications like these two, I cannot say whose recollection of events is to be preferred, or whether parts of each side's recollection are correct. This will depend on the precise facts found at trial after disclosure takes place and witnesses are cross-examined.
54. In short, it seems clear to me that, even applying the wider interpretation of section 16B(3) argued for by Ms Clarke, there is a substantial dispute of fact between the parties as to what were the purposes of the loan agreement, what Mr Woolsey knew about those purposes and what Mr Woolsey had reasonable cause to suspect regarding those purposes. The second ground of appeal therefore fails.

The third ground

55. Ms Clarke submits that, even if the loan agreement was a regulated agreement, it was exempt from the provisions relied upon by Mr and Mrs Payne by reason of section 74(1)(a) of the CCA 1974.
56. Section 74(1)(a) provides as follows:

"Exclusion of certain agreements from Part V.

(1) Except as provided in subsections (1A) to (2), this Part does not apply to -

(a) a non-commercial agreement".

57. A "non-commercial agreement" is defined in section 189(1) as:

"a consumer credit agreement or a consumer hire agreement not made by the creditor or owner in the course of a business carried on by him."

58. Section 189(2) provides:

"(2) A person is not to be treated as carrying on a particular type of business merely because occasionally he enters into transactions belonging to a business of that type".

59. The Chief Registrar dealt with this issue immediately after his findings about section 16B(3). He said:

"[46] That being the case, the agreement of 14 December 2012 must have been regulated. It follows that Mr Woolsey was in all probability carrying on a lending business, and in the absence of evidence that he was licensed to do so, I am entitled to infer that he was not in fact licensed and I do so."

60. Ms Clarke submits that this paragraph discloses an error of law by the Chief Registrar because it does not follow from his conclusion that the loan agreement must have been regulated that Mr Woolsey was in all probability carrying on a lending business.
61. I agree with Ms Clarke. I cannot see how it follows from the Chief Registrar's conclusion that the loan agreement must have been regulated that Mr Woolsey was in all probability carrying on a lending business. The mere fact that the loan agreement was regulated does not mean Mr Woolsey was carrying on a lending business. It seems to me the question whether Mr Woolsey was carrying on a lending business requires, first, findings of fact, then a consideration of the relevant statutory provisions, and then application of those provisions to the facts found to see whether or not the loan agreement was "made by the creditor....in the course of a business carried on by him" as set out in the definition of a "non-commercial agreement". The Chief Registrar does not carry out that exercise in paragraph [46].
62. Mr Flower argues that the Chief Registrar's finding in [46] was clearly based upon his consideration of the submissions and evidence as to Mr Woolsey's history of dealings which was before the Court as recorded in [29] to [32]. However, that is not what the Chief Registrar said in [46]. Rather, the Chief Registrar simply said that one conclusion flows from another. There is no reference in [46] to the evidence and submissions which he recorded in [29] to [32], let alone an assessment and analysis of that evidence and those submissions. Nor is there any analysis of the statutory provisions to see whether they apply to the facts. Nor is there any such analysis in [29] to [32].
63. I therefore agree with Ms Clarke that [46] discloses an error of law because the Chief Registrar has not applied the statutory provisions set out above. Accordingly, it falls to me to apply those provisions. Again, as I read the Chief Registrar's summary of the facts it does not deal with all the matters in the skeletons and the witness statements and so I must examine the skeletons and the statements. I will then have to apply the statutory provisions. In doing that I will have to consider the judgment of Popplewell J in Bassano v. Toft and Others [2014] EWHC 377 (QB) which Ms Clarke relied upon as casting light on the meaning of "in the course of a business". I will then address the matters raised by the parties in their supplemental skeletons sent to me after the hearing.
64. I start with Mr Woolsey's version of events. As set out in Ms Clarke's skeleton for the hearing before me, Mr Woolsey relies upon the fact that his business is that of a property developer and not of a money lender. Mr Woolsey had a longstanding friendship with Mr Payne. He says that he did not make the loan in the course of his business, but because he was a friend of the Paynes and had the means to assist them. He says that the non-commercial nature of the arrangement is evident from various facts including the following. The loans were sought by Mr Payne informally, often in the form of informal texts or e-mails. Also, Mr Woolsey originally advanced substantial loans to Mr Payne without written documentation. The loan agreement was only prepared to secure his position in the light of previous difficulties in obtaining repayment from Mr Payne. Although the loan agreement provided for interest, the rate was suggested by Mr Payne.
65. In contrast, as set out in Mr Flower's skeletons, including his skeleton for the hearing below which he relied upon before me, Mr and Mrs Payne identified a number of factors which they say negated Mr Woolsey's assertion that this was an act of friendship. So, reference was made to there being over £250,000 loaned previously by Mr Woolsey to Mr Payne upon punitive rates of interest including default interest of some £33,000. Reference was also made to Mr Payne's evidence that there was an additional £1,000 per month in interest payable under the earlier loan in 2010. It was pointed out that, as interest was payable under the loan agreement, the effect was that the default interest under the 2010 loan had been compounded by the present interest rate. It was said that that was not the act of someone assisting a friend, nor was it altruism. It was also pointed out that the current loan was supported by a professionally drafted loan agreement which was expressly drafted to comply with the CCA 1974 so as to exclude the loan being regulated by it. If Mr Woolsey really was acting simply out of friendship and not in the course of business then, asked Mr Flower, why was it necessary for him to exclude the loan agreement from regulation under the CCA 1974 if the loan would, in any event, not be regulated. It was pointed out that the rate of interest was in the region of 24% and that very strict terms were included to ensure that the monthly payments of £6,000 were made. Also, clause 5 contained what Mr Flower called "extraordinarily extortionate default interest rates". Further, it was pointed out that Mr Woolsey had also agreed to lend £500,000 to assist Mr Nicholson and Mr Patrick to purchase shares in the company. Reference was also made to the fact that a particular fee was paid by Mr Woolsey to his own bank which, it was said, suggested that Mr Woolsey was borrowing money from his own bank to lend to Mr Payne. Mr Flower told me, and I accept, that if, or when, enforcement proceedings were brought in the County Court, he would want to cross-examine Mr Woolsey as to what his business was and the extent to which his business included lending money and explore some of the above matters with him.
66. It seems quite clear to me, simply from the positions in the rival skeletons as summarised above, that there is a serious conflict between the parties as to whether Mr Woolsey's action in lending the money under the loan agreement was an act of friendship and altruism or whether it was a piece of hard nosed business. When I examine the witness statements, the conflict is confirmed by those statements.
67. In paras. 12 to 27 of his first witness statement Mr Woolsey refers to the different loans which he made to Mr Payne. In 2009 he lent £150,000 to be repaid in full by December 2010. In November 2010 he lent an additional £35,000 to be repaid by 18 December 2010. That loan was extended to March 2011. That loan was extended again in the sum of £255,000 (said by Mr Woolsey to represent the sums already paid plus further interest) plus interest to be repaid by 30 June 2011. Also, Mr Woolsey was to lend £500,000 to two individuals to enable them to buy into the practice. This did not take place due to the results of his accountants' investigation into the books. In 2011/12 the date for repayment of outstanding interest was put back to a later date. In November 2012 a further £50,000 was advanced pending completion of the formal loan documentation which became the loan agreement.
68. In para. 24 of her first witness statement, Mrs Payne relies on the number of transactions since 2009 and the total borrowing in excess of £250,000. She also relies on the fact that the lending has been on what she called commercial terms as to interest and that Mr Woolsey has sought to claim default interest. She also relies upon the charge and loan documentation drawn up by Mr Woolsey's Solicitors. She also draws attention to the fact that Mr Woolsey has sought to pass on fees, including a bank arrangement fee of £1,800 which, she says, shows that Mr Woolsey was borrowing money from a bank to lend it under the loan agreement. In para. 4 of his first witness statement Mr Payne adopts para. 24 of his wife's first statement. Then in para. 39 of his second witness statement Mr Payne refers again to the bank arrangement fee paid, he says, by Mr Woolsey to borrow money from Coutts to lend to Mr Payne.
69. With these matters in mind, I come back to the provisions of section 74(1)(a). The question is whether Mr and Mrs Payne have raised a dispute on substantial grounds that the loan agreement is not a non-commercial agreement within the meaning of that section. This depends on whether the loan agreement was "made by [Mr Woolsey] in the course of a business carried on by him".
70. It is convenient at this stage to mention Bassano which was relied upon by Ms Clarke. In paragraphs [32] to [33] of Bassano, Popplewell J considered what is meant by transactions occurring "in the course of" a business. He said this:

"[32] ......Transactions are not to be regarded as occurring "in the course of" a business unless they have some degree of regularity such that they form part of the normal practice of the business. In Davies v Sumner [1984] 1 WLR 1301 a self employed courier used his car almost exclusively for his business. He sold the car falsely stating that it had done 18,000 miles when its true mileage was 118,000 miles. His conviction for applying a false trade description to the vehicle "in the course of a trade or business" contrary to s. 1(1) Trade Descriptions Act 1968 was quashed by the Divisional Court whose decision was upheld by the House of Lords. Lord Keith said:

"Any disposal of a chattel held for the purposes of a business may, in a certain sense, be said to have been in the course of that business, irrespective of whether the chattel was acquired with a view to resale or for consumption or as a capital asset. But in my opinion section 1(1) of the Act is not intended to cast such a wide net as this. The expression "in the course of a trade or business" in the context of an Act having consumer protection as its primary purpose conveys the concept of some degree of regularity, and it is to be observed that the long title to the Act refers to misdescriptions of goods, services, accommodation and facilities provided in the course of trade. …….."

[34] The same principle was applied to the Consumer Credit Act licensing provisions by the Court of Appeal in Hare v Schurek [1993] CCLR 47 (1993) GCCR 1669. Section 40 in its then form rendered regulated agreements by unlicensed creditors unenforceable unless they were "non-commercial agreements" which bore the definition then, as now, in section 189(1) as meaning "a consumer credit agreement …….not made by the creditor or owner in the course of a business carried on by him" . The Court held that if the transaction between the parties was "one off" or "of a type only occasionally entered into by the applicant in the course of his motor trade business" or "unique or a manifestation of occasional transactions" it did not fall within the licensing requirements because it was not made in the course of a business. This conclusion was supported by s.189(2) which provides "A person is not to be treated as carrying on a particular type of business merely because occasionally he enters into transactions belonging to a business of that type." Mann LJ observed that such a conclusion was consonant with the purpose of the Act which is to regulate those who carry on particular forms of business as a trade or profession. See also Goode: Consumer Credit Law & Practice Issue 41 para 23.141 which in my view correctly summarises the position and how the judgment of Mann LJ in Hare v Schurek is to be interpreted. An occasional or one off consumer credit transaction does not require the creditor to be licensed because it is not carried out in the course of any business, whether consumer credit business or any other business.

71. Applying the approach of Popplewell J, in my judgment, there is a substantial dispute between the parties as to whether or not the loan agreement is a non-commercial agreement and whether it was made by Mr Woolsey in the course of a business carried on by him. Just looking at the number of different loans, and extensions of repayment dates over the period of 2009 to November 2012 it seems to me that, as Mr Flower argued, it could be said that the loan agreement was not simply an occasional transaction but was part of a pattern of lending. The sequence of loans to Mr Payne I have described in paras. 64 to 68 can be argued to be more than just "one-off" or occasional loans. Depending upon precisely what was involved in the possible loan to the two accountants that loan may, or may not, provide further support for this argument. The features of the loan agreement relied upon by Mr Flower may also provide further support. As Mr Flower says, some of the rates of interest are punitive. It may be that this is due to Mr Payne's poor record as a payer and is compensation for risk. Or, it may be that it evidences a business.
72. Simply looking at the witness statements without the benefit of cross-examination, I cannot say that the loan agreement was not made in the course of a business carried on by Mr Woolsey. There are matters which, in my judgment, Mr Flower legitimately wants to explore in cross-examination with Mr Woolsey. They include whether the proposal to lend to the two accountants was just an act of friendship to help Mr Payne, or whether it is evidence of a wider lending business being carried on by Mr Woolsey and whether, and if so why, Mr Woolsey was borrowing money from Coutts to lend to Mr Payne.
73. It is convenient to deal at this stage with the matters raised by Ms Clarke and Mr Flower in their helpful supplemental skeletons sent to me after the hearing. During the course of argument, I raised the question whether there were any authorities on the interpretation of "occasionally" in section 189(2). Following the hearing Ms Clarke identified two authorities: Tamimi v. Khodari [2009] EWCA Civ 1109 which considers section 189(2) of the CCA 1974; and Helden v. Strathmore Ltd [2011] EWCA Civ 542 which considered Tamimi in the context of different statutory provisions.
74. In Tamimi the discussion by the Court of Appeal of section 189(2) is at paras. [32] to [38]. It was held that the loans, of which at one stage there were 18 totalling £1,125,000 within a five month period, were on any view more than occasional: see [33]. However, as both Counsel agree this does not bind me to find, one way or the other, the question whether the loan to Mr and Mrs Payne was made by Mr Woolsey in the course of a business. I can see that Ms Clarke gains some support from this part of Tamimi for her argument that the loans in this case were occasional. However, for the reasons set out in para. 71 above. I still consider that Mr Flower may arguably be able to establish that like the various loans made by Mr Woolsey were more than occasional. I cannot say that Mr Flower's argument is fanciful, shadowy or speculative.
75. The Court of Appeal then went on in [36] and [37] to draw a "balance sheet" of features indicative of a business and contra-indicative of a business. Indications of the former were: (a) the frequency, (b) period, (c) size and (d) profit involved in the loans. Indications of the latter were: (a) that they were made to only one person, (b) were ad hoc, (c) were to foster goodwill, (d) would not have been made to anybody with whom the Claimant was acquainted, (e) were not recorded in writing, (f) had no security, (g) had no time for repayment, (h) that the fee was not related to the time each loan remained outstanding and (i) that the Claimant had no business premises. The Judge at first instance weighed the rival features and concluded that the Claimant did not make loans in the course of a business. The Court of Appeal held that the Judge was entitled to infer that the Claimant did not make loans in the course of a business.
76. In his supplemental skeleton Mr Flower homes in on this "balance sheet" approach and says that three of the matters identified as indicative of a business apply equally in this case, i.e. (a), (b) and (d). He also relies on five matters from the list of contra-indications as supporting his case. They are (d) due diligence; (e) the professionally drafted loan agreement; (f) the security; (g) the repayment schedule; and (h) the fee. He says that in this case, unlike Tamimi, all these five matters are present and support his case.
77. Mr Flower says that the approach in Tamimi and the factors to be taken into account make it clear that this issue is one which is not suitable for determination on a summary basis. I agree with Mr Flower. It seems to me that the balance sheet approach can only be applied after the facts have been found at a trial. At present each side can rely upon some factors in the list of indications and contra-indications. At present, Mr and Mrs Payne have an arguable case on the balance sheet approach. However, without findings of fact being made at trial after the rival recollections have been tested in cross-examination, the final balance sheet cannot be drawn.
78. As to Helden, this concerned the definition of "carried on by way of business" in article 3A of the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001, SI 2001/1177. Ms Clarke very properly points out that the issue was different to that in this case, but draws my attention to the fact that Tamimi was cited.
79. Lord Neuberger MR referred to Tamimi at [39] and said this:

"In my view, that case helps to the extent of emphasising the point that, whether a person carries on the business of engaging in a specific activity is a matter of secondary fact, an inference, which is essentially for the trial judge, who must determine the issue by reference to all the relevant facts of the case."

80. Mr Flower argued that what Lord Neuberger MR said supported Mr and Mrs Payne's case because there were cogent arguments on both sides which can only be determined properly by a trial once all the facts of the case have been explored. I agree. Until findings of fact are made about, for example, other possible loans such as to the two accountants and whether money was borrowed from Coutts to be loaned to Mr Payne, it cannot be determined whether or not the loan agreement was a non-commercial agreement.
81. Both Counsel agreed that these authorities do not bind me to find that Mr Woolsey either was or was not carrying on a business. However, I do agree with Mr Flower that the two authorities show that, on the skeletons and witness statements before me, there are cogent arguments on both sides which, as Lord Neuberger MR said in Helden, raise issues that can only be determined by reference to all the relevant facts of the case. The series of loans described earlier can be argued to be more than just "one-off" or occasional loans. When one brings into the mix the other points made by Mr Flower such as the reason for the inclusion of the section 16B declaration, the punitive rates of interest, the fee from Mr Woolsey's bank and so on, he gains more support for his argument. It may be that, after a full examination of the facts in the light of disclosure and cross-examination, Mr Woolsey will establish that the loan agreement was indeed a non-commercial agreement but, at this stage, it seems to me that Mr and Mrs Payne have raised a dispute on grounds that are substantial. I agree with Mr Flower that I cannot resolve this dispute on a summary basis. It needs to be resolved at a trial with the benefit of disclosure and cross-examination so that the trial judge can draw up the sort of balance sheet mentioned in Tamimi. It may be that Mr Woolsey will then establish that the balance sheet lies in his favour, but what I cannot say at this stage is that Mr and Mrs Payne have no realistic prospect of establishing the contrary.
82. It follows that the third ground of appeal also fails.

Conclusion

83. In summary, my decision is as follows. On the first ground, I follow the approach of Neuberger J (as he then was) in Guinan. On the second and third grounds, I accept both Ms Clarke's legal points, (i.e. that the Chief Registrar adopted too narrow an interpretation of section 16B(3) and that he did not apply the statutory provisions in para. [46] of his judgment). However, even applying the approach on the law argued for by Ms Clarke, I consider that there are substantial disputes between the parties on the facts which need to be decided in order to resolve these two grounds. These disputes cannot be resolved on these applications on a summary basis. The appeals therefore fail. I invite Counsel to agree an order to give effect to my judgment.