Nolan v Wright
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Hodge QC |
| Judgment Date | 26 February 2009 |
| Neutral Citation | [2009] EWHC 305 (Ch) |
| Docket Number | Case No: M8X054, 7MA90040 |
| Court | Chancery Division |
| Date | 26 February 2009 |
[2009] EWHC 305 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
ON APPEAL FROM DISTRICT JUDGE NEEDHAM
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
His Honour Judge Hodge QC
Sitting as a Judge of the High Court
Case No: M8X054, 7MA90040
Mr Clive Freedman QC and Mr Pepin Aslett (instructed by Bishop & Co) for the Claimant/Appellant
Miss Lesley Anderson QC and Mr Nigel Clayton (instructed by Blacks) for the Defendant/Respondent
Hearing dates: Tuesday 17 th & Wednesday 18 th February 2009
His Honour Judge Hodge QC:
In this case I have to decide whether an attempt to reopen a credit agreement as an extortionate credit bargain under sections 137 to 140 of the Consumer Credit Act 1974 is an action upon a specialty for which the relevant limitation period under section 8 of the Limitation Act 1980 is 12 years. It might have been thought that this point had been decided, at least up to the level of the House of Lords, by the decision of the Court of Appeal in the case of Rahman v Sterling Credit Ltd [2001] 1 WLR 496 (“ Rahman”). But in the later case of Paragon Finance Plc v Nash [2001] EWCA Civ 1466, [2002] 1 WLR 685(“ Paragon”) it was submitted that the Rahman decision had proceeded on the basis of a concession by counsel, and that the case was wrongly decided insofar as it held that the 1980 Act had any application at all to a claim to reopen an extortionate credit bargain. Happily for the Court of Appeal in Paragon, Dyson LJ (with whose judgment both Thorpe LJ and Astill J agreed) found it unnecessary to decide the limitation point, and he declined the invitation to do so: see paragraph 70. Unhappily, in this case that course is not available to me because Miss Lesley Anderson QC (who appears for the defendant and respondent to this appeal, Mr Wright, together with Mr Nigel Clayton of counsel) revives the submission that was advanced in Paragon that a claim to reopen an extortionate credit bargain is not a claim for substantive relief to which any period of limitation applies. For Mr Nolan, the appellant, Mr Clive Freedman QC (who appears with Mr Pepin Aslett of counsel) submits that Rahman is determinative of this issue, that it was correctly decided, and that Mr Wright's claim to invoke the provisions of the 1974 Act relating to extortionate credit bargains is statute-barred.
This is an appeal from a decision of District Judge Needham in a claim by a moneylender. In a reserved judgment handed down in writing on 21 April 2008, the district judge dismissed the claimant's application for summary judgment under CPR 24. At a hearing on 12 September 2008 I granted the claimant permission to appeal; and I directed that, at the hearing of the appeal, the appeal court should decide, as a preliminary issue, the question of whether the claim by the defendant borrower to reopen the credit agreement as an extortionate credit bargain was statute-barred. It seemed to me that, provided it was still open to the defendant to challenge the credit agreement as an extortionate credit bargain, that was an issue that could only be determined at a full trial after hearing oral evidence; and that, in such circumstances, for that reason alone the appeal should fall to be dismissed. In that event, it seemed to me that it would be undesirable that I should express any view on the other arguments raised by the claimant in support of his appeal for two reasons: First, because, if the case had to go for trial on the issue of whether the credit agreement was an extortionate credit bargain, the trial judge should not be fettered in his approach to the evidence, and in making relevant findings of fact, by any views that I had expressed, or conclusions that I had reached, as a result of a hearing conducted entirely on written evidence. Secondly, because, having acceded to the defendant's submission that I should dismiss the appeal and send the matter for trial, it would be wrong for me to proceed to adjudicate upon the claimant's challenge to the individual grounds of defence raised by the defendant in circumstances where, ex hypothesi, my decision would be irrelevant to the outcome of the appeal, and where, if any issue should fall to be resolved against the defendant, he might find it difficult effectively to challenge my decision. In other words, at the time of the September hearing, I contemplated that the decision on the preliminary issue might be determinative of the outcome of the appeal. In the event, that has proved not to be the case.
The background
The claim was commenced on 7 February 2007 for the recovery of £973,627.35 from the defendant pursuant to an unregulated credit agreement dated 14 November 1994 and a legal charge dated the following day. (The property which is the subject of that charge, 12 Poplar Grove, Knottingley, West Yorkshire, was repossessed by the claimant in February 2007 and forms no part of this action.) The principal sum originally advanced to the defendant was £16,000; and it is common ground that on or about 23 October 1995 £5,000 was repaid from the sale proceeds of one of two other properties that had been charged to the claimant as part of the original loan transaction. However, under the terms of the loan agreement interest fell to be paid at the rate of 3% per calendar month, compounded monthly (equivalent to an APR of 42.5%). Thus, by the time the matter came before the district judge in February 2008, the claim exceeded £1 million.
The defence puts the whole purported basis of the transaction at issue. It is the defendant's case that he was induced by the claimant and one Nigel Thompson (who was later convicted for some unrelated fraud) to transfer moneys totalling some £48,000, and derived from pension funds he had invested with Allied Dunbar and Scottish Widows, into the Basdring Pension Scheme, a self-administered occupational pension scheme of which the claimant was one of the trustees (until he was removed on 7 April 1998 by the relevant regulatory body) on the footing that £16,000 would be returned to the defendant in order to assist him in the purchase of 12 Poplar Grove on terms that, on the eventual sale of that property, the defendant would pay 36% of the net sale proceeds to the Basdring Pension Scheme together with a further 6% to the claimant and Mr Thompson in respect of “administrative costs”, and that the defendant would retain the balance of the net sale proceeds for himself. The defendant says that, at the insistence of the claimant and Mr Thompson, the transaction that was recorded in the loan documentation was “dressed up” as a secured loan from the claimant in his capacity as a financier and moneylender. By his defence and counterclaim, the defendants seeks to set aside the loan documentation as a sham, or as having been procured by undue influence and/or misrepresentation on the part of the claimant; and he also seeks to have it set aside or reopened as an extortionate credit bargain.
Before the district judge, the claimant was represented by Mr Michael Booth QC, leading Mr Aslett, and the defendant was represented by Mr Clayton. The claimant relied upon his witness statements dated 24 January and 27 February 2008. The defendant relied upon witness statements from himself and from Bryan Howard Smith both dated 13 February 2008. The defendant later made a second witness statement dated 7 March 2008 confirming certain further matters of fact upon which his counsel had relied in the course of his address. At the hearing of the appeal, and without objection from either party, I allowed applications to adduce additional evidence in the form of witness statements (with exhibited documents) from the claimant (dated 19 September 2008) and from the defendant's solicitor, Yat Hung Wong (dated 11 February 2009).
The preliminary issue
I turn first to the relevant statutory provisions. Section 137 (1) of the Consumer Credit Act 1974 provides that: “If the court finds a credit bargain extortionate it may reopen the credit agreement so as to do justice between the parties.” Section 138 sets out the circumstances in which a credit bargain may be found to be extortionate. Section 139 is concerned with the reopening of credit bargains. In particular, section 139 (1) provides that: “A credit agreement may, if the court thinks just, be reopened on the ground that the credit bargain is extortionate—(a) on an application for the purpose made by the debtor or any surety to the High Court, county court or sheriff court; or (b) at the instance of the debtor or a surety in any proceedings to which the debtor and creditor are parties, being proceedings to enforce the agreement, any security relating to it or any linked transaction; or (c) at the instance of the debtor or a surety in other proceedings in any court where the amount paid or payable under the credit agreement is relevant.” The powers available to a court in reopening an extortionate credit bargain are set out in section 139 (2). They include (a) directing accounts to be taken, (b) the setting aside in whole or in part of any obligation imposed on the debtor, (c) requiring the creditor to repay the whole or part of any sum paid, (d) directing the return to the surety of any property, and (e) altering the terms of the credit agreement or any security instrument.
No limitation period is stipulated in the 1974 Act, so if there is an applicable limitation period, it must be found in the Limitation Act 1980. Section 8 prescribes the time limit for actions on a specialty. By sub-section (1) “an action upon a speciality shall not be brought after the expiration of 12 years from the date on which the cause of action accrued”. It is common ground that an action upon a specialty includes an action upon a...
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