Rahman v Sterling Credit Ltd

An application to reopen an extortionate credit bargain under section 139 of the Consumer Credit Act 1974 is a statutory cause of action. Relief involving discharge or reduction of future liability is an action upon a specialty and falls within the 12-year period in section 8 of the Limitation Act 1980. A claim for repayment of sums already paid may instead attract the six-year period in section 9. A possession order does not end enforcement proceedings while possession remains unexecuted and further enforcement requires court process. The court may permit a Part 20 counterclaim where it is connected with the security claim and serves the overriding objective. Delay may be considered at trial, but does not alone bar permission. Issue estoppel does not apply where the extortionate-bargain issue was never determined.

Greyhound Credit Limited lent Mr Rahman and his wife £5,000 secured by a legal charge over their home. A possession order was made in 1990, but possession was never obtained and instalments continued to be paid. The charge was later assigned to Sterling Credit Limited.

In 1998 Mr Rahman sought permission to raise an extortionate-credit-bargain claim under section 139 of the Consumer Credit Act 1974. The District Judge refused relief and permission to counterclaim. HHJ Bradbury dismissed the appeal on the preliminary ground that the possession proceedings had ended. The Court of Appeal considered limitation, the effect of the unexecuted possession order, permission for a counterclaim, delay and issue estoppel.

Lord Justice Mummery delivered the judgment, and Lord Justice Simon Brown agreed. The appeal was allowed.

1. Limitation. The Consumer Credit Act 1974 contains no limitation period for section 139 applications. Applying the reasoning in Collin v Duke of Westminster [1985] QB 581, the statutory right to reopen the bargain derives solely from statute and is an action upon a specialty. A claim seeking reopening and relief from future payments therefore falls within section 8 of the Limitation Act 1980 and its 12-year period. The line of county-court decisions following First National Bank plc v Ann was incorrect to the extent that it subjected all section 139(2) claims to six years. A claim for repayment of sums already paid may fall within section 9 and its six-year period.
2. Unexecuted possession order. The making of a possession order, without present challenge to it, did not end the proceedings. Unlike CSI International Co Ltd v Archway Personnel [1980] 1 WLR 1069, the judgment had not been satisfied. The Rahmans remained in possession, Sterling continued accepting instalments, and enforcement required a further warrant because the existing warrant had expired. Those remained proceedings to enforce the security within section 139(1)(b). Section 139(4), reflecting Cohen v Jonesco [1925] 1 KB 119, prevented alteration of the existing possession judgment, but did not prevent relief concerning future payment obligations.
3. Permission and case management. The Civil Procedure Rules applied to the appeal, following Biguzzi v Rank Leisure plc [1999] 1 WLR 1926. Permission under Part 20 was appropriate because the proposed counterclaim was closely connected with enforcement of the charge and would avoid expense and delay. Delay alone was not a reason to refuse permission, although it could be considered at trial when assessing whether justice could be done. Issue estoppel did not apply because the extortionate-bargain issue had not been determined.
4. Permission was granted to serve the counterclaim. There was no order for costs below, and the appellant received the costs of the appeal.

1. Court of Appeal (Civil Division): appeal allowed in [2000] EWCA Civ 222; permission granted to serve a counterclaim seeking to reopen the credit bargain.
2. Bow County Court: HHJ Bradbury dismissed the appeal on 11 October 1999, holding that the possession proceedings had effectively ended.
3. Bow County Court: District Judge Naqvi dismissed the application on 23 December 1998 to set aside the possession order and seek permission to counterclaim.