Wilson & Anor v Hurstanger Ltd

Under paragraph 5 of Schedule 6 to the Consumer Credit (Agreements) Regulations 1983, an agreement need only state how repayment obligations are to be discharged. It may use several terms or methods and need not state the repayment amount expressly.

Paragraph 13 of Schedule 1 imposes a more precise requirement. The amount must be expressed as money, a specified proportion, or, only where those methods cannot be used, by stating how it will be determined. A rate of interest alone is insufficient where the amount can be expressed. A broker-paid commission requires the borrowers’ informed consent following full disclosure. Notice that commission may be paid can negate secrecy without obtaining informed consent, leaving a fiduciary breach for which equitable compensation may be awarded instead of rescission.

Mr Wilson and Ms Burton obtained an £8,000 regulated loan from Hurstanger Ltd through a broker. The lender paid the broker both the agreed arrangement fee and a further £240 commission. The loan agreement stated that £295 in legal costs would be debited to the loan balance and could be deferred with interest.

On appeal from Coventry County Court, the borrowers challenged the finding that the agreement contained the prescribed repayment term required by Schedule 6. Hurstanger challenged the finding that it did not state the amount of each repayment as required by Schedule 1. The defendants also challenged the rejection of their secret-commission claim. The central issues concerned the agreement’s compliance and the consequences of the lender-paid commission.

1. Consumer credit appeals dismissed. Lord Justice Tuckey gave the judgment, with Lord Justice Jacob and Lord Justice Waller agreeing. The Consumer Credit Act 1974 and the Consumer Credit (Agreements) Regulations 1983 distinguish prescribed terms governing enforceability from more detailed information requirements.
2. Schedule 6 paragraph 5 requires the agreement to state how the debtor is to discharge repayment obligations. The requirement permits combinations of the listed methods, or any other method, and does not require one single term. The agreement’s boxes and accompanying wording sufficiently explained repayment of the £8,000 and the deferred £295. No express amount was required under paragraph 5. The observation in McGinn v Grangewood Securities Limited [2002] EWCA Civ 522 that the amount of deferred payments should be stated was obiter and required qualification. The general statement in O’Hagan v Wright [2001] NICA 26 about fairly precise information did not assist against the regulations’ specific requirements.
3. Schedule 1 paragraph 13 imposed the stricter obligation to state the amount of each repayment as a sum, a specified proportion, a combination of those forms, or, only where those forms were unavailable, the manner of determination. The agreement required payment of £295 plus interest because collection was deferred. Stating an interest rate did not state the amount or a specified proportion and left the calculation to the borrower. The lender’s appeal therefore also failed.
4. The broker was the defendants’ fiduciary agent. Receiving commission from the lender created a conflict, and the lender knowingly paying it was an accessory to the breach. The agent bore the burden of proving informed consent based on full disclosure of all material circumstances and the nature and extent of the interest. The notice that commission might be paid negated secrecy, consistent with Shipway v Broadwood [1899] 1 QB 369, but it did not obtain informed consent because it failed to state clearly that commission was to be paid, its amount, and the possible effect on impartial advice.
5. This was therefore a partial-disclosure or half-way case, not a true secret commission case. The full remedies associated with a secret commission, discussed in Mahesan v Malaya’s Housing Society [1979] AC374 and Panama & South Pacific Telegraph Co. v India Rubber, Gutta Percha, and Telegraph Co. [1875] 9 Ch App 515, were unavailable. Following Johnson v E.B.S. Pensioner Trustees Limited [2002] Lloyd's Reps. PN 309, rescission for breach of fiduciary duty was discretionary. The court awarded £240 with simple interest at 1.29% per month from 5 August 2003, but refused rescission of the loan and charge as unfair and disproportionate. The secret-commission appeal was allowed.

1. Court of Appeal (Civil Division): In [2007] EWCA Civ 299, dismissed both consumer credit appeals, allowed the secret-commission appeal, and awarded £240 plus interest.
2. Coventry County Court: Mr Recorder Michael Douglas Q.C. held that the agreement contained the prescribed Schedule 6 repayment term but did not state the repayment amount required by Schedule 1. He ordered enforcement on terms and made an order for possession, while rejecting the secret-commission claim.