Nolan v Wright

A claim to reopen an extortionate credit bargain under the Consumer Credit Act 1974 is a statutory cause of action and an action upon a specialty. It is therefore subject in principle to the 12-year limitation period in section 8 of the Limitation Act 1980, running from entry into the credit agreement. A claim expressly seeking repayment of money previously paid is subject instead to the six-year period in section 9. The form of pleading does not alter the substance of the claim. Summary judgment should not be granted where unexplained features, allegations of fraud or sham transactions, and disputed evidence require full investigation at trial. A debt claim founded on a deed is not statute-barred under section 8 if brought within 12 years.

The claimant appealed from District Judge Needham’s refusal to grant summary judgment in a claim for more than £973,000 under an unregulated credit agreement and legal charge. The defendant alleged that the transaction was a sham or had been procured by undue influence or misrepresentation, and alternatively sought to reopen it as an extortionate credit bargain.

The appeal raised a preliminary limitation issue concerning sections 137 to 140 of the Consumer Credit Act 1974. It also challenged the district judge’s conclusion that the factual and legal issues required a trial. The central questions were whether the defendant’s statutory claim was time-barred and whether the claimant had shown that the defences had no real prospect of success.

1. Limitation of the statutory claim. The court was bound by Rahman v Sterling Credit Ltd [2001] 1 WLR 496. Its ratio was that a claim to reopen an extortionate credit bargain under section 139 of the Consumer Credit Act 1974 is a statutory cause of action and an action upon a specialty for section 8 of the Limitation Act 1980. The limitation period is 12 years from the date of the credit agreement.
2. The limitation period depends on the relief claimed. A claim for repayment of sums already paid is governed by section 9 and attracts a six-year period. The court rejected the argument that a claim pleaded as part of a defence falls outside the Limitation Act 1980; substance, rather than form, is decisive.
3. The cause of action accrues on entry into the credit agreement. This was consistent with the statutory source of the right and with the approach in Paragon Finance Plc v Nash [2001] EWCA Civ 1466, which required extortionateness to be assessed at the date of the bargain. Section 32 of the Limitation Act 1980 did not ordinarily assist the extortionate-bargain claim, although the possible application of section 32(1)(b) remained fact-sensitive and was not precluded if the matter otherwise proceeded to trial.
4. Summary judgment. The district judge was entitled to conclude that the case required a trial. The disputed account, alleged sham documentation, pension transfers, delayed enforcement, and exceptionally high claimed interest created substantial matters requiring cross-examination and disclosure. The court should not conduct a mini-trial or make tentative assessments of credibility where the claim and defence contain unexplained features bearing on their truthfulness. The approach was consistent with Extraktionstechnik Gesellschaft fur Anlagenbau GmbH v Oskar (1984) 128 SJ 417.
5. The appeal was dismissed. The statute-barred plea concerning recovery of the alleged debt was struck out because the legal charge was executed as a deed and the claim was brought within 12 years. The defendant’s claim to reopen the credit agreement was statute-barred, subject to the possible section 32(1)(b) issue. Costs were reserved for further submissions.

• High Court (Chancery Division): On appeal from District Judge Needham, the appeal was dismissed except that the plea alleging that the claimant’s debt claim was statute-barred was struck out.