Ghana Commercial Finance Ltd v Sawyer & Anor

A lender carrying on regulated consumer-credit business without the required licence cannot enforce a regulated credit agreement or linked security unless the statutory authority required by the Consumer Credit Act 1974 has been obtained. The court must take the resulting criminality and unenforceability into account of its own motion, regardless of the pleadings.

A common-law claim for unjust enrichment cannot be used to recover money where that would defeat the statutory purpose of protecting the debtor from liability. A declaration of incompatibility under the Human Rights Act 1998 does not alter the continuing force of the statutory provisions. An inconsistent first-instance decision does not bind another judge at the same level.

Barons Finance Ltd and Ghana Commercial Bunks Ltd made secured loans to Helen Sawyer and a co-borrower under regulated consumer-credit agreements. The lenders lacked the necessary consumer-credit licence. Possession orders were obtained without the court being told of that defect.

After the issue was raised, HHJ Simpkiss allowed appeals against the possession orders, dismissed the lenders’ claims, declared the agreements and charges unenforceable, ordered removal of the registered charges, and set aside related warrants and money judgments. The lenders sought a further appeal, challenging the statutory consequences, the refusal of an unjust-enrichment claim, the procedural basis for the relief, and the effect of later legal developments.

The issue was whether the proposed appeal raised an important point of principle or practice, or otherwise had a sufficient basis for permission on a second appeal.

1. Permission refused. The renewed applications did not raise an important point of principle or practice and had no realistic prospect of success.
2. The agreements were regulated agreements. Because Barons Finance and Ghana Commercial Bunks were unlicensed lenders carrying on consumer-credit business, the agreements were unenforceable under section 40 of the Consumer Credit Act 1974 in the absence of the necessary decision or order of the Office of Fair Trading. No such decision had been made or sought. The relevant provisions remained in force.
3. The finding that the lenders were not agents of Reddy Corporation was open to HHJ Simpkiss. In any event, agency would not have resolved the problem because the other companies would have been unlicensed credit brokers, engaging section 149 of the 1974 Act.
4. An unjust-enrichment claim could not be used to recover the principal. Following the reasoning in Dimond v Lovell [2002] 1 AC 384, the statutory purpose was that, subject to the court’s enforcement powers, the debtor should not have to pay. That consequence could not be reversed by a common-law remedy. The point applied with greater force where the creditor lacked the required licence.
5. The declaration of incompatibility discussed in Wilson v County Trust [2003] All ER 229 did not invalidate the relevant statutory provisions. As explained in Barons Finance and Reddy Corporation v Amir Ul Haq [2003] EWCA Civ 595, a declaration under section 4(6) of the Human Rights Act 1998 had no force to disapply the legislation; it continued to operate unless Parliament amended it.
6. The court could take the criminality of unlicensed consumer-credit business into account of its own motion. The lenders could not invoke equity or estoppel to recover money in circumstances involving criminal conduct. Removal of the unenforceable charges from the register was an inevitable and appropriate consequence, since otherwise they could impede dealings with the properties.
7. A different decision by HHJ Birtles, ordering repayment notwithstanding unenforceability, was not binding on HHJ Simpkiss. The question was whether that decision was correct.

• County Court: HHJ Simpkiss allowed the borrowers’ appeals against possession orders, dismissed the lenders’ claims, declared the agreements and charges unenforceable, ordered removal of the charges from the register, and set aside warrants and money judgments.
• Court of Appeal (Civil Division): Lord Justice Christopher Clarke refused the renewed applications for permission to bring a second appeal.