Bassano v Toft & Ors

A defective bill of sale does not allow a borrower to retain money advanced under an otherwise valid loan agreement. A one-off loan transaction is not made in the course of a consumer credit business merely because the lender records it through another business. An electronic act such as clicking an acceptance button may constitute a signature where it authenticates the agreement and is made in the prescribed space. A pledgee does not lose its security merely by surrendering physical custody. The security continues unless the pledgee voluntarily surrenders its special interest, or a superior third-party property interest intervenes.

The claimant obtained successive loans secured or intended to be secured on a valuable viola. The first defendant sought repayment of a loan made in 2010. The third defendants sought repayment of a later pawnbroking loan and priority against the sale proceeds of the viola.

The claimant relied on the Consumer Credit Act 1974, challenging the enforceability of the first defendant’s loan and the execution of the third defendants’ online agreement. She also contended that the third defendants had lost their pledge by allowing the viola to pass through dealers and into court-supervised sale. The central issues were whether the loans were enforceable and whether the pledge survived the loss of physical custody.

1. First defendant’s loan. The chattel mortgage was void and its repayment covenant unenforceable because it failed to comply with the Bills of Sale (1878) Amendment Act 1882. Nevertheless, the parties had made an independent express loan agreement, supported by the loan document, the mortgage terms and the claimant’s payment of interest. The money was therefore repayable.
2. The loan was not exempt under section 16B of the Consumer Credit Act 1974. The claimant’s status as a professional musician did not establish that the loan was predominantly for business purposes. However, the lender’s unchallenged evidence showed that this was a one-off loan. Applying Davies v Sumner [1984] 1 WLR 1301 and Hare v Schurek [1993] CCLR 47; (1993) GCCR 1669, it was not made in the course of a consumer credit business and was a non-commercial agreement. Part V therefore did not prevent enforcement.
3. The court stated that, alternatively, it would have exercised its discretion under sections 65 and 127 to enforce the agreement. The claimant suffered no real prejudice, the terms were clear, and the lender’s culpability was limited.
4. Electronic signature. Clicking “I Accept” generated an unalterable agreement bearing the claimant’s typed name and communicated her intention to be bound. It was therefore a signature for section 61 purposes. The words “I Accept” occupied the designated signature space and satisfied regulation 4(3)(a) of the Consumer Credit (Agreements) Regulations 2010. The agreement was properly executed.
5. Pledge. A pledgee’s special interest is not lost by every physical transfer. Delivery to an agent for safekeeping, demonstration or sale may be merely a transfer of custody. An unauthorised transfer by the agent is not a voluntary surrender by the pledgee. The interest is defeated only by a superior third-party property claim or a voluntary surrender of the pledgee’s special interest in circumstances inconsistent with its preservation.
6. Borro’s deliveries to Bishop and Sotheby’s were consistent with preserving and realising its security. Bishop’s unauthorised delivery to another dealer was not Borro’s voluntary surrender. Borro therefore retained its priority security interest. Mr Toft’s claim succeeded for £100,000 plus contractual interest, and Borro’s claim succeeded for £130,000 plus interest, payable from the sale proceeds in priority to Mr Toft.