NRAM Plc v McAdam & Anor

Where a contract expressly states that it is regulated under legislation, the parties may incorporate the legislation contractually even though the statutory regime does not apply to the agreement. The incorporated provisions must be relevant and capable of contractual application; provisions depending on the court’s special statutory jurisdiction are excluded. The incorporation normally includes amendments made from time to time where the contract is tied to an evolving regulatory regime. The agreement may therefore require the parties to treat the transaction as regulated, whether or not it is legally regulated. A shared assumption of law may also support contractual estoppel or estoppel by convention, but estoppel cannot confer jurisdiction on the court.

NRAM sought declarations concerning approximately 41,000 unsecured loans exceeding the statutory £25,000 threshold for regulation under the Consumer Credit Act 1974. The loans had nevertheless been documented in the same form as regulated agreements and expressly stated that they were regulated. NRAM had failed to provide compliant periodic statements under section 77A and had not refunded interest and default sums to borrowers whose loans were legally unregulated.

The defendants contended that the contractual documents incorporated the rights and benefits of a regulated agreement, or alternatively created an estoppel. The central issue was the contractual and estoppel effect of describing non-regulated agreements as regulated.

1. Contractual incorporation. The express references to the Consumer Credit Act 1974 and to the borrowers’ rights were contractual and could not simply be disregarded. Following the approach in Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd, [1959] AC 133, and applying Larussa-Chigi v CS First Boston Ltd, [1998] CLC 277, and Brandeis Brokers Ltd v Black, [2001] 2 Lloyd’s Rep 359, the legislation was incorporated only so far as its provisions were applicable and capable of contractual operation.
2. The incorporation included the legislation as amended from time to time. The agreement was tied to a regulatory regime known to evolve, and the contrary construction would produce an impractical series of different obligations. The incorporated provisions qualified the express payment terms where necessary.
3. The parties could not thereby convert the agreement into a regulated agreement or confer on the court statutory jurisdiction under Part IX. Nevertheless, provisions capable of contractual application, including sections 77, 77A, 83, 88, 89 and 97, supplied additional contractual protection.
4. On the proper construction of the loan agreement, the parties agreed that, whether or not the agreement was legally regulated, it would be treated as if it were regulated so far as possible. The defendants were accordingly entitled to recover the section 77A repayments. NRAM was in breach of contract by failing to provide them.
5. Alternatively, the documents established a shared assumption that the agreements would be treated as regulated and that the defendants would receive the statutory protections so far as possible. This could support contractual estoppel or estoppel by convention. An erroneous assumption of law could constitute such an assumption, but estoppel could not confer jurisdiction on the court. The court did not determine whether estoppel could itself provide a cause of action, because the contractual claim succeeded.
6. The court did not decide the separate warranty claim or promissory estoppel. Further argument was required on the precise form of the declarations.