Wood v Capital Bridging Finance Ltd

A creditor seeking to enforce a credit agreement must establish that the agreement is exempt from regulation under the Consumer Credit Act 1974. A business-purpose declaration creates a presumption, but that presumption is unavailable where the creditor or its agent knows, or has reasonable cause to suspect, that the debtor is not borrowing for the purposes of the debtor’s own business. A contractual estoppel cannot circumvent statutory consumer protection. Where a regulated agreement is improperly executed, enforcement requires the statutory enforcement procedure rather than an ordinary contractual money judgment. A debtor may raise the point for the first time on appeal where it depends on facts already found, the creditor bore the relevant burden, and allowing the point causes no injustice.

The claimant lent Mrs Wood £64,000 under a short-term bridging facility supported by security over her home. The facility contained a declaration that the borrowing was predominantly for Mrs Wood’s own business. In fact, the loan was intended to assist her son-in-law’s business, and the claimant’s representative knew that purpose.

The security was held ineffective. The Nottingham County Court nevertheless gave the claimant a money judgment for £151,883.34 plus contractual interest. Mrs Wood appealed, contending that the facility was a regulated agreement, that its non-compliant form meant it could be enforced only by statutory order, and that the issue could properly be raised for the first time on appeal.

Appeal allowed. The Court of Appeal set aside the money judgment but preserved the proceedings so that the claimant could apply for an enforcement order.

1. Under sections 8 and 16B of the Consumer Credit Act 1974, the creditor bears the burden of proving that the business-purpose exemption applies. A declaration complying with section 16B(2) creates a presumption, but section 16B(3) removes it where the creditor or a person acting on its behalf knows, or has reasonable cause to suspect, that the agreement was not entered into for the debtor’s own business.
2. The claimant’s representative knew that Mrs Wood was borrowing to assist her son-in-law. The declaration therefore attracted no presumption, and the claimant had made no attempt to prove that the loan was for Mrs Wood’s own business. The facility was consequently regulated.
3. Contractual estoppel, as explained in Peekay International Limited v Australia & New Zealand Banking Group Limited [2006] EWCA Civ 38 and Springwell Navigation Corp v JP Morgan Chase Bank [2010] EWCA Civ 1221, has contractual force. It could not give effect to a declaration which contracted out of statutory protection contrary to section 173(1). Estoppel by representation failed because the claimant knew the true purpose of the loan. Estoppel by convention could not be constructed from a declaration known to be false.
4. The point could be taken on appeal. The contractual money claim had effectively emerged only after the security claims failed, the claimant bore the burden of establishing that the facility was unregulated, and the facts disclosed no realistic prospect that further evidence would alter the conclusion. The public-policy protection of the Act applied despite Mrs Wood’s false declaration and the fraud concerning her address.
5. Because the agreement was non-compliant, it could be enforced only through an application for an enforcement order under section 127, not by the existing contractual judgment. The claimant was given liberty to apply in the same proceedings for that order and for consequential directions. The charging order could not survive the setting aside of the judgment. Any interim protection for the claimant was left for written submissions.

• Court of Appeal (Civil Division) [2015] EWCA Civ 451: permission to appeal granted and appeal allowed; the money judgment was set aside and the claimant was given liberty to apply for an enforcement order.
• Nottingham County Court, HHJ Godsmark QC, order dated 18 October 2013: judgment for the claimant in the sum of £151,883.34, with contractual interest at 3% per month.