NRAM Plc v McAdam & Anor

References in a consumer-credit document to an agreement being regulated by the Consumer Credit Act 1974 ordinarily state the agreement’s legal status. They do not, without clear language and supporting context, incorporate the Act or promise that an unregulated loan will be treated as regulated. Parties may confer specific statutory rights as contractual terms where that is legally possible, but cannot create statutory court jurisdiction or import an uncertain selection of protections. A false statement that an agreement is regulated may amount to misrepresentation and breach of contractual warranty. It does not by estoppel extend the regulated-agreement regime or trigger section 77A interest relief where the loan falls outside the statutory definition.

NRAM appealed from Burton J’s decision in the Commercial Court, reported at [2014] EWHC 4174 (Comm). The respondents had entered into unsecured loans of £30,000 before 6 April 2008. Their documents repeatedly described the loans as regulated by the Consumer Credit Act 1974, although loans exceeding £25,000 were outside the statutory regime at that time.

NRAM had failed to provide statements complying with section 77A and the Consumer Credit (Information Requirements etc.) Regulations 2007. The central questions were whether the contractual documents incorporated the Act, created an agreement to treat the loans as regulated, or gave rise to an estoppel conferring the Act’s protections, particularly the right not to pay interest during periods of non-compliance.

1. Appeal allowed. The respondents’ loans were not regulated agreements under the Consumer Credit Act 1974. They were therefore not entitled to the statutory section 77A protection against liability for interest during periods when compliant statements were not supplied.
2. It was conceptually possible for parties to an unregulated loan to confer by contract statutory rights capable of operating as contractual terms. However, the highly technical scheme of the Act, including its court-enforcement provisions and the jurisdiction conferred by section 141, meant that very clear words would be required. Parties could not by agreement confer statutory jurisdiction or import mandatory provisions such as those concerning enforcement orders, time orders and conditions on orders.
3. The relevant references to the Act were statements that the agreements were regulated, not words of incorporation. They did not amount to a promise that, if the statements were wrong, the borrowers would receive an uncertain selection of the protections applicable to regulated agreements. The decisions in Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd, Larusso-Chigi v CS First Boston Ltd and Brandeis (Brokers) Ltd v Black were distinguishable because they involved clear words of incorporation. The court also rejected the judge’s use of Daejan Properties Ltd v Mahoney as establishing a general rule that a statement that X is the case means that X is to be treated as the case.
4. The meaning of the documents depended on the contextual background, applying the approach in Chartbrook Ltd v Persimmon Homes Ltd. As in Tomlin v Reid, the documents assumed that the agreements were in fact regulated. That assumption was inconsistent with a separate agreement to treat them as regulated only for some purposes. The same conclusion followed for any implied term under Attorney General of Belize v Belize Telecom Ltd. The contra proferentem rule did not apply because no residual uncertainty remained after ordinary construction.
5. The documents could not create a shared assumption or estoppel that an unregulated loan was regulated, or that the borrowers enjoyed an unspecified selection of statutory protections. Estoppel could not confer jurisdiction on the court. Rights expressly set out in the loan documents, such as early settlement and cancellation, could operate as contractual rights, but the estoppel could not extend beyond them.
6. The statements nevertheless constituted representations and contractual warranties that the agreements were regulated. If false, they could support claims for misrepresentation under the Misrepresentation Act 1967 or breach of warranty, subject to limitation and other defences. Those issues were not decided. The parties were directed to agree the precise declarations and consequential orders, failing which written submissions would be considered.

1. Court of Appeal (Civil Division). The appeal was allowed. The court held that the loans were unregulated and that section 77A did not apply.
2. High Court of Justice, Queen’s Bench Division, Commercial Court. Burton J held that NRAM was obliged to provide redress, including repayment of interest and default sums, in the decision reported at [2014] EWHC 4174 (Comm).