Burrell & Ors v Helical (Bramshott Place) Ltd

For the purposes of the Consumer Credit Act 1974, credit requires a contractual obligation to pay money and a contractual deferral of that obligation for a significant period. The court determines that issue by construing the agreement in its factual and contractual context, while respecting the structure chosen by the parties where there is no allegation of sham. Economic consequences or commercial purpose alone do not establish credit. A payment required as a condition for exercising an assignment right is not necessarily deferred consideration for the original transaction. Nor is a landlord’s contingent entitlement to deduct a sum on termination an obligation imposed on the tenant at the outset. The transfer-fee provisions therefore did not provide credit.

Four married couples who were current or former residents of a retirement village brought proceedings challenging transfer-fee provisions in their long leases. In the CCA Claim they alleged that the provisions amounted to the provision of credit under sections 8 and 9 of the Consumer Credit Act 1974, making the agreements unenforceable or potentially unfair.

The defendant applied for summary judgment under CPR r 24.2 and alternatively to strike out the claim under CPR r 3.4(2)(a). The central issue was whether the transfer-fee provisions created an obligation to pay at the commencement of the leases which was contractually deferred until assignment or termination.

1. Application and summary judgment. The court held that the issues could properly be determined on the contractual documents and full argument. The summary-judgment test under CPR r 24.2 was satisfied, and there was no compelling reason for the issue to proceed to trial.
2. Meaning of credit. The relevant question was whether, on the proper construction of the leases, the claimants incurred an obligation to pay money at the outset and that obligation was deferred for a significant period. The court considered the approach in Dimond v Lovell [2000] QB 216 and the authorities applying it. The issue had to be assessed by reference to the contractual structure and substance, rather than the transaction’s economic consequences.
3. Transfer-fee provisions. The premium was expressly identified in clause 1 and was payable at the outset. Neither clause 2.13 nor any other provision imposed on the claimants an obligation to pay the relevant percentage. Under clause 2.13(g), payment by an assignee was a condition precedent to permitting an assignment, not deferred consideration for the lease. The claimants were not obliged to assign or to make the payment.
4. Termination provisions. Clause 4.6 likewise imposed no payment obligation on the claimants. It operated only if the landlord elected to terminate after specified contingencies. The landlord was then obliged to repay the market value of the remaining term, subject to deductions including the relevant percentage. That contingent deduction was not deferred consideration for the leases.
5. The defendant’s statements about the commercial return from transfer fees, post-contractual correspondence and the information sheet did not alter the clear contractual meaning. There was no allegation that the leases were a sham.
6. There was no provision of credit under the transfer-fee provisions. The claimants therefore had no real prospect of succeeding in the CCA Claim. Summary judgment was entered for the defendant. Consequential matters, including costs, were left for further submissions.

This was a first-instance decision. Master Teverson transferred the CCA Claim to the High Court on 5 May 2015 and directed that the application be heard before a judge.