Fortwell Finance Ltd v Halstead & Anor

A compromise of mortgage enforcement proceedings is not, merely because it concerns recovery of payments, the administration of a regulated mortgage contract. Under Article 61(3)(b)(ii) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, a compromise is not a necessary step in recovering payment, and enforcement action is expressly excluded. The statutory unenforceability regime in the Financial Services and Markets Act 2000 does not require a consent order to be set aside. Where parties voluntarily compromise a dispute about enforceability, the court’s power to reopen it is limited. A late request for a factual trial may also be refused where the evidence is no longer satisfactorily available.

The respondent lent the appellants £2.36 million secured on property which had been divided into flats and was being reconverted into a single dwelling. The appellants later contended that the loan was a regulated mortgage contract because the property was used as a dwelling, and that the respondent, being unauthorised, could not enforce the agreement under the Financial Services and Markets Act 2000.

After default, the parties entered a consent order for possession and judgment. The appellants unsuccessfully applied to set it aside in the County Court and appealed to Picken J, who dismissed the appeal on 15 March 2016. The central questions were whether entering the consent order amounted to administering a regulated mortgage under Article 61(2) of the 2001 Order, and whether the consent order should be set aside or the issue remitted for trial.

The appeal was unanimously dismissed. McCombe LJ gave the leading judgment, with Lindblom LJ and Leggatt LJ agreeing.

1. Administration of a regulated mortgage. The appellants’ argument depended on treating the consent order as administering a regulated mortgage. Although taking necessary steps to collect or recover payments might, read alone, encompass legal proceedings, a compromise is not a necessary step because proceedings can proceed to trial. Further, Article 61(3)(b)(ii) expressly excludes treating enforcement action as administration merely because a right to enforce is exercised. A compromise of enforcement proceedings therefore did not constitute administration. The potential criminal consequences under sections 23 and 26 of the Financial Services and Markets Act 2000 reinforced that construction.
2. Effect of FSMA on the consent order. The statutory regime did not operate as a complete answer requiring the consent order to be reopened. Dickinson & anor v Acorn Finance Ltd [2016] EWCA Civ 1194 showed that FSMA was not a blanket rule of unenforceability and did not dictate the result of the court’s discretion. The court applied that reasoning to the present compromise.
3. Consent order and compromise. The parties had genuinely agreed the consent order, and the appellants had chosen not to contest the enforceability issue for commercial reasons. The court’s ability to interfere with a consent order was limited: Community Care North East v Durham CC [2010] EWHC 959 (QB) and Weston v Dayman [2008] 1 BCLC 250 supported holding parties to a genuine compromise unless there was no agreement or a vitiating circumstance.
4. Late factual trial. A trial concerning the appellants’ intentions, the respondent’s knowledge and the property’s configuration would have been unsatisfactory more than five years after the events, particularly as the property had been sold. The application was also raised for the first time on the appeal. There was no error in refusing to set aside the consent order or direct a trial.

• Court of Appeal (Civil Division) The appeal from Picken J’s order was dismissed: [2018] EWCA Civ 676.
• High Court, Queen’s Bench Division Picken J dismissed the appellants’ appeal from the County Court order on 15 March 2016.
• County Court at Central London HH Judge Lamb QC refused to set aside the consent order on 2 October 2015. The underlying consent order had been made by Deputy District Judge Wallis on 17 February 2015.