Notting Hill Finance Ltd v Sheikh

An appellate court has a discretion to permit a new point on appeal. There is no general requirement for exceptional circumstances. The court must exercise caution and assess the proceedings below, the new point, prejudice and finality. Following a summary possession hearing, a defence requiring factual inquiry may be permitted where that inquiry would have followed case management directions rather than occurred at the initial hearing. Once the defence is permitted, the decision to enter summary judgment may be wrong under rule 52.21(3)(a), without establishing any procedural irregularity. Unrepresented status carries limited weight and does not generally alter the applicable rules.

Notting Hill Finance Ltd, the lender, advanced £50,000 to Nadeem Sheikh, the borrower, secured by a third mortgage over his home. The scheduled repayment was £71,000. Following default, the contractual interest rate increased to 12% compounded monthly, equivalent to 289.6% annually.

The lender brought possession proceedings. At a seven-minute hearing, the borrower attended with a duty solicitor but advanced no defence to the interest claim. The district judge ordered possession and entered a money judgment for £99,749, enforceable only with permission.

The borrower appealed promptly, arguing that the default interest provision was an unenforceable penalty. He subsequently applied to set aside the order and advanced an unfair-relationship challenge under the Consumer Credit Act 1974. HHJ Godsmark QC permitted the new arguments, reduced the money judgment to £71,000 and directed a trial of the default interest dispute. The possession order was unchallenged.

The lender brought a second appeal. The issues were whether the new defences could be raised on appeal and whether the district judge's order could properly be overturned for a serious procedural or other irregularity.

Appeal dismissed. Snowden J gave the judgment, with which Peter Jackson and Longmore LJJ agreed.

1. An appellate court had a general discretion to permit new points. Exceptional circumstances were not invariably required. The court had to exercise caution and consider all relevant factors, particularly the proceedings below, the new point and prejudice. The approach in Pittalis v Grant [1989] QB 605 supplied the governing principles. Jones v MBNA International Bank Ltd [2000] EWCA Civ 314 concerned the materially different situation of a completed evidential trial, where a new case could disrupt the evidence and undermine finality (paras 21–28).

2. The initial possession hearing was a summary determination rather than an evidential trial, consistently with Forcelux v Binnie [2009] EWCA Civ 854. Had the defences been raised, the district judge would probably have given case management directions. Any factual inquiry would therefore have occurred later, rather than at that hearing. Permitting the defences did not subvert a completed evidential process (paras 30–32).

   The borrower acted promptly, and the lender suffered no prejudice through reliance on the omission. The possession order and the £71,000 judgment remained unchallenged, so the original hearing was not wasted. Finality carried reduced weight because the proceedings had been brief and summary. Unrepresented status added little: the rules applied equally to represented and unrepresented parties, as stated in Barton v Wright Hassell LLP [2018] UKSC 12 (paras 33–37).

3. The appeal could be allowed under rule 52.21(3)(a) of the Civil Procedure Rules. Once a new argument was permitted, a lower decision could be recognised as wrong with the benefit of that argument, even where the proceedings had been conducted fairly. Here, entering judgment for default interest rather than directing determination of the arguable defences was the wrong option. Establishing a serious procedural or other irregularity under rule 52.21(3)(b) was unnecessary (paras 39–43).

4. The court left open whether district judges owed unrepresented defendants a duty to identify defences and whether any failure constituted an irregularity. However, the striking interest rate could properly have prompted the district judge to raise penalty or unfairness of his own motion (paras 43–45).

5. The directions for a full hearing of the default interest dispute were affirmed. Neither the penalty challenge nor statutory unfairness was determined. A 14-day stay of possession was granted for pragmatic reasons, given the changed circumstances and absence of real prejudice to the lender (paras 50–52).

1. Court of Appeal (Civil Division): In [2019] EWCA Civ 1337 , dismissed the lender's second appeal and upheld the directions for determination of the default interest dispute. Granted a 14-day stay of possession.
2. County Court at Nottingham: On 10 January 2019, HHJ Godsmark QC allowed the borrower's appeal concerning default interest, limited the money judgment to £71,000, permitted a defence and counterclaim, and directed the remaining dispute to proceed to trial on the multi-track.
3. County Court at Derby: On 20 September 2018, District Judge Hill ordered possession and entered judgment for £99,749, which could not be enforced without permission.