Goldhill Finance Limited v Tracey Margaret Smyth

An allegation that loan terms are unfair does not, without more, plead an unfair relationship under sections 140A–D of the Consumer Credit Act 1974. The statutory reverse burden on the creditor arises only where unfairness of the relationship is properly alleged. An agreed case summary may define and confine the issues for trial. An appellate court should exercise caution before allowing a new point which would require a further factual inquiry, alter the evidence and burden of proof, and prejudice finality in litigation. The fact that the secured property is a family home does not by itself justify reopening a fully tried case. Counsel should correct a material judicial misunderstanding of law, but the judgment must be read in the context of the issues actually advanced.

Goldhill Finance, a second-charge lender, obtained possession of the appellant’s residential property in the County Court after the judge held that the bridging loan was an unregulated mortgage contract and therefore outside the statutory protections relied upon at trial. The borrower appealed, contending that the judge had failed to consider the unfair-relationship provisions of sections 140A–D of the Consumer Credit Act 1974, had misapplied the burden of proof, and should have addressed the default interest rate as a penalty.

The High Court considered whether unfair relationship had been pleaded, whether the agreed case summary confined the issues to fairness arising only if the agreement was regulated, whether the point should nevertheless be admitted for the first time on appeal, and whether the judge should have raised penalty of his own motion.

1. Appeal dismissed. The loan’s status as an unregulated mortgage contract was not challenged. Although the judge’s statement that the Consumer Credit Act 1974 had no application to an unregulated mortgage was literally wrong, the statement was correct in the context of the issues agreed and tried.
2. The defence form and attached witness statement raised general concerns about fairness of the agreement and its terms. They did not allege an unfair relationship within sections 140A–D. The distinction mattered because section 140B(9) places the burden on the creditor once unfair relationship is alleged.
3. The agreed case summary confined the fairness issue to the event that the loan was found to be regulated. It therefore put beyond doubt that unfair relationship was not an issue for trial. The court ordinarily decides the factual and legal issues brought before it, and a party may confine its case to selected legal routes.
4. The proposed unfair-relationship case was a new point on appeal. Applying the principles in Notting Hill Finance Ltd v Sheikh, the discretion to admit it was refused. The case had followed a full trial; allowing the point would require amendment, a fresh evidential inquiry and consideration of the reverse burden. It would also cause substantial prejudice through a further trial and continuing indebtedness. The importance of the property as a family home did not outweigh those factors.
5. The appeal court did not assess the merits of the proposed unfair-relationship case because doing so would require a fresh review of the law and evidence. Had the point been admitted, the only appropriate course would have been remission for directions and a new trial.
6. The judge was not required to raise the penalty issue of his own motion. No authority or principle, including the Overriding Objective, supported imposing such a duty where both parties had legal representation.

• High Court (King’s Bench Division) — On appeal from the County Court decision of HH Judge Gerald dated 28 June 2021, the appeal was dismissed.