Rajinder Kumar & Ors v LSC Finance Limited

Whether a mortgage-backed agreement is an investment property loan is determined when the agreement is made. The inquiry concerns the intended use of the land and whether borrowing is wholly or predominantly for business purposes. A compliant declaration creates a statutory presumption, but a defective declaration creates neither that presumption nor an estoppel. It remains evidence of purpose. Guarantee provisions should be read together: a clause preventing recovery of interest under both the guarantee and loan prevents double recovery, but does not remove the guarantor’s liability for interest. Fresh evidence on appeal must satisfy the Ladd criteria and is approached cautiously where it challenges trial credibility findings.

LSC Finance Limited made a series of unregulated property-development loans to the appellants and companies connected with them. The appellants defaulted on three mortgage-backed Pattingham loan agreements and argued that they were regulated mortgage contracts under the Financial Services and Markets Act 2000, making them unenforceable by an unauthorised lender. They also disputed the construction of a guarantee clause concerning interest.

HH Judge Rawlings, sitting in the High Court, held that the agreements were investment property loans and enforceable, and that the guarantee clause prevented double recovery rather than excluding liability for interest. The appellants appealed and sought to adduce evidence from later criminal proceedings and introduce a further ground of appeal.

1. Disposition. Lady Justice Andrews, with whom Lord Justice Phillips and Lady Justice Asplin agreed, dismissed the appeal on both substantive grounds. The applications to adduce fresh evidence and amend the grounds of appeal were also refused.
2. Investment property loans. The agreements satisfied the baseline conditions for regulated mortgage contracts under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, but fell within the investment property loan exception. The two relevant criteria were fact-sensitive: the borrower’s intended use of the mortgaged land and whether the borrowing was wholly or predominantly for business purposes. Both questions were determined when the agreements were made. Later changes of intention were immaterial.
3. A declaration complying with article 61A(3) would create a statutory presumption of business purpose, subject to article 61A(4). The declarations here were defective because their heading referred to consumer credit and consumer hire provisions and did not identify regulated mortgage contracts. They therefore created no statutory presumption and could not operate as an estoppel. They remained evidential material which had to be weighed with the other evidence. The judge had properly considered the declarations, loan offers, valuation and contemporaneous evidence. His findings that the land was intended for development and sale, rather than personal occupation, were not challenged and satisfied both criteria. The agreements were consequently enforceable under the Financial Services and Markets Act 2000.
4. Guarantees. Clause 4.1 and clause 4.3 had to be read together. Clause 4.3 prevented LSC from recovering interest for the same period from both the borrower under the loan agreement and the guarantor under the guarantee. It did not release the guarantor from all liability for interest. That construction gave effect to both provisions and was consistent with the guarantee’s maximum-exposure clause. The alternative construction made no commercial sense in the context of the guarantees.
5. Fresh evidence. Under CPR 52.21(2), the Court of Appeal was guided by the principles in Ladd v Marshall [1954] 1 WLR 1489, as explained in Terluk v Berusovsky [2011] EWCA Civ 1534. The evidence had to be unavailable despite reasonable diligence, apparently credible and likely to have an important influence on the result. The Court also applied the caution in Riyad Bank v Ahli United Bank (UK) Plc [2004] EWCA Civ 1419 concerning post-trial evidence directed to credibility findings.
6. The later evidence about oral service arrangements and alleged inaccuracies concerning development sites did not bear materially on the issues tried. Even if the witnesses had been dishonest in the later criminal proceedings, the evidence did not show conscious and deliberate dishonesty concerning the present issues or a causative link to the judgment. Applying the principles summarised in Dale v Banga and others [2021] EWCA Civ 240, with reference to Royal Bank of Scotland Plc v Highland Financial Partners [2013] 1 CLC 595, Takhar v Gracefield Developments Ltd & Others [2020] AC 450 and Noble v Owens [2010] 1 WLR 2491, the proposed ground had no realistic prospect of success.

1. Court of Appeal (Civil Division) — In [2024] EWCA Civ 254, dismissed the appeal on the classification of the Pattingham loan agreements and the construction of the guarantees. It also refused the applications to adduce fresh evidence and introduce a further ground of appeal.
2. High Court of Justice, Business and Property Courts in Birmingham, Business List — HH Judge Rawlings held that the agreements were unregulated investment property loans and enforceable, and construed the guarantees as preventing double recovery of interest.