CBI Property Projects Limited v Tripipatkul & Tripipatkul

For the purposes of fairness under section 140A of the Consumer Credit Act 1974, a default interest rate may protect a legitimate commercial interest where default increases the lender’s risk, even though the loan is secured. Security is only one part of the lender’s protection. A lender may therefore have a proper interest in charging more while funding remains outstanding after default. The creditor may discharge the burden of showing fairness through evidence explaining the commercial context; expert evidence is not necessarily required. Fresh evidence on appeal will generally be refused where reasonable diligence would have obtained it for trial. Documents held by a party’s own agent may be within that party’s control, and finality in litigation weighs strongly against permitting an entirely new case at a late stage.

The defendants appealed, or sought permission to appeal, against HHJ Dight’s decision that their relationship with CBI Property Projects Limited was not unfair under section 140A of the Consumer Credit Act 1974. The dispute concerned a £1.4 million secured bridging loan, carrying interest at 8% per annum and default interest at 12% after non-payment.

Permission had been refused on the papers by Fancourt J. The defendants renewed the application before Mr Justice Adam Johnson, relying on four existing grounds concerning the default rate and a proposed new ground based on alleged secret commission evidence. The central questions were whether the existing grounds had a real prospect of success and whether the fresh evidence should be admitted.

1. Existing grounds. Permission to appeal was refused. The 12% default rate could rationally protect a legitimate interest of the creditor. Default indicated a diminished covenant to repay and increased lending risk. The existence of security did not remove that interest, since security values may fluctuate and security was only one element of the overall lending package.
2. The trial judge was entitled to find that the creditor had discharged the burden of showing that the relationship was fair. The judge had evaluated the factors identified in Deutsche Bank Suisse (SA) v Khan and Others [2013] EWHC 482 (Comm), including the commercial or quasi-commercial nature of the lending, bargaining position, legal advice, the parties’ conduct and the absence of earlier complaint. Evidence from the creditor’s director explaining that the terms reflected the increased risk was sufficiently clear. Expert evidence was not required.
3. The arguments that the default rate was unsupported by a legitimate interest, or operated perversely by increasing the secured debt, did not have a real prospect of success. The increased debt resulted from the altered risk profile caused by the defendants’ default, rather than creating that risk.
4. Fresh evidence. The application to amend the grounds under rule 52.17 of the Civil Procedure Rules 1998 was refused. The court applied the Ladd v Marshall [1954] 1 WLR 1489 factors, in light of the overriding objective and the continuing relevance of pre-CPR authority, including Hamilton v Al Fayed (Joined Party) [2001] EMLR 15.
5. The first Ladd v Marshall limb was not satisfied. The relevant emails were within the control of the defendants’ own agent, and the defendants had already sought disclosure of communications with him before trial. They could have pursued disclosure or required the agent to give evidence. Although the evidence was credible and might have influenced the trial, admitting it would permit an entirely new case after trial and would undermine finality in litigation.

• Chancery Appeals (ChD): Permission to appeal was renewed orally after Fancourt J had refused permission on the papers. Mr Justice Adam Johnson refused permission and refused the application to amend the grounds.
• Trial court: HHJ Dight held that the relationship between the creditor and debtors was not unfair under section 140A of the Consumer Credit Act 1974.