As the suggestion of unfair relationship between creditor and debtor had not been raised at the hearing of the mortgage possession proceedings, it would not be permitted to be raised on appeal and it had not been for the judge to raise the possibility of the interest rate being a penalty.
In Goldhill Finance Ltd v Smyth [2023] EWHC 362 (KB), Mr Justice Soole dismissed an appeal against a possession order made in favour of the mortgagee Goldhill Finance Ltd. The mortgage had been secured as a second charge on 20B Harold Road, London, N8, a property of which Ms Smyth was the leasehold owner and where she lived with her two children. The mortgage had been secured with the assistance of brokers and was a six-month bridging loan agreement, the purpose of which was stated to be “business cash flow”. The rate of interest was 2% per month, which increased to 5% per month in the event of default. Following default, possession proceedings were commenced.
Section 140A-D Consumer Credit Act 1974 gives the court power to make various orders if it determines that the relationship between the creditor and debtor is unfair. When the issue of unfair relationship is raised, the evidential burden is reversed such that the creditor has to prove that relationship is fair. Contrary to the argument advanced by the appellant at appeal, in this case unfair relationship had not formed part of the debtor’s pleaded case (which fact was put beyond doubt by the issues identified by the agreed case summary). Although the ex tempore judgment at the conclusion of the hearing had wrongly stated the CCA did not apply to an unregulated mortgage contract, on the live issues before the court there had been no error. There had been no obligation on counsel to intervene. The suggestion of unfair relationship was a new issue and applying the principles set out in Notting Hill Finance Ltd v Sheikh [2019] EWCA Civ 1337 raising it late would not be allowed.
The appellant was also incorrect to suggest the judge should have raised the issue of penalty of his own motion and pursuant to a duty under the overriding objective. There was no support for this in the overriding objective nor authority or principle to support that contention – not least where each party had legal representation.
Elizabeth Haggerty is a barrister
