In Newmafruit Farms Ltd v Alan Pither, the High Court has provided some useful guidance on the question of when occasional lending by entities whose primary business is not financial services must be authorised by the FCA in order to be enforceable under the Financial Service and Markets Act 2000 ("FSMA").


Newmafruit Farms Limited ("Newmafruit") is a family-owned fruit farming business. Between April 2009 and February 2014 it made a series of loans to Mr Alan Pither totalling £2,135,413. Mr Pither is a builder and property developer, and the purpose of the loans was to fund his property development business, although Mr Pither used some of the funds to pay off personal debts. The loans were not repaid, and, on 26 November 2015, Newmafruit issued a claim to recover them.

Mr Pither raised a number of defences in respect of various tranches of the loans. Newmafruit applied for summary judgment on the whole sum.


The Court granted summary judgment in respect of almost £1.4 million of the sums claimed, holding that the various defences raised by Mr Pither regarding those loans had no real prospect of success. However, in respect of a smaller, but not insignificant sum, the Court considered that a full trial was necessary to properly dispose of the issues, and refused to award summary judgment. In doing so it provided some useful guidance on the obligations that apply to entities lending money, as Newmafruit was, on an occasional basis.

Mr Pither's position in respect of this smaller tranche of loans was that they were unenforceable because Newmafruit was carrying on a business of entering into "regulated credit agreements" without the necessary authorisation from the FCA to do so (the "Licencing Argument")

The statutory provisions that the Licencing Argument was based on are complex, and have been amended numerous times. In short, transitional provisions made in a statutory instrument pursuant to FSMA apply to the enforcement of agreements made by unlicensed traders before 1 April 2014. These provisions require the Court to first decide whether the sums claimed by Newmafruit were due under a "regulated agreement". If they were, the Court then needed to decide whether Newmafruit was exercising lender's rights and duties "by way of business". If so, in the absence of a licence, the loans would be unenforceable.

In the event, the court held that loans totalling £125,659 were due under regulated agreements because they were lent to an individual for personal rather than business reasons and were, when considered separately, for sums under £25,000. In respect of these loans, then, the Court had to decide whether Newmafruit had been acting "by way of business".

The Court held that the test for deciding whether Newmafruit had acted "by way of business" was a broad one. Mr Pither was not required to show that the exercise of lender's rights under regulated agreements represented a business in its own right for Newmafruit. Rather, he was simply required to show that Newmafruit was "exercising lender's rights by way of business". Importantly, that could be the case even if Newmafruit only exercised lender's rights on one isolated occasion.

The Court concluded that Mr Pither had a real prospect of successfully arguing that Newmafruit was acting by way of business as required by this broad test, and therefore declined to award summary judgment in relation to the Licencing Argument.

This decision provides important guidance for entities that lend money on an occasional (or even a one off) basis. It is a clear reminder that it is not safe to assume that such lending falls outside of the consumer credit provisions in FSMA and that if the general prohibition in FSMA applies, the loans will be completely unenforceable.

If this case proceeds to a full trial, the Court will have the opportunity to provide further guidance on when a lender will be acting "by way of business" for the purposes of FSMA. Given that Newmafruit did obtain summary judgment on a large portion of the loans, though, its appetite to pursue the remainder through to trial may well be diminished.