The Court of Appeal (CA) has delivered its judgment in Wood v Capital Bridging Finance Ltd [2015] EWCA Civ 451.

The CA found that a money judgment in relation to a loan facility in favour of the claimant lender had been given in error because the facility was a regulated agreement under section 8(3) of the Consumer Credit Act 1974 (the Act) and could only be enforced by an enforcement order as its form and content were not as prescribed by the Act.  The CA rejected the claimant’s submission that the defendant was estopped by her business purpose declaration set out in the facility from denying that the agreement was unregulated.

The defendant, having been persuaded by her son-in-law to obtain money for his business, applied for a loan from the claimant which was secured by a mortgage on her home.  Under the exemption set out at section 16B of the Act, an agreement will be exempt if it is for an amount of credit exceeding £25,000 and if it was entered into wholly or predominantly for the purposes of a business carried on, or intended to be carried on by the debtor. A declaration in the agreement creates a presumption to that effect. However the presumption is disapplied if the creditor knew or suspected that the agreement was not entered into wholly or predominately for the business purpose.

The loan facility contained a declaration by the defendant that she was entering into the agreement for purposes of business carried on by herself, however it was disclosed to the claimant in meetings and by email that the real purpose was to support her son-in-law’s business.  The claimant advanced the loan and the defendant passed it to the son-in-law. He did not repay the defendant and the claimant issued mortgage possession proceedings.  On failing to obtain possession, the claimant resorted to its long-stop claim for money judgment. 

The judge ordered a money judgment in favour of the claimant and the defendant appealed, on the basis that the judge did not apply any discretion under the Act, conducting a purely contract-based account.  The loan facility was a regulated agreement under section 8(3) of the Act, and since the form and content of the facility were not as prescribed by the Act, it could only be enforced by an enforcement order under section 127 of the Act.   In resisting the appeal, the claimant sought to rely on estoppel, arguing the defendant was estopped from denying that the facility was unregulated by her declaration that the monies advanced would be used for the purpose of the defendant’s business. 

The Court of Appeal rejected the claimant’s argument, finding that it had known the truth so there had been no relevant reliance.  The appeal was allowed.

To read the full decision, click here.