The recent appeal to the High Court in Woolsey v Payne [2015] EWHC 968 (Ch), from the Chief Registrar in insolvency proceedings, considered the application of sections 16B and 74(1)(a) of the Consumer Credit Act 1974, which relate to the enforceability of loans made for business purposes and/or in the course of a business.

  • Section 16B provides an exemption for consumer credit or hire agreements exceeding £25,000 if entered into wholly or predominantly for the purposes of a business;  and
  • Section 74(1)(a) exempts non-commercial agreements, which are defined in section 189(1) as those which are not made in the course of a creditor’s business.

The decision in Woolsey - Section 16B

Deputy Judge Male QC found that whether or not a debtor enters into an agreement “wholly or predominantly for the purposes of a business carried on by him,” should not be interpreted narrowly so as to exclude, on the grounds of separate legal personality, a company director that borrowed money for the purposes of his company. To do so would be to apply a strict company law approach in the context of consumer created provisions, which would be inconsistent with the purpose of the CCA.

Section 74(1)(a)

The Chief Registrar had ruled at first instance that because the credit agreement must have been regulated (per section 16B, discussed above) then it followed that the creditor was in all probability carrying on a lending business and the agreement was therefore not exempt under section 74(1)(a). This was rejected by Male DJ as being an illogical assumption, and any conclusion that someone was carrying on a lending business should instead be reached by applying findings of fact to the relevant statutory provisions.

Citing the dicta of Lord Neuberger MR in Helden v Strathmore Ltd [2011] EWCA Civ 542, that whether the creditor was indeed providing a loan ‘in the course of a business’ was a matter for a trial judge, Male DJ was unable, having been presented only with witness statements and without the opportunity for cross-examination, to reach a conclusion on this point. DJ Male QC did however refer favourably to the ‘balance sheet’ approach of features indicative of a business and contra-indicative of a business used in Tamimi v Khodari [2009] EWCA Civ 1109