The Court of Appeal has considered the circumstances allowing a defendant to raise new points on appeal not raised at a first hearing of a possession claim at which an order for possession has been made. Those obtaining summary possession orders may now be more at risk of such orders being overturned on appeal where obvious potential challenges to such orders are not taken at short first hearings.
Notting Hill Finance Ltd loaned Mr Sheikh £50,000 secured by way of a mortgage over his home. Under the loan agreement the principal of £50,000 plus £21,000 in interest and other charges were repayable when due, but in the event of default further interest at a rate of 289.6% per year would become payable. Mr Sheikh defaulted so possession proceedings were commenced. Orders for possession and money judgment for £71,000 plus default interest were sought. By the time of the hearing date the amount sought had risen to £99,749. After a very short hearing, during which Mr Sheikh was represented by a duty advisor and no evidence was given, the district judge made a possession order and money judgment in the amount sought. No challenge was made to the default interest provision.
Mr Sheikh then instructed solicitors. They did not challenge the possession order but lodged an appeal on the basis that the default interest term was an unenforceable penalty along with an argument under the Consumer Credit Act 1974. On appeal the judge allowed Mr Sheikh to pursue the new points on the basis that the case was exceptional. The hearing before the district judge was a short, summary hearing at which Mr Sheikh had in effect been a litigant in person. If the points had been made, the district judge would not have given judgment but rather directions for the issue on default interest to be determined.
The Court of Appeal agreed with the appeal decision and dismissed Notting Hill Finance’s second appeal. Appellate courts have a discretion to allow new points to be taken on appeal and a case did not have to be exceptional before the discretion is exercised. The decision to exercise discretion should be a cautious one based on a range of factors, including the nature of the new point and the lower court proceedings, and also the prejudice it would cause to the opposing party. The hearing before the district judge was in reality one of a binary decision whether to give judgment or directions. Permitting pursuit of a new legal point did not subvert the evidential process as none had been given. Mr Sheikh had acted quickly and Notting Hill Finance had suffered no prejudice. Finality in litigation was important but this litigation had been short lived and summary in nature, and the possession order was not challenged.
The Court of Appeal considered the decision of the district judge was simply wrong; there had not been a serious procedural or other irregularity because the Court had complied with the rules. The decision was wrong because directions should have been given. Although not part of the decision, the Court of Appeal raised the interesting question as to what extent district judges hearing possession cases should be obliged to identify points unrepresented litigants might take during these short hearings. It was said in particular that alarm bells could have been expected to have rung given the very high rate at which the default interest had caused the debt to rise in such a short period of time.
The decision will no doubt give some comfort to those facing such proceedings that not all may be lost even if advice and/or representation cannot be obtained for the hearing itself but they then discover a point of law could have helped them. It will also provide some ammunition to those advising on representation and merits after an order has already been made. It does though pose a potential dilemma for those advising/representing clients bringing such proceedings. Aside from professional obligations that arise in cases where only one party is represented, to what extent should potential challenges/defences a defendant may have be raised during a summary hearing, if at all? Answers on a postcard…