The defendant borrower could still raise new arguments during the appeal against a possession order or in the application to set it aside.
Summary
The Court of Appeal considered when a defendant borrower may raise new arguments on an appeal of a possession order under CPR 55. It held that new arguments can still be raised on appeal or set aside application after a possession order is made.
Background
In January 2018 the defendant Sheikh (S) entered into a second charge mortgage agreement with Notting Hill Finance Ltd (N) for the sum of £50,000 due to be repaid over six months. S did not repay the sums due as required under the contract. N issued possession proceedings and a money claim for £79,520 comprising the principal sum along with interest at a rate of 30.04 per cent and default interest of 12 per cent compounding monthly (amounting to an yearly rate of 289.6 per cent).
The claim was heard in the county court in the absence of a completed defence form (N11M). S attended the hearing and was represented by the duty solicitor. The amount claimed at the time of the hearing was £99,749.00. S requested that possession be granted in 42 days to allow them time to refinance the agreement, but after hearing brief arguments the District Judge granted N’s request for possession in 28 days. Judgment was entered for the sum claimed.
S appealed to the Circuit Judge on the basis that the default interest was a penalty and unenforceable. S also issued a separate application to set aside the possession order under CPR 3.1(7) on the basis of the penalty argument and an additional argument that the penalty interest amounted to an unfair relationship pursuant to section 140A(1) of the Consumer Credit Act 1974 (CCA).
The Circuit Judge allowed S’s appeal in relation to the default interest and varied the judgment to £71,000. Permission was granted to file a defence and counterclaim and the claim was allocated to the multi-track with directions given to proceed to trial.
The judge referred to the decision in Jones v MBNA International Bank LTD (2000) EWCA Civ 514 which confirmed that there may be 'exceptional cases' to the normal rule that points of appeal can only be raised where they have been pleaded in the first instance.
N appealed to the Court of Appeal.
The court's decision
Appeal dismissed.
The Court of Appeal considered the factors taken into consideration by the Circuit Judge when deciding to exercise discretion in favour of S, namely:
the original possession hearing was a summary hearing and not a trial
the short length of time spent on such a hearing (seven minutes), and S being, in effect, a litigant in person due to the fact that a duty solicitor is in no position to probe the detail of a case
the possession order was challenged promptly after the hearing
that it was likely that case management directions would have been given for a trial if the enforceability of the interest rate been raised before
the failure of the District Judge to consider the default interest rate was 'unjust because of a serious procedural or other irregularity in the proceedings' – CPR 52.21(3)(b)
The Court of Appeal considered that an interest rate of 289.6 per cent was 'sufficiently striking' to alarm the District Judge. He could not have been criticised for raising the issue of whether such a term was unfair.
In particular, the court relied on the point that the first hearing of a claim for possession under CPR 55 was 'not in any real sense a trial at which any disputed factual evidence was led or tested by cross-examination'.
The options available to a District Judge at first instance are set out in CPR 55.8. The court may decide the claim or give case management directions. If the claim is decided without a trial, the normal strict rules about setting aside orders or introducing new grounds on appeal do not apply.
Comments
This judgment represents an extension of the principle established in Forcelux Ltd v Binnie (2009) EWCA Civ 854, that a possession order made in a busy possession list with duty representation is not an order made at trial but akin to a summary hearing. The Court of Appeal takes a realistic approach to the ability of a defendant to advance complex arguments in these circumstances.
This case will assist defendants in raising appeals or making applications to set aside orders on the basis of issues identified after the hearing.
CPR 55.8 applies equally to rent possession hearings, so this judgment applies to possession orders made on grounds of rent arrears.