Dickinson v UK Acorn Finance
The Court of Appeal upheld the High Court decisions of District Judge Smith and HHJ Hodge QC that a claim brought by borrowers against a lender under the Financial Services and Markets Act 2000 was an abuse of the court’s process and should be struck out. Gary Cowen acted for the successful party in the High Court and Stephen Jourdan QC acted for them in the Court of Appeal.
The case concerned a mortgage to secure a short term loan. The lender started County Court proceedings to enforce its rights. The borrowers filed a defence admitting the loan, charge and arrears, asking for time to pay, and saying they did not want the court to consider if the relationship with the lender was unfair. A possession order was then made. The borrowers then sought to set aside the order on the ground that there was a sub-charge which prevented the lender from exercising its rights under the charge. There were a series of court hearings at which that claim was dealt with. The borrowers lost and an appeal was dismissed.
Then, after they had lost, and the lender was about to recover possession, the borrowers issued a new claim in the High Court, contending, for the first time, that most of the land included in the charge was used in connection with a dwelling, that the charge was therefore a “regulated mortgage contract” entered into by an unauthorised person, and so unenforceable under s.26 of the 2000 Act, and that they were therefore entitled to set aside the possession order, and get back all the money they had paid and the costs incurred by them in the possession action. A regulated mortgage contract is one under which a lender provides credit to an individual borrower, the contract provides for the obligation of the borrower to repay to be secured by a first legal mortgage on land in the UK, and at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling by the borrower.
The lender applied to strike out the claim relying on three alternative arguments: (1) there was a cause of action estoppel resulting from the county court judgments; (2) there was an issue estoppel arising from those judgments, or (3) the new claim was an abuse of the process because of the principle that parties should bring forward all the claims and defences they wish to assert at the same time - the Henderson v Henderson principle.
District Judge Smith held that there was both a cause of action and an issue estoppel, but the lender could not rely on those estoppels, because of the decision of the Privy Council in Kok Hoong v Leong Cheong Mines Ltd [1964] AC 993. In that case, it was held that a default judgment for rent under a hire agreement did not prevent the hirer, when sued for a later instalment of rent, from contending the agreement was void under legislation relating to moneylending and the registration of bills of sales. Estoppel cannot prevent a party from relying on statutory provisions enacted for their protection. However, the District Judge also held that the claim was an abuse of the process of the court, applying the Henderson principle. Here, a broad, merits-based approach was appropriate, balancing the policy of the 2000 Act against the policy of the Henderson principle. He held the balance came down firmly in favour of the Henderson principle.
On appeal, HHJ Hodge QC agreed with his approach. Lewison LJ gave permission for a second appeal because there was an important point of principle – should s.26 of the 2000 Act trump the Henderson principle.
The Court of Appeal held that it should not. The 2000 Act did not impose a blanket ban, because it allowed the borrower to elect to enforce the contract and also gave the court power to allow it to be enforced if it was just and equitable to do so. If there are circumstances in which the contract could be enforced, it could not be said that the application of the Henderson principle means that the court is enforcing an unenforceable agreement. The 2000 Act was not, therefore, a trump card.
The judgment can be found here
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