Neutral Citation Number: [2013] EWHC 153 (QB)
Case No: 2012  FOLIO 1497
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 06/02/2013

Before :

HIS HONOUR JUDGE MACKIE QC
- - - - - - - - - - - - - - - - - - - - -
Between :

	BARONS FINANCE LIMITED
REDDY CORPORATION LIMITED	First Claimant
Second Claimant	
	- and -		
	TIMMY OLUSEGUN MAKANJU	Defendant	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

The Appellant Defendant appeared in person. The Respondent Claimants were not represented 
Hearing date: 10 January 2013
- - - - - - - - - - - - - - - - - - - - -
Judgment

Judge Mackie QC : 

1.	This is an application for permission to appeal and to do so out of time by the Defendant Mr Makanju against whom the Claimant, Barons Finance Limited (“Barons”) obtained a judgment in the Clerkenwell and Shoreditch County Court on 13 April 2009.  The judgment was given by District Judge Manners for £10,495.22 and possession of a flat, 25 Knebworth House, Londesborough Road, London N16 8RL following a hearing at which the Claimant was represented by a solicitor and which Mr Makanju attended in person. Mr Makanju says that none of the issues which he seeks to raise now were put to the judge, who would have been unaware of them because of what may have been a lack of candour by the Claimant.
2.	The Notice of Appeal seeks to appeal against a decision of District Judge Cooper dated 21 June 2012 refusing an application to suspend the order for possession.  As it has been clear from the outset that in substance the appeal is against the underlying judgment in 2009 I gave permission to Mr Makanju to amend and to do so at the hearing of the appeal when Barons will no doubt attend and be represented.  Barons was aware of this hearing as, if permission were given, the substantive appeal was also to have been heard today, but did not attend. In this judgment I identify the points which I expect that Barons would have made had it been here opposing permission and set out the provisional views I have formed about those points. I am putting this judgment in writing so that Barons, Mr Makanju and other parties are aware of the issues which arise in these cases to help them to prepare their evidence and submissions at future hearings. I emphasise that the views I express are only to  ‘permission to appeal’ standard, subject to correction after I have heard from the parties in this and other cases  and in no sense final conclusions.
Background
3.	This is one of a collection of cases from county courts in the Greater London area, which I will call the “Barons cases”, which have been sent to the London Mercantile Court to coordinate.  The cases involve claims and appeals arising from loans made by Barons and companies associated with it including Reddy Corporation Limited and Ghana Commercial Bunks (sic).  Sometimes, as a result of clerical errors, other similar names are used. The loans were generally made to people who have arrived in this country quite recently and are under severe financial pressure, at high rates of interest usually secured by charges on the borrowers’ homes.  In some of the cases, but not this one, there is an intermediary between Barons and the borrower whose role has been controversial.  In most cases the Defendants now seek to set aside or appeal against orders obtained some years ago. These Defendants generally claim that they entered into the loans under severe financial and personal pressures and have only recently learned of the legal grounds upon which the original judgments, often obtained by default or after only perfunctory resistance, may be challenged.  The Defendants often say that they were unaware of their legal rights when entering into the transaction in dispute.
4.	The Claimant is usually represented by its director Mr Gopee, a quasi litigant in person of great experience but sometimes by Counsel. The Defendants often represent themselves. Those retaining lawyers often do so only sporadically. The lawyers, operating on a shoestring, sometimes lack full instructions on the facts and, as a result, the legal issues.
5.	Barons often  points out, with some justice, that providing loans to people in need and who cannot borrow elsewhere meets a legitimate need and the rates of interest reflect the risk involved and are no higher than nationally known lenders such as Wonga.
Procedural requirements
6.	An application for permission to appeal must generally be brought within 21 days of the decision that the Appellant wishes to appeal.  Although the appeal against the order of District Judge Cooper was in time that against the order of District Judge Manners was more than two years late. Under CPR 52.6 the court may extend time and takes a decision by reference to the checklist in CPR 3.9. This requires the court to consider all the circumstances including nine specific considerations:-
(a)	The interests of the administration of justice.  For reasons I will give this consideration seems to me to overwhelm the others.
(b)	Whether the application for leave has been made promptly.  It has not.
(c)	Whether the failure to comply was intentional.  The Appellant did not intend to appeal at any time within the 21 day period because he says he was unaware of the grounds for doing so.
(d)	Whether there is a good explanation for the failure.  The Appellant claims that he was unaware of his rights or of the defences which he now seeks to put forward until he took informal legal advice after he was unsuccessful before District Judge Cooper.  While ignorance of the law is in general no excuse, this explanation is a sound one given the apparent failure of the Respondent at the time the loan was made to provide the Appellant with information which the law requires to be supplied.
(e)	The extent to which the party in default has complied with other Rules and orders.  The Appellant appears to have complied with all other procedural requirements despite being a litigant in person.
(f)	Whether the failure to comply was caused by the party or his legal representative.  As the Appellant has not been represented any failure is his alone.
(g)	Whether the trial date can still be met if relief is granted.  There is no trial date.  
(h)	The effect which the failure to comply had on each party.  The Claimant/Respondent has been left with the impression that it has valid and enforceable orders subject only to such relief as the court might grant from time to time.
(i)	The effect which the granting of relief would have on each party.  For reasons I give below the Appellant will be able to raise strong grounds of defence and the Claimant will face the prospect of its judgment being set aside after a lengthy period throughout which it was reasonably entitled to assume that the case was over.
7.	If the court allows the Appellant to seek permission to appeal out of time he must still show that his case has a real prospect of success.  
Real prospect-the facts agreed or not greatly in dispute
8.	I take this summary from the documents lodged by Mr Makanju and from those on the court file, in particular letters from Mr Gopee on behalf of Barons.  In the spring of 2008 Mr Makanju had money problems and Barons agreed to lend £6,500 secured on the flat referred to above on terms set out in a Letter of Offer dated 19 April 2008.  This Letter of Offer is Barons’ standard document, or very similar to it, as I have  seen from the other cases before this court.  The letter is headed in capital letters “BARONS FINANCE LIMITED”.  It then offers to make a loan repayable on demand of £6,500 (payable to Amber Home Loans) plus £950 “being our initial administrative/arrangement/setup expenses payable by you”.  The total loan of £7,450 is granted subject to specified terms and conditions.  Condition one is a requirement for security as a legal charge on Barons’ standard terms on the flat.  The second condition requires minimum monthly payments of £260.75.  The third condition charges interest at 3.5% per month calculated on a day-to-day basis on the balance outstanding and debited to the account monthly in arrear.  The fourth condition sets out a right to discharge the debt at any time after two months.  In smaller type beneath the four conditions the letter states:
“We reserve the right to alter, modify, vary or withdraw this offer at any time before your account is opened without any liability to disclose any reason and our decision shall be final and at our absolute discretion.  The contract law applicable shall be that of England and Wales.”
In one case Mr Gopee suggested that this wording in some way enabled the transaction to override the provisions of the Consumer Credit Act (“the Act” and references to sections are to those in the Act).  That submission was incorrect.
9.	The letter is signed “H Glover (Manager of Deeds and Securities)” and, in smaller type below that). Mr Makanju is asked to sign and return a copy of the letter to confirm his acceptance of the terms.  There is, in bold ink at the bottom these words “WARNING: you must not sign the acceptance of this loan offer unless you are sure you can afford the repayment.  Your home is at risk if you do not keep up the agreed repayment”.
10.	The legal charge is also in the Barons’ standard form, or similar to it, and is in favour of Barons not Reddy Corporation.
11.	The money was advanced., there was at once or very soon a failure by Mr Makanju to pay and on 21 August 2008 Barons sent their standard form demand for payment of the whole debt within seven days.  The form was headed “Barons Finance Limited” but beneath the signature in smaller letters appear these words “For and on behalf of the Manager of Legal Services for Reddy Corporation Limited (Consumer Credit Licence number 478145) as the Principal of Barons Finance Limited”.  On 8 February 2009 proceedings were issued in the County Court leading to the hearing and the judgment on 16 March 2009.  Having obtained the judgment Barons showed patience and correspondence ensued throughout 2010 until March 2012 when it threatened to obtain a warrant for possession.  Mr Makanju appears to have paid something over £4,000 to reduce the loan over time but, as a result of the interest rate and expenses, the amount still owing on an advance of £6,500 is currently more than £35,000.  Mr Makanju has sought help from various debt organisations to enable him to pay off or refinance the loan and also it seems has tried to sell the property.
Grounds of Appeal relied on by Mr Makanju
12.	Mr Makanju contends that Barons failed to comply with the requirements of the Act relating to the form and content of the agreement and the provisions in Sections 61(2) and 63(1) relating to the formalities of execution.  He also claims that there was an unfair relationship between the parties within Section 140A of the Act given the circumstances in which the loan was made, what Mr Makanju says was his desperate need to obtain a loan to stave off possession proceedings and what he describes as a “usuriously high interest rate of 3.5% per month”.  He also relies on other legal provisions which, as a litigant in person, he was understandably unable to develop in oral argument.  It appears that some of Mr Makanju’s arguments may have come from a template or summary of available arguments which he has obtained from some source.
13.	On his claim under Section 140A Mr Makanju draws attention to the matters disclosed in a press release from the Office of Fair Trading dated 28 August 2012 following a decision on 11 June 2012 by the First-tier Tribunal General Regulatory Chamber (Consumer Credit) to uphold the refusal by the OFT to renew the Consumer Credit Act licences of Reddy Corporation or to grant such licences to Barons Bridging Finance 1 Limited on 19 April 2011. (See Barons Bridging Finance 1 Limited  Case No CCA/2011/0004 and 0005. Unfortunately no lawyer drew my attention to the existence of this comprehensive and helpful judgment and I learned of it through a web search prompted by reading the press release. But for reading the Tribunal judgment I would also have been unaware of the decision of Dyson LJ in 2003 to which I refer below.)
Do Mr Makanju’s defences have a real prospect of success?
14.	The appeal has real prospects of success for the following reasons. I again emphasise that views expressed about the merits of the Claimant’s likely responses to the appeal are provisional and subject to correction following the substantive appeal
15.	Failure to comply with requirements of the Act. The form and process used by Barons does not comply in numerous respects with the requirements of the Act and the Regulations made under it. For example the form does not set out the prescribed arrangements about the number of repayments, the amount of repayments, the frequency and timing of repayments. Further the agreement did not contain a term stating its minimum duration of the agreement nor state a total charge for credit nor set out a term stating the APR.  That is a conclusion reached by other courts on this form, for example, Barons Finance-v-Olubisi a decision of His Honour Judge Birtles in the Lambeth County Court on 26 April 2010. (The judge also upheld the Defendant’s claim under Section 140A). In that case Barons, through Mr Gopee, sought permission to appeal which was refused by Lord Justice Longmore who gave reasons in a judgment at [2011] EWCA Civ 1461.  In cases before me Mr Gopee has not claimed that the Barons’ procedure complied with the Act and indeed in one case (Manyo-Plange) conceded that it did not. 
16.	One consequence of the standard form failing to comply with the Act is that transactions are “improperly-executed regulated agreements” and enforceable only by an order of the court. ( Section 65)
17.	Transactions not exempt from requirements of the Act. In one recent case (Manyo-Plange) Barons has contended that these agreements are exempt agreements as a result of the Consumer Credit (Exempt Agreements) Order 1989 as amended.  As a result of these provisions the Act does not regulate, amongst other things, a debtor-creditor-supplier agreement for fixed-sum credit, under which the total number of repayments of credit does not exceed four, and those payments are required to be made within a period not exceeding twelve months beginning at the date of the agreement.  Barons cannot however rely on this exemption.  The agreement is not a “debtor-creditor-supplier” agreement (see Section 12).  Further the Barons’ agreement does not provide that the total number of repayments of credit does not exceed four and it does not require those payments to be made within a period not exceeding twelve months beginning with the date of the agreement.  The exemption relied on is directed, as OFT guidance in November 2010 indicates, to transactions such as an annual gym membership payable in quarterly instalments.
18.	Conducting business without a licence. It also appears that Barons has been carrying out Consumer Credit Act business without a licence.  This is not a point taken by Mr Makanju but one which the court should, as I see it, take of its own motion. That activity, if proved is a criminal offence (see Section 39). The court should not facilitate illegal activity by enforcing that activity. Further if Barons does not have a licence it is an “unauthorised person” and any Consumer Credit Act agreement entered into is unenforceable against, in effect, the borrower, except in limited circumstances (see Section 40(1)).  The borrower may also be entitled to recover what it has paid. 
19.	Barons claims that these agreements are carried out by it as agent for Reddy Corporation which at all relevant times held a Consumer Credit Act licence until April 2011.  While the Act permits a licence holder to act through an agent the insertion of a sentence in small print on Barons’ standard Letter of Offer does not of itself create an agency.  The alleged agency has the appearance of a sham. There is no evidence in these cases so far of any active involvement by Reddy Corporation in anything and the charges over assets are taken not by Reddy but by Barons.  I have pointed this out in other cases (e.g. Nnadiekwe)
20.	I have also recently discovered from the Tribunal decision that the issue has arisen before in these cases and been evaluated thoroughly.  In Barons Finance Limited and Reddy Corporation Limited v Amir Ul Haq reported at [2003]EWCA Civ 595 Lord Justice Dyson, as he then was, when considering an application by Mr Gopee on behalf of Barons for permission to appeal considered, among other issues, this agency argument.  On the facts which apparently involved Reddy in the transactions more closely than in this one, the Lord Justice concluded that the agreements in question were entered into by Barons as principal and not as agents for Reddy.  There was no real prospect of Barons succeeding in an appeal against that decision.  This issue was carefully considered by the Tribunal to which I have referred to above.  In twenty paragraphs from 3.1 to 4.2 under the heading “the agency issue” the Tribunal considers the matter in detail before reaching this conclusion at 4.1:-
“The Tribunal therefore, is of the firm view and duly finds with regard to the various reported agency agreements which have been said to be formerly in existence and which apparently continue to be used in some form or other, that no reliance can be placed on the existence of any claimed agency agreement or arrangement.”
21.	The Tribunal goes on to conclude that it is not satisfied that any valid agency agreement was ever in place with regard to any of the alleged agents, that is companies other than Barons.
22.	 Of course each case turns on its own facts but at present it seems overwhelmingly likely that this argument if put forward in Mr Makanju’s case would fail with the consequence that this transaction would indeed have been made by an unauthorised person and neither Barons (nor Reddy) would have the right to the relief granted by the District Judge in March 2009.
23.	It follows that Mr Makanju has a real prospect of success.
Should Mr Makanju have permission to appeal out of time?
24.	On 16 February 2009 Mr Gopee made a statement in support of the original application to the County Court.  This too was in standard form and it also had, in small letters the words “the signatory to the said Letter of Offer had expressly disclosed its principal as being Reddy Corporation Limited the holder of a Consumer Credit Licence number 478145”.  For the reasons that I have given, and in particular because he was present in the case of Ul Haq in 2003 Mr Gopee must have known that Barons’ basis for claiming to be able to run a consumer credit business was open to serious question. Mr Gopee would also have known that the standard form agreement did not comply with the Consumer Credit Act in the respects I have outlined above. These matters should have been disclosed to the District Judge.
25.	Mr Gopee’s statement contains at paragraph 7, in smaller type than the remainder of the document, the following words:-
“The agreement created by the acceptance of the aforesaid Letter of Offer is one which is outside the restrictions imposed by the Consumer Credit Act 1974 by virtue of Article 3(1a)(i) of The Consumer Credit (Exempt Agreements) Order 1989 … whereby the payment by the Defendant to the Claimant was due to have been made within a period not exceeding twelve months beginning with the date of the agreement i.e. when the formal demand was made.”
This statement was incorrect and I am unaware of any reason why  Mr Gopee on behalf of Barons could reasonably have believed it to be true.
26.	I repeat and re-emphasise that I have not yet seen or heard evidence or submissions from the Claimants as this was an application for permission. Barons will be able to deal with such matters at the hearing of the appeal. However the material at present before the court suggests that Barons obtained the judgment in 2009 having known for some years, and without disclosing , that there were grounds upon which its  application would fail if the court were given the full picture.  
27.	Finality.The Claimant has argued in other cases that, the legal process having been completed, the interests of finality require the judgment to be left undisturbed. While that is an important principle it seems to me to have little weight in the unusual circumstances of this category of case. This is a category where it appears that defendants who have started at the disadvantage of not receiving information which the law required to be provided at the time of the loan, receiving loans in breach of the legal requirements designed to protect them, from  a lender who is unlicensed potentially in breach of the criminal law, are then put through a legal process where the lender does not disclose to the Court matters which any lawyer would feel bound to draw to its attention.
28.	Unjust enrichment. Another argument put forward by the Claimant in these cases is that it would be without purpose to reopen judgments obtained, despite their Consumer Credit Act difficulties, because Barons will in any event be able to recover what it says is owed by bringing an action for unjust enrichment.  That argument was rejected by the District Judge in Ul Haq:
“   on the basis that to have allowed it would in effect have meant that the strict statutory requirements of the Consumer Credit Act could be easily circumvented and in effect had little or no force. Whilst it may be thought that the Claimants suffer an injustice to allow the claim where the Consumer Credit Act requirements have not been met simply could not be correct.”  
That view was approved both by the circuit judge and by Lord Justice Dyson and I have informed Mr Gopee before that my own view is precisely the same.
Conclusion
29.	Permission to appeal was  granted on 10 January when I gave brief reasons which I have now expanded in the hope of assisting the parties to these cases. The appeal itself will be heard with other Barons’ cases on Thursday 14 March at 10.30am.