[Important updated information at the end of the post 13/02/2013]
Barons Finance Ltd & Reddy Corporation Ltd v Makanju  EWHC 153 (QB) was an application for permission to appeal, brought by Mr Makanju, against a possession order made against him in 2009.
Mr Makanju was the leasehold owner of a flat. He borrowed £6,500 (£7,450 when the fee was included). The monthly interest was 3.5%. The minimum monthly repayment was £260.75 (rather conviently amounting to the monthly interest meaning that if no more than the minimum payment was made the debt would remain at £7,450 for eternity). The agreement also provided for Mr Makanju’s flat to be charged.
Unsurprisingly, Mr Makanju defaulted on his loan and Barons Finance brought possession proceedings and, at a hearing in which Mr Makanju was not represented, a possession order was made against him. In 2012, some three years after the possession order was made, Mr Makanju sought to suspend the warrant. This application was refused and Mr Makanju appealed against that decision. The High Court gave Mr Makanju permission to amend his grounds of appeal to be against the possession order and for it to be heard out of time.
HHJ Mackie QC gave permission to appeal and, in doing so, exceptionally took certain points of its own motion that had not formed part of Mr Makanju’s application for permission to appeal. When one looks at the reasons for why permission is given it is quite obvious, however, why he did so.
Permission to appeal was granted for the following reasons:
1) The form of the loan did not comply with various requirements of the Consumer Credit Act 1974 and the regulations made under it, i.e the form did not set out the prescribed arrangements about the number of repayments, the amount of repayments, the frequency and timing of repayments. Nor did the agreement contain a term stating its minimum duration of the agreement or state a total charge for credit nor set out a term stating the APR.
HHJ Mackie QC noted that Barons Finance’s standard form – of which this was one – had already been found by Longmore LJ (in the case of the Olubisi  EWCA Civ 1461 (another permission application)) not to comply with the Act for the same reasons.
2) The agreement was not an exempt agreement (as contended for by Barons Finance) and the Act applied (Barons Finance had contended that it was exempted by the Consumer Credit (Exempt Agreements) Order 1989, but that only applied to certain creditor-debtor-supplier agreements, of which this was not one).
3) Barons Finance did not have a licence to make Consumer Credit Act loans. This meant that the loan was almost certainly unenforceable and Mr Makanju was entitled to the return of the money he had paid under the loan. While this was not a point taken by Mr Makanju, the court took the view that it should not facilitate illegal activity by enforcing that activity and it was therefore appropriate to take the point of its own motion.
Barons Finance’s contention that it was the agent for the Reddy Corporation was dismissed. The purported agreement had the appearance of a sham and there was no evidence that the Reddy Corporation had any involvement in the loans (e.g. it had not taken out the charge). It was also of note that this argument of agency had been rejected by Dyson LJ back in 2003 (in Ul HaqEWCA Civ 595). While not relevant to this case, the Reddy Corporation had also had its licence revoked in 2011.
Permission to appeal was granted out of time because Barons Finance ought to have known that they were no longer able to provide Consumer Credit Act loans, that it was not the Reddy Corporation’s agent and its agreement did not, in any event, comply with the Consumer Credit Act. All of these points ought to have been drawn to the attention of the judge hearing the possession claim.
Moreover, while the delay of over three years would usually be an important factor, this was of little weight in a case involving alleged criminal activity and where borrowers had not been given sufficient information to make them aware that their loans were unenforceable.
Ordinarily, we would not report on an application for permission to appeal, but then such cases do not normally find their way onto bailii. This is clearly an important case and would appear to be a prelude to a much bigger case involving various borrowers and Barons Finance, which is to be heard by the Mercantile Court sometime this year.
It may be possible for other borrowers of Barons Finance, if they act now, to bring a claim against Barons Finance and be joined to the case being heard in the Mercantile Court. We’d be very interested if anyone can supply us with any more information on this upcoming case.
Moreover, Barons Finance are still bringing claims for possession against defaulting home owners and it is important that advisers (especially those on the duty desk), but more importantly the home owners themselves, are aware that defences to these claims are likely to succeed and, will almost certainly succeed, if this case is brought to the judge’s attention.
[Update 13/02/2013. We have been reliably informed that a winding up order was made against Barons Finance Ltd on 19th September 2012, in respect of costs orders against it in possession cases. We have seen a copy of the Order, which also refused permission to appeal. Barons Finance Limited is in administration and cannot, as a legal entity, continue to act under their Consumer Credit Licence (which didn't exist), or begin/continue any legal proceedings they have commenced against borrowers. ]