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How final are possession orders and money judgments? Court of Appeal allows new points on appeal

  • United Kingdom
  • Financial services disputes and investigations

13-09-2019

Notting Hill Finance Limited v Nadeem Sheikh [2019] EWCA Civ 1337

Summary:

The usual rule is that a party cannot raise claims or issues in subsequent proceedings (e.g. an appeal) which could and should have been raised in the first proceedings.  However, there are exceptions to this rule and in this case, the Court of Appeal (‘CoA’) held that new arguments could be raised on appeal even though they had not been raised at the initial possession hearing.  The decision provides useful guidance on when judicial discretion might be exercised to dis-apply this rule and due to the very nature of possession proceedings, an order for possession or money judgment cannot always be relied on as final.

Background:

On 9 January 2018, Mr Sheikh entered into a loan agreement with Notting Hill Finance Limited (‘Notting Hill’) for £50,000 for a term of 6 months at a basic interest rate of 30.04% per annum (‘the Loan’). The Loan was secured by way of a charge over Mr Sheikh’s home.

The terms of the Loan stated that an aggregate sum of £71,000 was repayable on 10 July 2018 (made up of the principal sum of £50,000 and contractual interest and charges in the sum of £21,000).  Further, in the event of a default, a compound interest rate of 12% per month applied i.e. an interest rate of 289.6% per annum (the ‘default interest provision’).

Mr Sheikh failed to repay the Loan by 10 July 2018 and Notting Hill commenced possession proceedings.

First instance decision

Mr Sheikh did not instruct solicitors or file a Defence. However, he attended the hearing and was represented by the duty solicitor.  Save for the claim form and particulars of claim, the only evidence before the District Judge was a witness statement from Notting Hill which stated that the amount due as at the date of the hearing was £99,749 (which included interest at the default rate).

The hearing lasted seven minutes and when the District Judge enquired about the “figures”, he was referred to the sum of £99,749 by Notting Hill.  Neither the Defendant or his duty solicitor made arguments about the alleged sum due but accepted that an order for possession would inevitably be granted.  The only argument was about when the order would require possession to be given.  The, District Judge ordered that possession be provided within 28 days and made a money judgment against Mr Sheikh in the sum of £99,749, such judgment not to be enforced without permission of the Court.

Promptly after the hearing and within time, Mr Sheikh instructed solicitors who lodged an appeal against the District Judge’s decision. Mr Sheikh did not seek to overturn the order for possession or the money judgment, but argued that there was an arguable defence that the default interest provision was a penalty or unfair under the Consumer Credit Act 1974.  By failing to address these points, he argued that the District Judge’s decision was “unjust because of a serious procedural or other irregularity” (CPR 52.21(3)(b)).  Notting Hill accepted that if the issue had been raised before the District Judge then it would have amounted to a genuine dispute and instead of granting an Order for possession and a money judgment, the District Judge would probably have given case management directions for the issue to be determined. 

The first appeal

Holding that this case was an ‘exceptional’ case in which the general rule of finality should not apply, HHJ Godsmark QC, a Circuit Judge, allowed the appeal in relation to the issue of default interest, and varied the District Judge’s order to grant judgment limited to £71,000 (rather than £99,749).  He identified a number of features of the case which he considered relevant to the exercise of his discretion.  These were:

  1. the fact that possession hearings are very short summary hearings and not full trial;
  2. Mr Sheikh was in effect a litigation in person;
  3. Mr Sheikh attended the hearing;
  4. the need for finality in litigation;
  5. the District Judge’s order was challenged very quickly after the hearing;
  6. Notting Hill acknowledged that had the default interest have been challenged, it was probable that the District Judge would have directed that the issue be determined. 

HHJ Godsmark QC also held that the failure to identify the potential defences meant that there had been a serious procedural or other irregularity in the proceedings before the District Judge such that the appeal should be allowed under CPR 52.21(3)(b).  Notting Hill appealed the case to the CoA.

The CoA Decision:

The CoA held that “there is no general rule that a case needs to be “exceptional” before a new point will be allowed to be taken on appeal”.  The decision depends on an analysis of all the relevant factors which include the nature of the proceedings which have taken place in the lower court, the nature of the new point, and any prejudice caused to the opposing party if the new point is allowed to be taken.  The Circuit Judge had correctly identified the main factors relevant to the exercise of his discretion to allow new points to be considered, but did not have to consider the case exceptional to do so.  

The CoA also held that there had been no procedural or other irregularity under CPR 52.21(3)(b), although it was possible to say that the District Judge’s decision to grant judgment rather than to give case management directions was “wrong” under CPR 52.21(3)(a).  Finally, the CoA did not comment on whether there was any positive duty on the District Judge to have questioned the default interest, especially given the amount was sufficiently striking to have rung alarm bells, but said that the District Judge could not be criticised if he had.

Comment:

The decision is helpful because it confirms that cases do not need to be “exceptional” for the general rule of no new claims or issues on appeal to be dis-applied and gives guidance as to the sorts of factors that will be considered.  It is noteworthy that the CoA disagreed with the Circuit Judge by holding that Mr Sheikh’s position was not materially affected by the fact that he had effectively been a litigant in person at the possession hearing: CPR 55 is designed to be straightforward and accessible.

Due to the very limited nature of possession hearings, it is possible that not all claims or issues will be made before the District Judge and so an order for possession or money judgment is not always the end of the road and lenders should keep this in mind. It was also important to the Court’s decision that no prejudice had been caused to Notting Hill and that it had not taken steps to obtain permission to enforce the money judgment before the appeal by Mr Sheikh was lodged.        

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