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In CFL Finance Ltd v Bass & Others [2019] EWHC 1839 (Ch) Chief ICC Judge Briggs held that a settlement agreement was not regulated by the Consumer Credit Act 1974 (“CCA”).

Background

In November 2010, CFL Finance Ltd (“CFL”) sued Moises Gertner (“MG”) on a personal guarantee, compromising on terms that MG pay £2m by instalments. On a failure to make payments, the settlement provided that the claimed sum would be payable.

When CFL attempted to enforce, MG argued the agreement was CCA regulated and unenforceable as a result. The Judge disagreed.

Comment

s.9(1) CCA provides that "credit" includes any form of financial accommodation. MG’s case was that the settlement’s provisions for instalment payments was credit, following Dimond v Lovell [2000] 1 QB 216, where the court held "if payment ... is deferred after the time when, if nothing about the time for payment had been agreed, the payment would be due, the payer is giving credit". Dimond was distinguished on the basis that the times for payment were agreed and no sums were therefore due until then. This is to misunderstand Dimond, and to redefine credit in a way excluding all current CCA agreements. Instead, the court should have looked to place a hypothetical usual time for repayment on this agreement. By contrast with a contract for the purchase of goods, under a settlement agreement, the time for payment is bound up in the reasons for settling and is unique.

In Holyoake v Candy [2017] EWHC 3397 (Ch), a loan was rescheduled on multiple occasions, each agreement to do so being therefore CCA regulated. The court distinguished Holyoake on the basis that the original contract there was a loan, not a personal guarantee. However, the nature of the underlying obligation which creates the indebtedness is irrelevant to whether time is then given for payment. Given the court found that MG had implicitly accepted his debt by the nature of the terms, it is difficult to see how this could be thought to be anything but a refinancing under s.11(1)(c) CCA.

Conclusion

This would be a welcome decision, since the Holyoake position creates numerous pitfalls when settling agreements. However, the basis of the decision is clearly shaky, and I would not be surprised if it were appealed.

Alex Cunliffe / 22nd Aug 2019


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