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Setting aside a possession order

  • United Kingdom
  • Financial services disputes and investigations

24-05-2018

Lukan v Ghana Commercial Finance Ltd [1]

The High Court has recently allowed an out-of-time appeal against an order refusing to set aside a possession order, which had been obtained in the absence of the homeowner. The lender had not complied with the Consumer Credit Act 1974 (CCA), which rendered the loan agreements unenforceable.

Background

The applicant borrowed £5,000 from the respondent lender in 2008. The loan was secured against the relevant property and another property. The facility purported to be a secured bridging loan regulated by the CCA. Following alleged arrears of mortgage repayments, the lender issued possession proceedings against the applicant in March 2009.

The lender obtained a possession order and money judgment in June 2011 while the applicant was absent in Nigeria. When the applicant returned from Nigeria, he applied to set aside the warrant for possession, but his application was dismissed. His appeal was also unsuccessful and the respondent took possession of the property.

In July 2016 the applicant learned that the respondent did not have a consumer credit licence. The applicant was also informed of the decision in Barons Finance Ltd v Makanju [2] a collection of cases involving the respondent and other related companies. The High Court had granted permission to appeal against a decision refusing an application to suspend the order for possession, on the basis that the lender had not complied with the CCA, and that it had conducted business without a licence, which made the loan agreements unenforceable against the borrower. The applicant appealed to the High Court.

Decision

The High Court allowed the appeal and reversed the decision not to set aside the possession order. In reaching its conclusion, the court considered the similarities between the present case and Barons Finance, where loans had been made to borrowers under severe financial pressure. The overall picture from those proceedings was that there were significant issues with the way in which the lender and companies associated with it had operated towards borrowers.

To set aside the order, the applicant needed to satisfy the conditions set out under CPR 39.3(5) because the applicant was not present at trial. These conditions required the applicant to (a) act promptly when he found out that the court had made an order against him, (b) have a good reason for not attending the trial, and (c) have a reasonable prospect of success at the trial.

The court concluded that these conditions had been satisfied. In terms of conditions (a) and (b), the applicant was deemed to have acted promptly and to have a good reason for being absent from the This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

hearing, namely that he had been unwell in Nigeria. In respect of condition (c), it was held that the applicant had a reasonable prospect of success in proving that the lender had failed to comply with the requirements under the CCA.

The court considered that the loan agreement, which was held to be regulated by the CCA, did not comply with the provisions of the 1974 Act. In particular, the court took into account that the agreement did not state its minimum duration, the total payable, the timings of repayments, the annual percentage rate or the total charge.

As a result, the loan agreement constituted an improperly-executed regulated agreement, enforceable only by an order of the court (Section 65(1) of the CCA 1974). The lender’s argument that the loan was an unregulated urgent bridging loan was rejected by the court, as the applicant had demonstrated that the property was his home.

Comment

This decision is a useful overview of the conditions that need to be satisfied by borrowers who, having failed to attend the possession hearing, apply out of time to set aside a possession order. It also highlights the consequences for lenders of failing to comply with the requirements set out in the CCA relating to regulated loan agreements.

1 Queen’s Bench Division, 16 January 2018, unreported.

2 [2013] EWHC 153 (QB).

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