Newmafruit Farms Ltd & Ors v Pither & Ors

The First Claimant, Newmafruit Farms Ltd (“Newmafruit”) is a family-owned fruit farming business, of which Mr Melvyn Newman is a director and substantial shareholder. The First Defendant, Mr Alan Pither, is a builder and property developer. Newmafruit claims to have lent substantial sums to Mr Pither and seeks repayment of those sums, together with interest. Newmafruit now applies for an order striking out all or part of Mr Pither’s Re-Amended Defence and/or summary judgment on all or part of the claim.

On 26 November 2015, Newmafruit issued a claim for repayment of loans made between April 2009 and February 2014 amounting in total to £2,135,413, plus interest. At that stage, the only defendant was Mr Pither.

In paragraph 1 of the Particulars of Claim it was said that the purpose of the loans was to fund Mr Pither’s property development business. At paragraphs 4-6, Newmafruit alleged that the majority of these loans (amounting to £1,623,092) were governed by the terms of an agreement entered into between Newmafruit and Mr Pither on 20 June 2011 (“the June 2011 Agreement”), which provided for repayment by 20 June 2013 together with interest. In addition, there were loans made prior to the June 2011 Agreement (amounting to £100,651), which were said to have been governed by an implied term that they were immediately repayable; and loans made after the June 2011 Agreement (amounting to £411,670), said to have been governed by implied terms derived from the parties’ previous course of conduct. Paragraphs 20, 24, 34 and 35 referred to a schedule to the Particulars of Claim, which itemised the loans Newmafruit said were made to Mr Pither.

In paragraph 3 of his Re-Amended Defence, Mr Pither accepted that the Claimant had indeed advanced funds for various developments. At paragraphs 4 and 5, he admitted that on 14 April 2009 AMP Consultants Ltd (“AMP”), a company of which he was director and shareholder, borrowed £125,000 from the Claimant; and on 5 January 2011 he personally borrowed a further £75,000 from the Claimant. But no other admissions were made as to the allegations made at paragraphs 4-6 of the Particulars of Claim and the Claimant was put to strict proof of them: see paragraph 6 of the Re-Amended Defence. Mr Pither admitted entering into the June 2011 Agreement but denied that he was indebted to the Claimant in the sum alleged or at all: see paragraph 7 of the Re-Amended Defence. At paragraphs 34 and 35 of the Re-Amended Defence reference was made to a memorandum of understanding agreed by the parties’ solicitors in or around May 2013, but never executed. The failure to execute this document was said to give rise to defences of waiver and estoppel. At paragraphs 46 and following of the Re-Amended Defence, the Defendant pleaded that the loans are unenforceable because of various provisions of the Consumer Credit Act 1974 (“CCA”) and the Financial Services and Markets Act 2000 (“FSMA”).

The present application was issued on 9 May 2016. It was supported by a witness statement from Mr Martin Beasley, a solicitor employed by Griffin Law, which was then acting for Newmafruit.

A timetable was set by Master Bard. Mr Pither was to file and serve any evidence in response to the application by 4 July 2016. Newmafruit was to file and serve any evidence in reply by 18 July 2016. Both these dates were extended by agreement. The application was listed to be heard on 26 and 27 July 2016.

On 8 July 2016, Mr Pither filed a witness statement. At paragraph 20, he said:

“There is no evidence that I received any payment pursuant to [the Agreement] and the Claimant is invited to produce evidence thereof that I received any such sums at all”.

At paragraph 21, he said:

“Part of those monies well in excess of £25,000 were used for personal as opposed to business reasons therefore, I am advised, should potentially come within the CCA and or FSMA and similar legislation and would be susceptible as evidence at trial and not at this interim stage.”

At paragraphs 26 and 27, he made reference again to his pleaded defences of waiver and estoppel.

On 22 July 2016, a without notice application was made by Newmafuit, Priory Homes (Kent) Ltd (in administration) (“PH Kent”) and Priory Homes (Norfolk) Ltd (in administration) (“PH Norfolk”), the latter two companies being special purpose vehicles established by Mr Pither to undertake specific property developments. That application was heard by Jay J. He ordered that PH Kent and PH Norfolk be joined as claimants; and that Mr Derek Peter, Priory Homes (East) Ltd (in liquidation) (“PH East”), AMP and Brill Links Sports Management Ltd (“Brill”) be joined as (respectively) Second, Third, Fourth and Fifth Defendants. He also granted a worldwide freezing injunction and disclosure order against the Mr Pither, Mr Peter and AMP, tracing orders against PH East and Brill and permission to amend to advance claims in deceit, breach of fiduciary duty, dishonest assistance, conspiracy, breach of contract and unjust enrichment against the Defendants.

The case advanced to justify these orders was described by Mr David Head QC, who appeared for the First Claimant on the application now before me and also for the Claimants in the applications before Jay J, in his skeleton argument for the former application as follows:

“3.1

The New Claims arise principally out of separate lending made by Newmafruit to PH Kent and PH Norfolk, which were special purpose vehicles set up by Mr Pither to develop land in Kent and Norfolk. PH Kent and PH Norfolk engaged PH East, Mr Pither’s construction company, to develop the land. Newmafruit lent Priory Kent and Priory Norfolk the monies to acquire the land and paid PH East, on PH Kent and PH Norfolk’s behalf, for the purported costs of the constructions works.

3.2

The claimants now believe that a considerable proportion of the sums paid to PH East were not used for the purposes of the property developments, as Mr Pither represented they would be, and were not properly due to PH East. Only a fraction of the work represented by Mr Pither to have been undertaken was actually done. Substantial sums appear to have been misappropriated and used to fund other ventures in which Mr Pither was interested and/or pay his personal expenses. There is also evidence demonstrating that at least some of the sums lent to Mr Pither personally for the express purpose of certain agreed property developments were also misappropriated for other purposes with the involvement of the Second Defendant (Mr Peter), PH East and the Fourth and Fifth Defendants (AMP and Brill respectively).

3.3

AMP and Brill were companies owned by Mr Pither which received significant sums by way of misappropriated monies. Mr Peter, an accountant, is Newmafruit’s former Finance Director and Company Secretary. He is a long-standing associate of Mr Pither and was his personal accountant. While acting on behalf of Newmafruit, Mr Peter authorised the vast majority of payments requested by Mr Pither. The claimants believe that Mr Peter authorised these payments knowing that a substantial proportion would not be used for legitimate purposes…”

Preparation for the hearing before Jay J had taken up time. The First Claimant had been intending to serve reply evidence by 20 July 2016 (the date agreed by way of extension of the deadline set by Master Bard). But it did not do so until the evening of 25 July 2016, in the form of a witness statement of Mr Melvyn Newman exhibiting (amongst other things) bank statements said to evidence transfers of funds said to have been lent. At paragraph 26, Mr Newman added this:

“The debt claim set out in the Particulars of Claim included six payments totalling £400,000 made by Newmafruit to the Third Defendant [PH East] (rows 32 to 37 of the Schedule to the Particulars of Claim). Following a legal and factual investigation and analysis of Newmafruit’s lending by its newly appointed legal team (Peters & Peters and counsel) it has been concluded that these sums were in fact advanced as part of lending by Newmafruit to the Second and Third Claimants rather than Mr Pither. As such, Newmafruit no longer seeks repayment of these sums as a debt due from Mr Pither and the Particulars of Claim will be amended to reflect this.”

It followed that the total sum for which judgment was now sought was £1,735,413. An amended schedule was produced reflecting this.

The present application first came before me on 26 July 2016. Mr Maurice Rifat, who then appeared for Mr Pither, said that Mr Newman’s evidence had been served late and there had not been time for him to take instructions on it, let alone time for Mr Pither to respond by evidence of his own. Mr Rifat applied for an adjournment. Mr Head opposed this. I took the view that it would be wrong to determine the application without giving Mr Pither the opportunity to consider, give instructions on and if necessary respond to Mr Newman’s new evidence. Since the parties were due before the court on 29 July 2016 for the return date on the freezing injunction and disclosure orders, it seemed sensible to adjourn the hearing of this application to the same date, so that both could be heard together by the same judge. This gave Mr Pither the 3 clear days from service of Mr Newman’s reply evidence envisaged in CPR r. 24.5(3)(b), exactly the same time as he would have had if that evidence had been served on 20 July 2016 (as agreed).

Mr Pither served a witness statement on 28 July 2016 responding to Mr Newman’s late evidence. The return date on the freezing injunction and disclosure orders and the adjourned hearing of the First Claimant’s application were listed before me on 29 July 2016. It was agreed between the parties that the freezing injunction should be continued on the same terms and I so ordered. I then heard submissions from both sides on the application to strike out the Re-Amended Defence and for summary judgment.

After the hearing, I invited and received further written submissions on the effect of the somewhat complex statutory provisions engaged by the CCA/FSMA defences.

There was no dispute as to the tests to be applied in determining this application.

CPR r. 3.4(2)(a) confers power to strike out a statement of case if it appears to the court that the statement of case (i) discloses no reasonable grounds for defending the claim or (ii) is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings.

CPR r. 24.2 enables the court to grant summary judgment on the whole of a claim or on a particular issue if (i) it considers that the defendant has no real prospect of successfully defending the claim or issue and (ii) there is no other compelling reason why the case or issue should be disposed of at trial.

In determining the summary judgment application, the question is whether the Mr Pither has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 2 All ER 91, per Lord Woolf MR at 92j. This means that the defence must carry “some degree of conviction” and be “more than merely arguable”: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472, per Potter LJ at [8]. It is for Newmafruit to establish that Mr Pither has no real prospect of success: ibid, at [9]. The court must not conduct a “mini-trial”: see Swain v Hillman at 95b. But, as Potter LJ said in ED & F, at [10]:

“that does not mean that the court has to accept without analysis everything said by a party in his statements before the court. In some cases, there may be no real substance in factual assertions made, particularly if contradicted by contemporaneous documents. If so, issues which are dependent upon those factual assertions may be susceptible of disposal at an early stage so as to save the cost and delay of trying an issue the outcome of which is inevitable”.

He continued as follows at [11]:

“I would only add that, where there is a claim for judgment for monies due and issues of fact are raised by the defendant for the first time which, standing alone would demonstrate a triable issue, if it is apparent that, with full knowledge of the facts raised, the defendant has previously admitted the debt and/or made payments on account of it, a judge will be justified in taking such acknowledgements into account as an indication of the likely substance of the issues raised and the ultimate success of the defence belatedly advanced.”

Where a summary judgment application gives rise to a short point of law or construction, the court should “grasp the nettle” and decide the point if it has before it all the evidence necessary for a proper determination and is satisfied that the parties have had an adequate opportunity to address the point in argument. This is because “if the respondent’s case is bad in law he will in truth have no real prospect of… successfully defending the claim against him”: ICI Chemcials & Polymers v TTE Training Ltd [2007] EWCA Civ 725, per Moore-Bick LJ at [12]. The court should, however, be cautious about deciding a point of law or construction if the respondent in his evidence asserts facts that, if established at trial, might be relevant to the outcome: ibid, at [13].

The applicable principles were summarised in ten points by Simon J in JSC VTB Bank v Skurikhin [2014] EWHC 271 at [155]. The eighth was as follows:

“Some disputes on the law or the construction of a document are suitable for summary determination, since (if it is bad in law) the sooner it is determined the better... On the other hand the Court should heed the warning of Lord Collins in AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 at [84] that it may not be appropriate to decide difficult questions of law on an interlocutory application where the facts may determine how those legal issues will present themselves for determination and/or the legal issues are in an area that requires detailed argument and mature consideration, see also at [116].”

I have followed Mr Giles’s course and considered in turn each of the tranches of lending identified in his further skeleton argument. I have considered separately at the end the CCA/FSMA and estoppel/waiver defences and an additional defence of set-off advanced at paragraph 14 of Mr Giles’s skeleton argument.

Rows 1 (£60,000 drawn down on 14 April 2009) and 2 (£65,000 drawn down on 13 May 2009) together amount to £125,000. These sums were lent pursuant to a Loan Agreement made on 14 April 2009 (“the 2009 Agreement”) between Newmafruit (as “Lender”) and AMP (as “Borrower”). The agreement provides on its face that it has been executed as a deed, but it lacks the requisite formalities. Its first recital records:

“The lender has agreed to lend the sum of £125,000 to the borrower to cover short term funding requirements. An advance of £60,000 to be made immediately and the balance within 21 days.”

Its second recital records that AMP will arrange for the loan to be secured as a second charge against a freehold property or another asset acceptable to the lender.

AMP is owned and controlled by Mr Pither. But the contracting party was AMP, not Mr Pither personally. So the claim against Mr Pither can succeed only if, at some point after the 2009 Agreement was made, Mr Pither assumed the obligation to repay the monies lent under it.

Mr Head submitted that Mr Pither did assume the obligation to repay these sums. He relies on the June 2011 Agreement, made between Mr Pither personally (“the Borrower”) and Newmafruit (“the Lender”). Clause 1.1 defines words and expressions. It provides (insofar as material):

“‘Facility’ means up to a maximum to two million pounds (£2,000,000) including the two hundred thousand pounds (£200,000) previously advanced to the Borrower and AMP Consultants.

…

‘Property’ means the assets owned by the Borrower listed in the Schedule to this agreement.

‘Redemption Date’ means the 2^nd (second) anniversary of the date hereof with the option to extend for a further 12 (twelve) months as agreed in writing between the parties.”

Clause 2 provides:

“2.

AGREEMENT FOR FACILITY

The lender agrees to lend to the Borrower upon the terms, conditions and provisions of this Agreement, the drawdowns by the Borrower to be made against any specific projects from time to time subject to the Lender’s approval.”

Clause 4 provides insofar as material as follows:

“4.

SECURITY”

4.1

The Borrower and the Lender agree that any sum advanced to the Borrower under this Agreement will be secured on the property of the Borrower regardless of whether or not the lender registers a charge over the Property.”

Clause 6 provides as follows:

“6.

REPAYMENT

6.1

In consideration of the Lender making the advances of funds hereunder the Borrower undertakes to repay the sums advanced to the Lender free from any legal or equitable right of set-off on the Redemption Date.

6.2

Notwithstanding the provisions of Clause 6.1 the Borrower may at any time repay the sums advanced hereunder or so much of its [sic] as may be owing on giving to the Lender seven (7) days’ notice subject to the Borrower at the same time also paying or discharging all other obligations and liabilities due or owing by the Borrower to the Lender under this Agreement or under the terms of any security associated with or collateral to it.”

At paragraph 10 of his skeleton argument, Mr Head submitted that the June 2011 Agreement “subsumed and replaced” the 2009 Agreement. He argued that, by entering into the 2011 Agreement, Mr Pither was assuming an obligation to repay the monies advanced to AMP under the 2009 Agreement.

Mr Head and Mr Giles agreed that this point depends on the construction of the June 2011 Agreement. Neither counsel could suggest any concrete respect in which the evidence that might in due course be available to the trial judge would add materially to the factual matrix so as to affect the outcome. Both were content for me to decide the point on the evidence available at this stage. That course is consistent with the Court of Appeal’s guidance in ICI Chemicals, as set out above; and, in the light of the parties’ submissions, does not offend Simon J’s stricture in JSC VTB Bank v Skurikhin.

In my judgment, Mr Pither did not, by entering into the 2011 Agreement, assume the obligation to repay the £125,000 lent to AMP pursuant to the 2009 Agreement. I have reached that conclusion for four reasons.

First, although “Facility” is defined to include the prior lending to AMP, clause 6 does not by its terms oblige Mr Pither to repay the sums falling within this definition. Indeed, the word “Facility” does not figure in any operative provision of the document, apart from the heading above clause 2.

Secondly, what the Borrower did assume, by clause 6.1, was the obligation to repay “the sums advanced”. That phrase is not defined, but its position in clause 6.1 suggests that it refers back to the “advances of sums hereunder” that constituted consideration for the repayment obligation. Clause 6.2 refers to the “sums advanced hereunder”. On a natural construction, these phrases connote sums advanced after the conclusion of the 2011 Agreement and pursuant to the legal framework established by it, not sums already lent under previous agreements. The operative part of clause 2 is consistent with this: what the Lender was agreeing to lend “upon the terms, conditions and provisions of this Agreement” were the drawdowns “to be made” (ie in the future); there is nothing to indicate that the repayment obligation attached to anything other than these future drawdowns.

Thirdly, there is nothing on the face of the 2011 Agreement, objectively construed, that indicates expressly or impliedly any intention to discharge AMP’s liability under the 2009 Agreement, or to replace or supplement it by making Mr Pither liable for a debt owed by a different legal person. The definition of “Facility” is insufficient on its own to indicate such an intention. As Mr Giles submitted, there is another more plausible explanation for that definition, viz. that it was included to make clear that the £200,000 previously lent to Mr Pither and AMP under previous agreements would count towards the £2,000,000 maximum that Newmafruit was agreeing to lend. In other words, Newmafruit was agreeing to lend up to a further £1,800,000. Understood in this way, the obligations assumed by both parties under the June 2011 Agreement related to future lending only.

Fourthly, I do not think that anything of significance can be drawn from the contrast between the wording of clause 4.1 (“any sum advanced to the Borrower under this Agreement”) and clause 6.1 (“sums advanced”). If, as I have concluded, the latter refers to sums advanced under the June 2011 Agreement, clause 2 makes clear that such sums were to be advanced to the Borrower, and not to any other person. If the intention had been to impose an obligation to repay sums previously advanced to another person, it would have been easy to make that clear in clause 6.1.

It follows that the sums amounting to £125,000 claimed at rows 1 and 2 of the amended schedule are not owed by Mr Pither. Because the application for summary judgment is directed against Mr Pither only, it must therefore be dismissed insofar as it relates to these sums.

I record, in case it is of relevance at any later stage, that the failure of this part of the application for summary judgment does not depend on the need for more detailed argument or more mature consideration. Rather, it flows from my view that: (i) the determination of this part of the application turns on a question of construction; (ii) the question of construction is suitable for determination on a summary basis; and (iii) the answer is clear in Mr Pither’s favour.

Rows 3 (£6,489 on 20 August 2010), 4 (£61,162 on 29 September 2010) and 6 (£15,000 on 5 May 2011) are all identified in the amended schedule as referable to a development project at Quail West, Naples, Florida (“the Quail West Project”). Row 7 records a payment of £17,500 said to be referable to a development project at Corringham, Thurrock, Essex (“the Corringham Project”). The total of these rows is £100,651.

In paragraph 6 of the Re-Amended Defence, Mr Pither did not deny that the loans set out at rows 3, 4, 6 and 7 had been made, but he did put Newmafruit to strict proof of them. In his Re-Amended Defence, he said this:

“15.

…in July 2011, Newman and the Defendant purchased land for residential development in Florida in the United states of America. The development was outside the format of conditions of the £2,000,000 facility referred to in the agreement of 20 June 2011. The cost of the land purchased and disbursements totalled £175,000 which the Defendant admits was introduced by the Claimant. The agreement was based on an equal division of profits from the development. The land was subsequently sold in July 2015 for £253,053.30. This sum was paid into the development, with the consent of the Claimant and/or Newman, at Bybrook Road and Jubilee Lane to pay for Priory Home (East) Limited June valuations on both sites.

16.

In December 2011, the Defendant purchased a development in Corringham, Essex using the loan facility granted by the agreement of 20 June 2011. The construction loan for the site was provided by Close Brothers finance. In addition, also in December 2011 the Defendant purchased the development site at Birchington. The purchase of land was again made from the facility granted on 20 June 2011 and the construction loan was supplied by National Westminster Bank. At this point, Newman decided to change the agreement to have an equal division of the profit from the profit from the Birchington site and any future sites purchased using the said loan facility. A verbal agreement to this effect was made between Newman and the Defendant and witnessed by Derek Peter and superseded the terms and conditions of the agreement of 20 June 2011 referred to above. In consequence of this new agreement and an equal division of profits, it meant that no interest was payable or accruing.”

More generally, in response to the allegation that Mr Pither had failed to repay either the loans or the interest due on them, Mr Pither pleaded as follows:

“24.

…it is denied that interest was payable… or that the 50% share of profits between the parties was in addition to the repayment of the loans. Thus interest was not payable thereon, as a share of 50% of the profits was substituted by agreement between the parties in lieu of any interest that would otherwise be paid.”

At paragraph 12 of his witness statement of 8 July 2016 (which appears at the end of a section headed “Loans to the Defendant”), Mr Pither said this:

“Set out in the Re-Amended Defence at paragraph 14 onwards are details of how the relationship between us developed and rather than repeat the details thereof, I rely upon paragraphs 14-21 of the Re-Amended Defence. I also deny that interest is payable in respect of any of the monies advanced whether for business or personal use. The agreement reached subsequently between myself and Newman was that each would have a 50% share of the profits realised from the completion of the three developments in relation to Priory Homes (Norfolk) Limited (“Norfolk”), Priory Homes (Kent) Limited (“Kent”) and Burchington [sic]. In consequence there was no interest payable thereon as the 50% share of the profits was substituted by agreement between myself and Newman in lieu of any interest that would otherwise have been paid.”

As to the Quail West Project, Newmafruit’s best evidence is contained in paragraphs 10-12 of Mr Newman’s witness statement of 25 July 2016. He explains that Mr Pither suggested buying land on a golf course in Florida with a view to building a luxury home on it; and he (Mr Newman) agreed orally that Newmafruit would lend Mr Pither the money needed to acquire the plot. The sums at rows 3 and 4 were paid to Florida attorneys in connection with the purchase. The sum at row 6 was paid to AMP to cover engineering drawings, lawyers’ fees and association fees.

As to the Corringham Project, Mr Newman said at paragraph 14 that Mr Pither presented this as an opportunity to develop 8 bungalows and requested £17,500 for bank financing, broker commission, council fees, ground reports and contamination tests. He explained at paragraph 15 that, around the same time, Mr Pither was also seeking to acquire and develop a site at Birchington, Kent (“the Birchington Project”). At paragraph 16, under the heading “Personal loan facility to Mr Pither of 20 June 2011”, Mr Newman said this:

“In March 2011, Mr Pither approached me for further financing in order to acquire additional land plots in Florida and to pay for further costs in respect of the Quail West development [MLN2/11-12]. Mr Pither was also seeking funding from Newmafruit to acquire the Birchington and Corringham sites. I was not prepared to approve further lending to Mr Pither by Newmafruit without formal arrangements being put in place recording the position in respect of interest, profit share and repayment terms.”

The reference to MLN2/11-12 was to an email sent on 18 March 2011 by Mr Pither to Mr Peter and Mr Newman:

“Derek/Melvyn

Where we are at Quail West –

On the other Lot M63 we must show proof of funds in Priory International before the bank will consider our offer, so we need to transfer $85,000.

Also we need to instruct Curtis to draw the plans up on the first Lot before we can arrange finance. We require a full set of drawing and engineered drawings which cost circa $18,000.

We also owe some annual fees to Quail West and we have to settle Dan Peck’s bill – both of these, say $3,000 total.

So we need to transfer $110,000. Derek has all the bank details and cheque books.

Regards

Mr Newman’s response, on 19 March 2011, was as follows:

“Hi Alan

We need to discuss the way forward. am I expected to finance all the costs apart from support from the bank? if that’s the case I need to know exact arrangements on interest, percentage of profits etc. always seem to be lending out money without very little coming in as well as no proper arrangements for the money to be paid back. I am not prepared to lend any more funds until this is formalised. I would never make a very good banker!”

There was a further email sent on 5 May 2011 by Mr Pither to Mr Peter, copied to Mr Newman:

“Derek/Melvyn

Monies needed for immediate transfer for Thurrock Project [sc. the Corringham Project] 17,500K.

Breakdown of this is: 5000.00 Close Brothers, 6500.00 Asset Cap (commission) 3200.00 Thurrock Council (for reserve matters), 2800.00 for Ground report tests and contamination tests,

Please transfer this money to AMP Consultants.

America

We need 25,000K sent to the Priory Homes International LLP for drawings (ernginnering [sic] drawings) these are needed before we can apply for a construction mortgage also we have to pay the lawyers fee’s [sic] and association fees for Quail West. You would probably be better putting this transfer throught [sic] a currency agency to get the best dollar rate. If that’s a problem transfer it to AMP and I will get Kim to organise it.

Alan”

Mr Newman responded at paragraphs 27-30 of his witness statement of 25 July 2016 to the allegation that the proceeds of the sale of Quail West had been applied with Newmafruit’s consent to the developments at Bybrook Road and Jubilee Lane. He relied on a chain of emails between him and Mr Pither in 2015. On 18 June 2015, Mr Newman emailed Mr Pither. The email included the following passage:

“From the information sent through from the USA a and [sic] subsequent email to Tony, you confirmed that the funds from the USA sale (minus the holding tax) will be coming through on June 22^nd. This should be approximately £252k. Can you please let us know when the money is received so we can decide how it is allocated.”

Mr Newman said that he received no substantive response to this email, but that in mid-July 2015 it became clear that Mr Pither had applied the monies to pay subcontractors of PH East without discussing or agreeing this with him. In a further email on 15 July 2015, Mr Newman noted that:

“Infact [sic] the money that came in from the USA sale of land, had already been allocated, without any consultation with ourselves”.

Mr Pither replied on 21 July 2015, that:

“With reference to monies from the USA, we were under pressure to pay subcontractors and could not afford to hold up any payments, which would have been likely based on past history.”

Mr Newman said that these exchanges show that he did not consent to the application of the sale proceeds of Quail West to any other development, far less agree that the application of the sums in this way would discharge Mr Pither’s debt to him.

At paragraph 17 of his witness statement of 28 July 2016, Mr Pither said this about the Quail West Project:

“Priory Homes International LLC was incorporated to purchase the plot at Quail West. Rather than having individual members of the LLC, Peek and Peek Solicitors [sc. Peck & Peck PA, a firm of Florida attorneys] advised us to have a UK company as a sole shareholder of the LLC. We used Priory Homes (Christchurch) Limited as the UK company for this. As for his own security, Mr Newman agreed to become a director of Priory Homes (Christchurch) Limited. He was issued with his own Priory Homes email address and business cards so he was well aware that he was a Director of the Company. In December 2010 he requested that his Directorship be terminated which was duly confirmed.”

At paragraph 20, Mr Pither said this about the transfer identified at row 7:

“This money was used on the Corringham Project by Priory Homes but was paid to AMP Consultants Limited as agreed with Mr Newman, as Priory Homes (East) Limited did not have a bank account at that time as it had only just been incorporated two weeks previously on 21^st April…”

At paragraph 22, Mr Pither responded as follows to paragraph 16 of Mr Newman’s witness statement of 25 July 2016 (set out at paragraph 38 above):

“At this time there was no mention of profit share and it was purely a loan. Mr Newman did not want to get involved in any of these deals. He was basically just looking for interest on monies lent, as detailed in the 2011 Loan Agreement.”

At paragraph 24, Mr Pither said that it was in around December 2011 that Mr Newman indicated that he would like to participate in the Birchington Project on a 50/50 profit sharing basis.

Mr Pither responded as follows to Mr Newman’s evidence about the application of the Quail West proceeds:

“36.

Paragraph 27 – The monies of £253,053.30 from the sale of Quail West were placed into Priory Homes (East) Limited, at Mr Newman’s instructions, and also as per his instructions were used against the Priory Homes (Kent) Limited and Priory Homes (Norfolk) Limited developments. This clearly discharges my overall debt by the same amount and I am not therefore sure why Mr Newman states otherwise…

37.

Paragraphs 28, 29 & 30 – In paragraph 27 Mr Newman confirms that he gave consent to have monies paid into Priory Homes (Kent) and Priory Homes (Norfolk) Limited for use on those projects. The Quail West monies were used to pay Priory Homes (East) Limited valuation on Priory Homes (Kent) Limited and Priory Homes Norfolk (Limited) as the development progressed.

38.

Paragraph 30 – This was a very informal agreement all the way through. I assumed that any monies paid into the development would be used to discharge any debts and interest.”

In my judgment, it is possible to draw the following conclusions at this stage. I start with the sums identified at rows 3, 4 and 6 (i.e. those referable to the Quail West Project).

First, these sums were transferred on the dates set out in the amended schedule to the US-based recipients detailed in Mr Newman’s witness statement of 25 July 2016. This is demonstrated by the bank statements exhibited to that statement; and it is not contested by Mr Pither in his evidence.

Secondly, at paragraph 3 of his skeleton argument, Mr Giles said that paragraph 15 of the Re-Amended Defence

“says, in so many words, that [the Quail West Project] was a joint venture into which [Newmafruit] introduced £175,000”.

I agree that paragraph 15 of the Re-Amended Defence, read on its own, is capable of bearing that interpretation, though it contains no express assertion that Mr Pither was not obliged to repay the sums in question. It is noteworthy that the Re-Amended Defence contains no denial that these sums were lent, only a vague non-admission. But it would not be satisfactory to decide this issue on the pleadings alone.

Thirdly, the best indication of the true position comes from Mr Pither’s own evidence filed in opposition to this application. The contention that the sums identified in rows 3, 4 and 6 did not have to be paid back (because they had been introduced by way of investment, rather than by way of loan) is conspicuous by its absence from Mr Pither’s witness statement of 8 July 2016. The only mention of any profit sharing agreement is in paragraph 12 – and that refers to an agreement said to have been reached “subsequently” (ie after the June 2011 Agreement) whose effect was to relieve Mr Pither of the obligation to pay interest. There is nothing in paragraph 12 to indicate an understanding on Mr Pither’s part that the profit sharing agreement also extinguished his obligation to repay the principal sums lent. Mr Pither’s witness statement of 28 July 2016 also contains no express denial that the sums identified in rows 3, 4 and 6 were repayable. More significantly, at paragraph 22, Mr Pither positively asserts that, as at March 2011, “there was no mention of a profit share and it was purely a loan”; that “Mr Newman did not want to get involved in any of these deals”; and that “[h]e was basically just looking for interest on monies lent”. Given that this is a direct response to paragraph 16 of Mr Newman’s witness statement of 25 July 2016, the reference to “any of these deals” must be taken as a reference to the Quail West, Corringham and Birchington Projects, which are the subject of the latter paragraph.

Fourthly, Mr Newman’s email of 19 March is inconsistent with the suggestion that there had already been an agreement relating to the Quail West Project to the effect that Mr Pither had no obligation to repay any of the sums paid by Newmafruit. On the contrary, the terms of that email (“always seem to be lending out money”, “not prepared to lend any more funds until this is formalised”, “I would not make a very good banker!”) indicate the parties’ understanding that these sums were loans, albeit the precise terms on which they were to be repaid had not yet been worked out.

Fifthly, Mr Pither’s assertion that the sums realised from the sale of Quail West were applied with Newmafruit’s or Mr Newman’s consent, so as to discharge any debt, is inconsistent with the contemporaneous correspondence. Mr Newman could not in good faith have written as he did on 18 June 2015 and 15 July 2015 (see paragraphs 43 and 44 above) if he had previously agreed that the Quail West sale proceeds would be applied to other developments so as to discharge the debt owed to Newmafruit. If Mr Pither had truly believed that there was such an agreement, he would have pointed this out, rather than giving the explanation he gave on 21 July 2015 (see paragraph 44 above). Mr Pither’s witness statement of 28 July 2016 contains no explanation of, nor even any reference to, these emails. His answer is limited to repeating the assertion that the sale proceeds were applied “at Mr Newman’s instructions” (paragraph 36) and to a vague reference to “a very informal agreement all the way through”, from which he “assumed” that any monies paid into the developments would be used to discharge any debts and interest (paragraph 38). At paragraph 37, Mr Pither noted what he read as a confirmation by Mr Newman that he gave consent to have the sale proceeds paid into PH Kent and PH Norfolk for use on these projects. In fact, Mr Newman, far from confirming this, had denied it in terms.

I turn now to row 7 (which relates to the Corringham Project). As with rows 3, 4 and 6, the bank statements exhibited to Mr Newman’s witness statement of 25 July 2016 show that this sum was transferred on 5 May 2011. The emails of the same date show what it was for and that it was transferred to AMP at Mr Pither’s direction.

In paragraph 16 of the Re-Amended Defence, Mr Pither pleaded that the profit sharing agreement in December 2011 “meant that no interest was payable or accruing”, not that the obligation to repay was extinguished. That was consistent with the last sentence of paragraph 24. Insofar as the first sentence of paragraph 24 suggested that the profit-sharing agreement gave Mr Pither something more (namely, relief from the obligation to repay the loans), the best that can be said about the Re-Amended Defence is that, read as a whole, it is ambiguous.

As to Mr Pither’s evidence, the points made in paragraph 54 above apply with equal force to row 7 as they do to rows 3, 4 and 6: there is nothing in Mr Pither’s witness statements of 8 or 28 July 2016 to indicate that the sum in row 7 (i) was not a loan; (ii) was not a loan to Mr Pither or (iii) was the subject of any subsequent agreement that relieved Mr Pither of the obligation to repay it. At paragraph 24 of his witness statement of 28 July 2016, Mr Pither referred to “the £17,500 lent to me personally” as being outside the June 2011 Agreement. He went on to mention the 50/50 profit sharing agreement concluded in December 2011, but did not say that it extinguished his liability to repay the £17,500.

On this part of the case, I am prepared to accept that the pleadings, though not as clear as they might be, disclose a factual issue. However, as the authorities set out at paragraphs 17-19 show that is not enough. On analysis of the pleadings, the evidence and the contemporaneous documents, there is “no real substance” in the factual assertions underlying this part of Mr Pither’s defence (to adopt Potter LJ’s formulation cited at paragraph 18 above). Subject to the CCA/FSMA and estoppel/waiver/set-off defences considered below, Newmafruit is entitled to summary judgment in respect of the sums claimed at rows 3, 4, 6 and 7 of the amended schedule.

Row 5 of the amended schedule identifies a sum of £75,000 transferred on 17 December 2011 but governed by a loan agreement dated 5 January 2011 (“the January 2011 Agreement”) between Mr Pither (“the Borrower”) and Newmafruit (“the Lender”). The January 2011 Agreement is silent as to the purpose of the loan.

There is no dispute that this sum was in fact transferred to the client account of Davis-Law Associates; and no dispute that it was a loan to Mr Pither. Mr Pither’s defence to this part of the claim depends entirely on the applicability of the CCA and/or FSMA, which I consider at the end of this judgment. I say no more about it here.

The sums identified in rows 8 to 27 between them make up the bulk of the claim. They were transferred between 1 July 2011 and 19 June 2013 to various recipients. They amount to £1,423,092 in total. The amended schedule ascribes each payment either to a specific project (Quail West, Birchington or Corringham) or indicates that the sum was “Paid to Priory Homes (East) Limited as requested” or “Paid to AMP Consultants Limited as requested”. Mr Newman said this at paragraph 19 of his witness statement of 25 July 2016:

“Following execution of the 20 June 2011 Facility, Newmafruit advanced a total of £1,423,092 to Mr Pither in addition to the £200,000 which had already been advanced. I exhibit records demonstrating these bank transfers [MLN1/7-24]. Pursuant to the terms of the June 2011 Facility, these advances were made solely for the purpose of business projects undertaken by Mr Pither. To the best of my present knowledge (investigations are presently still ongoing by Peters & Peters) these advances were made for the purposes of the following property developments:

19.1

The purchase of the Corringham and Birchington plots.

19.2

Other costs in connection with the Corringham and Birchington developments.

19.3

Further costs in relation to Quail West.”

Mr Pither’s response to this in paragraph 26 of his witness statement of 28 July 2016 was as follows:

“The amount of £1,423,092 was not a loan, it was a payment by the Claimant into the joint venture agreement between the Claimant and Priory Home (East) Limited. It was not loaned pursuant to the loan facility agreement of 20^th June 2011. There were also various payments to AMP Consultants Limited as well. There is no evidence that any of these payments were for projects or requested by myself and approved and paid under the loan facility of 20^th June as alleged. There were so many transfers of money taking place in respect of various joint venture agreements that it is impossible to say whether any, or all, of the payments set out in the bank statements at pages 7-24 of Exhibit Bundle MLN/1 were loans and whether they were loans pursuant to the facility agreement. I put the Claimants to strict proof in relation thereto.”

Mr Giles made a number of additional points in his skeleton argument. He relies heavily on the fact that Mr Newman can only identify the purposes for which the payments were made “to the best of my present knowledge” and that “investigations are ongoing” in this regard. That, he said, is an insufficiently certain basis for summary judgment. He also noted that, in the original version of the schedule, there was a claim for further loans totalling £411,670 after 19 June 2013; but that it was now accepted that £400,000 of these were loans to PH Kent and PH Norfolk and should not have been claimed against Mr Pither. Mr Giles made the point that there is no satisfactory explanation of how this error was made and argued that it calls into question the assertion that the other payments were loans to Mr Pither.

In my judgment, the following conclusions can fairly be drawn.

First, it is plain from the terms of the June 2011 Agreement that Newmafruit and Mr Pither intended to establish a facility under which the former could lend up to £1,800,000 to the latter (in addition to the £200,000 that had already been advanced separately to AMP and Mr Pither).

Secondly, Newmafruit has identified sums totalling £1,423,092, which it says were lent pursuant to the facility in the two years following the conclusion of the June 2011 Agreement. It has an explanation for no longer claiming the additional sums totalling £400,000 that appeared as rows 32-37 on the original schedule. These were advanced in 2014, at around the time when Newmafruit entered into two agreements with NatWest dated 10 January and 11 February 2014 to borrow £1,500,000 and £2,500,000 respectively. The agreements are exhibited to Mr Newman’s First Affidavit sworn in support of the application for a freezing injunction and they state on their face that the sums were being lent to Newmafruit to lend on to PH Kent and PH Norfolk. Mr Giles said that it was not made clear that the evidence filed in support of the freezing injunction was being be relied upon in support of the present application. I do not accept that it is unfair to take this evidence into account. It was served on Mr Pither at the same time as Mr Newman’s statement of 25 July 2016. Mr Pither would have had to read and consider it for the return date on the freezing injunction. He could have responded to it if he had wished to do so. Mr Giles was unable to point to any particular line of enquiry that might have been prompted if Newmafruit had said in terms that it was also being relied on for the purposes of the summary judgment application.

Thirdly, Mr Pither admits that the Corringham and Birchington sites and also the Cromer and Ashford sites were purchased using money from the facility granted by the June 2011 Agreement: see paragraphs 16 and 18 of the Re-Amended Defence. It has been open to him, at any time since receipt of the claim, himself to identify the sums used for these purchases. If he had done so, (i) he would thereby have admitted that the sums identified were owed by him to Newmafruit (subject to any argument that the obligation to repay was superseded by the profit-sharing agreement); and (ii) there would have been a positive evidential basis for the argument that the remaining sums were not lent pursuant to the June 2011 Agreement. Mr Pither chose not to do this. The consequences are that he has avoided making any admission as to which of the sums now claimed was lent pursuant to the June 2011 Agreement; but there is no positive evidential basis on which Mr Pither can dispute that the sums now identified as having been lent pursuant to the June 2011 Agreement were so lent.

Fourthly, on 22 February 2013, Mr Pither signed and sent a letter to Chavereys, Newmafruit’s auditors, in the following terms:

“I confirm that at 31 May 2012, a loan balance of £1,595,000 (as per the attached schedule) plus interest accrued during the year ended 31 May 2012 of £30,814, was due to Newmafruit Farms Limited from me, Alan Pither.

Following the year ended 31 May 2012, in the period to 1 February, a further £970,000 has been loaned by Newmafruit Farms Limited to me.

Per the loan agreement dated 20 June 2011, the interest rate attached to the loan stands at 4%, calculated daily.

The loan is secured upon my property, which is of sufficient value to meet the outstanding loan balance as at 1 February 2013.

The loan balance shall be repaid by 20 June 2013 unless the option to extend the loan for one year is agreed as per the loan agreement. This option has not at this time been enacted.

The loan has been invested in the following property developments, undertaken by Priory Homes:

•

Priory Homes, Lampits Hill, Corringham, Essex

•

Priory Mews, The Square, Birchington, Kent

•

Jubilee Lane, Cromer, Norfolk,

•

Bybrook Road, Ashford, Kent

•

Quail West, Naples, Florida”

On its face, this letter appears to constitute an unambiguous acknowledgement of debts substantially in excess of those presently claimed, owed by Mr Pither to Newmafruit. It is difficult to see how it could have been written if Mr Pither believed that, as a result of a profit sharing agreement in around December 2011, he was relieved of the obligation to repay the sums lent under the June 2011 Agreement. Mr Pither offered no explanation for this letter in his evidence. Mr Giles made no submissions about it. It is, as it seems to me, the kind of evidence Potter LJ must have had in mind at [11] of his judgment in ED & F: see paragraph 18 above.

Fifthly, Mr Pither’s response to this part of the claim is unclear and inconsistent. As noted in paragraph 58 above, the Re-Amended Defence is ambiguous as to whether the profit-sharing agreement that Mr Pither said had been concluded in December 2011 relieved him of the obligation to repay just the interest due under the June 2011 Agreement or the principal sums as well. His witness statement of 8 July 2016 suggested the former. In his witness statement of 28 July 2016 he appeared to advance a wholly new defence: that the sums claimed in rows 8-27 were not lent under the June 2011 Agreement at all, but were invested in or loaned to PH Kent and PH Norfolk. On closer analysis (see in particular the last two sentences of paragraph 26), he was not in fact saying that. He was just making the negative point that Newmafruit cannot prove which payments were made under the June 2011 Agreement and for what purpose. The unsatisfactory state of Mr Pither’s pleadings and written evidence on this issue can properly be taken into account in determining whether his defence to this part of the claim has a real prospect of success.

Sixthly, it is true that Mr Newman said at paragraph 19 of his witness statement of 25 July 2016 that Peters & Peters’ enquiries were ongoing, but these enquiries were directed at establishing for which property developments the sums had been lent. If the sums were lent pursuant to the June 2011 Agreement, it is not necessary for Newmafruit to establish and prove which payment was referable to which project. Newmafruit says that the payments were lent pursuant to the June 2011 Agreement. It has a plausible explanation for distinguishing the additional £400,000 originally claimed but now not pursued. The letter of 22 February 2013 is an acknowledgement by Mr Pither that sums in excess of those now claimed were lent pursuant to the June 2011 Agreement. So the inability confidently to marry every transfer identified with a particular project does not supply a good answer to the application.

For these reasons, and taking into account the pleadings and evidence as a whole, I conclude that neither of Mr Pither’s principal defences – viz. (i) that the sums identified in row 7-28 were not loans made pursuant to the June 2011 Agreement and (ii) that Mr Pither was relieved of the obligation to repay those sums by subsequent agreement – carries the “degree of conviction” referred to by Potter LJ in ED & F (see paragraph 18 above). Neither has a real prospect of success in the sense identified by the authorities set out at paragraphs 18-20 above. Accordingly, subject to the CCA/FSMA and waiver/estoppel/set-off defences, Newmafruit is entitled to summary judgment in respect of these sums.

Rows 28 (£7,413 on 5 July 2013), 29 (£1,860 on 5 July 2013) and 30 (£2,397 on 31 December 2013) identify payments said not to have been governed by the June 2011 Agreement.

Mr Newman’s evidence about these is at paragraphs 20-23 of his witness statement of 25 July 2016. The first was to Homestyle Improvements UK Ltd and is said to have been in respect of works carried out on Mr Newman’s home by Mr Pither. The second was to Stacatruc and is said to have been to hire a forklift truck for “one of Mr Pither’s construction sites”. The third was to Peck & Peck’s Trust Account for the Quail West Project.

Mr Giles submitted that Mr Pither’s evidence for these claims was weak and said that Mr Pither denied that these were loans to him. The Re-Amended Defence contains no such denial, just a non-admission. Paragraph 28 of Mr Pither’s statement of 28 July 2016 does include a bare denial, followed by the statement that “[t]here is no evidence to show that they were personal to myself”.

The third of these payments (row 30) was to the same firm of Florida attorneys as previous payments made in relation to the Quail West Project. That seems to me to fall into the same category as the sums identified at rows 3, 4 and 6. For the reasons given at paragraphs 53-57 above, and subject to the CCA/FSMA and waiver/estoppel/set-off defences, Mr Pither’s defence to that part of the claim has no real prospect of success. The same applies to row 30.

As to rows 28 and 29, I agree with Mr Giles that the evidence as to the purpose of these transfers, and the basis on which they were made, is too exiguous to justify summary judgment. Newmafruit accepts that these transfers were not governed by the June 2011 Agreement. As to row 28, it is not obvious that money paid by Newmafruit for work on Mr Newman’s home should be regarded as a loan to Mr Pither, rather than as a sum for which Mr Newman would be liable in any event. As to row 29, the evidence is too vague to establish that the sum identified was understood as constituting a loan to Mr Pither.

There are two respects in which the loans, or some of them, are said to be unenforceable.

First, it is said that Newmafruit was carrying on a business of entering into “regulated credit agreements” without a licence or authorisation or permission to do so; that the loans were made and are being enforced by Newmafruit in the course of that business; and that these loans are therefore unenforceable. I shall call this “the Licensing Defence”.

Secondly, it is said that the loans are unenforceable because of the absence of the required pre-contractual disclosure and certain other specific information. I shall call this “the Disclosure/Information Defence”.

The statutory provisions under which the Licensing Defence is said to arise are complicated. They have been amended many times prior to 1 April 2014 but, as Mr Head and Mr Giles agreed, none of these amendments is material.

Until 1 April 2014, s. 21(1) CCA provided:

“Subject to this section, a licence is required to carry on a consumer credit business.”

Section 40(1) provided:

“A regulated agreement is not enforceable against the debtor… by a person acting in the course of a consumer credit business… if that person is not licensed to carry on a consumer credit business… of a description which covers the enforcement of the agreement.”

Section 189(1) defined terms. “Credit” was defined by reference to s. 9 CCA to include “a cash loan, and any other form of financial accommodation”. A “consumer credit agreement” was defined by reference to s. 8(1) CCA as

“an agreement between an individual (‘the debtor’) and any other person (‘the creditor’) by which the creditor provides the debtor with credit of any amount”.

A “consumer credit business” was defined as

“any business being carried on by a person so far as it comprises or relates to (a) the provision of credit by him, or (b) otherwise his being a creditor”.

A consumer credit agreement was a “regulated agreement” if it was

“not an agreement (‘an exempt agreement’) specified in or under section 16, 16A, 16B or 16C”.

Section 16B provided, insofar as material, as follows:

“(1)

This Act does not regulate—

(a)

a consumer credit agreement by which the creditor provides the debtor with credit exceeding £25,000…

if the agreement is entered into by the debtor… wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.”

Section 189(2) CCA provided as follows:

“A person is not to be treated as carrying on a particular type of business merely because occasionally he enters into transactions belonging to a business of that type.”

Mr Head relied on the commentary on this provision in Goode:Consumer Credit Law and Practice, at §27.15:

“…regularity of activity is necessary before that activity can be regarded as a business activity so as to attract the licensing provisions. Thus a person making occasional bridging loans for his clients or customers would not on that account alone be carrying on a consumer credit business.

Note that this subsection has been preserved by the changes brought about in 2014.”

The changes referred to here were given effect on 1 April 2014 by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) No. 2) Order 2013 (SI 2013/1881), made under FSMA. As the editors of Goode rather vividly explain (op. cit., §27.112), this instrument “eviscerates the CCA 1974, leaving its disjecta membra forlornly on the sand”. Among the provisions of the CCA omitted by Part 5 of SI 2013/1881 were ss. 16B, 21 and 40. There were, however, transitional provisions in Part 8, where Article 48 deals with the enforcement of agreements made by unlicensed traders. That applies to a “regulated agreement” entered into before 1 April 2014 (“a relevant agreement”) (Article 48(1)). “Regulated agreement” has the meaning given by the CCA (Article 29). Article 48(2) provides:

“A relevant agreement is not enforceable against the debtor… by a person carrying on a regulated activity of the kind specified in article 60B(2)… of the Regulated Activities Order if that person does not have permission to carry on the activity.”

The Regulated Activities Order is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), as amended. Article 60B, headed “Regulated credit agreements”, provides in paragraph (2):

“It is a specified kind of activity for the lender or another person to exercise, or have the right to exercise, the lender’s rights and duties under a regulated credit agreement”.

A “regulated credit agreement” in defined in paragraph (3), in the case of an agreement entered into before 1 April 2014, as

“a credit agreement which—

(i)

was a regulated agreement within the meaning of section 189(1) of the Consumer Credit Act 1974 when the agreement was entered into; or

(ii)

became such a regulated agreement after being varied or supplemented by another agreement before 1 April 2014.”

The prohibition on enforcement in Article 48 of SI 2013/1881 applies only to a person carrying on a “regulated activity” of a specified kind. To understand the concept of a “regulated activity”, it is necessary to explain the structure of FSMA, under which SI 2013/1881 was made. Section 26(1) FSMA provides:

“An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.”

The “general prohibition” is the prohibition in s. 19 on carrying on a “regulated activity” in the United Kingdom, or purporting to do so, without being (a) an authorised person or (b) exempt person. Section 22 provides that an activity is a “regulated activity” if it is “an activity of a specified kind which is carried on by way of business” (emphasis added) and relates to (among other things) an investment of a specified kind. “Specified” means specified in an order made by the Treasury: s. 22(5). Schedule 2, which is given effect by s. 22(2), makes provision supplementing s. 22. Part II of Schedule 2 sets out matters with respect to which provision may be made under s. 22(1) in respect of investments. Part II includes paragraph 23, headed “Loans and other forms of credit”, which identifies “Rights under any contract under which one person provides another with credit”. “Credit” is defined for these purposes as including “any cash loan or other financial accommodation”. The applicable “order made by the Treasury” is SI 2001/544, as amended.

This labyrinth of provisions, applied to the facts of this case, gives rise to the following questions.

First, are any of the sums claimed by Newmafruit due under a “regulated agreement” made before 1 April 2014? If so, the provisions of Article 48 of SI 2013/1881 apply and a second question arises: in seeking to enforce its entitlement to those sums, is Newmafruit “a person carrying on a regulated activity of the kind specified in article 60B(2)” of SI 2001/544? Given the terms of s. 22 FSMA, it could only be such a person if it were carrying on the activity of exercising lender’s rights and duties under regulated agreements by way of business.

As to the first question, it is again necessary to consider the lending in tranches:

Thus, the sums identified at rows, 3, 5, 6, 7 and 28-30 (amounting to £125,659 out of the total £1,735,413 claimed) were or were arguably lent pursuant to “regulated agreements”. In relation to these sums, the second question arises: was Newmafruit a person carrying on by way of business the activity of exercising rights under regulated agreements? If so, the regulated agreements are unenforceable by force of Article 48(2) of SI 2013/1881.

As to this, Mr Head relied on s. 189(2) CCA. That applies when determining whether someone is carrying on a business for the purposes of one of the provisions of the CCA that remain in force. But the CCA provisions making it obligatory for a person carrying on a consumer credit business to have a licence (s. 21) and making unenforceable regulated agreements made by unlicensed persons acting in the course of a consumer credit business (s. 40) are no longer in force. Article 48 of SI 2013/1881 achieves effects that are not wholly dissimilar. In doing so it applies by reference some of the concepts and definitions in the CCA, but not s. 189(2). For the purposes ofArticle 48 of SI 2013/1881, the question is whether the person seeking to enforce the agreement is a “person carrying on a regulated activity”. “Regulated activity” is not defined in SI 2013/1881, but there is nothing to rebut the presumption that it has the same meaning as it has in FSMA, under which SI 2013/1881 was made: see s. 11 of the Interpretation Act 1978. By s. 22 FSMA, an activity is not a “regulated activity” unless it is not only “an activity of a specified kind” but also “carried on by way of business”. FSMA has its own provisions for determining when a person is and is not to be regarded as carrying on an activity by way of business. Orders can be, and have been, made for this purpose under s. 419 FSMA: see the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (SI 2001/1177), as amended. But they do not deal with the particular activity at issue here: viz. exercising the lender’s rights and duties under a regulated credit agreement.

The meaning of the phrase “carried on by way of business” in FSMA was considered in Helden v Strathmore Ltd by Newey J ([2010] EWHC 2012 (Ch)) and by the Court of Appeal: [2011] EWCA Civ 542, [2011] Bus LR 1592. That case shows that there is a distinction between (a) an activity “carried on by way of business” and (b) carrying on “the business of engaging in that activity”. In relation to some activities (eg arranging and advising on regulated mortgage contracts), SI 2001/1177 provides that the activity is only to be treated as regulated if the person carries on the business of engaging in that activity. But where an activity is not so specified (as with exercising the lender’s rights and duties under a regulated credit agreement), the looser requirement applies and it is only necessary to show that the activity is “carried on by way of business”: see per Lord Neuberger MR in the Court of Appeal at [40]-[41], endorsing the observations of Newey J at first instance at [69].

Newey J referred at [83]-[84] to the Financial Services Authority’s Perimeter Guidance Manual (PERG), which, while not binding on the courts was still “of interest”. It provided as follows at PERG 2.3.3G:

“Whether or not an activity is carried on by way of business is ultimately a question of judgment that takes account of several factors (none of which is likely to be conclusive). These include the degree of continuity, the existence of a commercial element, the scale of the activity and the proportion which the activity bears to other activities carried on by the same person but which are not regulated. The nature of the particular regulated activity that is carried on will also be relevant to the factual analysis.”

At PERG 4.3.3G, the FSA said that the difference between the “carrying on the business” test and the “by way of business test” “should have little practical effect” but, at PERG 4.3.6G, it identified some distinctions. These passages appear in the same form in the current edition of PERG, issued by the Financial Conduct Authority, to which Mr Head and Mr Bird made reference in their written submissions filed after the hearing.

Newey J continued as follows:

“85.

Taken in isolation, it may be that the phrase ‘an activity of a specified kind which is carried on by way of business’, as used in section 22(1) of FSMA, could be taken to refer to carrying on the activity of a specified kind’ as a business and, hence, to apply only where the activity of itself represents a business. Such a construction would, however, mean that there was no real distinction between (a) an activity ‘carried on by way of business’ (within section 22(1)) and (b) carrying on ‘the business of engaging in that activity’ (within, say, article 3A of the Business Order ). Yet I agree with the FSA that the ‘carrying on the business test’ in the Business Order is supposed to be “a narrower test than that of carrying on regulated activities ‘by way of business’ in section 22’. As the FSA observes, the former test ‘requires the regulated activities to represent the carrying on of a business in their own right’. The section 22 test, in contrast, cannot be intended to mean that the relevant activity should itself represent a business. Section 22 must extend to cases where an ‘activity of a specified kind’ is carried on in the course of a wider business, not limited to undertaking that activity.

86.

Suppose, to take an example with similarities to the present case, that a money lender whose dealings did not normally fall within FSMA (say, because most loans were to companies) entered into ‘regulated mortgage contracts’ from time to time. It seems to me that section 22 would be capable of applying to the ‘regulated mortgage contract’ transactions. That view is, as I see it, consistent with the FSA’s comment (see para 84 above) that ‘the ‘by way of business’ test in section 22 could be satisfied by an activity undertaken on an isolated occasion’…”

This means that it is not necessary for Mr Pither to show that the exercising of lender’s rights under regulated agreements represented for Newmafruit the carrying on a business in its own right. The test is the looser one of whether the activity of exercising lender’s rights under regulated agreements was carried on by Newmafruit “by way of business”. The latter test could be (though would not necessarily be) satisfied even if the activity were undertaken “on an isolated occasion” only.

Mr Newman gave some details in paragraphs 34 to 36 of his witness statement of 25 July 2016 about the extent of Newmafruit’s lending activities. He indicated that, from 2008, Newmafruit began to generate substantial profits and thereby to build up substantial cash reserves. Mr Peter “suggested that Newmafruit could earn a better return on its money by lending directly to businesses and entrepreneurs”. It therefore made loans of varying amounts not only to Mr Pither but also to others (including a Mr and Mrs Gosling, Mr Peter and various corporate entities). Mr Newman’s evidence does not address the extent to which Newmafruit is currently engaged in the activity of exercising its rights as lender under these agreements.

In the light of this evidence, and applying the looser test explained by Newey J in Helden v Strathmore, it is impossible to say, in respect of the sums lent pursuant to regulated agreements, that Mr Pither has no real prospect of establishing that Newmafruit is acting “by way of business” in exercising its rights as lender under these agreements. Given the relevant factors identified, the “judgment” referred to in PERG 2.3.3G could only be made on much fuller information. Thus, so far as it relates to the regulated agreements, the Licensing Defence raises a triable issue.

The Disclosure/Information Defence relies on the provisions of ss. 55, 61 and 65 CCA, which are among the fragments left untouched by SI 2013/1881. Section 55 provides that regulations may require specified information to be disclosed in the prescribed manner to the debtor before a regulated agreement is made. Section 61 imposes further requirements on the form of regulated agreements, also by reference to regulations. In each case, breach of the relevant requirement makes the agreement enforceable against the debtor on an order of the court only: see ss. 55(2) and 65(1). Further provision as to the circumstances in which enforcement should be permitted is made in s. 127, which makes relevant the prejudice caused by the contravention, the degree of culpability for it and the powers of the court to impose conditions on or suspend the operation of its order (s. 135) and to vary any agreement (s. 136).

It is common ground that none of the agreements giving rise to the debts claimed by Newmafruit in this action was preceded by the required disclosure and none of them was executed in the prescribed form. Mr Head submitted that it was obvious that the court would nonetheless permit their enforcement under ss. 55(2) and 65(1). I do not agree. The multi-factorial assessment required by s. 127 when deciding whether to permit enforcement seems inherently unlikely to be possible on an application for summary judgment. Certainly on the evidence before me on this application, I do not see how I could form a clear view on either the prejudice caused to Mr Pither by enforcement or the degree of culpability on Newmafruit’s part for the various contraventions of the regulations. As far as it relates to the regulated agreements, the Disclosure/Information Defence therefore raises a triable issue.

These defences were not addressed by Mr Giles in his oral argument, so I can deal with them relatively quickly.

Insofar as Mr Pither relies on any “periods where the agreements, whatever the interpretation thereof, were not enforced” (see paragraph 26 of his witness statement of 8 July 2016) as an implied waiver of Newmafruit’s right to demand repayment of the sums due under the June 2011 Agreement, this defence is inconsistent with clause 11.4 of that agreement, which provides as follows:

“No failure or delay on the part of the lender to exercise any power, right or remedy under this Agreement shall operate as a waiver thereof…”

In any event, a waiver (express or implied) can only arise as a result of “an unambiguous representation arising as a result of a positive and intentional act done by the party granting the concession with knowledge of all material circumstances”: Halsbury’s Laws of England, vol. 22, §592. There is no act on the part of Newmafruit pleaded or evidenced that could amount to an “unambiguous representation” of this kind.

In his Re-Amended Defence, Mr Pither relied on a memorandum of understanding said to have been agreed by the parties’ solicitors in or around May 2013. In paragraph 28 of his witness statement of 8 July 2016, he said that the memorandum was supposed to have accompanied the 2014 agreements and exhibited two memoranda dated May 2015 that he said regularised the position between PH Kent and PH East and between PH Norfolk and PH East. Even if these memoranda may be relevant to Newmafruit’s lending to PH Kent and PH Norfolk, I do not see what relevance they could have to Newmafruit’s lending to Mr Pither personally. As I have said, Mr Giles chose not to address this issue in his oral submissions. In these circumstances, I conclude that any defence based on these memoranda has no real prospect of success.

Finally, Mr Giles said in paragraph 14 of his skeleton argument that, by paragraph 13 of Mr Beasley’s witness statement, Newmafruit had accepted a liability of £130,000 to Mr Pither, who is entitled to set this sum off against any liability to Newmafruit. The sum was said to be due for works done by Mr Pither to Mr Newman’s home. There are three difficulties with this. First, no set-off is pleaded by Mr Pither. Secondly, Mr Pither’s original pleaded case (see paragraph 26 of the Defence) was that the works done on Mr Newman’s home gave rise to a debt (of £231,600, not £130,000) due to PH East, not Mr Pither personally. In the Re-Amended Defence, Mr Pither’s position was that this sum was “a separate claim between the Defendant and Newman”. On either version, this was not a debt owed by Newmafruit to Mr Pither. Thirdly, even if it could be established that the sum was due from Newamfruit to Mr Pither personally, in clause 6.1 of both the January 2011 and June 2011 Agreements Mr Pither agreed to repay the sums borrowed “free from any legal or equitable right of set-off on the Redemption Date”. As the Court of Appeal held in Continental Illinois National Bank & Trust Company of Chicago v Papanicolaou [1986] 2 Lloyd’s LR 441, the purpose of such clauses is to entitle the lender to be paid quickly and to prevent disputed cross-claims from defeating an application by the lender for summary judgment (see per Parker LJ, giving the judgment of the Court, at 444 and 445). For these reasons, the defence of set-off has no real prospect of success.

For these reasons, I conclude that:

I shall invite further submissions as to the appropriate form of order in the light of these conclusions and on any ancillary matters.