False representations lead to possession order and money judgment against a dishonest borrower

In a case that will be of great interest to the many unregulated lenders in the UK, Mark Dennis, Head of Restructuring and Insolvency, and Jess Le Rendu, Trainee Solicitor, successfully secured a possession order and money judgment against a dishonest borrower.

We were acting for an unregulated short-term bridging finance lender who had advanced a short-term loan to a borrower. The borrower had made various representations, including that she would not reside at the property that the loan was to be secured upon, and that the loan was to be used for the purposes of a business. The lender relied on those representations in advancing the loan as an unregulated product.

It was then found out that these representations were false. The borrower admitted that she had instructed her bank to change her address on her statements to a false address, and that she had signed a false tenancy agreement.

When the borrower failed to make repayment of the loan, HF initiated possession proceedings on behalf of the lender, seeking possession of the security property and a money judgment for the amount due under the loan. These proceedings were defended by the borrower on the basis that the loan was unenforceable pursuant to s26 of Financial Services and Markets Act 2000, or in the alternative that there was an unfair relationship between the lender and the borrower arising out of the loan pursuant to s140A of the Consumer Credit Act 1974.

After a two and a half day trial and a further consequential hearing, HHJ Godsmark KC found there was no prohibition on the enforcement of the loan under Financial Services and Markets Act 2000. HHJ Godsmark KC ordered that the borrower give the lender possession of the security property within 28 days, and entered a money judgment in full in respect of the sums due to the lender and awarded costs in full.

When determining whether the borrower should be granted any relief under the Consumer Credit Act 1974, HHJ Godsmark KC found that the dishonesty of the borrower was the weightiest factor and that the fraud was persistent, determined and flagrant, to the extent that no remedy was to be granted.