High Court rules on application of CCA ‘business purpose’ exemption to multi-borrower loans

In Campbell v Tyrrell & Ors [2022] EWHC 423 (Ch), the high court considered the application of the ‘business purpose’ exemption in s.16B(1) of the Consumer Credit Act 1974 (the “CCA“) to a loan entered into between a married couple, Ms Campbell and Mr Tyrell as joint borrowers and a company called Goldcrest Finance Limited (“Goldcrest“) as lender.

The stated purpose of the loan was to refinance debts owed to HSBC (and secured against the marital home of Ms Campbell and Mr Tyrell) incurred by the business carried on by Mr Tyrell in partnership with a Mr Laitak. Mr Laitak was also a director of Goldcrest. Both Ms Campbell and Mr Tyrell had signed declarations designed to satisfy the presumption of a ‘business purpose’ provided for in s.16B(2) CCA stating that:

“I am/We are* entering this agreement wholly for the purposes of a business carried on by me/us* or intended to be carried by me/us*.”

However, it was known to Mr Laitak that Ms Campbell had no direct role in Mr Tyrell’s business dealings and that her predominant occupation was that of a ‘housewife’ (it was admitted that she had been personally introduced to him as such on a number of times).

The court found that:

1. the role of Mr Laitak as both Mr Tyrell’s business partner and as a director of Goldcrest did not render Goldcrest’s relationship with Ms Campbell an unfair one (the court highlighted that Mr Laitak was aware that Ms Campbell had guaranteed previous business loans of Mr Tyrell, Ms Campbell relied upon her own independent legal advice and Ms Campbell had played an active part in the negotiation of the loan);
2. the omission of the words ‘or predominantly’ after ‘wholly’ in the above form of declaration was not sufficient to disapply the exemption and render the loan unenforceable save by court order;
3. that where there are two borrowers and the ‘business purpose’ exemption is being relied upon both borrowers must be entering into the loan ‘for the purposes of the business’ otherwise the exemption fails and the loan becomes a regulated one; and
4. that, therefore, in the present case the loan agreement had been unenforceable by the appointment of the LPA receivers and the sale of the secured property.

However, on the facts of the case the court found that Ms Campbell had suffered no financial loss as a result of the appointment and sale.