Court considers ‘pollution’ of a P2P loan agreement

This hearing was an application by the Peer-to-Peer lending platform Open Access Finance Ltd (T/A Unbolted) for determination of a Preliminary Issue prior to trial.  The issue concerned the consequences resulting from the potential status of eight so-called corporate lenders who had participated (along with some 600 individual retail investors) in lending some £148k to the claimant, secured against valuable chattels.

Some background to this litigation can be found in this judgement of Chief Master Marsh.

Mr Iain MacDonald, the barrister representing the P2P platform, told the court that the claimant had made an application to amend his Particulars of Claim to argue that each of the eight corporate lenders “was acting in the course of a business“.  If this proposed claim could be successfully argued, it was said the claimant intended to plead that these now-reclassified ‘commercial lenders’ would by virtue of their commercial status breach certain provisions within the Consumer Credit Act (“CCA”) and the Financial Services and Markets Act (“FSMA”).  This breach, it was expected to be argued, would render the Loan Agreement unenforceable.

The issue facing the court today was very specifically and very narrowly looking at what is meant by the term ‘Loan Agreement’.  Mr MacDonald contended that a P2P agreement was in fact made up of many smaller (in this case some 612) discreet contracts between the borrower and individual investors.  This was the position established in Lederer v Allsop LLP.   Therefore, a court finding that one of these 612 agreements was unenforceable would have little consequence on the remaining 611.

Mr Richard Roberts, the barrister representing the borrower, argued that their position was the opposite – that a corporate lender acting in a commercial way could contaminate the whole loan by unenforceability. 

This was a situation Mr MacDonald described as “rather startling” by referring to the civil and criminal sanctions that could affect an innocent retail investor resulting from breaching the CCA and the FSMA.  “The pollution by one commercial lender can have enormous consequences” Mr MacDonald remarked.

In any event Deputy Master Glover, the procedural judge dealing with the application, began the hearing stating “that the determination may be academic as at the moment it’s not clear whether the claimant is going to be advancing the case there was any commercial lending at all”. 

Deciding to hear Open Access Finances application on the basis that both parties had prepared for it, Deputy Master Glover told the court that he would reserve his position on both whether he would even consider the preliminary issue, and indeed if so, his judgment on it.

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Rolls Building
Deputy Master Glover on behalf of Chief Master Marsh
Andrew Milne v Open Access Finance Limited
FS-2019-000004
31/03/2021 – 10:30am Remotely via MS Teams
Application hearing