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England and Wales Court of Appeal (Civil Division) Decisions
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Cite as:  Bus LR 418,  EWCA Civ 1218,  1 All ER (Comm) 854
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ON APPEAL FROM CHESTER COUNTY COURT
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE SULLIVAN
MR JUSTICE OWEN
| SOUTHERN PACIFIC PERSONAL LOANS LIMITED
|- and -
|MR MICHAEL WALKER & ANR
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7404 1424
Official Shorthand Writers to the Court)
MR DAVID BERKLEY QC and MR ADRIAN SALTER (instructed by Turner Coulston) for the Respondent
Hearing date: 14th October 2009
Crown Copyright ©
Lord Justice Mummery :
Background facts and proceedings
Judgment below discussed
"(1) In this Act "credit" includes a cash loan, and any other form of financial accommodation.
(4) For the purposes of this Act, an item entering into the total charge for credit shall not be treated as credit even though time is allowed for its payment."
"19. ….section 9(4) must be applied without too narrow an interpretation of the word "item." If a charge for credit is correctly recognised in accordance with the detailed regulations …. then any cash loan or other financial accommodation made or afforded by the creditor to the debtor for the purpose of discharging the liability for that charge should not be treated as part of the credit to which the total charge for credit relates. It may be, though it is unnecessary to any decision in this case, that the loan made to pay the charge is itself a separate credit which should be made the subject of a regulated agreement to which the Act applies, whether as a linked transaction within section 19 or otherwise". (see also Chadwick LJ at paragraph 35)
!7. …. although the figure of £18,375 is not specifically described as the amount of credit, it is in fact treated as such. Interest is calculated on that total rather than on the lower figure."
"18…section 9(4) effectively prohibits the charging of interest on a charge for credit even if time for payment is deferred. The reason is that if it is included in the amount of credit, that contravenes the decision in Wilson, if it is not then the document does not accurately record the reality of the transaction. I really cannot improve on the way he puts it in his further submissions which were submitted on 30th January.
"to charge interest upon any element of a regulated advance is by definition to treat that element as credit. This is equally true where that element must by law form part of the charge for credit since it cannot lead a double life (as the trial judge wrongly held it could in Wilson). Yet section 9(4) is absolutely prohibitive. It does not say that a particular element can be treated as credit for some purposes (e.g attracting interest) but not for others(e.g .identifying the aggregate advance) nor does it say that a particular element may be treated as credit by the lender but not by the court."
19. It is well established law that the court should look at the substance not the form. Counsel for the Defendants cites Watchtower Investments v. Payne CA 20.07.01
"The purpose of the court's consideration is to arrive at what in reality is the true cost to the debtor of the credit provided."
20. That is plainly right. In reality in this case there were not three elements to the repayment, the capital, the fee and the interest on the capital, but four elements , the capital, the interest on the capital, the fee and the interest on the fee. The fact that the last was included meant that the fee was treated as credit and this contravenes section 9(4)."
Discussion and conclusions
(1) Prohibition of interest on charge for credit
(2) Amount of Credit
The secondary point
Lord Justice Sullivan
Mr Justice Owen: