On 9th September, the High Court handed down judgment in Newmafruit Farms Ltd v Pither [2016] EWHC 2205 (QB). The lender, a family-owned fruit farming business (“Newmafruit”), sought summary judgment on a series of loans advanced to a builder. Some of the loans were ‘regulated credit agreements’ and the borrower claimed that these were unenforceable, as the lender lacked an OFT licence to enter or administer such agreements (they were entered prior to the transfer of regulation in April 2014). Newmafruit submitted that it had not been lending “by way of business”.

The High Court cited Helden v Strathmore Ltd [2011] EWCA Civ 542 as authority that there was 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 (e.g. arranging and advising on regulated mortgage contracts), the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 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 administering regulated credit agreements), the looser requirement applies and it is only necessary to show that the activity is “carried on by way of business”

Accordingly, it was not necessary for the borrower to show that the administration of credit agreements represented for Newmafruit the carrying on of a business in its right. The test was the looser one of whether Newmafruit carried on the activity of administering regulated credit agreements “by way of business”. Potentially this test could be satisfied where the activity was undertaken on an isolated occasion.

Summary judgment was refused on these loans. Newmafruit had been lending not only to the respondent builder, but also to other individuals and corporate entities. The “judgment” referred to in PERG 2.3.3G (based on a variety of factors, including continuity, scale and profit) could only be made on much fuller information and therefore whether Newmafruit had been lending by way of business was a triable issue.