Court upholds ruling against high-rate loan: Those with huge interest charges may have a chance, writes Sue Fieldman

ROBERT Leadbeater won a decisive victory last week against the loan company that is charging him interest of 60.1 per cent on his mortgage.

Huntpast, the lender, had been trying to repossess his home in Eastleigh, Hampshire, but the Court of Appeal decided the loan agreement was unenforceable.

The Independent first highlighted Mr Leadbeater's predicament in September 1991. He had been in financial difficulties when a broker arranged a four-month bridging loan on his property, on the basis that a remortgage would materialise.

He took out the loan in August 1986 for pounds 18,500 at an annual percentage rate (APR) of 60.1 per cent.

The original loan company was North Mount Securities, but on the day of completion the debt was assigned to another lending company, Huntpast.

Martin Brand, a partner in Brand Montague solicitors, is a director of North Mount and Huntpast. Brand Montague and the two lending companies have the same address in South Harrow, Middlesex.

Out of the loan of pounds 18,500 Mr Leadbeater had to pay four months' interest in advance, amounting to pounds 2,960, a broker's arrangement fee of pounds 4,500 - which unknown to Mr Leadbeater included legal costs of pounds 450 - and a a pounds 125 insurance premium.

After repaying the existing mortgages, Mr Leadbeater received just pounds 65.49 from the pounds 18,500 loan. Mr Leadbeater was supposed to pay pounds 740 a month to cover the interest but found he was unable to meet these repayments. Moreover, the re-mortgage fell through.

The pounds 18,500 loan consequently escalated to pounds 176,754 by September 1991 and could now amount to about pounds 200,000. His house is worth about pounds 40,000.

Meanwhile, Huntpast started proceedings to repossess the house. This week the Court of Appeal confirmed a decision in a lower court that the agreement was unenforceable.

The court decided that the four months' interest in advance, the pounds 125 insurance premium and the legal fees of pounds 450 were all part of the total charge for credit. If you deduct these items from the amount of the loan of pounds 18,500, you are left with pounds 14,965.

Gregory Hine, Mr Leadbeater's current solicitor, said: 'The loan agreement was, therefore, held to be a regulated agreement - less than pounds 15,000. Huntpast was unlicensed under the Consumer Credit Act for these purposes. The agreement is, therefore, unenforceable.

'Solicitors should be alert to the danger that documents initially produced in such proceedings may not necessarily reflect the real history of the transaction.'

We asked Mr Brand for his comments on the case but we received no reply.

Mr Hine advises that Mr Leadbeater's story is a cautionary tale for others. 'Never borrow money at very high rates of interest to get out of debt.'

His words of warning come too late, however, for Roydon Dagger. He and his wife, Stephanie, used to own a four-bedroom bungalow.

They now live in rented accommodation with their three children. Their home has been repossessed and they are virtually penniless.

Mr Dagger said: 'We have lost everything financially. Please do not let any more consumers lose their homes in this way. It is not morally right.'

In August 1990, the couple were in arrears with their mortgage. They answered an advertisement for a company called Tradefair. Mr Dagger said: 'In September 1990, Tradefair arranged for us what we thought was a short-term loan, and we understood that they would arrange a re-mortgage after three months.'

The loan was for pounds 8,640 with the finance company Grangewood Securities, repayable by 180 monthly instalments. The loan was secured on Mr Dagger's bungalow and the APR was 42.7 per cent.

The loan agreement took effect in September 1990, and within a month Tradefair went into receivership. 'We were left with the mortgage, the loan on our property and no remortgage. There was no way we could pay,' said Mr Dagger.

The first mortgagee, Canadian Imperial Bank of Commerce, repossessed the property at the end of 1991.

Mr Dagger's home has just been sold for pounds 76,000. He does not expect to receive any money from the sale after the mortgage and loan have been discharged. In fact, he is worried that he will still owe money, which he could not repay.

Mark Pickston, a former Tradefair director, denied that the company knew it would be unable to get a remortgage for Mr Dagger when it arranged the loan just four weeks before the firm collapsed.

Michael Moss, a spokesman for Suburban and Provincial Management, the company which acts as managers to Grangewood, said: 'Tradefair were brokers who submitted applications to Grangewood from time to time.'

(Photograph omitted)