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Jackson v Ayles [2021] EWHC 995 (Ch) was an application by a trustee in bankruptcy for possession and sale of the bankrupt’s matrimonial home. The interest in the judgment is that she also sought a declaration that security held over the property by a lender, Mr Pumphrey, was unenforceable by reason of breach of provisions of the Financial Services and Markets Act 2000. She also sought a declaration that a second charge was void as having been given in the period between presentation of the bankruptcy petition and the making of the bankruptcy order (which was conceded at trial).

Section 19 FSMA 2000 prevents anyone but an “authorised person” or an “exempt person” from carrying on a “regulated activity” in the UK. Section 22(1) provides that an activity is a “regulated activity” if, among other things, it is “an activity of a specified kind which is carried on by way of business” and either (under section 22(1)(a)) “relates to an investment of a specified kind” or (under section 22(1)(b)) “in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind.” The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 specifies kinds of activity for the purposes of section 22 of FSMA (see article 4). The activities specified include activities relating to “regulated mortgage contracts,” an expression defined in article 61 (see the summary in the judgment of  Newey J, as he then was, in Helden v Strathmore Ltd [2010] EWHC 2012).

The first question Chief ICC Judge Briggs had to answer in the case before him was whether the lending that had given rise to the disputed security amounted to a business, as the trustee contended but which Mr Pumphrey denied: his case was that the loan was made as a friend. The judge found on the facts that the transaction had been a business transaction and he gave reasons for that finding based on the evidence before him.

The second question was whether in the circumstances of the case the lender should be relieved of the consequences of that under section 28 FSMA (as Newey J had done in Strathmore). Sub-section (3) provides that if the court is satisfied that it is just and equitable in the circumstances of the case, it may allow the agreement to be enforced or money and property paid or transferred under the agreement to be retained. Sub-section (4) sets out other considerations to which the court must have regard; subsection (5)  directs the court (where section 26 applies, as it did here) to “The issue… whether the person carrying on the regulated activity concerned reasonably believed that he was not contravening the general prohibition by making the agreement.” As the court had found that the loan in issue was unenforceable under section 26(1) FSMA, it was obliged to consider that issue.

It was accepted, indeed conceded, that Mr Pumphrey had not been aware of the FSMA requirements. The Chief ICC Judge weighed up carefully reasons for and against granting relief against unenforceability and considered the objective and subjective elements implied in the test. He ultimately found against Mr Pumphrey on the basis that he could not make out a case for having a reasonable belief: he had not taken reasonable steps to inform himself of the legislation (by taking legal advice or appropriate advice or undergoing training) which had, by the time the loan was made, been in force for some time, at the same time finding that he could not make out a subjective belief if he was unaware of the relevant law. He cited Neuberger MR, on appeal against the judgment of Newey J ([2011] EWCA Civ 542): “[P]eople who carry on regulated activity and are ignorant of the law, even if reasonably so, should be more at risk because they are more of a danger to the public.


Frances Coulson
Senior Partner, Head of Insolvency & Litigation


Standout firm known for its personal insolvency work for clients including private companies, individuals and governmental institutions. Frequently acts for insolvency practitioners, assisting with the realisation of assets, both in the UK and abroad.

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