Royal Court orders property firm to repay Acorn Finance £200,000

Thursday 09 June 2022

The Royal Court has ordered a UK property company to pay back a £200,000 loan it took out from Acorn Finance.

The lender took legal action after ECI Limited and its directors, Sean and Elliot Caffrey, failed to pay back the money, arguing that the interest rate was extortionate, and therefore illegal and unenforceable.

They also said that the lending contract had been frustrated because of covid or Irish legislation; the directors had no choice but to agree to the terms of the loan guarantees, which they did not understand when they signed.

The loan agreement between Acorn Finance and ECI Limited was entered into in November 2020. The loan was for £200,000 and the total interest was the same amount.

The loan provided for 16 monthly payments of £25,000 each to cover capital and interest, with the annual interest rate therefore being 75%. 

Acorn Finance only went to court seeking repayment of the capital, something judge Matthew Thompson, Master of the Royal Court, agreed was a good idea.

He said: “The plaintiff [Acorn Finance] had accepted that there was an argument for trial about what rate of interest any of the defendants might be obliged to pay.  

“In my judgment the plaintiff was right to make that concession because it is extremely arguable that the rate of interest claimed is penal and therefore might well be reduced.”

However, Advocate Thompson also rejected the defence of the ECI and its directors, as argued by their lawyer, Advocate Andrew Begg.

Because Acorn Finance were only seeking the repayment of the £200,000 capital, the judge said that this would have had to have been settled regardless of whether the interest rate was deemed excessive or not.

With regard to covid, Advocate Thompson said it was no argument, because the loan agreement had been signed eight months after the pandemic begun, so it could not have been a “a supervening event frustrating performance of the contract.”

Another of the property company’s arguments for not repaying the loan was that Irish legislation made it illegal for any commercial building work to be carried out or for commercial properties to be sold.

The Royal Court was critical of this defence.

In his judgment, Advocate Thompson said: “This pleading is wholly unsatisfactory because it fails to plead all material facts.

“Firstly, it does not plead when the Irish legislation came into force.  

“If the Irish legislation was already in force when the loan agreement was entered into, it cannot be a supervening event frustrating a contract for the same reasons that the covid pandemic could not be a supervening event.”

He added that the relevant legislation had not been identified, which Advocate Begg should have done and disclosed from the beginning of the case, so all sides knew the basis of this plea.

“For an advocate to plead the effect of legislation without knowing what that legislation was, or having any sight of its terms, is also a material failure on the part of that advocate to satisfy himself that the legislation does indeed raise an arguable defence appropriate to plead,” said Advocate Thompson.

The judge also rejected the defendant’s ‘guarantee defence’, concluding that a failure to understand the meaning of an agreement was not a defence. 

“There was also no trickery in the terms of the guarantee,” he said. “It is not an artificial device or designed to mislead. Rather […], it is clear on its face.”

Advocate Thompson granted ‘summary judgment’ against ECI Limited and its directors to repay Acorn Finance £200,000.