McKenzie v Creation Consumer Finance Ltd [2023] EWHC 1904 (KB) (England and Wales)

Appeal against a Trial Judge’s finding of fact

Sections 75 and 140 Consumer Credit Act 1974 (the “CCA”); Solar Panel Litigation; Application of Hodgson; Mitigation of loss; Impact of Sale.

Why should I read this?

This Appeal is a helpful reminder that the role of the Appeal Court is not to re-hear a case but to review the earlier decision [1] . An Appeal should only be allowed if the Court is satisfied by an appellant that the decision of the Court below was wrong [2].

This Appeal also gives helpful guidance to lower Courts on how to deal with misrepresentation and/or breach of contract claims for losses flowing where the chattel in question has been sold (and continues to provide a benefit for future owners), and provides further guidance on remedy as per Hodgson v Creation Consumer Finance Limited [2021] EWHC 2167 (Comm) (“Hodgson”) when a property is sold.

The Background

In April 2015 Ms McKenzie purchased the supply and installation of a solar panel system (the “System”) from My Planet Limited (the “Supplier”). The System was installed by the Supplier on the roof of Ms McKenzie’s property. Creation Consumer Finance Limited (“CCF”) financed the System with a fixed sum loan agreement with Ms McKenzie. The claim was brought against CCF under the connected lender liability provisions at section 75 of the Consumer Credit Act 1974 (the “1974 Act”).

By their claim, Ms McKenzie complained that the non-disclosure of commission arrangements between CCF and the Supplier gave rise to an unfair relationship within the meaning of section 140A of the 1974 Act. Ms McKenzie also complained that a statement allegedly made by the Supplier as to the future performance of the System amounted to an actionable misrepresentation for which CCF was liable.

On 7 November 2022 (nine days before the Trial), Ms McKenzie completed the sale of her property. The sale price was £427,500. An offer in that amount had been made on 12 June 2022. This was an increase of £297,550 when compared to the £129,950 that Ms McKenzie had paid for the property in 2001. Ms McKenzie did not inform CCF of the marketing, offer or sale of the property until 22 September 2022, three months after the offer had been made and only six weeks before the trial. On 15 November 2022 (the eve of Trial), Ms McKenzie provided copies of a buyer’s questionnaire showing that the purchaser of the property had sought assurances on three occasions that the right to receive the future benefits that would be derived from the System was included in the sale.

On 16 November 2022, a fast-track trial took place.

In relation to the misrepresentation claim, the Judge held that he was satisfied that the representations as alleged were made to Ms McKenzie and Ms McKenzie was entitled to rely on the statements of the agent of the Supplier. When considering loss and the assessment of damages, the Judge applied the formula as set out by HHJ Pearce in Hodgson. In applying the Hodgson formula, the Judge found that the benefit that Ms McKenzie received from the System outweighed the loss by £1,449.96. He dismissed the claim for that reason.

In relation to the claim that there had been an unfair relationship under s.140A of the 1974 Act, the Judge, noting his broad discretion, held that the relationship was not unfair, and he should not make an award under s.140B of the 1974 Act, and of note, this point was not appealed.

An Appellant’s Notice was served and permission to appeal was granted.

The Appeal

• Frederick Lyon (instructed by SK Lloyds Solicitors) for Ms McKenzie

• Lia Moses (instructed by Eversheds Sutherland (International) LLP) for CCF

There were four grounds for appeal:  

Ground 1: 

The order dismissing the claim was unjust because of a procedural irregularity on account of a failure to give reasons for finding that, notwithstanding the sale of the property, she must give credit for future benefits to be derived from the System according to the formula as set out by HHJ Pearce in Hodgson.

Ground 2:

If the order dismissing the claim was based on a finding that Ms McKenzie must give credit for future benefits to be derived from the System that would be received by the purchaser of the property, it was wrong in law because Ms McKenzie should only be required to give credit for benefits that she herself received.

Ground 3:

 If the order dismissing the claim was based on a finding that the property had increased in value because of the System, such a finding was wrong.

Ground 4: 

If the order dismissing the claim was based on a finding that Ms McKenzie had failed to mitigate her loss, such a finding was unjust because of a procedural irregularity because such an argument was not properly canvassed at trial.

The Decision

Mr Justice Griffiths gave a helpful and thorough overview of the Grounds of Appeal and set out his reasoning as to why he rejected the Appeal.

As to Ground 1:

Mr Justice Griffiths considered why the Trial Judge had reached the decision that he did and found his reasons to be sufficient to explain why he made his decision. The Trial Judge decided that, with the lack of evidence about the exact amount by which the sale price was increased by reason of the System and having found that the proceeds of sale of the property had increased by the inclusion of the System, the Trial Judge adopted the Hodgson calculation as the best available means of putting a figure on it. Such increase exceeded the total cost of finance, therefore there was no loss. Consequently, Ms McKenzie succeeded in proving liability, but failed in proving an essential element of the tort, which is damage. Ground 1 was therefore rejected.

As to Ground 2:

On reflection, Ms McKenzie did not maintain this ground as the correct reading of the judgment, the corollary being Ground 2 fell away.

As to Ground 3:

Ms McKenzie argued that the Trial Judge’s decision "placed weight on an irrelevant factor; namely that [Ms McKenzie’s] buyer's conveyancing solicitors had asked whether the entitlement to receive the FIT payments was included within the sale and disregarded the oral evidence of [Ms McKenzie] that a nearby property without solar panels had recently sold for more than her own". Taking the second point first, Mr Justice Griffiths noted that the Trial Judge did not disregard the oral evidence of Ms McKenzie, and it was open to him to place little or no weight on her evidence, and weight was a matter for him to determine. This did not mean that he doubted Ms McKenzie’s credibility.

As to the first point, the evidence demonstrated that the buyer of the property knew of the System and was interested in the benefits flowing from the System. The question then was what weight to place upon that evidence, and weight was a matter for the Trial Judge. The Trial Judge’s reasoning was not based only on this evidence, but this was part of the evidence which supported his conclusion. The Trial Judge was not therefore wrong to refer to it. Mr Justice Griffiths confirmed that it did not matter that the System was not referred to in the property sales material. The System would have been visible upon the buyer’s viewing of the property.

The question for the Appeal Judge was whether the Trial Judge’s approach was “rationally insupportable”, and he did not think that it was. The Trial Judge found there to have been an increase in the property due to the System and had to put a figure on it.

The Trial Judge had very little to go on when deciding what the increase in the sale price of the property had been. The tool he had to hand and used, from Hodgson, was at the very least aligned with the question he had to decide. The burden of proof was on CCF (the defendant), and the Appeal Judge recognised that. On the other hand, it was Ms McKenzie who was best placed to provide the evidence, and she had provided very little. There was some disadvantage to CCF in the timing of the sale relative to the trial and a complaint had been made about late and inadequate disclosure.

For the reasons stated above, Ground 3 was rejected.

As to Ground 4:

It was rejected on the basis that the Trial Judge did not use the word “mitigate” or “mitigation” anywhere in the judgment and this was not a position pleaded or argued. On reading the judgment the Appeal Judge found that the Trial Judge determined that Ms McKenzie received a benefit from the System after the sale of her property in the form of an increase in the sale price, and if Ms McKenzie did not give credit for that benefit she would be receiving a “windfall”. She was free to sell her property and there was no failure to mitigate. 

Practical considerations when considering an appeal

• there are costs risks involved for the losing party. When considering an appeal against an earlier court’s finding of facts, note that an appeal court should not interfere with the trial judge’s conclusions on primary facts unless it is satisfied that he was plainly wrong; an appeal court is bound, unless there is a compelling reason to the contrary, to assume that the trial judge has taken the whole of the evidence into his consideration, and the mere fact that a judge does not mention a specific piece of evidence does not mean that he overlooked it; the weight that a judge gives to evidence is pre-eminently a matter for him; and an appeal court can set aside a judgment on the basis that the judge failed to give the evidence a balanced consideration only if the judge’s conclusion was rationally insupportable [3]. This is an incredibly high burden for an appellant to overcome

• if it is apparent why an earlier court reached the decision that it did, and such decision was rational, an appeal should not be considered. The Appeal Judge in this case found the earlier Judge’s conclusion to be rational

• it is imperative that a transcript is obtained and forms part of the appeal bundle. Ms McKenzie failed to obtain the transcript for this appeal which could have impacted the Appeal Judge’s ability to properly consider what evidence was before the Trial Judge (fortunately both parties’ counsel were at the trial and were able to inform the appeal court as to what happened at the trial).

Practical considerations for solar panel claims where the property is being sold or marketed

• best practice will be to ensure that if the property is being marketed or has recently sold, the claimant provides all evidence as to the marketing and sale. That might include evidence from the sales agents and the conveyancing solicitors. If there are gaps in the evidence, and a failure to demonstrate that the gaps will be filled, consideration should be given to an application for specific disclosure

• the onus is on the defendant to prove what value is attributed to the benefits of the goods (which is to be applied to the loss), but that can be difficult in circumstances where the evidence provided by a claimant is limited. As with all goods, solar panel systems have a value. They provide, at the very least, savings to energy bills, and owners might be entitled to FIT or SEG payments. With that in mind, where there is a sale of the property with the solar panels in situ, and no evidence to the contrary, one might start by looking at the application of the Hodgson calculation, as the Trial Judge did in this case. Claimants are free to negotiate a sale of their property with the knowledge of what the future benefits from the system are likely to b

Further reading on the Appeal

McKenzie v Creation Consumer Finance Ltd [2023] EWHC 1904 (KB) (28 July 2023) (bailii.org)

Hodgson v Creation Consumer Finance Ltd [2021] EWHC 2167 (Comm) (29 July 2021) (bailii.org)

English v Emery Reimbold & Strick Ltd. [2002] EWCA Civ 605 (30th April, 2002) (bailii.org)

Volpi & Anor v Volpi [2022] EWCA Civ 464 (05 April 2022) (bailii.org)

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1. CPR r.52.21(1)

2. CPR r.52.21(3)

3. Volpi & Anor v Volpi [2022] EWCA Civ 464; [2022] 4 WLR 48

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