Paragon was right to call in £6.9m buy-to-let loans, says High Court

Buy-to-let lender Paragon Mortgages has been cleared in the High Court of wrongfully calling in £6.9m worth of buy-to-let loans from a husband and wife investor couple.

Robert and Frances McEwan-Peters had built up an enormous buy-to-let portfolio.

The High Court heard that Paragon viewed it as being in ‘terminal trouble’, but at peak, in 2007, there were 200 properties, mostly in the Leeds area and primarily let to students. The properties were mostly financed by Paragon to the tune of £32m.

The court heard this had since been reduced to about £27m.

The action was brought after Paragon called in two sets of loans, one worth £3,198,061 and the other worth £3,654,482, which had been made on a number of properties.

The couple’s legal action against Paragon challenged whether it should have demanded repayment of the loans only after three months’ arrears were outstanding.

Paragon called five witnesses in the court hearing, but Robert McEwan-Peters appeared for himself and the judge said that a ‘notable absentee’ was his financial adviser, a Mr Brian Holden.

The couple had run their buy-to-let business initially through a partnership and then through a series of companies.

During 2007, the business ran into trouble, particularly in regard to one of their companies, RMP Leeds, which had 73 properties. In July 2007, Paragon made a formal demand for all RMP Leeds loans and in another company, RMP Properties Headingley.

Various discussions followed as to how the problems would be resolved, and in July 2008, part of the property portfolio had been disposed of.

But in August 2008 their arrears totalled £282,645 and the following month they failed to make a payment of £50,000 to Paragon by an agreed date and time.

Paragon subsequently appointed two receivers and made an application for administrative orders, which were duly made in October and were not challenged. At the time the receivers were appointed, the couple were 2.8 months in arrears.

Paragon then made a formal demand for payment of outstanding balances of £6.9m in May 2009. In return, the couple’s solicitors argued that there had been repeated assurances by Paragon that no enforcement action would be taken until they were three months in arrears.

Paragon denied it gave any such assurance and the judge, Mr David Steel, ruled that he accepted this. He said he was clear that company policy was to threaten enforcement where any account became more than two months in arrears.

The judge also accepted Paragon’s assertion that the whole of the couple’s personal and corporate buy-to-let portfolio was in ‘terminal trouble’.

A spokesman for Paragon said after the High Court judgement: “We do not comment on individual cases. But in those rare cases when we are obliged to resolve a matter with a buy-to-let borrower through the courts, it is reassuring to have our position upheld as unequivocally as it was in this case.”

According to the Yorkshire Evening Post on November 6, 2008, RMP Properties, set up in 1999 by Robert McEwan-Peters and latterly run with his wife, went into administration but continued to be run by administrators.