Unenforceability Cases on hold until further notice

[Ruprecht]

One of the London judgments is now online.

 

It dealt with if an unenforceable agreement can be reported to CRAs.

 

The judge decided they can continue to report it and it didn't amount to enforcement.

 

McGuffick v The Royal Bank of Scotland Plc [2009] EWHC 2386 (Comm) (06 October 2009)

 

I wonder what the case would be if they issued a defective default notice though. The account hasn't really defaulted then has it, so can they say it has?

[car2403]

One of the London judgments is now online.

 

It dealt with if an unenforceable agreement can be reported to CRAs.

 

The judge decided they can continue to report it and it didn't amount to enforcement.

 

McGuffick v The Royal Bank of Scotland Plc [2009] EWHC 2386 (Comm) (06 October 2009)

 

I wonder what the case would be if they issued a defective default notice though. The account hasn't really defaulted then has it, so can they say it has?

 

I can't see why that case went that far when the agreement was clearly enforceable???

[WelshMam2009]

Was hoping to get some of my defaults removed...

[Tricky Dickie]

I can't see why that case went that far when the agreement was clearly enforceable???

 

Was it to establish that whilst the lender was in breach of a Section 77 request the agreement was effectively unenforceable and therefore the lender could not report non payment to CRA's.

Are there any other implicaions from this judgement,Justice Flaux seems to be taking a lot of detailed points from Wilson v FCT.

[the_shadow]

I can't see why that case went that far when the agreement was clearly enforceable???

 

Oh god not another Rankine moment I've just read through most of the proceedings and dont like what I see.

 

Setting out of what the court considers enforcement and backing this up with Rankine

 

S.

[Ruprecht]

I can't see why that case went that far when the agreement was clearly enforceable???

 

Even the judge said it was a bad case to use it as a test case.

 

The agreement in it wasn't irredeemably unenforceable but I got the impression the judge would have made the same judgment even if it was.

 

Basically the debt still exists, it's just not enforceable.

 

Down to sitting out the 6 years until it disappears and ignoring constant letters from one DCA and another, reporting them to the OFT when they threaten legal action.

 

I wonder how many times the bad debt is written off against different tax bills as it goes round and round like this.

[WelshMam2009]

Never had any faith in ICO in the first place...this just re-affirms it!!

 

In that context it is significant that the ICO (whom the bank's solicitors consulted) take the view set out in their email of 14 July 2009, that it is appropriate for CRAs to record information about unenforceable regulated credit agreements because, amongst other reasons, such information may properly inform responsible lending decisions, irrespective of whether the liability of the debtor is enforceable and responsible lending decisions are dependent upon lenders receiving accurate information about the ability and/or inclination of individuals to repay their debts. These are the same considerations as lie behind the Irresponsible Lending Project of the OFT.

[Tricky Dickie]

I think it was RBS who asked for this case to be referred to the High Court probably because they knew they had a good chance of winning.

Just waiting for this to be in every media very soon with the headlines You Do have To Pay Your Debts

[saddler68]

Seems to be a judgement on very narrow area of law to me? Other, bigger issues, are reaffirmed. Will be a storm in a tea cup this one. Trickie is right though the banks will spin it, probably through Daniella L.

[Reader]

Originally Posted by car2403

I can't see why that case went that far when the agreement was clearly enforceable???

 

 

I agree with Car. Quickly reading through the case it was not that the agreement was unenforceable it was to stop the lender reporting to CRAs, is that correct?

 

Confused (again) Reader

[Ruprecht]

Originally Posted by car2403

I can't see why that case went that far when the agreement was clearly enforceable???

 

 

I agree with Car. Quickly reading through the case it was not that the agreement was unenforceable it was to stop the lender reporting to CRAs, is that correct?

 

Confused (again) Reader

 

Yes it was mainly about if they could report an unenforceable agreement to the CRAs.

 

The judgment actually reaffirmed that some agreements pre April 2007 are irredeemably unenforceable. We all knew that anyway didn't we?

 

People with nasty credit files will just have to wait 6 years for it to drop off! Might be a good idea to have as little as possible to do with the banks anyway.

[Tricky Dickie]

Yes it was mainly about if they could report an unenforceable agreement to the CRAs.

 

The judgment actually reaffirmed that some agreements pre April 2007 are irredeemably unenforceable. We all knew that anyway didn't we?

 

People with nasty credit files will just have to wait 6 years for it to drop off! Might be a good idea to have as little as possible to do with the banks anyway.

 

Couldn't agree more,swindling bastards heres another example of their dodgy practices

 

http://uk.biz.yahoo.com/091006/140/irm70.html

[WelshMam2009]

The very fact that Rankine was used as an authority says it all really!!

[haggis1984]

Seems like part of the debtors case was that reporting to CRAs constituted enforcement, and as such should cease when in default of a s77 request. The judge accepeted the banks argument that reporting to CRAs was not for enoforcment purposes, but for the purpose of supporting responsible lending within the industry.

 

'Mr Handyside submitted that the continued reporting by the bank to the CRAs of the state of the claimant's account during the period of non-compliance was not a coercive tool in the hands of the bank, but an essential aspect of responsible lending and of the licensing process'

 

'I do not consider that either reporting to the CRAs or the related activities referred to in (i) and (ii) come anywhere near amounting to enforcement if activities'

 

 

 

 

Am I right in thinking there was a period of non compliance with s77, and then the bank complied?

And in this case what was Mcguff thinking about when deciding to purcsue the question of CRA reporting as enforceabillity - when clearly once the bank had complied with s77 they defo had a right to continue reporting to CRAs anyway.

Edited October 6, 2009 by haggis1984

[car2403]

Putting the Rankine issues to one side, an irredeemably unenforceable agreement results in all the terms - including sharing of data with third parties - being voidable in law, IMHO. Therefore, a s.10 DPA Notice would actually void the agreement terms allowing sharing. Even if it didn't, it's arguably unfair under the UTCCR 1999 to allow a Creditor to report an unenforceable debt, as there is no legal obligation to repay. Even the ICO shares this view, but it seems this wasn't raised in this case, which astonishes me completely.

 

This may end up being a Rankine moment, as this case is flawed, IMHO.

 

The Banks (and every other organisation that provides CRA's with data) will latch on to this to put anyone challenging them off doing so, just as they did when the original charges hearings were lost because Claimants were unprepared.

 

The moral of the story; don't bring a claim unless you understand - and can successfully argue - the legal issues behind it. There's always the Judge lottery to be won, also, but without this as a basic, you're wasting your time and actually making the consumer issues that are being challenged elsewhere even more difficult to fight.

[car2403]

Seems like part of the debtors case was that reporting to CRAs constituted enforcement, and as such should cease when in default of a s77 request. The judge accepeted the banks argument that reporting to CRAs was not for enoforcment purposes, but for the purpose of supporting responsible lending within the industry.

 

'Mr Handyside submitted that the continued reporting by the bank to the CRAs of the state of the claimant's account during the period of non-compliance was not a coercive tool in the hands of the bank, but an essential aspect of responsible lending and of the licensing process'

 

'I do not consider that either reporting to the CRAs or the related activities referred to in (i) and (ii) come anywhere near amounting to enforcement if activities'

 

I disagree with this part of the Judgment - default of a CCA request is clearly designed to prevent a Creditor taking action against a Debtor while in default. The issue here is "what are they prevented from doing?". Well, the Act seems to mean that they can't take legal action, but we all know that Defaults are used as a debt collection method, not a pre-enforcement protocol, as the CCA clearly intends them to be.

 

So long as Judges allow CRA data to be shared while in default of a CCA request and the Creditor doesn't actually take the action outlined in the Default Notice, these injustices will continue. Judges need to realise that "enforcement" needs to be considered widely, including termination of the Account and sharing of account date with CRA's, IMHO.

 

Tsk, tsk...

[Undercover-Elsa]

This is an apalling and sinister test case. Have I read it wrongly or does this now make mincemeat of in dispute template letters, in that this has decreed that enforcement only refers to actually going to court. Are we now to see our already battered members being harrassed, pursued, defaulted, terminated, and contantly threatened with court action even when no agreement is produced and the banks/DCA's KNOW they ultimately can't actually enforce it in court?

Surely, as administrators of the Consumer Credit Act it is for the OFT to define what constitutes enforcement, not some one off clearly pro bank court case. At the end of the day it is THEY who issue the Consumer Credit Licenses.Or not.

I'm fuming. Can you tell?

Elsa x

[haggis1984]

Hi Car,

 

I couldnt see anywhere that the judge refers to the issue of whether or not default/termination constitutes enforcement - but I can see this was in Mguffs skeleton argument

[Artie44]

Hi Car,

 

I couldnt see anywhere that the judge refers to the issue of whether or not default/termination constitutes enforcement - but I can see this was in Mguffs skeleton argument

Quote from the judgement:

 

"79. In contrast, the bank invited the court (as set out in the list of issues) to conclude not only that reporting to the CRAs did not amount to enforcement, but that a number of other activities did not constitute enforcement: (i) reporting to CRAs without also telling them that the agreement is currently unenforceable; (ii) disseminating or threatening to disseminate the claimant's personal data in respect of the agreement to any third party; (iii) demanding payment from the claimant; (iv) issuing a default notice to the claimant; (v) threatening legal action and (vi) instructing a third party to demand payment or otherwise to seek to procure payment.

 

80. So far as activities (iii) to (vi) are concerned, it was accepted on behalf of the claimant that these did not amount to enforcement or actions to enforce the agreement. That concession seems to me to be correct: at most these activities are steps preparatory to subsequent enforcement. Furthermore, in a recent decision, Rankine v American Express Services Europe Ltd [2009] CCLR 3, HHJ Simon Brown QC (sitting as a Deputy High Court Judge) concluded that the bringing of proceedings is only a step taken with a view to enforcement and not actually enforcement. It seems to me that that conclusion must be correct. Were it otherwise, as Mr Handyside pointed out, one would be left with the conundrum that the creditor could not apply to the court for an enforcement order under section 127(1), because to do so would amount to enforcement, not permitted by section 65(1).

 

81. Once it is recognised that the bringing of proceedings is not enforcement, it necessarily follows that activities (iii) to (vi) do not constitute enforcement, since they are all steps taken prior to the commencement of proceedings and therefore by definition, at most, steps taken with a view to enforcement."

Edited October 6, 2009 by Artie44

[car2403]

This is an apalling and sinister test case. Have I read it wrongly or does this now make mincemeat of in dispute template letters, in that this has decreed that enforcement only refers to actually going to court. Are we now to see our already battered members being harrassed, pursued, defaulted, terminated, and contantly threatened with court action even when no agreement is produced and the banks/DCA's KNOW they ultimately can't actually enforce it in court?

Surely, as administrators of the Consumer Credit Act it is for the OFT to define what constitutes enforcement, not some one off clearly pro bank court case. At the end of the day it is THEY who issue the Consumer Credit Licenses.Or not.

I'm fuming. Can you tell?

Elsa x

 

This is only one case, I'd imagine some how it's going to be Appealed either way.

[Undercover-Elsa]

Hi Car,

I fervently hope so.

Elsa x

[Undercover-Elsa]

Perhaps we could seek quotable clarification from the OFT in relation to what THEY consider to constitute enforcement in the light of considering conduct in respect of granting/renewing Consumer Credit Licenses...??

[car2403]

Perhaps we could seek quotable clarification from the OFT in relation to what THEY consider to constitute enforcement in the light of considering conduct in respect of granting/renewing Consumer Credit Licenses...??

 

They will say what is or isn't enforcement is open to interpretation and only a Court can decide the facts of individual cases.

 

Complaining to them will hopefully result in a trend showing what is going on, but I doubt that will result in much action as a result, sadly. :rolleyes:

[haggis1984]

Speaking as a lamen I was aware that the ICO considered it acceptable for a creditor to continue reporting to CRAs when in default of a s77 request - and it seems pretty obvious a judge would give weight to this.

 

What I find really surprising is that MCguffs solocictors thought it appropriate to test the issue of enforcement in a case where the creditor was originally in brecah of s77 but then recitified.

 

(If im reading correctly that BOS did eventually provide an enforceable CCA after a period of non-compliance)

 

Im also very surprised that there was no defence issued with regard to any interest/charges added during the period of non-compliance - surlely this is enforcement?

 

 

Thanks for finding that quote Artie!

[heliosfa]

This is an apalling and sinister test case. Have I read it wrongly or does this now make mincemeat of in dispute template letters, in that this has decreed that enforcement only refers to actually going to court. Are we now to see our already battered members being harrassed, pursued, defaulted, terminated, and contantly threatened with court action even when no agreement is produced and the banks/DCA's KNOW they ultimately can't actually enforce it in court?

Surely, as administrators of the Consumer Credit Act it is for the OFT to define what constitutes enforcement, not some one off clearly pro bank court case. At the end of the day it is THEY who issue the Consumer Credit Licenses.Or not.

I'm fuming. Can you tell?

Elsa x

 

I think it kind of does mess somethings up. Noteably, the Section 10 notice - the judgement implies it really does need a reason sspecified in the notice.

 

 

HOWEVER, the judgement itself implies it is for a VERY specific situation:

19. In other words, this is a case of temporary or redeemable unenforceability, concerned only with section 77 of the Act. In that respect it differs from two other factual scenarios where unenforceability can be said to be permanent or irredeemable[1]: (i) where the agreement is improperly executed, so that by virtue of section 65(1) of the Act, the agreement is only enforceable on an order of the court and, in the exercise of its discretion under section 127(1) the court declines to make an enforcement order and (ii) the case again under section 65(1) where section 61(1) (a) has not been complied with and by virtue of section 127(3), the court has no power to make an enforcement order (and the similar provision under section 127(4) where section 64 has not been complied with).

 

This is only one case, I'd imagine some how it's going to be Appealed either way.

I was thinking that, however counsel for the claiman see a bit "McDuff" (I'll get my coat now!... or maybe not )

 

What I find really surprising is that MCguffs solocictors thought it appropriate to test the issue of enforcement in a case where the creditor was originally in brecah of s77 but then recitified.

 

(If im reading correctly that BOS did eventually provide an enforceable CCA after a period of non-compliance)

 

Im also very surprised that there was no defence issued with regard to any interest/charges added during the period of non-compliance - surlely this is enforcement?

It was a NAFF case to take to court as it (seems to) have an enforceable agreement behind it.

 

 

As for what Enforcement is, I see the same thing happening here as in Rankine. The Court seems to be taking the very narrow view that "Enforcement" (or "Enforce the Agreement") means Securing Payment or the debtors Performance.

 

HOWEVER,

"Enforce the Agreement" doesn't just refer to securing payment. This is just one right confered to the Creditor under the agreement and there are other rights granted in the agreement, such as charging interest, adding (valid) late payment charges, sharing data with the CRAs and transfering the agreement.

 

Each of these is a "right" that is "Enforced" (Taken advantage of) by the Creditor.

 

 

Surely if the draftsman of the Act, and thus Parliament, had intended a creditor to ONLY not be able to secure payment, then they would have stated that was the only right that could not be enforced. However they have used the more general term of enforcing the agreement.

 

 

Now to quote (my emphasis) an E-Mail I received from Francis Bennion (The Draftsman).

PowerPoint Presentation Dear HeliosFA,

Thank you for your interesting email. It raises a question about the legal meaning in legislation of a reference to the right to “enforce” an agreement, that is compulsorily obtain the benefit of any term of the agreement, express or implied.

 

 

An agreement cannot be enforced unless it is embodied in a contract or deed. The usual case is that it is embodied in a contract. This means that, apart from legislation such as the Consumer Credit Act 1974 (the CCA), the contract can be enforced by applying to an appropriate court for an order made under the general law of contract.

 

 

If the court order is not obeyed willingly the court can be asked to impose sanctions. If necessary these will be forcibly put into effect by officers of the state, such as bailiffs or police officers. This may involve the seizure of money or other property sufficient to satisfy the contractual obligation.

 

 

When the CCA says that in certain circumstances a party to a contract is, by virtue of the CCA, not entitled to enforce it this means that the party will fail if he or she tries to persuade the court to make an order under the general law of contract such as is described above. The other side will point out the facts to the court and argue that in the circumstance the applicant is not entitled to the order sought.

 

 

In the section 65 case you mention the object is to ensure that a court gets to decide whether the party wishing to enforce the agreement deserves to be able to do so. If he or she does, the court will allow it; otherwise not. In some cases a party might otherwise be able to “enforce” an agreement without going to court at all, as by distraint or set off.

 

 

Yours sincerely,

Francis Bennion

H