Claim Stayed – Due to Unenforceable CCA Test Cases.

[diddydicky]

The contention advanced by ABC's lawyers was that if the DN was ineffective, the termination which ABC subsequently brought about in reliance upon that ineffective DN, was itself ineffective. In support, ABC said that since the law did not permit a creditor to terminate an agreement unless there had been serivce upon a debtor of an effective DN, by extension therefore, rather than having been terminated, the agreement endured.*

 

The law in support of this proposition was Consumer Credit Act 1974 section 87(1)(a) which says:

 

(1) Service of a notice on the debtor or hirer in accordance with section 88 (a “default notice ”) is necessary before the creditor or owner can become entitled, by reason of any breach by the debtor or hirer of a regulated agreement (a) to terminate the agreement

 

ABC went on to say that owing to the agreement enduring, ABC were therefore at liberty to serve a second DN.

 

At first blush, that looks quite a convincing argument. The Act itself forbids the creditor the right to terminate save in certain circumstances. So if the required circumstances were not present, how could the law regard the agreement as having terminated?

 

[1] Termination of a Contract and General Principles

A good place to start would be to dispel the myth that the law will not tolerate contract breaking. On the contrary whilst not actively encouraging it, the law will tolerate it. The courts will rarely impose upon one party an obligation to perform under a contract against its will, to do what it failed to do or redo what it tried and failed to do. Instead, what the law will do is on the one hand restrain the contract breaker from procuring the benefits it would have enjoyed had it fulfilled its contractual obligations and on the other, enable the injured party to recover damages flowing from the breach.

 

In*Golden Strait Corporation v Nippon Yusen Kubishka Kaisha*[2007], Lord Bingham said:

 

'The repudiation of a contract by one party ("the repudiator"), if accepted by the other ("the injured party"), brings the contract to an end and releases both parties from their primary obligations under the contract. The injured party is thereupon entitled to recover damages against the repudiator to compensate him for such financial loss as the repudiator's breach has caused him to suffer. This is elementary law.

 

The damages recoverable by the injured party are such sum as will put him in the same financial position as if the contract had been performed.'

 

What's more, the law will not merrily award whatever loss the injured party says he suffered. The court will require the injured party to prove his loss and further, will expect the injured party to take steps to mitigate the loss.*

 

'An injured party such as the owners may not, generally speaking, recover damages against a repudiator such as the charterers for loss which he could reasonably have avoided by taking reasonable commercial steps to mitigate his loss.'*[Lord Bingham in Golden Strait Corporation.]

 

Further still, in assessing damages the law will not even award what the parties may at formation of the agreement have agreed should be payable as liquidated damages in the event of breach. The court will not permit the recovery of liquidated damages unless the damages represent a fair pre-estimate of what loss might flow from the breach. If the liquidated damages are shown to be excessive and unrepresentative of the sactual loss suffered the law will readily declare the liquidated damages as a penalty and unenforceable.

 

In short, not only does the law tolerate contract breaking, but also, it will not tolerate the injured party taking advantage of the wrongdoer. The law does not pounce on the contract breaker to teach him a lesson. The court only awards the innocent party what damages truly flow from the breach. That admits of the possibility that a contract breaker can get away with it. If the injured party is unable to show resulting loss, the injured party may get nothing.

 

'One must look at the contract as a whole, and if it is clear that the innocent party has lost nothing, he should recover no more than nominal damages for the loss of his right to have the whole contract completed.'*[Edmund Davies LJ in*'The Mihalis Angelos'*(1971)]

 

[2] Termination in Non-Conformity with section 87.

The contention I advance is that an ineffective DN does not prohibit the creditor from terminating the agreement. Termination after service of an effective default notice is lawful termination, but as we have seen, a party may still terminate an agreement and be in the wrong for doing so. The law operates on a wrongful termination to offer to the injured party the choice of accepting the termination or to hold the contract breaker to his promise.

 

In the world of consumer credit, I contend a termination of the agreement by a creditor in terms whereby he announced he would no longer permit the debtor time to repay the credit, was a creditor in repudiatory breach of the agreement, unless in leading up to termination, the creditor complied with the requirements of the Act in circumstances where the debtor was in first breach of the agreement.

 

Further, and it is worth remembering, the Act is an Act for the purpose of consumer protection. The purpose of the Act is not to preserve the rights of creditors in contracts and to protect them from misadventure where for example, they terminated an agreement where it subsequently transpired the termination had not been in their interests. If that were so, the Act would have been an Act for the better protection of financiers.*

 

In a proper case, the law will come to the aid of the vulnerable to protect them from the consequences of their contracts (for example the unsound in mind, children, those under duress or undue influence). To suggest financiers fell into that bracket and the Consumer Credit Act*

operated to protect them and not the consumer, was absurd. The civil law does not come to rescue the misadentures of the sain and the savvy.

 

The clue to the position of the creditor on termination is in the use of the word 'entitled' in section 87(1). 'Entitled' connotes a right or a benefit. The Act therefore confers rights, conditional upon the provisions of section 87(1) being fuilfilled. Fail to fulfill the condition and the entitlements do not become available.*

 

In the case of a contract entered into by a person under duress and who then breaks the contract the law will come to that person's aid by recognising that person's plea that the contract was made under duress. If that person seeks a declaration of the court that the contract was made under duress the court wil readily declare the contract void.

 

If the Act had intended that a creditor's termination in circumstances where section 87(1) had not been fulfilled by the creditor and was to be of no effect, the Act would have declared that termination void. It doesn't. The termination is voidable at the option of the debtor.

[3] The Debtor's Point of View

Third, let us look at the position from the ordinary man as debtor's point of view in a consumer credit situation.*

 

The DN is defective for failing to conform to the prescribed terms, or gives misleading information or at worse is plain nonsense so that the debtor does not know precisely what he has to do in order to comply with it and is consequently disadvantaged. Should the law disregard the fact that the creditor put the debtor at a disadvantage and thereby at risk the creditor might lawfully terminate the agreement?*

 

'This statute was plainly enacted to protect consumers, most of whom are likely to be individuals. When contracting with a large financial organisation they are at a disadvantage. The contract is likely to be in standard form and relatively complex with a number of detailed provisions. If the hirer is said to have broken its terms, the hirer needs to know precisely what he or she is said to have done wrong and what he or she needs to do to put matters right. The lender has the ability and the resources to give that information with precision. If he does not do so accurately then he cannot take what Mr Gruffyd conveniently referred to as "the next step".*[per Kennedy LJ in Woodchester v Swayne [1998]]

 

Moving on, if the debtor receives a notice from the creditor in which the creditor expressly states the contract is terminated, what is the debtor supposed to think? Would the law regard him as likely to think the creditor had terminated the contract or would the law regard him as thinking it had not terminated because strictly speaking, the creditor had served a default notice which was not in accordance with prescribed terms?

 

Or where perhaps the creditor did not expresly terminate but sent the bully boys over to demand the keys to the car. What was the debtor to think then? Would the debtor think the creditor had terminated?

 

It seems to me on the basis of the passages below, the courts will be ready to hold a creditor to his words and actions.

 

"... a person who signs a document, and parts with it so that it may come into other hands, has a responsibility, that of the normal man of prudence, to take care what he signs, which if neglected, prevents him from denying his liability under the document according to its tenor".

[per Lord Wilberforce in*Gallie v Lee*(1971)]

 

'.. a man cannot escape from the consequences, as regards innocent third parties, of signing a document if, being a man of ordinary education and competence, he chooses to sign it without informing himself of its purport and effect..'

[per Scott LJ in*Norwich & Peterborough Building Society v Steed*(1992)]

 

In short, the creditor is bound by his deed. All that is required is for the debtor to accept the creditor's termination. He can write saying 'thank you I accept you termination' or he can conduct himself in a way in keeping with that termination. Not paying the instalments would be in keeping with an acceptance of the termination.

 

[4] The fiction of the Second DN and the Enduring Obligation

The service of any second default notice, at a time when the contract is terminated, owing to the wording of the DN in its prescribed form, would perpetuate the fiction that the contract endured. The same can be said owing to the provisions of section 89 of the Act.

 

The form of words in the DN incorporate text in order to meet the intention of section 89 of the Act which provides:

 

'If before the date specified for that purpose in the default notice the debtor or hirer takes the action specified under section 88(1)(b) or © the breach shall be treated as not having occurred.'

 

In other words, in serving the second DN, the creditor would be suggesting:

 

[a] an obligation had persisted post termination by which the debtor was bound to make instalment payments (ie post-termination 'arrears'), and

that if payment of those 'arrears' was made, an obligation to make future instalment payments would endure.

 

The obligations at [a] and are obligations enduring during the currency of the agreement. Besides maintaining the fiction of the enduring agremeent as I say, it seems to me any second DN would be bound to be defective for over-stating the sums due. The creditor can not state as an amount due for 'arrears' of instalments that which he said in consequence of his termination was no longer due and payable by instalments. If the creditor sought to use a form of DN which made sense by getting round the fact the agreement had been terminated, the DN would not be in prescribed form.

 

The only way in which a second DN would be of value to the creditor would be where the contract had been re-instated. If the debtor has accepted the termination, re-instatement requires the consent of the debtor.*

 

The net result of [1] to [4] is the agreement is terminated for all time. The creditor's remedy is now limited by section 87(1). All that is left for the creditor to recover is the sum truly in arrear at the date of the default notice.

 

Damage to Credit

A man's credit is damaged when it is impugned. He learns it is damaged when he seeks credit to fund a transaction and is turned away or when his creditors seek to call in debts. The effect can be simple embarrasment to being totally destabilising. A learned his credit was impugned when he was warned by his bankers. The damaging effect of the adverse reporting could have been a lot worse.

 

I had deliberately tried to keep my first post as simple and straight forward as I could. I hope this expanded version showing the way strands of law can intertwine to build a case is of assistance.

 

courtesy of X20

Edited February 12, 2010 by diddydicky

[oilyrag]

Hi Guys,

IMHO stepping outside of the CCA 1974 is a difficult thing to do for us mere mortals. John Story's battle is an eloquent decider for me not to enter the minefield of common and contract law.

 

It has been said here several times that in any case Statute Law overrides all Common law issues. Although I do see where DD is coming from, I do see it becomes more fraught with difficulty when you go down this route.

 

I think again the issue is with where the Cancellations and Terminations regulations can be used to good effect in strengthening or even providing a defence when this is "tried on" by the creditor. Usually on the back of defective documentation to boot.

 

regards

oilyrag.

[Redfish]

Thanks Paul • if an agreement has been subsequently varied by the lender, then the lender is obliged to supply a copy of both the original agreement as well as the current one. Does this mean that if apr etc has been varied then the original signed agreement not a recon one has to be supplied. Thanks Maxedout.

 

Im fairly certain the Mcguff judgement touched on this and did state that if an agreement has been varied then the original has to be supplied.

 

If there's disagreement on this from other caggers Ill try n back this up with a quote from the judgement 2mo when ive got time to re-read it

 

I know Haggis1984 has already found the OFT summary of this, here is the direct quote from the Waksman judgement which I have now used in my CCA requests:

 

Carey V HSBC Bank plc [2009] EWHC 3417 (QB) (23 December 2009)

 

"108. Accordingly, I conclude that Reg. 7 requires a copy of the executed agreement in its original form as well as a statement of the terms as they are at the time of the request."

 

"SUMMARY OF FINDINGS:

 

234.

 

(4). If an agreement has been varied by the creditor under a unilateral power of variation, the creditor must still provide a copy of the original agreement, as well as the varied terms."

 

I used this in my CCA request to Sharkleycard and they sent me an 'agreement' that had no personal details and no signature and a standard letter citing the limited requirement for documents under the CPR! They didn't even address the Waksman judgement requirements. It was funny because I hadn't even mentioned the CPR and have no intention of taking them to court. I think the CMCs have been sending out CPR letters thinking that is the only way to get hold of the original copy and banks have been sending standard responses.

 

More fool them, they will soon be in breach of s78...

[patrickq1]

Hi Guys,

IMHO stepping outside of the CCA 1974 is a difficult thing to do for us mere mortals. John Story's battle is an eloquent decider for me not to enter the minefield of common and contract law.

 

It has been said here several times that in any case Statute Law overrides all Common law issues. Although I do see where DD is coming from, I do see it becomes more fraught with difficulty when you go down this route.

in story was it not the other way round the judge decided to ignore the statute and made his own mind up and went for common law instead

?

[diddydicky]

Hi Guys,

IMHO stepping outside of the CCA 1974 is a difficult thing to do for us mere mortals. John Story's battle is an eloquent decider for me not to enter the minefield of common and contract law.

 

It has been said here several times that in any case Statute Law overrides all Common law issues. Although I do see where DD is coming from, I do see it becomes more fraught with difficulty when you go down this route.

in story was it not the other way round the judge decided to ignore the statute and made his own mind up and went for common law instead

?

 

If my memory serves me correctly that is a post you made several months ago on another thread

 

i think you will find it is the creditor who "steps outside" and into general contract law when he unlawfully attempts to repudiate his obligations under the agreement

 

the debtor (performing or injured party) does NOT HAVE TO follow him- indeed all he needs to do is totally ignore what the creditor did and the creditor will be legally obliged to continue to perform (not that he will of course- ive never known of a creditor changing his mind once he has repudiated)

 

however, the injured party then leaves the door wide open for the creditor to withdraw from or correct his unlawful action and to put right that which he did wrong (that is to say he can then issue a new default notice and put his mistakes right- or if he has demanded payment of sums not yet due prior to issuing a DN - he can simply issue a DN then make the demand again after serving the valid DN ) and carry on where he left off

 

 

as you say if you dont feel comfortable doing that - then that is fine-

 

one has to weigh up the pro's and con's

 

what would be the con's of accepting the unlawful rescission?

 

this is as far as the injured party would need to venture outside the CCA

 

i do not agree with your comment that a judge is "free to choose" which legistlation he chooses to use

 

the creditor either lawfully terminates in line with the requirements of the CCA or he doesn't

 

the judge (IMO)would be hearing any claim from the creditor under the provisions of the CCA can ONLY make a decision (and it could be the subject of an appeal) that the action by the creditor was within or without of the requirements of the CCA - IMO he could therefore only rule that , although the act was unlawful, it was of no significance or not detrimental to the injured party and i cant see any scope for him "wandering off" into the realms of some other legislation in order to come to a decision

Edited February 27, 2010 by diddydicky

[justify]

Yes agree entirely DD...

 

J

[ruinedbynatwest]

 

................ONLY if you step outside of the CCA and into contract law and ACCEPT (as is your right as the injured party) his unlawful repudiation will you be entitled to cease to continue to perform YOUR obligations under the agreement

 

it is this MUTUAL agreement (started by the other side unlawfully) for neither party to continue to perform that leads to the "effective" termination of the agreement -

 

important to understand the process.................

------------------------

Diddy!

 

Don't forget that Section 173 CCA(74) forbids "Contracting-Out" of the CCA - which serves to reinforce Parliament's intentions that clever traders (and clever punters) WILL NOT be able to exclude a consumer's (or a debtor's) rights !!!

 

Similarly, don't forget the Constitutional Maxim "The Common Law Must Not Defeat The Statute" - although the common law courts hate those of us who remind them of this maxim (Why??? FOR GOD's Sake, WHY ???) they cannot allow a common law agreement (as the likes to which you refer) to have the effect of overriding either S 173 CCA or the constitutional requirement that where a conflict arises as between the common law and the statute (here the CCA) the common law must give way to the Statute- and if it does not give way, it does so unlawfully.

 

THis is the fundament of my case (Story) against both Natwest (they have very powerful legal teams), and the Courts - they have turned a blind eye to the fact that in Story the facts show that the banker/customer relationship was effectively on a statutory basis, where I had banked with Natwest since 1970, and that since that date (and certainly since the CCA was implemeted in 1977) I had a continual "roll up" and "roll over" of what were CCA regulated agreements (that were continually repaid, by the way). The Judgment in Story clearly shows this pattern, but ackowledgement of the (regulated) history between Natwest and myself would have the effect of putting the banker/customer relationship onto a statutory footing - this case setting legal precedent.

 

John Story

 

www.ruinedbynatwest.com

Edited February 28, 2010 by ruinedbynatwest
typos

[Blondie40]

Any news yet on the cases to be heard in Manchester this month?

 

B40

[diddydicky]

------------------------

Diddy!

 

Don't forget that Section 173 CCA(74) forbids "Contracting-Out" of the CCA - which serves to reinforce Parliament's intentions that clever traders (and clever punters) WILL NOT be able to exclude a consumer's (or a debtor's) rights !!!

 

Similarly, don't forget the Constitutional Maxim "The Common Law Must Not Defeat The Statute" - although the common law courts hate those of us who remind them of this maxim (Why??? FOR GOD's Sake, WHY ???) they cannot allow a common law agreement (as the likes to which you refer) to have the effect of overriding either S 173 CCA or the constitutional requirement that where a conflict arises as between the common law and the statute (here the CCA) the common law must give way to the Statute- and if it does not give way, it does so unlawfully.

 

THis is the fundament of my case (Story) against both Natwest (they have very powerful legal teams), and the Courts - they have turned a blind eye to the fact that in Story the facts show that the banker/customer relationship was effectively on a statutory basis, where I had banked with Natwest since 1970, and that since that date (and certainly since the CCA was implemeted in 1977) I had a continual "roll up" and "roll over" of what were CCA regulated agreements (that were continually repaid, by the way). The Judgment in Story clearly shows this pattern, but ackowledgement of the (regulated) history between Natwest and myself would have the effect of putting the banker/customer relationship onto a statutory footing - this case setting legal precedent.

 

John Story

 

www.ruinedbynatwest.com

 

i accept what you say- however, the law DOES tolerate and accomodate law breaking even if it does not encourage it

 

you must not steal someone's property- but if you do there is redress and the law does prevent a right of redress to the injured party on the grounds that the thief was "not allowed to step outside of the law"

 

similarly, if one party "steps outside" of the CCA and repudiates his obligations under the agreement (as creditors often do by demanding early repayment of sums not yet due) then the law tolerates and accomodates this and gives the injured party a right to "elect" whether to accept the unlawful act or to hold the contract breaker to the contract

 

i would say it is unheard of, when a debtor advises a creditor that he has repudiated by demanding repayment of sums not yet due and demands that the creditor continues to allow credit- that the creditor would comply ..........which is why in 99% of cases- rather than the debtor then having to start an action against the creditor for breach of contract-- it would be far easier to elect to acceot the rescission and let the creditor do any "running"

[ruinedbynatwest]

i accept what you say- however, the law DOES tolerate and accomodate law breaking even if it does not encourage it

if one party "steps outside" of the CCA and repudiates his obligations under the agreement (as creditors often do by demanding early repayment of sums not yet due) then the law tolerates and accomodates this and gives the injured party a right to "elect" whether to accept the unlawful act or to hold the contract breaker to the contract

 

Hello Diddy!

Well put!

The presumption (that 'the law tolerates and accomodates' ) extra curriculae contractual activity directly addresses the point I question in Story. As Mr Bennion reminds us (in his opinion of Story), Section 173 does not tolerate and accomodate either party "contracting out" (or stepping out as you say) and it does not tolerate it for the reasons of the type you then illuminate. Even our silk, Jonathan Gilman QC got that wrong when he had suggested that application of the CCA could be "negatived" if the parties agreed to it !

 

The point (that the protection is non-negotiable) is ignored, overridden, by the Common Law, as are eg, EU directives on Consumer Credit that forbid a trader to lend on anything other than the borrower's ability to repay. The UK practice of lending against the family home to, say those who rely solely on state benefits is most strongly condemned by the EU - I've been contacted by countless people who complain that they were loaned sums they simply could not repay from their benefits and they faced repossession. This scenario, of course, gathers very little sympathy indeed and for the most obvious of reasons, but that reason was directly addressed by Crowther when he turned the risk around to deter traders from repossessing in such situations; a Court would see from the paperwork that ridiculous lending practice had contributed to the problem. People in that particular situation face a hostile audience wherever they go because of the common law tradition of caveat emptor - "Buyer Beware" - when will the credit industry face up to social policy and accept that their lending policies must be addressed in the light of reason ?

 

Regretably, the reality is that Debtor Protection is a very poor relation as far as the Common Law is concerned, I take heart from the fact that when my row with Natwest started in 1989 with the "inspirational" threats of Harry Jackson "We'll see to it that you're F...ing ruined" (as in "Ruinedbynatwest") my family was in a very bleak wilderness with very little support - a support that is now vastly enhanced by the majority of contributors who input to sites like this one. I say "majority" because it is a sad reality that the credit industry has infiltrated the content to a certain extent to create confusion that deflates the progress that is definitely occurring in this important area of social law.

 

John Story

www.ruinedbynatwest.com

Edited March 23, 2010 by ruinedbynatwest
typos

[ihatemybank]

Hi Everyone.

 

Before December 2009 there was a great buzz on this thread and everyone was expecting the Waksman judgement to be in favour of the debtor. Since it was handed down there has been very little contributions/posts to this thread surrounding the issues of the unenforcable agreement and there seems to be a shift in discussion surrounding invalid default notices e.t.c.

 

Does anybody have anything further to add or has the debtor lost? Is anyone aware of any other test cases in the pipeline?

 

Thanks

 

IHMB

[uptoeyeballs]

Hi Everyone.

 

Before December 2009 there was a great buzz on this thread and everyone was expecting the Waksman judgement to be in favour of the debtor. Since it was handed down there has been very little contributions/posts to this thread surrounding the issues of the unenforcable agreement and there seems to be a shift in discussion surrounding invalid default notices e.t.c.

 

Does anybody have anything further to add or has the debtor lost? Is anyone aware of any other test cases in the pipeline?

 

Thanks

 

IHMB

 

http://www.consumeractiongroup.co.uk/forum/debt-collection-industry/240186-dissecting-manchester-test-case.html

[chris5664]

Hi,

I want to agree with ihatemybank.

I am so confused, can any one in lay terms please break this all down for us all?

· Can banks, credit cards just knock up any old rubbish now.

· Can we still defend this.

 

Thanks

Chris5664

[dp77]

Dissecting the Manchester Test Case is 105 page thread (and counting)

[ihatemybank]

ok.. thanks all. I didnt realise that thread existed until today. I thought the discussion has continued on this thread as it did early jan.

[Guest Alison82]

Is there any update with this? where do people stand with uneforcable CCA's

[caro]

Is there any update with this? where do people stand with uneforcable CCA's

 

This thread should help explain it. http://www.consumeractiongroup.co.uk/forum/showthread.php?240186