Dissecting the Manchester Test Case....

[Et Contra Pacem Regis]

I must agree with Antigone on the defective Default Notice.

 

Section 87(1) prohibits termination of the agreement without the service of a valid Default Notice. The creditor cannot effectively terminate the agreement until one is served. Suppose a creditor serves a defective notice and then purports to terminate the agreement:

 

1. The agreement, clearly, does not end. It continues as before.

 

2. The creditor has indicated that it will not continue to honour its obligations under the agreement. This is a breach of contract. You might call it a repudiation, but that is merely a breach of contract.

 

3. The standard remedy for breach of contract is damages. The damages are "expectation" damages - the amount of money necessary to put you into the position you expected to be, but for the breach. It is therefore unlikely that the debtor will actually suffer any damage as a result of the breach of contract.

 

4. If the debtor "accepts" the repudiation, then the contract is terminated at that point. That cannot effect monies which have already fallen due (arrears) or the money already owing. Accepting a repudiation would merely put the debtor in the same position as if a valid default notice had been served and the agreement properly terminated by the creditor. The only difference between the two situations is who terminates: creditor or debtor. There is no reason why the effect of termination should differ depending on who terminated.

 

5. There is no reason why a valid default notice could not be served after termiantion. The wording does not require that the agreement must be subsisting.

 

6. It would however, be largely pointless to serve a valid default notice after the debtor has accepted a repudiatory breach, because the creditor will no longer be interested in doing any of the things listed in section 87(1), save perhaps enforcing a security. Section 87 is not a bar on enforcement without a default notice, only a bar on specified courses of action. Termination by the debtor relieves the creditor of the need to take any of the actions listed in Section 87.

 

That, or something likely it, is a chain of reasoning which would allow a judge to find against someone who accepts a repudiatory breach. By "accepting" the breach, the debtor has himself termianted the agreement with the same effect as if the creditor had terminated it.

[Et Contra Pacem Regis]

He will probably suffer from the consequences of adverse data (a 'default') being recorded on his credit file for 6 years, or until he is able to remove it. He may also have goods removed, where that entitlement is not lawfully available to the OC.

 

He may be damaged by a credit reference default. Then the issue is whether a credit reference default can be entered without service of a Default Notice. Credit reference defaults are not mention in section 87(1) so no specifically prohibited.

 

Are you saying that s87(1)(b) does not apply where the contract is ended following issue of a defective DN? CCA seems to be clear here, that the OC may not claim 'sums unpaid' without compliance with s88.

 

Section 87 prohibits the demand of "earlier payment", not "sums unpaid" - creditors can require payment of sums which have already fallen due (i.e. arrears) at any time. The arguement would be that payment of the outstanding balance falls due on termination, and that termination is brought about by the debtor's acceptance of the creditor's repudiation, so that it is the debtor who terminates the agreement. Section 87 does not limit the debtor's ability to terminate.

 

How can an agreement that is ended be breached?

 

LA

 

The creditor could rely on breach of the agreement prior to the issue of the Defective Default Notice. Just because the agreement ended after the breach, that does not preclude the creditor from relying on that breach.

 

ECPR

[Et Contra Pacem Regis]

I must agree with Antigone on the defective Default Notice.

 

Section 87(1) prohibits (LAWFUL)(it remains my view that the creditor cannot effectively terminate the agreement without service of a valid default notice) termination of the agreement without the service of a valid Default Notice. The creditor cannot effectively terminate the agreement until one is served. Suppose a creditor serves a defective notice and then purports to terminate the agreement:

 

1. The agreement, clearly, does not end. It continues as before.

 

2. The creditor has indicated that it will not continue to honour its obligations under the agreement. This is a breach of contract. You might call it a repudiation, but that is merely a breach of contract. ( i would argue that at that stage it is an unlawful repudiation- since at that point the creditor has not breached the contract- he has merely threatened to do so)(refusal to perform a contractual obligation is known as an "anticipatory breach" - See for example White and Carter v McGregor [1962] AC 413)

 

3. The standard remedy for breach of contract is damages. The damages are "expectation" damages - the amount of money necessary to put you into the position you expected to be, but for the breach. It is therefore unlikely that the debtor will actually suffer any damage as a result of the breach of contract.( not so)(LA made a good point regarding this, however, what other damage are you saying is suffered by the creditor's refusual to perform obligations?)

 

4. If the debtor "accepts" the repudiation, then the contract is terminated at that point. That cannot effect monies which have already fallen due (arrears) or the money already owing. Accepting a repudiation would merely put the debtor in the same position as if a valid default notice had been served and the agreement properly terminated by the creditor. The only difference between the two situations is who terminates: creditor or debtor. There is no reason why the effect of termination should differ depending on who terminated.(in accepting the unawful repudiation the performing party does NOT terminate- they merely excerise the right to releive themselves of their continuing obligations under the agreement- a big difference)(how is ending the obligations of each part to perform the contract not a termination? see below)

 

5. There is no reason why a valid default notice could not be served after termiantion. The wording does not require that the agreement must be subsisting. (poppycock) (citation?)

 

6. It would however, be largely pointless to serve a valid default notice after the debtor has accepted a repudiatory breach, because the creditor will no longer be interested in doing any of the things listed in section 87(1), save perhaps enforcing a security. Section 87 is not a bar on enforcement without a default notice, only a bar on specified courses of action. Termination (is one of those actions that the creditor cannot take without first serving a valid DN)(see the rest of this sentence the debtor can terminate the agreement) by the debtor relieves the creditor of the need to take any of the actions listed in Section 87.

 

That, or something likely it, is a chain of reasoning which would allow a (biaised or unkwowledgable)(better arguements than the Default Notice arguement lost in Heath v Southern Pacific Mortgages and Walker v Southern Pacific Loans before the court of appeal. Were they unknowledgable or biased?) judge to find against someone who accepts a repudiatory breach. By "accepting" the breach, the debtor has himself termianted the agreement with the same effect as if the creditor had terminated it.[/quote

 

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point 3- the CCA is different from other legislation and it has already been ruled in the house of lords that the remedy is not simply limited to damages- nor does the normal rules of unjust enrichment prevail- for the lords have ruled that in this act- it is acceptable for individuals to be unjusty enriched for the greater good

 

 

In one instance a judge awarded damages of £1000 to a defendant in such circumstances without any proof of loss A citation of this case would be useful so that everyone can see what you're referring to.

 

CCA is different, however, its remedies are very narrow. The Act specifically provides that it gives no remedies but those expressly set out in the text. However, this arguement is not really about the remedies provided under the Act, but rather what their effect is in this particular situation.

 

point 4 the agreement is not technically "terminated" upon acceptance of the unlawful repudiation- if it did then it would deny the injured party the ability to sue for damages- but it does bring to and end the primary re

sponsibilites of both parties under the agreement

 

It is perfectly normal for an injured party to terminate a contract when the other party refuses to perform his obligations (i.e. repudiates the contract or commits a "repudiatory" breach). Sometimes the injuried party has to do so in order to mitigate his loss. Terminating the agreement after a breach has taken place does not prevent the injured party from bringing a claim for breach of contract.

What is the difference between "bring to an end the primary responsibilities of both parties" and "terminate"?

point 5- as you say no reason why a creditor cannot serve a default notice post termination - however it would do him no good whatsoever and would be entirely useless since it would be impossible for the purpose and intent of the DN to be realised- the debtor could never comply

 

If the creditor has already demanded immediate repayment of those sums that were not yet due under the agreement, and the agreement is effectively terminated by the debtors accetance of it- how can the creditor state-with any accuracy the sums due to remedy the default notice - since that which he would attempt to claim as arrears outstanding- in respect of monthly payments - are those which he previoulsy stated were immediately due and were no longer payable in monthly instalments!

 

Further, how may the debtor be able to remedy the alleged default contained in the default notice and then return to the "status quo" which is stipulated in s89-

 

ie:- to act as if the breach had never occurred!!

 

To this I would say that the new Default Notice would have to be based upon whatever breach led to the service of the first Default Notice and if the requirement of the Default Notice were fulfilled the Debtor and Creditor would have to continue as if no breach had occured, as the Act requires. This is no stranger than what you are proposing - that debts under an enforceable agreement can somehow vanish if the creditor serves an invalid default notice.

 

an agreement that has been terminated by the consent of both parties- whether lawfully or unlawfully- can only ever be re instated if both parties agree to do so

 

therefore post termination a valid default notice can never be served and the creditor is left with only the genuine amount of arrears that were oustanding as at the time the agreement ended

 

Has the agreement at this point been terminated, or not? If it has been terminated why is the outstanding balance not due (which, after all, is the main point of termination for the Creditor)?

 

your conclusion, with respect is perverse- you seem to imply that faced with an unlawful repudiation- the performing party is unable to elect without losing- ie head the creditor wins and tails he loses

 

this is simply not the case

 

Your conclusion seems equally perverse to me. Unenforceablity under section 127(3) is very clear remedy. What you are proposing would give similar effect to section 87, and effect which is not evident on the face of the Act. I am not proposing that the debtor looses either way, only that he can get damages, and not avoid the bulk of the debt.

 

the creditor cannot claim entitlement to the benefits of s87 (sums not yet due) unless he first serves a valid DN

 

if the creditor then unlawfully repudiates the agreement and the performing party accepts- then the creditor can NEVER claim entitlement to those sums that were not yet due since in order to do so he must serve a valid DN which he now cannot do!

 

My position remains that the outstanding balance would fall due on termination of the agreement, whether termination is by the creditor or by the debtor. I can see no reason why the effect should be different as between the two.

 

the judge would therefore not be entitled to take any view at all since the claim before him-by the creditor for immediate payments of sums that were not yet due under the agreement must fail since by virtue of the creditors failure to first serve a valid default notice- he is not entitled to claim entitlement to and he has no cause of action to claim these sums and therefore his claim in this respec must fail

 

any proposition that he could then commence a succesful action for these sums by simply sidestepping the cca on account of the non existence of the agreement would be fanciful

 

see above, I think that the sums are due. Sidestepping of the CCA would only take place if the Debtor "accepted" the creditor's repudiation and agreed to the termination of the contract. That is the debtor's choice.

 

apologies for the red- after all this time i have only just found out how to answer points within the quoted text!!

 

no apologies necessary

 

As to the rest, I have not claimed any more authority for my arguements than anyone else here. That my opinions are different from the majority here does not make them incorrect. Until the point is authoritatively decided, it remains an open arguement. Other views exist, and even if we all agreed, that would be no guarantee that the courts would find in our favour. Even If there is no devil's advocate here, there will certainly be one in court some day.

 

I have not claimed to be a lawyer, because that would not be true. I have some legal education, but I am not qualified to practice. If I were I would probably not be posting here.

 

This isn't really the place to discuss legal history, but yes, trespass vi et armis etc is the ancestor of modern tort law.

[Et Contra Pacem Regis]

Or specifically allowed. Why do you favour the creditor's use of this tactic?

 

I don't particularly. I just can't see anything to prevent it in section 87. If it is unlawful for the creditor to register a default without having served a valid default notice, for example, if the default entry leads people reading it to think that the valid notice has been served, or that the agreement has been terminated, then the debtor might have an action for defamation. That is fair enough. I just don't think that invalid default notices have the effect contended for.

 

News to me. "payment of the outstanding balance falls due on termination" is not something covered by CCA (unless s88 is properly complied with) and is not in any credit agreement I have (or have seen). It is only due, in my understanding, when the OC complies with s88.

 

The debtor in no way terminates the agreement. He accepts the OC's termination.

 

I still do not think that the creditor can terminate without a valid default notice. section 87 seems to me to expressly prohibit termination, not merely render the termination unlawful. The creditor's actions after termination could simply be a breach of contract. By accepting that repudiatory breach the debtor could effect termination of the contract.

 

Looking, for example, at a set of Cahoot terms and conditions, at 14.4: "where we or you end the agreement and close a cahoot account (a) you must repay all amounts you owe under the agreement". Some Captial One terms circa 2005 are rather more vague, stating (to paraphrase) that the creditor can end the agreement in exceptional circumstances (which is wrong, of course) and that the debtor must then pay all amounts owing. Although the agreement is silent as to what happens in the event of termination by the debtor, it would then be a matter of how one construes the contract.

 

There might, I suppose, be an issue if there is no such clause in the contract as it exists at termination; that requires more thought.

 

This is the OC's argument. The issue is that a s87 notice must comply with s88 in order that the debtor is given his lawful right to remedy. If this is not given, and the OC terminates, the debtor is within his rights to then accept termination.

 

The specific point is that there was a breach, but the opportunity to remedy that breach was compromised by the defective DN. This is recognised by the Woodchester judgement - the need for an accurate DN - as it impacts on the potential remedy of the breach. The OC is, in effect, denying the debtor the full lawful right to remedy.

 

Yes, the Debtor has been denied an effective right to remedy the breach. That is why the creditor has to serve a new, correct, default notice before continuing. If they don't they are in breach of contract and the debtor can recover damages should they suffer any.

 

Are you brave enough to reveal your true interest in this ECPR? Your views seem very pro-industry.

LA

I am not, nor have I ever been, as you seem to imply, employed by a bank, debt collector or one of their solicitors. If I were, I would've had the courtesy to respect the forum rules and post in the section for bank employees.

 

My attitude to CCA comes from experience as a paralegal working for a solicitor's firm which joined the great CCA feeding frenzy. Thankfully the firm has turned to other work now. I saw plenty of behaviour on both sides which was pretty disgusting and I've seen plenty of arguements consigned to the dustbin, by District Judges or the Court of Appeal. That, basically, is why I am advocating for the Devil here - because, in this case, I think that whatever the morals of the point, the creditors will win in court.

[Et Contra Pacem Regis]

Thanks ECPR. Your views will certainly help us form our own arguments, so hopefully you will keep posting. I also think it is extremely valuable having a devil's advocate here, even if unpopular with others!

 

One question - if an OC issues a defective DN followed by 'termination', how can this actually be remedied? I assume you believe that it can only be remedied by a court agreeing that (a) the DN is defective and (b) the agreement has not been terminated.

 

I would say that, unless something else happens to bring the agreement to an end, such as the debtor terminating the agreement, then the agreement continues. If the creditor issued a claim for the outstanding balance, based on the defective DN, then he should discontinue the claim, serve a valid DN and start all over again, however some creditors try to get round this by serving a new DN during proceedings and then applying to amend their particulars to plead the new DN. I can see some district judges agreeing to that (because the point about discontinuing or amending is Civil Procedure, they have quite a wide discretion).

 

So far as I have the time I intend to continue posting, though as you chaps have probably noticed it takes a while for me to get round to each post. As someone pointed out it may be best to take devil's advocacy into a separate thread, to avoid (further) threadjacking.

 

In this case, the debtor may have had goods removed or been forced to pay an amount significantly in excess of what should have been paid under the agreement as well as 'default' and other charges. He may have had to deal with DCAs, or even fight in court to avoid a CCJ. He may in fact have a CCJ against him. All without him being aware that he could have defended on the basis of a defective DN and that the OC was acting unlawfully by enforcing 'termination' and recovery of unpaid amounts.

 

All of this is quite true. As to defending an invalid claim, the Defendant would usually get his costs - that's all Defendants ever get when the Claimant fails, even if the claim was misconcieved from the start. As I said before, if the agreement is still in existance then the above could involve breaches of contract, and inaccurate credit reference entries might be actionable. If a CCJ were granted by default then the Defendant might get it set aside.

 

Unfortunately, as they say, ignorance of the law is no excuse. There are plenty of people and companies who do actionable things and aren't sued because the injured party simply doesn't know that they have a claim, and don't find out until after the limitation period is up. The mechanisms for protecting consumers are far from perfect - but this is straying from the point.

 

Woodchester does not help here - there is no indication that the agreement was effectively terminated. The judgement was merely to get Swaine & Co to pay the arrears plus costs, rather than the full amount of the balance (as far as I can see). I don't know if the contract endured beyond that.

 

My view is still that 'terminating' the agreement with all the muscle that the OC can draw upon is far more serious than the original breach committed by the debtor. It is not an equitable situation. So if the OC enforces his own actions, what redress does the debtor actually have if it is not a more serious breach of contract and a claim that s87(1)(b) or © should apply?

 

LA

 

The purported termination of the agreement, and any breach the creditor commits in reliance upon termination, are, in my view, actionable, if you can show damage, precisely the same as if a car dealership sells you a lemon. That is where, in my view, the debtor gets his remedy, if purported termination harms him.

 

As for the others, congratulations, you've spotted that I like most other people do not spell check forum posts. If I were at work I wouldn't be using contractions or colloquialisms either. Sadly, I've seen plenty of bad spelling and grammar in the legal world, even from counsel.

[Et Contra Pacem Regis]

Another question for you ECPR...

 

I think that DNs include a statement saying that failure to remedy the breach in the time provided will cause the default to be registered with the CRAs. I don't know if this is universal or, in fact, a legal requirement, but all DNs I have seen have this statement.

 

If the DN is defective, and the debtor is effectively denied the right to remedy, do you consider that the OC retains the right to record the default? If not, what can the debtor do about it? You may have seen in other threads (also posts in this one) how difficult it can be to have a default removed.

 

This is a particular issue as credit scoring is not used just for assessing suitability for financial products.

 

LA

 

Yes, this is a good point - I've seen DNs both with and without the threat of CRA, but I don't really know sufficient about the operation of the CRAs to know whether a default notice is a strict requirement of entering a default, or even what creditors generally understand a default entry to indicate.

 

On the DN/TN/DN point, assuming that no termination acutally occurs (i.e. termination is ineffective because it is prohibited by s87(1)), then the second DN can still work. If termination does occur, for whatever reason, the complicated question is what happens if the debtor remedies under the second DN.

[Et Contra Pacem Regis]

Please clarify what you mean by 'in this case'.

That on the Defective Default point, the creditor will be successful in the majority of cases.

 

I am (and several others here on CAG are) aware of several cases where the creditors have either not won in court or failed to turn up at all and lost by default - never appealing.:)

 

"not won" on the strength of the Defective DN/TN arguement, where no other issues were in play?

 

If Creditors fail to turn up to argue the case, while it's promising, it does not prove that the debtor's arguement was right. If the creditor looses by not turning up, there is little it can do by way of an appeal. Judges aren't sympathetic to companies which waste their time.

 

This is not new to us so please clarify exactly where you think you are adding value to the debate. Are you seeking to address CCA issues as a whole or just the DN/TN scenario? Whatever you are seeking to do, posts ought to be appropriate to the forum topic.

I mentioned it because one or two people pointed out the unfairness of the DN/TN situation to the debtor, the creditor's stronger position etc. I do not think that those points add any strength to the technical argument.

 

Also, please remember the main topic of this thread. Your post #2846 mentions mortgages and states "better arguments than the Default Notice argument lost in Heath v"...??? What do these have to do with our discussion? The discussion is primarily about the CCA and debts under the CCA, not agreements not covered by the CCA. Also when you say 'better arguments', that's almost completely irrelevant because context is everything! Reference case(s) only become relevant to the degree they address the subject matter being presently debated - not the general prospect of winning or losing against a lender for any action. Why? Because every case is different, though similarities of course exist.

I raised this point because my motives for disagreeing with the consensus were questioned. While the cases have no direct relevance, they, and many others show which way the wind is blowing, therefore I mentioned them to point out that my position is based on cynicism rather than personal interest, as had been suggested.

 

I now feel the detailed DN/TN debate is taking away from the main topic of this thread. I only raised invalid DN/TN as one of a series of possible criteria towards unenforceability of a debt under the CCA (and not common law etc) because of past knowledge of what some, such as Surfaceagentx20 have achieved in this area. What I was looking for was a possible yea or nay on it as a basis for unenforceability under the CCA. IMO, discussing unenforceability and the issues which come out of it is in line with dissecting Waksman which is what this thread is all about. Waksman did not rule on Default Notices or Termination in the Carey case as it relates to unenforceability.

This thread seemed to have wandered far from the original subject when I arrived, however I do take your point about threadjacking. My original intention was to make it clear that antigone was not a lone voice and that the DN arguement should come with a health warning.

 

ECPR, as you've said you are here on CAG to add value to the community, your experience and thoughts will be much more helpful if they also point out HOW consumers ( it's all in the name...Consumer Action Group ) can, possibly, get positive outcomes. Whilst it's very helpful to debate for the other side and point out weaknesses in arguments for consumers etc, such points should not confuse the main clear points which have been established. Also, if you wish to shoot down a clearly established line of argument, the best place to take it on is in the thread/s in which it was established and where the issue can be more focused and competently debated.

 

I remain of the view that people reading this forum should be aware that disagreement exists; that the arguements set out are not universally accepted outside this forum - that can get lost when reading threads full of people agreeing on everything, however to avoid further threadjacking, and having left things in this thread as complete as I can, I'll start a separate thread for Devil's Advocacy (tomorrow though, dinner is calling...)

 

My view (returning to the point) is that there are very few CCA arguements which a high probability of success:

 

1. Wilson v FCT type cases (obviously) but these will be very rare. Other cases suggest that the point can arise where insurance or payment of other arrears are a conditions of the loan, but the Supreme Court may take the oppertunity to narrow the scope of Wilson when they give judgment in Walker.

 

2. Cases where no terms are provided at all at the time of signature (engaging section 61(1)(a)) i.e. you fill in a form full of details, but sign without ever being given the prescribed terms. This is probably relevant only to a few credit card cases. I've heard perhaps one or two people saying that they remember this happening with their credit card.

 

3. Cases where the debtor has been treated incredibly badly by the Creditor, sufficient that the court is willing to use section 140B to rewrite the agreement. There's very little authority on this, but Shaw v Nine Regions seems to suggest that the bar is very high. Before it's demise I believe Cartel/CCLS had some success with section 140B but it was an unreported case.

 

ECPR