Harsh Letter received from Kensington *Claim struck out in court*

[rbrears]

Really feel for you and I’m sure the decision came as a great shock

 

I’ve read the witness statements and skeleton argument you have posted. Of course I haven’t seen your claim or the defence and my comments are based on what I have read in this thread. They are really just my immediate thoughts on your case. Don’t forget that you are appealing (if you do) against a decision to strike out your claim. All you have to do is persuade the judge that there is a legal basis for your claim that should be heard – you do not have to “win” at this stage.

 

Starting with the obvious stuff.

 

1. The lender’s witness statement admits that the erc sum is in effect an arbitrary figure.

2. The lender’s witness statement acknowledges that the reason for the erc is to compensate the lender.

 

What does that compensation comprise of? The witness statement says loss to the lender of profit on mortgage repayments. Thus the compensation is expressed to be in relation to the non payment of future instalments (and therefore a profit element for the lender) under the mortgage. This is in all respects expressed in terms as a liquidated damages clause save for the fact that the lender gives a contractual right to the consumer in the contract to redeem early. In effect and in totality the contract behaves as if there is a liquidated damages clause for a “breach” but also provides that the circumstances giving rise to the payment of those “damages” is not a breach.

 

Whether a payment required under a clause can be a penalty on breach is decided looking at the time the contract was made and not the time of breach (Dunlop Pneumatic Tyre Company)

 

Note particularly the dicta of Colman J in Lordsvale Finance Plc v. Bank of Zambia [1996] QB He says:

 

"whether a provision is to be treated as a penalty is a matter of construction to be resolved by asking whether at the time the contract was entered into the predominant contractual function of the provision was to deter a party from breaking the contract or to compensate the innocent party for breach. That the contractual function is deterrent rather than compensatory can be deduced by comparing the amount that would be payable on breach with the loss that might be sustained if breach occurred." (emphasis added).

 

But is the main function of the erc to deter you from breaching the contract when the contract actually provides a contractual right to redeem early?

 

So if there is no breach the contract provides that the lender can be compensated in circumstances where the borrower is in full compliance with the other terms of the contract? Is the requirement of breach a deciding factor or can a clause be a penalty even if on the face of the contract there is no breach?

 

The silver thread going through the whole of the rules on penalty clauses is that – the rules will not apply unless there is a breach of contract.

 

The perennial problem is that of early termination in accordance with the contract. Many bank charges sites quote Bridge –v- Campbell as a case supporting the recovery of charges and that is fine for bank charges where there is a breach of the contract. It does not sit well with erc cases. In that case the court recognised the inequality of treatment of a borrower where he was a) in breach and had to make a payment under the contract and b) terminated the contract early and had to make a payment under the contract. In the first case the payment demanded could be subjected to the rules on penalties. In the latter it could not. So a person in breach was in a more favourable position than a person who complied with the contract in terms of the scrutiny of the payment they were required to make.

 

In the context of consumer protection and penalty case law is it equitable or fair for the lender to frame the contract in this way? This problem has exercised the judiciary in cases from Bridge –v- Campbell onwards and judges have said that the law should be changed so that an oppressive or unreasonable penalty clause should not escape judicial scrutiny as a penalty just because it is framed in such a way so as not to arise on a breach of contract.

 

In effect the erc clause is a penalty clause drafted so as to avoid a breach and the application of the rules on penalties. Thus far case law has made clear that although this situation is unsatisfactory, the law as it stands will only apply the rules on penalties where there has been a breach. However, under the special considerations that apply to consumer contracts it can be suggested that this approach, in the context of consumer contracts, can no longer be justified.

 

Both the Law Commissions of England and Wales (Penalty Clauses 1975 paras 17-26) and Scotland (Scottish Law Commission Discussion Paper No. 103 on Penalty Clauses 1997 – para 4.1 have reached the conclusion that the rules on penalties should apply outside the restriction of breach of contract.

 

In your witness statement paragraphs 9 and 10 talking about the erc clause effectively being a penalty probably did not persuade partly because they do not expand on the above. But the main reason will be that despite the dissatisfaction voiced by judges for 40 years and the Law Commission recommendations the law has to be changed by legislation and so far has not been (except for any effect of consumer regulations). I think this is undoubtedly the reason why the lender won on its strike out application and was the root cause of the judge being persuaded that the usual law must apply – i.e. no breach, no penalty.

 

 

 

As to consumer protection issues - the consumer has no choice in the imposition of these terms as they are on the lender’s standard conditions and not open to negotiation – nor is the nature of the payment, the basis for it and the method of its calculation by reference to any alleged loss and a proper or any pre-estimate made in any way clear to the consumer at the time the contract is entered into. What about accelerated payment of that loss as would occur where an erc was paid? What are the actual costs to the lender? Is any information given to the consumer to inform him of the method of calculation and the basis of the costs/compensation and any discount for accelerated receipt of losses? Answer – No.

 

It cannot be argued with any force in sub-prime lending that the consumer has the choice not to accept the mortgage conditions and go elsewhere. All sub-prime and indeed high street lenders in these circumstances operate the same policy.

 

Under UTCCR 1999 can we rely on regulation 7? It is mentioned in your witness statement (para 10) but the mention is brief and the point is not expanded on. The requirement is that any term of the contract is expressed in plain intelligible terms. What is the purpose of this requirement – just that the consumer understands the actual words used, or that the basis and nature of the term is made clear? If the latter then we should be arguing that as even the lender admits that the term is to provide compensation and contends that the term is a liquidated damages clause that the basis of that compensation should be explained. Compensation for what? How calculated? We can say that without that information the term is not clear and intelligible – it is merely an arbitrary sum payable on termination.

 

Note that the OFT has published article(s) stating that it is possible to calculate a proper estimate of losses in respect of erc’s and I think this is linked to above in this thread.

 

If it is compensatory in nature then it is to provide “damages” and they must be either liquidated, i.e. ascertained at the time of the making of the contract or they may be a penalty. If this argument applies then the term is arguably not clear and intelligible and the term should be interpreted if possible in favour of the consumer. The interpretation in favour of the consumer must be that the clause provides for compensation which is arbitrary, not ascertained or justified and which is therefore a penalty. This argument pits the weight of the consumer protection regulations against the established common law that there must be a breach for the rules on penalties to apply. In not making the term clear and intelligible the lender is effectively inserting a possible penalty clause in the contract but avoiding the application of the rules on penalties by avoiding the circumstances giving rise to payment being a breach. Who knows the outcome of a submission like that?

 

Is such conduct fair in a consumer contract? If not can we bring in Regulation 5? Your appeal should certainly suggest so. One can even despite the above observations understand a judge accepting that there must be a breach for the rules on penalties to apply, although I feel that this pays no attention to the consumer protection angle and at best you can ask the judge in your written appeal to agree that there is a point of law to argue on the interaction of these two branches of the law. But that just means that you are asking to be a test case.

 

 

My final thought has not been discussed at all so far. As there is an equity of redemption (and I don’t mean an equitable right to redeem early – there is none – but the full equitable interest - namely the proprietary interest in land in its own right of which the right to redeem is merely a part) is the payment not a clog on that right? This would be on the basis that the term in the mortgage contract was unconscionable or oppressive. The bar is high and the term must be excessive but looking at the nature of the term, the way it is drafted to avoid the application of the rules on penalties, and the lack of information given to the consumer, one can at least argue that there is a point of law to be argued that should be heard that the erc is a clog on the equity of redemption and therefore void.

 

I can’t think of anything else that might be of help at the moment and its getting late – already been thinking about this for a good few hours now! - but I hope others will add to this and give you some hope if you wish to appeal the decision to strike out.

 

With all my best wishes ;-)

[red1]

rbrears

Very eloquently put but I have been blinded with science.

In your opinion (and in layman terms) what would be the best way for Jamorgan to get this decision overturned.

 

Could you perhaps draft her a letter to put before the judge?

 

Thanks

red1

[rbrears]

Hi Red1 - if Jamorgan wants me to I'll try and get something done for her this weekend. The 30k figure quoted above is a bit much - I dont think in the first instance that the matter goes anywhere other then the DJ who made the decision. If he agrees then the case should proceed in the county court initially (assuming it was a DJ - if it was a CJ then the matter goes back to him - also in the County Court) so far as I understand it.

 

However, having said this if Jamorgan were to win her appeal and then the hearing of her claim the chances of an appeal against that decision by the lender is pretty high - but lets go one step at a time.

[red1]

Me again rbrears

Thanks for that.

Another quick question if I may. Most of us have been referring to Bridge –v- Campbell , however in your opinion this doesn't bode well. So for the rest of us what would be the best route to go down if making a claim.

Any help appreciated as I really am quite a numpty.

Thanks again

[zootscoot]

Thanks for your contribution rbrears you have made things much clearer.

The crux of Morgy's case rests on this point.

The perennial problem is that of early termination in accordance with the contract. Many bank charges sites quote Bridge –v- Campbell as a case supporting the recovery of charges and that is fine for bank charges where there is a breach of the contract. It does not sit well with erc cases. In that case the court recognised the inequality of treatment of a borrower where he was a) in breach and had to make a payment under the contract and b) terminated the contract early and had to make a payment under the contract. In the first case the payment demanded could be subjected to the rules on penalties. In the latter it could not. So a person in breach was in a more favourable position than a person who complied with the contract in terms of the scrutiny of the payment they were required to make.

 

I thought Morgy would have a strong argument for being in breach because she was forced to end early because she could no longer afford the mortgage payments and therefore would come into category a) you distinguish above and therefore subject to the penalty provisions. As in fact occured in Campbell Discount v Bridge the House of Lords decision

 

However, if Morgy's case is does not come into that category their may be little hope for others either.

This puts them into category b). The arguments for treating a term relating to exercising a right as a penalty are strong and I agree are ripe for changing. However, this is something only the House of Lords can do at present.

[jamorgan]

Ok,

Heads completely messed up now after reading todays threads but anyway, Bona very kindly gave me a number to ring with regards to the transcript.The lady said I would need an EX107 form and I would need to state on the form one of the following:

1. The whole case £150.00 plus vat on average depending on how many words or

2. The Judgement which would be considerably less

 

She said it would take a couple of days and then it would have to be sent back to court to get Judges approval

 

which do you want me to get guys and what the hell shall I do now

x

[mrsfoot]

Hi Morgy

 

Well i have spent the last hour or so reading yout thread, sometimes with a smile, more often with tears streaming. I can only begin to understand how you must feel, however take heart with what they clerk said. I have a friend who is a clerk in court and he sees so many ppl defending themselves agianst sharks. This was not your day, your day will some.

 

I have to say i would hang fire a few days, let your head re orient and your heart slow before doing anything.

The Judge was telling you to appeal, in writing so its official so he can give you a nudge in the right direction. Most d.j's are reasonable and will help the smaller person in a claim (whethr defendant or claimant)

Just a few points to consider:

1. Do you belong to union? If so you get legal advice so give them a go. My hubby is in talks with his union rep with regards to them doing something for ppl who claim, as most of his workmates and most ppl in union have been affected so its about time they helped out!!

2. Ask for a breakdown of the costs, they will have to show each call etc and it may just reduce it down.

3. Keep smiling, you have given hope to a lot of ppl on here, we all back you, and im sure if push came t shove someon from here would be happy to go with you to the next hearing as a friend (they cant speak but will be a hand to hold)

[gizmo111]

Hi Morgy,

 

I would get the full transcript - can you afford this at present.

As Mrs Foot says if you need someone to come wit hyou let me know - I am just over bridge in Bristol - wish I had realised earlier in the week and at least you would have had some support.

 

Warmest wishes

[paulpb123]

Hi Morgy,

If you've got the money then a transcript of the whole case so nothing gets missed. If you don't have the money then we'll just have to get it to you.

wrote this while Gizmo was responding!

[jamorgan]

Ok paul will get the full transcript no problem .

Does anyone know whether you pay up front or when recieved.

 

Giz wished you could have been there for support but never mind love thanks anyway

 

mrsfoot thanks for the advise on the union thing I shall look into this too thankyou

M

[Bona]

Hi Morgy

 

We paid a cheque up front with a small deposit incase it went over what they agreed not a fortune but i think if you can afford it get the whole thing The court will have the form get them to fax it to you if you cant get down there empahsise that you need it urgently

[jamorgan]

Lady said I can get it off the internet an ex107 form so will get that in morning first thing hun

x

[nevos]

If I'm not banned from posting in your thread jamorgan: You could ask the Law Society to revue the charges, I did this once on a patent case and got a £1500 reduction in the other sides costs.

[jamorgan]

Thanks Bona,

 

And thanks for that bit of info Nevos,

shall I wait untill the transcript is sent first before I do anything else though

[nevos]

Hi, jamorgan: Better let a more qualified one answer that.

 

The Unfair Terms in Consumer Contracts Regulations came into force on 1 July 1995. They implement an EC Directive (EC Directive 93/13) in the UK. The Regulations apply to standard contract terms to be used with consumers in contracts made after 1 July 1995.The Regulations say that a consumer is not bound by a standard term in a contract with a seller or supplier if that term is unfair. The Regulations also give the Director General of Fair Trading powers to stop the use of unfair standard terms by businesses and to prevent anyone recommending such terms, if necessary by obtaining a court injunction.

 

The Regulations say that a term is unfair if it creates a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer (in other words, if it unduly weights the contract against the consumer and in favour of the business). The test of unfairness also takes into account whether the imbalance is 'contrary to the requirement of good faith' which includes whether the supplier's behaviour was fair and equitable. The Regulations include an indicative list of 17 examples of terms which may be regarded as unfair. These include hidden terms (which bind the consumer to terms they did not know about), penalty clauses (for breach of contract) and the right to increase the price of what is supplied.

[pinkglitter]

dear god !!!! Morgy i dont know what to say !! i work for Shoosmiths solicitors and know a few decent ones, PM me if you want me to try to get anything looked at, we to have a secured loan with Kensingston and were being taken to court on the 12th Jan but as luck would have it my bank charges money came through so i was able to pay them and the court case was suspended, now got to go throught the whole thing agaimn with our mortgage, stupid thin is we have 40k equity in the house the arrears are 4k andf they want to take our house !!!! still think of what i said about shoosmiths:razz:

[zootscoot]

Hi Morgy,

 

On the issue of costs the court and the other party are bound by the overriding objectives of the CPR:

 

 

The overriding objective 1.1 (1)These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly.

(2)Dealing with a case justly includes, so far as is practicable –

(a)ensuring that the parties are on an equal footing;

(b)saving expense;

©dealing with the case in ways which are proportionate –

(i)to the amount of money involved;

(ii)to the importance of the case;

(iii)to the complexity of the issues; and

(iv)to the financial position of each party;

(d)ensuring that it is dealt with expeditiously and fairly; and

(e)allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases.

 

 

Application by the court of the overriding objective 1.2 The court must seek to give effect to the overriding objective when it –

(a)exercises any power given to it by the Rules; or

(b)interprets any rule subject to rule 76.2.

 

 

Duty of the parties 1.3 The parties are required to help the court to further the overriding objective.

 

 

I think Kensington have breached these by sending a barrister into the county court (where solicitors tend to appear)to defend against a litigant in person. It would also be worth looking to see if any other claimants against Kensington have a similar defence to yours in which case it you could argue that its simply a template and could not therfore have cost so much. Who were solicitors?

[nevos]

Zootscoot: Are the above rules grounds to make an official complaint and have the case re heard?

[zootscoot]

No not to have the case reheard. Coud be grounds to ask the court to review the costs ordered.

[lellypea]

Anyone know what happened to all posts of yesterday....20th??

[Bona]

Try looking under posts removed from hiJacked thread no idea what it means

[lellypea]

Oh...right..got it. Thanks Bona.

[zootscoot]

They are here so that they do not detract attention from the important issues in this thread.

 

http://www.consumeractiongroup.co.uk/forum/mortgage-companies/59773-posts-moved-hijacked-thread.html

[jamorgan]

Hey Zoot,

Drydens were the solicitors and I believe Preistley1965 who went to court Friday were also using drydens I do Believe they sent a Barristar too.

Priestley1965 said in his post that the barristar gave him a bundle of docs before the cmc, thats what drydens did to me

M

[rbrears]

JAMORGAN

 

Are you going to appeal?