50% liability or not on termination

[postggj]

I have started this thread as my grey cells are in overdrive at the moment. just been having a short discussion on this and do not wish to hijack that thread

 

This is all to do with the termination of a HP agreement by the creditor for failure to keep to the agreed payments, and the creditor demanding back the full contractual value of the agreement contract.

 

In Yeoman Credit, Ltd. v. Waragowski

 

A clause is written into an agreement that the creditor can claim back the full contractual payments on any breach by the debtor on termination of that agreement. The Waragowski judgement is known as the Wargowski clause.

 

The Wargowski case can now legitimately be applied only to unregulated agreements. The Consumer Credit Act 1974 now affirms that the Wargowski clause has no relation to agreements Regulated by the CCA 1974

 

The Judgment in Rover v Siddons

 

The case in question involved a consumer who bought a car on hire purchase, but then fell behind with his payments. The consumer did not understand, or try to exercise, his right to terminate at any point. Eventually the finance company served a default notice and terminated the agreement. The finance company repossessed and sold the car. Some time later they sued the consumer for the full cost settlement, making reference to a liquidated damages clause in the agreement. The District Judge also made it clear that the consumer’s entitlement to terminate the agreement was only extinguished at moment when the creditor terminated. It was therefore right to assess the finance company’s losses by reference to sections 99 and 100 of the Consumer Credit Act. The liquidated damages clause was found to be an unenforceable penalty clause and the claim was dismissed.

 

The judgment in Rover v Siddons shows where a finance company terminates a hire purchase agreement and then tries to rely on a liquidated damages clause, will help the debtor offer a robust defence to their claim

 

The District Judge also made it clear that the consumer’s entitlement to terminate the agreement was only extinguished at moment when the creditor terminated. It was therefore right to assess the finance company’s losses by reference to sections 99 and 100 of the Consumer Credit Act. The liquidated damages clause was found to be an unenforceable penalty clause and the claim was dismissed.

 

SO I WILL ASK THE QUESTION

 

Why have civil claims placed before the courts not been challenged on creditors claiming the full liability of any alleged repudiatory breach by the debtor of a Hire Purchase agreement.

 

The law as it stands only supports a 50% liability ????

Edited June 26, 2013 by postggj

[Peterbard]

I think the answer is that it can, but it would have to be argued, and the outcome would very much turn on the evidence in the particular case.

[postggj]

Thanks for the comment, it is appreciated but i am after objective reasoning, not opinions or subjective comments

 

I have posted up the case law to support my reasoning and case law dictates that all the creditor can claim is the 50% mark on the agreement

 

Please prove me wrong with either statute or case law

[Peterbard]

Bit of a daft remark if I may say, most things a open to interpretation even statute and case law.

 

I think the case you refer to is lower court and not binding, you are going to have to try and develop the argument yourself I am afraid.

 

First you need to understand the issue. Good luck.

[postggj]

yes the lower case was in a county court and does not set precedent but can be used to support your argument in court

 

lets leave out Rover v Siddons then

 

The Waragowski judgement that creditors use is no longer applicable to regulated agreements

 

SO I ASK AGAIN

 

If the Waragowski clause is no longer applicable under statutory provision, by what authority can creditors demand sums in excess of the 50 % mark

 

Believe me i do understand the issue and i pose my questions to get objective replies that i can substantiate

 

THROUGH EITHER CASE LAW OR STATUTORY PROVISION

[Peterbard]

You will have to look under common law in relation to repudiatory breach of an agreement.

 

When an agreement is breached and the cause of that breach goes to the very heart of the agreement, that breach can be accepted by the innocent party and he can then claim all sums payable under the contract.(this is not opinion, law 101).

 

Therefore it depends on the nature of the breach, in a cca agreement it also depends on if a compliant notice has been served.

[postggj]

quote

 

When an agreement is breached and the cause of that breach goes to the very heart of the agreement, that breach can be accepted by the innocent party and he can then claim all sums payable under the contract.(this is not opinion, law 101).

 

But we are talking of an agreement specifically regulated under the CCA 1974, not normal contract or Legal personality,

 

The CCA 1974 is the statutory authority and if the Waragowski judgement is no longer applicable to the CCA 1974,

 

I ask again: How can the Waragowski clause still be used

 

The key to this is if the debtor accepts the breach and does not dispute it,

 

IF THE TOTAL AMOUNT PAYABLE IS DISPUTED

 

whole new ball game

 

It is confirmation i am after, one way or another, not hearsay

Edited June 26, 2013 by postggj

[Peterbard]

quote

 

When an agreement is breached and the cause of that breach goes to the very heart of the agreement, that breach can be accepted by the innocent party and he can then claim all sums payable under the contract.(this is not opinion, law 101).

 

But we are talking of an agreement specifically regulated under the CCA 1974, not normal contract or Legal personality,

 

The CCA 1974 is the statutory authority and if the Waragowski judgement is no longer applicable to the CCA 1974,

 

I ask again: How can the Waragowski clause still be used

 

The key to this is if the debtor accepts the breach and does not dispute it,

 

IF THE TOTAL AMOUNT PAYABLE IS DISPUTED

 

whole new ball game

 

It is confirmation i am after, one way or another, not hearsay

 

The CCA is silent on the subject of penalties upon the termination after breach by the creditor sadly, other than the stipulation that a section 87 notice must be served.

 

Not to say that an argument cannot be made to dispute the legality, but you cannot depend on the CCA.

[postggj]

Section 87 notices, SAY 87(1) is a mechanism to terminate the agreement if the creditor so wishes, and only on the arrears, not the TAP

 

What would be the process of an agreement terminated by the creditor?

 

All the creditor will be entitled to would be 50% of the TAP

 

To claim any more will be classed as unjust enrichment

 

There is no provision within the CCA 1974, or case law to support claiming the full value of the contract on termination, only 50 %

 

Case law to support it was the Waragowski clause,

 

WHICH IS NOW IRRELEVANT ON REGULATED AGREEMENTS

[Peterbard]

Section 87 notices, SAY 87(1) is a mechanism to terminate the agreement if the creditor so wishes, and only on the arrears, not the TAP

 

What would be the process of an agreement terminated by the creditor?

 

All the creditor will be entitled to would be 50% of the TAP

 

To claim any more will be classed as unjust enrichment

 

There is no provision within the CCA 1974, or case law to support claiming the full value of the contract on termination, only 50 %

 

 

No you are wrong there, section 87 is required to recover all liabilities under the contract, no section 87 notice is required to recover arrears, only payments not yet due under the contracts.

Edited June 26, 2013 by Dodgeball

[postggj]

7 Need for default notice.

 

(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, or

(b)to demand earlier payment of any sum, or

©to recover possession of any goods or land, or

(d)to treat any right conferred on the debtor or hirer by the agreement as terminated, restricted or deferred, or

(e)to enforce any security.

[postggj]

To rectify a breach a default notice under 87(1) will be served

 

The debtor has to bring the account back up to the level that no breach occurs

 

That is paying back any missed contractual payments within 14 days

 

BUT WE ARE GOING OFF TOPIC NOW

 

LETS STICK TO THE QUESTION AT HAND

 

50% liability of not on termination

[Peterbard]

Section (b) early repayment of any sum Postbagg.

[Peterbard]

This was my earlier point, how do you expect to get a coherent answer, when you do not understand the question.

I will leave you to it.

 

[postggj]

AGREED BUT THEN WE GO INTO THE PROVISIONS OF SECTION 88

 

88 Contents and effect of default notice

 

.(1)The default notice must be in the prescribed form and specify—

 

(a)the nature of the alleged breach;

 

(b)if the breach is capable of remedy, what action is required to remedy it and the date before which that action is to be taken;

 

©if the breach is not capable of remedy, the sum (if any) required to be paid as compensation for the breach, and the date before which it is to be paid

 

WE WILL ALSO BE VENTURING INTO THE DEFAULT AND TERMINATION REGS

 

BUT AS STATED WE ARE GOING OFF TOPIC, LETS GET BACK TO THE MATTER AT HAND

[postggj]

I asked the question for which no reply under statute or case law has been used to substantiate any different

 

I will wait for more comments

 

Thanks for the debate and we agree to disagree

[Gaston Grimsdyke]

I think the original question was why isn't Rover v Siddons followed as it represents the law. The answer is that it doesn't represent the law, it's just what a DJ in Leicester County Court thought, and his opinion doesn't bind anyone.

 

The rationale in Siddons is that if a hirer terminates he has a restricted liability, but if the creditor terminates the liability is the full contractual payments. So it means that a person in breach pays more than a person not in breach, so the termination sum clause must be a penalty. Superficially appealing, but I have never heard of Siddons being followed by any other judge. The reason is that the 50% rule in the old Hire Purchase Act used to apply whoever terminated, dewbtor or creditor. However, when the CCA replaced the HPA the 50% rule for creditor terminations was taken out, therefore Parliament must have intended that a creditor termination would attract the higher termination sum, so such a clause cannot be a termination clause.

 

And why did Parliament do that? Simply because creditors inevitably make a loss on the 50% rule, so overnight hire purchase as a product would disappear which would be to the consumer detriment. So the irony is that the increased liability for a creditor termination is actually to benefit the consumer.

 

Siddons was wrongly decided and would have been reversed if Rover had appealed.

[postggj]

Interesting point and thanks for the contribution

 

As always, the lack of definitive case law is a hurdle as always

 

To settle this argument once and for all would require an appellate court Precedent

 

I think a debtor is at a disadvantage using the above scenario as a defence without a clear definition, and having to rely on judicial interpretation is unwise

[Peterbard]

I think the original question was why isn't Rover v Siddons followed as it represents the law. The answer is that it doesn't represent the law, it's just what a DJ in Leicester County Court thought, and his opinion doesn't bind anyone.

 

The rationale in Siddons is that if a hirer terminates he has a restricted liability, but if the creditor terminates the liability is the full contractual payments. So it means that a person in breach pays more than a person not in breach, so the termination sum clause must be a penalty. Superficially appealing, but I have never heard of Siddons being followed by any other judge. The reason is that the 50% rule in the old Hire Purchase Act used to apply whoever terminated, dewbtor or creditor. However, when the CCA replaced the HPA the 50% rule for creditor terminations was taken out, therefore Parliament must have intended that a creditor termination would attract the higher termination sum, so such a clause cannot be a termination clause.

 

And why did Parliament do that? Simply because creditors inevitably make a loss on the 50% rule, so overnight hire purchase as a product would disappear which would be to the consumer detriment. So the irony is that the increased liability for a creditor termination is actually to benefit the consumer.

 

Siddons was wrongly decided and would have been reversed if Rover had appealed.

 

Have to agree sadly. Unless there are extenuating circumstances, and you get a friendly judge.

[Peterbard]

AGREED BUT THEN WE GO INTO THE PROVISIONS OF SECTION 88

 

88 Contents and effect of default notice

 

.(1)The default notice must be in the prescribed form and specify—

 

(a)the nature of the alleged breach;

 

(b)if the breach is capable of remedy, what action is required to remedy it and the date before which that action is to be taken;

 

©if the breach is not capable of remedy, the sum (if any) required to be paid as compensation for the breach, and the date before which it is to be paid

 

WE WILL ALSO BE VENTURING INTO THE DEFAULT AND TERMINATION REGS

 

BUT AS STATED WE ARE GOING OFF TOPIC, LETS GET BACK TO THE MATTER AT HAND

 

Just need to clear up this point.

 

A section 87 notice is only necessary if the creditor wishes to claim sums not already due under the contract, if they are only chasing arrears they can just demand payment, no notice is required.

 

It is quite important to understand this in this context because the creditor must issue one of these before he can make a claim for all sums due under the contract,(or indeed take action to re-posses the vehicle) without he can only claim arrears.

 

In fact he can only terminate the contract after he issues a section 87 notice.

 

The notice gives 14 days to remedy the account by paying the arrears, if the debtor pays these the account is said to have never been breached and will return to the point before the default was issued.

 

Ok, so a debtor misses some payments and default notice is issued giving warning of imminent termination of the agreement, there is nothing stopping the debtor getting in first( within the 14 day period) and terminating under section 99 of the act, in doing so he saves himself having to pay all the sums due under the agreement. This is something that finance companies do not tell you and neither do dealers.

 

 

Addition, the above only applies after one third of he contract price has been paid, before this they can re-posses without a court order.

Edited June 27, 2013 by Dodgeball

[postggj]

This is nothing new

 

 

If i had a vehicle on finance, i could terminate the agreement after only six months as an example

 

The only liability on the debtor will be sums due up to the 50% mark of the agreement

[Peterbard]

This is nothing new

 

 

If i had a vehicle on finance, i could terminate the agreement after only six months as an example

 

The only liability on the debtor will be sums due up to the 50% mark of the agreement

 

Actually you are quite wrong, this was only confirmed following a test case.

 

Before this credit companies maintained that the facility to terminate under section 99 was curtailed after the default notice was issued, after the decision it was proven otherwise.

 

When someone is presented with a default notice it is quite a different situation to someone who just decides he is going to terminate after six months.

[postggj]

QUOTE

Actually you are quite wrong, this was only confirmed following a test case.

 

THEN PLEASE POST UP THIS TEST CASE TO SUPPORT YOUR REASONING

 

I am not saying you are in error, i am asking you to substantiate your argument with case law or an amendment to the Default and Termination Regs/CCA 1974 (as amended)

 

You can voluntary terminate any HP agreement prior to termination, even with arrears

 

All that will be due ares sums up to the 50% mark

Edited June 27, 2013 by postggj

[Peterbard]

QUOTE

Actually you are quite wrong, this was only confirmed following a test case.

 

THEN PLEASE POST UP THIS TEST CASE TO SUPPORT YOUR REASONING

 

I am not saying you are in error, i am asking you to substantiate your argument with case law or an amendment to the Default and Termination Regs/CCA 1974 (as amended)

 

You can voluntary terminate any hp agreement, even with arrears

 

All that will be due is sums up to the 50% mark

 

 

Yes i will when I find it , however you miss the point i fear.

[sequenci]

Morning guys.

 

I'll have more time to join in tomorrow (lots on today) but perhaps the UTCCRs could play an important factor in all this?

 

Seq.