Zooman view on ERC claims

[Guest Zooman]

I’ve been a member of this site for 7 months, and I can assure you my expertise of the judicial system stems much further back in time.

 

My first practical experiences of the civil court system came when I was green and much younger and still had ideals. I was shocked when I realised that Judges basically, within the rules, ran their court rooms like chiefdoms, I was shocked how court deadlines could be plainly brushed aside and how orders could go non-complied with and no real consequences. Over time I matured and learnt to play the game (something that cannot be instilled in the class room), I also learnt to accept that litigation is about making money, and not justice. The majority of cases are settled outside of court, and then court used to argue over whom is going to foot the bill and how much that bill should be.

 

By personal experience of the law in insolvency and not contract law, this said I still have an understanding of contract law and it interruptions and implications, but am no expert.

 

I have felt from the first time I read of these claims being brought had they had no chance of success, I felt the arguments were greatly flawed and being driven not by legal understanding, but by a sense of misplaced justice and in more than one case greed. People have placed a lot of unfounded faith in the system, that the system will protect them, as they are litigants in person, and also a great misunderstanding of the courts attitude to litigants in person.

 

Now I will turn to these claims and give my personal opinion, I do not expect all whom read it to agree with me, but because I care about you all and do not want to see you become victims of these claims I am going to share my opinion.

 

Firstly.

 

You were free to take a mortgage where ever you chose to, and in the event that you had little choice in your decision because of your circumstances you were free to rent and wait until your circumstances improved.

 

The mortgage market is highly competitive, more so then bank accounts, tens of thousands of different deals are on the market at any one time. You chose to take this mortgage as it offered you something in return for ERC, what that was differs greatly from deal to deal, from a cash back lump sum to just the ability to take a mortgage.

 

The banks do not try to argue this point with bank accounts, as they know you have very little choice in current accounts and that they all have the same terms, and in addition having a personal account has become a fundamental part of adult life. But this is clearly not the case with mortgages, mortgages are an instrument to a goal but not essential.

 

When you entered into this bargain, your mortgage company asked you in return for the bargain to give it a minimum amount of time you would trade with them, and they also said, in the event you leave before x date you will do x, the ERC. This was not hidden and you entered freely into this agreement with your eyes open.

 

 

Secondly.

 

Small claims, it is true that you are offered cost protection on the small claims track. And I will give you my views on this.

 

I do not consider given the importance of these claims that the allocation to the small claims track is appropriate to these claims. I have the awful feeling these claims have been put on the small claims track as the Judge making the allocation has not read the claim and defence and/or has been so used this last 9 months of claims brought against the banks that they have not defended, that he believed they would not defend these claims.

 

With this in mind my concern is that as it becomes clearer that they are going to defend ERC claims, and that the claims are re-allocated to the fast track, I would not be surprised if you tuned up for a small claims hearing, and the judge on the day adjourned and re-allocated to the fast track once he was fully aware of the nature of the claim and it was evident they are defending.

 

In the event that it stayed on the small claims track there are provisions within CPR in small claims for costs, when the losing party has acted unreasonably, I believe that bringing such a flawed claim is in itself unreasonable. But this is not for me to decide, and this would be different from Judge to Judge.

 

Although I would expect the defendant to argue that they are being prejudiced by the use of the small claims track, where for obvious reasons it has no choice but to defend these claims, in order mto maintain the commercial viability of ERCs within the industry. If their customers are free to use the small claims court to recover an amount under £5,000 and it is costing them more than the sum claimed to defend the matter, it is a clear prejudice and not what the small claims track for intended for. Due to the claim being merit less in the first place the defendants, in the interests of justice and the integrity of the civil system, should be financially compensated for having to defend the claim.

 

Then for many there will also be the contractual clause that allows them to recover any and all legal costs arising from the mortgage agreement, I believe also this clause in affect waves your rights to cost protections in any track, and they will be awarded reasonable costs, and trust me what the courts will consider reasonable will be far greater then you will, in MaroonFox’s claim the court considered £7,500 to be reasonable. It is also well established that these clauses are win or lose, they get reasonable costs.

 

If and when the defendants will bring up this clause is a matter for the defendant and its lawyers, and I would not try to second-guess them, but you, as the claimant should be aware this is a possibility if your contract has such a clause.

 

It is not impossible to get a settlement offer from the defendants at this stage, but I truly believe that we will be seeing the last of the settlements within the next 2 weeks (I hope I am wrong). Up until now the industry has been at a loss how to deal with these claims, and just like the bank charges have not wanted to go into court until all considerations had been made, as can be seen by Fox’s claim Cobbett’s at least put together a strong argument to it clients to convince them they should be allowed to defend the claim which they did.

 

Now after Fox’s hearing I firmly believe it is just a matter of time for the news to filter though out the industry of Cobbett’s success, and although it was in the county courts I expect a lot will be made of the fact they (the courts) brought in the Circuit Judge to hear the case.

[mrsfoot]

Having read the above, i can wholey agree with the statement that eventually all claims will be defended.

 

I would also like to take this time to thank Zooman for clarifying the small claims cost system, as many people are still under the impression that no costs can be awarded by being in small claims and this can be a dangerous and expensive train of thought.

[lizvp]

Zooman, i read your post with a great deal of interest, i feel that i needed a dose of that type of objectivity/reality.

we are approaching a court case with our previous mortgage company to recover charges (non ERC) of less than £1k inc interest, more out of a sense of outrage (or as you say, misplaced justice) at the way we were treated by them than anything else-not really the best motive, but human apparently.

i have been concerned from the start about this clause of which you speak, a concern which became alarm when i discovered the clause included in their defense. could i ask you if this is it....

the society shall be entitled to all expenses incurred by the society in the exercise of its rights and powers hereunder (including costs and expenses of legal proceedings and in connection with the appointment of the receiverand the exercise of his powers) on a basis of full indemnity which shall carry interest at the rate of interest from the date of expenditure.

i had thought that we were safe enough on the small claims track; is this not, then, the case?

and would this clause in any case now be invalid as the mortgage has been redeemed? part of their defense is that the redemption value (which obviously included said charges) was accepted as a true account and accordingly settled.

i truly apologise for all the questions; your post has clearly given me much to think about. i usually resolve my internal thought processes by talking at the dog (an olde english sheepdog, clever enough to understand that i buy his pigs ears); i seem to have progressed to typing

[kennyh]

Hi Zooman,

Posted a reply on another thread about costs (which you answered) but here seems more appropriate.

My final question dealt with establishing the veracity of bills presented by the opposition legals upon our withdrawal. If Section 15 of the Supply of Goods and Services Act were to be invoked, might it concentrate their minds before they try to clobber us?

I don't know whether we are permitted to ask for, and even challenge, the component make up of bills thus presented? I have taken on board your comments about the 'real' world but it still seems fundamentally wrong that we should risk being ripped off when at our most vulnerable - after all most people (admittedly not all) went into this cos they need the cash.

[Guest Zooman]

Zooman, i read your post with a great deal of interest, i feel that i needed a dose of that type of objectivity/reality.

we are approaching a court case with our previous mortgage company to recover charges (non ERC) of less than £1k inc interest, more out of a sense of outrage (or as you say, misplaced justice) at the way we were treated by them than anything else-not really the best motive, but human apparently.

i have been concerned from the start about this clause of which you speak, a concern which became alarm when i discovered the clause included in their defense. could i ask you if this is it....

the society shall be entitled to all expenses incurred by the society in the exercise of its rights and powers hereunder (including costs and expenses of legal proceedings and in connection with the appointment of the receiverand the exercise of his powers) on a basis of full indemnity which shall carry interest at the rate of interest from the date of expenditure.

i had thought that we were safe enough on the small claims track; is this not, then, the case?

and would this clause in any case now be invalid as the mortgage has been redeemed? part of their defense is that the redemption value (which obviously included said charges) was accepted as a true account and accordingly settled.

i truly apologise for all the questions; your post has clearly given me much to think about. i usually resolve my internal thought processes by talking at the dog (an olde english sheepdog, clever enough to understand that i buy his pigs ears); i seem to have progressed to typing

My post was made to relation to ERC, not plenty charges all you have to do to win is prove your case, and IMO you will get no costs in small claims court as your claim has merit. As to the clause, tbh it looks like it is but I have never seen your contract so it is unsafe for me to say if it is or not, but I think you know the answer already. Have it checked by a lawyer to be on the safe side.

[Guest NATTIE]

zooman- as ever an informative post

[DarcyCarter]

Thanks Zooman - interesting thoughts.

 

I agree with you about the fairness issue.

 

My feeling though is that the unenforceable penalty argument does have some chance of success. Although I understand your comments about "entering the mortgage with your eyes open", this doesn't actually affect whether or not the cluase is a penalty.

 

To establish this, you would first have to show that the ERC clause was covered by the rule against penalties despite the fact that there has been no breach of contract. My research suggests that there are some grounds for this.

 

In particular, although ending the mortgage is a contractual right, the payment is required in order to do so. In the different but arguably analogous case of Hire Purchase Agreements, judicial statements have been made to the effect that such payments are perhaps an attempt to circumvent the rule against penalties and that this should not be allowed. There are failrly long arguments on this but that's the gist of it.

 

If the rule against penalties does apply, it seems to me that many ERCs would fall foul of them. I have had a letter from a lender admitting that they were set at a commercial level, and not worked out on a individual borrower basis. By definition, this cannot therefore be a genuine pre-estimate of loss.

 

It might well be that I am barking up the wrong tree with this, but I am interested to know whether you have considered and dismissed these arguments in coming to the conclusion that ERC claims have little chance of success?

 

All the best

[kennyh]

Hi Darcy, A well balanced intermission. Do you have any more to offer on ["To establish this, you would first have to show that the ERC clause was covered by the rule against penalties despite the fact that there has been no breach of contract. My research suggests that there are some grounds for this. "] (Damned if I know how to get the fancy background and all!!)

Today we see whether our defendants have filed defence and we're still considering our position. So this could be crucial.

If you're not comfortable airing in open forum a pm would be welcome.

And I'm still seeking guidance on exit strategy.