Durkin v DSG Retail Ltd
| Jurisdiction | Scotland |
| Judge | Lord Hodge,Lady Hale,Lord Wilson,Lord Sumption,Lord Reed |
| Judgment Date | 26 March 2014 |
| Neutral Citation | [2014] UKSC 21 |
| Court | Supreme Court (Scotland) |
| Docket Number | No 8 |
| Date | 26 March 2014 |
[2014] UKSC 21
Lady Hale, Deputy President
Lord Wilson
Lord Sumption
Lord Reed
Lord Hodge
Mr Durkin has fought this battle for many years. He purchased a laptop computer from PC World in Aberdeen for £1,499 on 28 December 1998. He entered a debtor-creditor-supplier agreement with HFC Bank plc under section 12(b) of the Consumer Credit Act 1974 to fund the purchase, apart from a £50 deposit which he paid. On the next day he rejected the computer because it did not conform to his contract. PC World did not accept that he had validly rescinded the contract until the sheriff at Aberdeen in a judgment dated 26 March 2008 determined that he had. In the meantime, HFC treated him as being in default and intimated that default to credit reference agencies. Mr Durkin claimed damages for financial loss caused by the damage to his credit. The principal issue in this appeal is whether Mr Durkin was entitled to rescind the credit agreement on rescission of the sale agreement.
In December 1998 Mr Durkin wanted to buy a laptop computer which had an internal modem by which he could connect to the internet. On 28 December 1998 he went to PC World in Aberdeen to purchase a suitable product. He specified his requirements to Mr Andrew Taylor, a member of the store's management, who introduced him to a sales assistant, Mr Robert Slorance. The sales assistant identified a product but said he was unsure whether it had an inbuilt modem. Because PC World did not allow customers to remove a laptop from its box before purchase, the sales assistant agreed that Mr Durkin could take the computer home and, if on inspection it was found not to contain an internal modem, he could return it. Mr Durkin paid the deposit and completed and signed the credit agreement, which the sales assistant gave him, for the balance of £1,449. The sales assistant signed the credit agreement on behalf of HFC. When he took his purchase home and opened the sealed box, he discovered that the laptop did not have an internal modem. At about 9 am on the following day he handed back the computer to the store and asked for his deposit of £50 to be returned and the credit agreement cancelled. Mr Taylor refused to accept Mr Durkin's rejection of the goods and took no step to cancel the credit agreement.
That remained PC World's position in the action which Mr Durkin initiated in the sheriff court in Aberdeen in 2004 until the sheriff in his judgment of 26 March 2008 granted a declarator that Mr Durkin had validly rescinded the contract of sale. In the later proceedings before the Inner House PC World did not challenge the sheriff's finding that the contract of sale had been rescinded.
Mr Durkin did not pay any money to HFC under the credit agreement. In late February or early March 1999, after he returned from working offshore, he responded to a request for payment by telephoning HFC to advise it that he had rejected the laptop and had rescinded his contract with PC World. He intimated to HFC that he had rescinded the credit agreement also. On 8 March 1999 Mr Durkin wrote to the managing director of PC World to explain that he had rejected the computer, that PC World's manager had refused to refund the deposit, and that HFC was demanding money from him because the manager would not tell it that the goods had been rejected.
On 22 July 1999 HFC wrote to Mr Durkin to warn him that he had arrears of £326.22 and that if he did not resume payments under the credit agreement it was possible that he might have difficulty in obtaining a mortgage or other credit because HFC reported monthly to credit reference agencies on the status of customer accounts. HFC also informed him that if he did not respond to the letter it would serve a default notice on him in accordance with section 87(1) of the 1974 Act. Mr Durkin telephoned HFC to re-affirm his position that the sales contract had been rescinded and that he was not due to pay any sums under the credit agreement.
Without making any enquiries about Mr Durkin's claim that he had rescinded both the contract of sale and the credit agreement, HFC issued a default notice and intimated to the UK credit reference agencies, Experian Ltd and Equifax Ltd, that he had been in default of his obligations under the credit agreement since 14 January 1999. They recorded the alleged default on their registers. Thereafter Mr Durkin attempted without success to persuade the credit reference agencies to correct their registers. The entries remained on the registers until about 2005 or 2006.
Mr Durkin raised a small claims action against DSG Retail Limited, which trades under the name of, among others, PC World, and recovered his £50 deposit in an out-of-court settlement in which DSG did not admit any liability. But that did not resolve his problem with HFC. He found that the entries on the credit registers prevented him from opening new accounts with credit card companies and other lending institutions. He had used credit cards in funding his lifestyle and wished to make use of offers of 0% credit on transferred balances to minimise the cost of his borrowing by transferring from one credit card company to another at the end of each period of interest-free credit. The entries on the registers of the credit reference agencies prevented him from doing so.
Mr Durkin therefore raised an action in Aberdeen sheriff court in early 2004 against both DSG and HFC. He sought a declarator that he had validly rescinded both the contract of sale and the credit agreement and claimed damages of £250,000 from HFC for its negligence in representing to the credit reference agencies that he had defaulted on the credit agreement. He claimed damages from HFC under three heads of loss: (i) damage to his financial credit, (ii) loss from interest charges caused by his inability to exploit seriatim the offers of 0% credit and (iii) loss caused by his inability to put down a 30% deposit on a house in Benalmedena, Spain in October 2003, measured essentially by the difference between the price available in 2003 and the enhanced value of that property three years later.
DSG contested Mr Durkin's claim that he had rescinded the contract of sale and it was only after proof of the facts that he established that DSG had been in material breach of contract entitling him to rescind the sale contract. HFC contested both his entitlement to rescind the credit agreement and his claim for damages. Sheriff Tierney followed the opinion of Sheriff Principal Reid in United Dominions Trust Ltd v Taylor 1980 SLT (Sh Ct) 28 and held that section 75 of the 1974 Act (which I discuss in paras 18 – 26 below) had the effect that Mr Durkin had been entitled to rescind and had rescinded both the sale contract and the credit agreement. The sheriff awarded Mr Durkin (i) £8,000 for injury to his credit, (ii) £6,880 for the extra interest which he had had to pay and (iii) £101,794 for the loss of a capital gain arising from his inability to purchase the Spanish property in 2003.
Mr Durkin appealed to the Inner House of the Court of Session against the sheriff's assessment of his damages. HFC cross-appealed against the sheriff's findings (i) that section 75 of the 1974 Act enabled Mr Durkin to rescind the credit agreement, (ii) that HFC was in breach of its duty of care, and (iii) that HFC's breach of duty had caused the second and third heads of loss. HFC did not dispute the award of £8,000 if it had been in breach of its duty but submitted that there was no evidence to entitle the sheriff to make the awards which he did under the second and third heads of loss.
At a hearing before the First Division of the Inner House Mr Durkin's appeal on the amount of damages failed. Worse for him, HFC's counsel persuaded the court that section 75 did not allow him to rescind the credit agreement. In addition, the court accepted HFC's submission that, absent averments and evidence of the sort of enquiries which a bank could reasonably have been expected to make, Mr Durkin had not shown that HFC had failed in its duty of care. Further, counsel for HFC analysed the evidence in the transcripts of evidence and the documents and persuaded the court that the evidence did not permit the sheriff to hold that a breach of duty by HFC had caused Mr Durkin loss under the second and third heads of claim. The court therefore amended the sheriff's findings of fact to exclude his claims for loss of interest and the loss arising from his inability to purchase the property in Spain. On 15 June 2010 the First Division granted decree of absolvitor to HFC.
Mr Andrew Smith QC sought permission to advance a new ground of appeal, namely that there was on a proper analysis no contract of sale and no credit agreement. As this stance contradicted the basis on which the case had been pleaded from the outset and argued in the courts below, we refused his application. The issues for this court therefore are (i) whether Mr Durkin had rescinded the credit agreement, (ii) whether HFC was in breach of a duty of care to him and (iii) whether on the findings of fact any breach of HFC's duty of care caused him loss exceeding the £8,000 which the sheriff had awarded for the loss of his credit.
The credit agreement, which DSG's sales assistant presented to Mr Durkin for his signature in the PC World store, was a personal loan agreement which described in a schedule the purchase of the computer, the £50 deposit payable on supply and the amount of credit which was the balance of the purchase price. The first clause of the terms and conditions was entitled...
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