Forward Trust Ltd v Whymark
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE STUART-SMITH,LORD JUSTICE FARQUHARSON |
| Judgment Date | 11 July 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J0711-5 |
| Docket Number | 89/0700 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 July 1989 |
[1989] EWCA Civ J0711-5
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BIRMINGHAM COUNTY COURT
(HIS HONOUR JUDGE MICKLEM)
Royal Courts of Justice
The Master of the Rolls
(Lord Donaldson)
Lord Justice Stuart-Smith
Lord Justice Farquharson
89/0700
SIR WILLIAM GOODHART Q.C. AND MR. F. A. PHILPOTT (instructed by Messrs. Trowers & Hamlins, London Agents for Messrs. Bettinsons, Birmingham) apeared for the Appellants (Plaintiffs).
THE RESPONDENTS were not represented and did not appear.
The issue raised in this appeal is deceptively simple and has furrowed many judicial and other legal brows. The scenario is (a) a regulated consumer credit agreement, (b) default by the borrower, (c) a requirement by the lender that the borrower pay the full outstanding balance less the statutory rebate allowable for "early settlement" which is ignored by the borrower and (d) County Court proceedings to recover what is due from the borrower. Two problems are: should the lender issue a summons for the whole amount outstanding or for that amount less whatever rebate would be applicable, assuming that the demands in the summons were met within 14 days? If the borrower makes no payment, for what sum should the court give judgment?
The facts
On 22nd August 1986 Mr. Whymark entered into a personal loan agreement with Forward Trust. Such an agreement is a regulated consumer credit agreement under the Consumer Credit Act, 1974 ("the Act"). It was a 10 year loan repayable with interest by 120 monthly instalments, beginning on 23rd September 1988. The principal sum lent was £2,527.57, the interest £3,790.43 and the monthly repayments £52.65. Interest was calculated at 15 per cent per annum on the sum lent, giving an annual percentage rate of 24.6 per cent.
By 2nd March 1988 Mr. Whymark was £210.60 in arrears with his payments and Forward Trust served him with a default notice under section 87(1) of the Act. By this notice Forward Trust gave him until 12th March 1988 to remedy the breach by paying this sum. The notice also told Mr. Whymark that, if he did not do so, Forward Trust might, and impliedly would, at some time later require payment of the outstanding balance of £5,580.90 "less rebate allowable (if any) as set out below". If Mr. Whymark had read on, he would have learnt that the amount of the "rebate allowable (if any) was £2,689.32 and that "Rebate is calculated on the assumption that payment is made on the date shown [i.e. 12th March 1988] and will be revised if payment in full is not made by that date". The notice, which was in the form required by the statute, added that "If the arrears are not paid by the date shown above [i.e. 12th March 1988] it will then be our intention to instruct solicitors to issue proceedings against you or transfer your account to our debt recovery agents without further notice".
True to their word, on 28th March 1988 Forward Trust issued a summons out of the Birmingham County Court claiming £5,587.48 together with £99 costs, making £5,676.48 in all. The £5,587.48 was particularised as follows:—
| Total Instalments payable | £6318.00 |
| Less | |
| Total amount paid £737.10 | |
| Interest Rebate0.00 | 737.10 |
| 5580.90 | |
| Add | |
| Contract interest at 15% p.a. on 4 overdue instalments of £52.65 each | 6.58 |
| 5587.48 |
On 28th April 1988 judgment was entered against Mr. Whymark for £5690.48.
Mr. Whymark asked for time to pay but, from Mr. Whymark's point of view, Mr. Registrar Sankey did rather better in that on 30th September 1988 he set the judgment aside. An appeal by Forward Trust to His Honour Judge Micklem was dismissed, but leave was given to appeal to this court. Apart from the request for time to pay, Mr. Whymark has ignored the court proceedings no doubt in the hope that, if he adopted this course, they might go away. It has to be said that thus far his expectations have been realised.
The Statutory Background
Loan, hire-purchase and credit-sale agreements commonly provide for the period of credit to be drastically curtailed upon the happening of certain events and, those events apart, it is desirable that a creditor should not be discouraged from discharging his indebtedness at the earliest convenient moment. In either event, if a debt which includes interest or a credit charge calculated by reference to a fixed period of credit is prematurely discharged, the lender achieves a windfall profit. Parliament has intervened with a view to remedying this situation. The principal provisions are as follows:—
"94 (1) The debtor under a regulated consumer credit agreement is entitled at any time, by notice to the creditor and the payment to the creditor of all amounts payable by the debtor to him under the agreement (less any rebate allowable under section 95), to discharge the debtor's indebtedness under the agreement.
…
95 (1) Regulations may provide for the allowance of a rebate of charges for credit to the debtor under a regulated consumer credit agreement where, under section 94, on refinancing, on breach of the agreement, or for any other reason, his indebtedness is discharged or becomes payable before the time fixed by the agreement, or any sum becomes payable by him before the time so fixed."
Consumer Credit (Rebate on Early Settlement) Regulations 1983 ( S.I. 1983 No. 1562)
"2. Entitlement to rebate (1) Subject to the following provisions of this Regulation, the creditor shall allow to the debtor under a regulated consumer credit agreement a rebate at least equal to that calculated in accordance with the following provisions of these Regulations whenever early settlement takes place, that is to say whenever, under section 94 of the Act, on refinancing, on breach of the agreement, or for any other reason, the indebtedness of the debtor is discharged or becomes payable before the time fixed by the agreement, or any sum becomes payable by him before the time so fixed.
…
4 (2) Subject as hereinafter mentioned, in the case of agreements under which credit is repayable by instalments, the amount of the rebate shall be as follows—
(i) where credit is repayable in equal instalments at equal intervals, the amount of the rebate shall be given by the formula set out in Part I of Schedule 2 to these Regulations;
(ii) where credit is repayable in unequal instalments or in instalments at unequal intervals, the amount of the rebate shall be given by the formula set out in Part II of Schedule 2 to these Regulations."
The formulae referred to in Regulation 4 for calculating the statutory rebate in differing circumstances all depend upon it being possible to ascertain "the settlement date". This is defined by Regulation 6:—
"Settlement date (1) Subject to paragraph (3) below, where the agreement provides for the credit to be repaid by instalments to be made only at monthly or shorter intervals and early settlement takes place between two instalment dates for repayment of credit under the agreement, the settlment date shall be taken to be the date of the instalment due under the agreement immediately following—
(a) the date of service of a notice on the creditor under section 94 of the Act, if accompanied by payment of the amount due on early settlement (less any rebate allowable under these Regulations), or any later date specified as the date for early settlement in the notice, if the debtor pays the amount in question not later than that date;
(b) the date specified as the date for payment of any sum by the debtor involving early settlement in any notice served under section 76(1) of the Act, any default notice or any notice served under section 98(1), if the debtor pays the amount in question (less any rebate allowable under these Regulations) not later than that date;
(c) in any other case, the date on which the debtor pays any sum involving early settlement.
(2) Subject to paragraph (3) below, where the agreement provides for the credit to be repaid by instalments to be made at other than monthly or shorter intervals and early settlement takes place between two instalment dates for repayment of credit under the agreement, the settlement date shall be taken to be 14 days after the date referred to in paragraph (1)(a), (b) or (c) above, as the case may be.
(3) Where the creditor has given the debtor a statement under section 97 of the Act indicating the amount of the payment required to discharge the debtor's indebtedness under the agreement, the settlement date shall be taken to be the date specified in Regulation 3 of the Consumer Credit (Settlement Information) Regulations 1983, if the debtor pays the amount (less any rebate allowable under these Regulations) not later than that date.
(4) In any other case, the settlement date shall be the date on which the debtor pays any sum involving early settlement."
The Commercial Problem
Forward Trust do not seek any windfall profit as a result of suing to recover the indebtedness under the loan agreement. They do, however, object strongly to being placed at any significant disadvantage. This, they claim, is exactly what hapens if they can only obtain judgment for the outstanding amount less the statutory rebate. The rebate represents future interest which, if they sued in the High Court, would be replaced by interest on the judgment debt. They are, however, required by section 141 of the Act to sue in the County Court whose judgments do not bear interest, unless and until rules are made under section 74 of the County Courts Act 1984 which has not yet occurred.
Their preferred solution was that they should obtain judgment...
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