McGuffick v Royal Bank of Scotland Plc
| Jurisdiction | England & Wales |
| Judgment Date | 06 October 2009 |
| Neutral Citation | [2009] EWHC 2386 (Comm) |
| Date | 06 October 2009 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2009 Folio 910 |
[2009] EWHC 2386 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: The Honourable Mr Justice Flaux
Case No: 2009 Folio 910
Mr Richard Handyside QC and Miss Julia Smith (instructed by DLAPiper UK LLP) for the Defendant
Hearing dates: 23 rd and 24 th September 2009
The Hon. Mr Justice Flaux:
Introduction
The present claim was commenced in the Chester County Court. It is one of a large number of claims currently before County Courts all over the country where disputes have arisen between lenders (such as the present defendant, The Royal Bank of Scotland Plc to which I will refer as “the bank”) and their borrowers or debtors (such as the present claimant). These disputes concern the effect on loan agreements and other credit arrangements (all of which are regulated consumer credit agreements within the meaning of the Consumer Credit Act 1974) of provisions such as section 77 of that Act, which render the agreement unenforceable in certain circumstances. On 3 June 2009, His Honour Judge Halbert of his own motion referred this case to the Commercial Court in London with a view to its being determined by the Commercial Court as a test case. By order of Andrew Smith J on 25 June 2009, the case was transferred to the Commercial Court and directions for trial were given, including that it should be listed for trial before me on 23 and 24 September 2009.
Witness statements were served by the bank from various employees who had dealt with the claimant's account and (albeit somewhat later than the order of Andrew Smith J required) from the claimant himself, but neither party required any cross-examination. Accordingly, the facts are not really in dispute and can be stated relatively briefly.
The essential facts
On 3 October 2005, the claimant entered into a fixed-sum regulated loan agreement with the bank under which the claimant received credit in the sum of £17,034. The total amount to be repaid was £20,781 in 60 monthly instalments of £346.35. It is not suggested by the claimant that the agreement was in any way improperly executed, so that sections 61, 65 and 127 of the Consumer Credit Act 1974 are not directly in issue.
No payments were made under the agreement in respect of the 10 monthly payments of £346.35 which fell due between 1 August 2006 and 16 May 2007, save for a payment of £692.71 on 11 January 2007 and a payment of £692.70 on 26 February 2007, which were paid by the Claimant's Loanguard payment protection insurance, which he had opted to take out at the time that the agreement was entered. In consequence arrears of £2,078.09 were outstanding on 16 May 2007.
The bank served a default notice bearing that date on the claimant pursuant to section 87(1) of the 1974. That section provides that the service of such a notice is necessary before the creditor is entitled to take particular steps (including so far as relevant demanding “earlier payment of any sum”, here requiring immediate repayment of the total balance outstanding).
That default notice was accompanied by what is evidently a standard form letter of the same date from the bank headed “Formal notice of intention to file a default and to take action to recover debt”. Since considerable reliance was placed on this document by Mr Andrew Moran QC for the claimant, I should quote the relevant passage in full:
”Please note that unless within 28 days of the date of this letter, satisfactory payment or arrangements for payment are made with the Bank, in response to the attached default notice, information about your indebtedness will be given to the following Credit Reference Agencies,
Callcredit plc
Equifax Europe Limited
Experian Limited
The Group and other companies may use the record of default and any other information provided to the agencies when considering applications by you, or other members of your household, for facilities including motor, household, credit, life and general insurance.
The existence of information on accounts in default at the Credit Reference Agencies may impair your ability to obtain credit or other financial facilities such as current accounts for a period of up to six years.”
Since June 2007, the balance outstanding on the claimant's loan account with the bank has been £15,066.21, the last payment having been made from payment protection insurance in that month. No further payments have been made. The bank has not levied any default charge or interest since the account went into arrears in August 2006.
In October 2007, the claimant's account was referred to Apex Credit Management Limited, one of the debt collection agencies used by the bank. Correspondence was sent to the claimant but to no effect and, in October 2008, the bank instructed a second debt recovery agency, Capquest Debt Recovery Limited. They corresponded with the claimant between October 2008 and February 2009, including sending a letter before action dated 12 November 2008, but again this had no effect.
By a letter to the bank dated 25 February 2009, MJP Justice Ltd (“MJP”), the solicitors for the claimant, made a section 77 information request in relation to the agreement. The letter stated that the claimant considered the agreement to be in dispute, and that no reference was to be made to any credit reference agencies or other regulatory bodies in respect of the agreement and that no enforcement action should be contemplated whilst the agreement was in dispute. The letter enclosed a letter of authority signed by the claimant giving authority to MJP to seek the information and documents from the bank under section 77. That letter makes it clear that the purpose of obtaining the documents is to ascertain whether or not the claimant can obtain a declaration that the agreement is irredeemably unenforceable under sections 61 and 127 of the Act. This is one of a number of similar requests from the same solicitors on behalf of other clients. The bank has received hundreds of such requests from solicitors and claims management companies, apparently for a similar purpose.
It is probably convenient at this stage to set out the relevant provisions of section 77 of the Act as amended:
Duty to give information to debtor under fixed-sum credit agreement
77 (1) The creditor under a regulated agreement for fixed-sum credit, within the prescribed period after receiving a request in writing to that effect from the debtor and payment of a fee of £1, shall give the debtor a copy of the executed agreement (if any) and of any other document referred to in it, together with a statement signed by or on behalf of the creditor showing, according to the information to which it is practicable for him to refer,—
(a) the total sum paid under the agreement by the debtor;
(b) the total sum which has become payable under the agreement by the debtor but remains unpaid, and the various amounts comprised in that total sum, with the date when each became due; and
(c) the total sum which is to become payable under the agreement by the debtor, and the various amounts comprised in that total sum, with the date, or mode of determining the date, when each becomes due.
(4) If the creditor under an agreement fails to comply with subsection (1)—
(a) he is not entitled, while the default continues, to enforce the agreement…..
The provision formerly in subsection (4) (b) making it an offence to breach subsection (1) was repealed by the Consumer Protection from Unfair Trading Regulations 2008, to which I will return later in this judgment. The “prescribed period” is 12 working days. The evidence of Claire Price, who works in Loan Operations Credit Management Services within the bank, is that although it is the practice of the bank to keep copies of all credit agreements, it is sometimes not possible to comply with requests under section 77 within the prescribed period.
In this case, the bank initially could not locate a copy of the agreement and on 8 April 2009, the bank wrote to MJP informing them of this and stated that, in the circumstances, if the claimant decided not to meet his obligations under the agreement, the bank would not be able to enforce repayment of the loan. The letter added that the bank considered that the claimant should continue to meet his obligations under the agreement, bearing in mind that it was not void but remained valid and that any continuing default would be reported to the Credit Reference Agencies (to which I will refer as “CRAs”). In cases where the bank has confirmed that it is unable to enforce the agreement, its standard practice is not to pursue legal action against the customer and to put a stop to all collection activity, so as not to give the false impression that it is entitled to obtain a judgment. That practice has been followed in this case.
Correspondence ensued in which MJP threatened proceedings for a declaration of unenforceability by the court if a copy of the agreement were not produced within 28 days and for an injunction if the claimant's credit rating were affected. By 11 May 2009, the bank had located a copy of the agreement and wrote to MJP enclosing it and stating that recovery action would now continue. Through inadvertence, the bank overlooked that it had not provided a signed statement of account as required by section 77(1).
Although collection activity had recommenced, on 13 May 2009 the bank ascertained that the claimant had issued these...
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