On 19 June 2007, Amex issued a Default Notice asserting a breach of the agreement requiring remedial action in accordance with section 87(1) of the Consumer Credit Act 1974 (“the Act”).  Mr Brandon did not make the minimum payment and so on 11 July 2007, Amex sent Mr Brandon a Notice of Cancellation.

Amex then issued proceedings and Amex applied for summary judgment.  For Amex to succeed, Mr Brandon must have no real prospect of successfully defending the claim or issue in accordance with CPR Part 24.2(a)(ii).

Before the District Judge, Mr Brandon argued that the default notice required payment within 14 calendar days from the date of this Default Notice, but no allowance was made for the fact that he would not receive this notice on the same day and so he was given less than 14 days before the agreement was cancelled.  Applying the usual Civil Procedure Rules on service the District Judge gave summary judgment for Amex regarding the default as de minimis (minimal) and something he was prepared to overlook. Subsequently, on appeal, the Judge held that as no enforcement action was taken within the 14 days, the argument was not relevant because Mr Brandon had not suffered “any prejudice at all by virtue of that technical breach…” At the appeal stage, Amex also sought to rely on the contractual agreement which entitled Amex to terminate as an alternative to the Default Notice.  The Judge considered that this argument had not “simply been sprung” on Mr Brandon as it had been flagged previously.

The Court of Appeal noted that Mr Brandon’s stance was devoid of merit, but it could not conclude that there was no real prospect of a successful defence.

• On the first issue of the validity of the Default Notice the court was of the view that Amex was not entitled to summary judgment.  Mr Brandon’s defence could not be dismissed “as being unreal”.
• As a matter of construction, the Court of Appeal could not accept that the 14 day period ran from service of the Default Notice as opposed to the date of the Default Notice. It could not be presumed that the Default Notice would have been served less than two days after being posted.
• As a matter of construction, the Default Notice had not or may not have allowed the minimum statutory period for Mr Brandon to remedy the breach and so the defect could not be overlooked as de minimis.
• As regards the arguments on contractual termination, the Court of Appeal considered whether it could rely on a clause in the agreement and proceed on the basis of non-default termination.  The court was in broad agreement that sections 76 and 98 did not apply to this agreement.  However, there had been no mention of this before the District Judge and the point was only mentioned in the skeleton argument before the Judge.  The Court of Appeal considered that this was too significant a change of case and therefore it would not be fair to permit summary judgment on the basis of contractual determination without proper arguments.

Accordingly, Amex was not entitled to summary judgment and this matter would proceed to trial.  As the Court of Appeal noted “regardless of the outcome of the appeal, Mr Brandon is a bad credit risk; for this conclusion, he has only himself to blame.”

Ian Karl Robert Brandon v American Express Services Europe Ltd [2011] EWCA Civ 1187

Trading Standards Officers conducted onsite visits, a website sweep and a mystery shopping exercise.  They found that:

• Misleading advertising is the most significant area of non-compliance, in particular failing to disclose fees and misrepresenting debt management services as being free when they are not;
• Frontline advisers working for debt management companies are lacking in competence and are providing poor advice on inadequate information;
• There is low industry awareness of the Financial Ombudsman Service (FOS) for resolving consumer complaints.

 The OFT plan to update their Debt Management Guidance and will carry out robust enforcement action against licensees that fail, or refuse, to change advertising and/or behaviour.

 Attached is a link to the detailed report http://www.oft.gov.uk/shared_oft/business_leaflets/credit_licences/OFT1274.pdf and the Debt Management Guidance  http://www.oft.gov.uk/shared_oft/business_leaflets/credit_licences/oft366.pdf.

The claimants alleged that the APR stated in the agreement should be regarded as the primary figure and the monthly interest rate should be calculated from and should correspond (as closely as possible) to the APR.  They produced an expert report from a mathematician and computer expert who concluded that the APR rates on the monthly cash advance balance rate were incorrectly stated.

A regulated agreement is not properly executed unless the agreement contains all the prescribed terms.  If improperly executed, it is only enforceable by an order of the court.  The court cannot grant such an order in respect of agreements signed before 6 April 2007 and so those agreements which did not contain all of the prescribed terms are irredeemably unenforceable.  The claimants alleged that the APR was misstated and as a consequence the agreements were unenforceable.

The Judge explained that there is a very clear difference between the nature and function of the stated monthly (or annual) rate and the APR. The stated monthly or annual rate is (on its face) a contractual term.  The APR is designed to provide information to consumers and is arrived at by a complex formula designed to include not only interest rates but also other charges.  The APR is not a prescribed term.  Merely because the APR is included does not make it a prescribed term of the agreement.  The APR is not the driver of the figures and in any event,  if it were,  it would be unworkable as the APR figure only needs to be stated at the inception of the agreement.

Accordingly the claims that the agreements were irredeemably unenforceable because of an alleged mismatch between the APR and the stated rate of interest were struck out.

This case involved calculating the interest rates retrospectively, which as the Judge pointed out had “a surreal quality to it”. In the light of the series of cases which have resulted in a positive outcome for lenders, this is yet another nail in the coffin for those who seek to use the courts to bring consumer credit related claims on a very tentative and speculative basis.

Sternlight v Barclays Bank Plc and others [2010] EWHC 1865

Consumer Credit Litigation Solicitors (“CCLS”) were the solicitors for all the claimants. CCLS was the trading name for the sole practice of Mr Burley.  The claims management company was Cartel Client Review Limited (“CCR”).  Following on from the judgment, permission was given to  join Mr Burley trading as CCLS and CCR in respect of an application for a non-party costs order against them.  In addition, Mr Wright who was the sole shareholder and managing director of CCR was also joined to the application for a non-party costs order.

CCR conceded that it should be jointly and severally liable with the claimants for the costs.  The court decided that a costs order was justified against CCLS.  The solicitors failed to obtain after the event insurance (“ATE”) for its clients.  Not only did it fail to obtain ATE, but it failed to tell the clients and was effectively acting without instructions.  The overwhelming likelihood was that if CCLS had acted as it should have done these cases would not have been issued or progressed and the costs incurred by the lenders would not have been sustained. 

As for Mr Wright, the court decided not to make a non-party costs order against him. CCR was not itself the relevant claimant or defendant.  Although CCR as a claims management company would benefit in the event of success, there was nothing improper in that.  The claimants were genuine claimants who decided to make these claims.  CCR was not itself the relevant claimant or defendant.  The real causative factor on the issue of costs was the failure to obtain ATE, which was CCLS’s fault not CCR or Mr Wright.

Mohammed Adris and others v The Royal Bank of Scotland plc and (1) Cartel Client Review Limited (2) Richard Burley trading as Consumer Credit Litigation Solicitors (3) Mr Carl Wright [2010] EWHC 941

The draft guidance consists of a document setting out the technical legal issues for businesses and consumer advisers, and a simpler version for consumers.

The consultation is open until 21 April 2010.  The technical legal advice makes the following points:

•  Consumers have been given an exaggerated expectation of what the creditor or owner must do in order to comply with an information request as a result of misleading claims by claims management companies and inaccurate information on the internet.
• A number of creditors, appear not to understand their obligations under these sections.
• The purpose of these sections is to provide information to the consumer, not to provide a method for consumers to avoid paying their debts.
• The OFT considers that the creditor in sections 77 and 78 and the owner in section 79 includes a person who has merely bought the debts under the agreement. 
• As well as assignees ensuring that they are able to obtain from the assignor copies of the agreements and documents and historical information on the account, the original creditor should ensure that if necessary and appropriate, it is able to readily obtain from assignees any necessary information on the most recent state of the account.
• The creditor should satisfy itself that the writer of the request has the proper authority to obtain the information.  If there is no authority with the request the creditor is entitled to reply by asking to see the authority.
• If the request comes from only one debtor where there are two or more debtors, it must be complied with and the response given to both or all debtors.
• The creditor is not entitled to charge more than £1.
• The creditor can send the documents by ordinary second class post to the address given in the request.
• It is wise to retain some record of posting.
• If a claims management company does not hold a license then the OFT would expect the creditor to inform the debtor/hirer  why the information is being sent direct to him and to notify the OFT and Ministry of Justice.
• The request should be complied within 12 working days after the receipt is received.  The day the request is received is not included, but it will include the day the information is sent.
• A true copy as confirmed in the recent case of Carey v HSBC Bank plc does not mean an exact copy.
• There is no obligation to provide a signed copy.  The creditor may be able to provide evidence that its practice was always to require a signature to its agreements.
• The creditor can reconstitute a copy of the agreement.  The name and address at the time of execution must be included, but this can be taken from any source available.
• If the reason why no copy of the agreement is given to a request under these sections is that there never was an executed agreement, the creditor should acknowledge this in its response.
• Where there has been a variation, the duty is to provide the original agreement, but a copy of the latest variation or a clear statement of the terms of the agreement as varied.
• Any copy must be easily legible.
• The consultation provides details of the documents to be provided.
• The consultation also provides details of the statements of account that should be provided.
• The duty does not apply if the agreement has been paid off or terminated.
• It does not apply where judgment has been obtained unless there is an interest-after judgment clause in the agreement which the creditor or owner has not expressly waived.
• If the creditor fails to comply with the duty, it is not entitled, while the failure to comply continues, to enforce the agreement.
• If sections cannot be complied with, the debt does not disappear and it is perfectly acceptable for a creditor to seek to pursue the debt and to register any arrears or default with a credit reference agency.
• If a creditor were to threaten court action, knowing that such action is not possible, this would be misleading and oppressive.
• Where an agreement is unenforceable because of non-compliance with the sections:
• The OFT would expect the creditor to take steps to check that there was an agreement and that there are monies outstanding.
• No communications or requests should threaten court action or other enforcement of the debt where the creditor is aware that it cannot or will not be entitled to enforce the agreement.
• The creditor should make it clear in communications that the debt is unenforceable.  Failure to do so would unfairly mislead the debtor.
• Where a creditor has satisfied itself that a debt does exist and is correctly described, it is acting fairly in registering a default with credit reference agencies and informing the debtor or hirer that it intends to do so.