Asset Finance


Consumer Finance


Motor Finance


Recent court cases with potential implications for members
11/11/14

Please find attached a couple of fairly recent Court case judgements which may have wider implications. They are:

Foster – Burnell v Lloyds TSB Bank Plc (A County Court judgement in Taunton on  the 23 June)

Grace & George v Black Horse Ltd (Court of Appeal case [2014] EWCA Civ 1413, which was handed down on 30 October)

Foster – Burnell v Lloyds TSB Bank Plc

This case related to bank charges for unplanned overdraft facilities between 2007-2009.

Under the Unfair Terms in Consumer Contract Regulations (UTCCR) 1999 this case didn’t appear to have any merit (the charges were part of the core terms within Lloyds TSB’s clauses 15.4 and 15.6). However, the Judge accepted the claimants argument that following a European Court of Justice (ECJ) case (Hatosag 2012) the Judge could consider the fairness of the clause allowing for future variation of charges i.e. firms should give reasons for any variation in price charged or method of variation in price variation clauses. To this end Judge Stockdale says: “that this court is both entitled and indeed obligated to assess the term of its fairness or otherwise. I am satisfied I have both the legal and factual elements necessary for this task” (p16 paragraph 38).

The Judge also found in the claimants favour in relation to a second limb to the particulars related to the banks conduct in the manner of reporting to CRA’s a breach of DPA, which was based on a factually incorrect position at the time of the report being made. The claimant sought damages but as no causal link was found the Judge only awarded for non-pecuniary damage.

We also understand that the claimant appealed to try and get this case to have wider implications. This was strongly rejected. However, we believe this case still has wider implications in that going forward members are like to need to have to justify any price variations in contracts and will not necessarily be able to rely on core terms under UTCCR (1999) in their contracts. This is also the way the FCA is going and indeed members still need to be fully aware of Principle 6 (TCF) which again may lead to the same conclusion about price variations.

Grace v Black Horse Ltd

Russell Kelsall from Squire Patton Boggs has kindly provided a brief summary below:

It was an appeal on limited grounds but the important (and wider) point decided was on the reporting of debts to CRAs under an irredeemably unenforceable agreement and whether that breached the fourth principle of the Data Protection Act 1998 (“DPA”).  The Court of Appeal decided:

  • The decision in McGuffick v The Royal Bank of Scotland plc [2009] on what “enforcement” meant for the purposes of the Consumer Credit Act 1974 applied equally to redeemable and irredeemable unenforceability (see para 32).
  • However (and this is the important issue), McGuffick did not answer the question of whether the registration as a default of an unpaid amount due under an irredeemably unenforceable agreement amounts to a breach of the fourth principle of the DPA (see para 34).
  • While the Court did not find its decision “at all easy”, it concluded that the consumers’ submissions (that there was a breach of the DPA (but not the CCA) by reporting to CRAs where the agreement was irredeemably unenforceable) were right because:

-it was common ground that a default registration with a CRA was a stigma and with “potentially serious consequences for the consumer’s credit rating” (see para 42);

– it was “very counter-intuitive to think that [the consumer] can accurately be stigmatised as a defaulter in a semi-public register without, at least, the unenforceable nature of the debt being recorded in the same entry” (see para 43);

The Court of Appeal then did, however, accept that its conclusion “may require re-examination of remediable unenforceable”, because the Court was by no means certain that “the same analysis may not equally apply”, but that question was for “another day”.

This decision therefore leaves another practically difficult problem which McGuffick had largely resolved.  For agreements which are irredeemably unenforceable, the Court of Appeal’s decision suggests that a default should not be recorded with CRAs without a note to say that the agreement is irredeemably unenforceable (and the Court said, at paragraph 38, that if “an accurate registration cannot be accommodated, then the answer is for the industry to change its registration systems, and in the meantime for inaccurate registrations not to be made”).  For agreements which are redeemably unenforceable, the Court of Appeal simply said that its conclusion may require “a re-examination”.’

Plevin v Paragon Supreme Court Judgement

Just a reminder that the Plevin Judgement is due to be deliberated at the Supreme Court tomorrow (Wednesday 12 November) at 9.45. It will also been streamed live at: https://supremecourt.uk/news/future-judgments.html. We will get out a note on this judgement tomorrow.