Statute Barred - Default or last payment

fatbelly

The full case is here.

http://www.bailii.org/ew/cases/EWCA/Civ/2012/1959.html

Will post more later.

matttye

Tixy wrote: »

Link here now for anyone else reading http://www.forwarn.com/news/db.asp?PageName=Court_of_Appeal_provide_welcome_relief_for_Finance_Companies

I would suggest contacting national debtline for clarification on this case and if/how it impacts on your particular debt.
I would think its possible that the court of appeal case will have a different impact on a fixed term agreement such as the one in the case to a revolving credit repayable on demand agreement.

Personally I might be tempted to wait for a few weeks before replying anything at the moment.
The chance of 1st credit taking legal action right now is probably slim, and your previous letter won't have counted as acknowledgement.

It seems to me that the case will apply to any debt governed by the statute of limitations.

The judgment can effectively be summarised by saying that the lender has no right to sue until the contract is terminated, if I've understood it correctly (I haven't read the entire thing word for word). One or two late/missed payments is usually not enough, as defaults are usually issued after 3-6 months of non payment.

Therefore the cause of action would surely have to be the date the default notice is received.

rizla_king

Helpful http://forums.moneysavingexpert.com/showpost.php?p=47252359&postcount=4

matttye

rizla_king wrote: »

Helpful http://forums.moneysavingexpert.com/showpost.php?p=47252359&postcount=4

fatbelly's post (and the case linked to within it) precede this case, so may not be relevant now.

Not saying it isn't, just that it might not be - perhaps fatbelly can clarify!

fatbelly

The case did not overturn any case law - merely clarified it in relation to hire purchase agreements that contain a clause like the one in the BMW agreement. This is clear if you read the text of the judgement. Comment from CAB as follows:

Limitation of action

Claim for outstanding balance due under hire purchase agreement not statute barred when under the terms of the agreement the limitation period did not begin until the creditor gave notice rather than when the debtor defaulted.

It is generally the case that county court action to recover a credit debt is statute-barred once six years have passed since the client last made a payment under the agreement (subject to any later written acknowledgement of the existence of the debt by the client). This is based on the Court of Appeal’s decision in Reeves v Butcher (1891). This case concerned a loan for five years. The creditor agreed not to call in the loan during the five year term so long as the debtor made quarterly payments of interest. But the agreement provided that if the debtor defaulted in payment of any quarterly instalment for 21 days the creditor could call in and demand payment of the loan. No interest was ever paid but the creditor did not issue proceedings until nearly six years after the end of the five year term. The creditor argued that they were not bound to call in the loan at once on default in payment and that a fresh right to sue arose at the end of the five year loan term. The Court of Appeal held that the right to sue arose at the time when the debt could first have been recovered by court action. The loan became repayable 21 days after the debtor defaulted in payment of the first quarter’s interest.

There are exceptions to this where a demand for payment must first be made before the right to sue can arise. For example overdrafts which are only repayable ‘on demand’, in such cases the limitation period does not begin until the demand for payment is made.

In BMW Financial Services v Hart ([2012] EWCA Civ 1959, 10 October 2012) the credit agreement in question was a hire purchase agreement. Clause 11 of the agreement stated: “(a). The Owner [BMW] will be entitled to terminate the hiring either by retaking possession of the Goods, or by written notice in any of the following circumstances … (i) If the Customer fails to pay on the due date for payment, any rental or other payment under this or any other agreement with the Owner …”. Clause 12 provided as follows: “(a) If the Owner terminates the hiring or this Agreement under Clause 11, or if the Owner accepts the Customer’s repudiation of the Agreement, the Customer shall pay to the Owner (i) all rentals and other payments which are due but unpaid; and (ii) as compensation and/or liquidated damages for breach of the Agreement, the Balance of Amount Payable...”.

Mr Hart failed to pay the repayments due in July and August 1999 and on 26 August 1999 BMW served him with a termination notice. Mr Hart then left the UK and went to live on the continent. The vehicle was recovered and sold. BMW did not issue a claim form until 26 August 2005. Mr Hart became aware of the judgment against him when he returned to the UK and applied to have that judgment set aside on the ground that the claim was statute barred. The judge held that the contract in Reeves v Butcher was identical with the present case and that time began to run when Mr Hart defaulted. The judge considered that one reason for that rule was that otherwise a creditor could postpone the running of limitation by failing to act on his entitlement. The judge ruled on the limitation point in Mr Hart’s favour and set aside the judgment. BMW appealed. It was not disputed that the claim form was in time if time began with the issue of the termination notice.

The Court of Appeal held that Reeves v Butcher was a case of a single condition precedent for the issue of proceedings, namely - default of payment for 21 days, and not an identical case to the present case. It was a matter of the construction of each contract. The need to construe each contract carefully on its own terms had been emphasised in many subsequent decisions. In the present case the Court of Appeal decided that BMW had no right to sue for the clause 12 payments, ie. for the full sum due upon an acceleration less any credits, until a termination notice had been given or an acceptance of the repudiation had been communicated. In this case the termination notice served both purposes. Before such a notice or acceptance of repudiation the only amounts due were the outstanding instalments. Unlike in other cases, the mere failure to pay an instalment did not by itself, under the provisions of the relevant contract, accelerate the obligation to repay the whole amount outstanding. The claim was not time barred and the judgment would not be set aside.

Some creditors have interpreted this decision as saying that a prior demand for payment is necessary in all cases involving credit debts before the limitation period can start. That is not the case. As the Court of Appeal itself commented, ultimately this was a simple case where the decision was based upon the wording of a particular contract which is common to many hire purchase agreements. The decision applies existing and long-standing case law and does not overrule Reeves v Butcher. However, to the extent that BMW v Hart says that you need to look at the terms of the agreement to see when the cause of action accrued, this is not a controversial point.