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Credit-card written off at Leeds County Court June 2009

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Credit-card written off at Leeds County Court June 2009

edited 30 November -1 at 1:00AM in Credit Cards
5 replies 5.8K views
orangetraderorangetrader Forumite
103 posts
edited 30 November -1 at 1:00AM in Credit Cards
Judge Langan at Leeds County Court, reported 3rd June 2009

Bank of Scotland Credit-card with £15k balance. Bank of Scotland were unable to supply a signed agreement containing prescribed terms.

Judgement of £15k written-off, agreement declared irredeemably unenforceable, default to be removed from credit file and Bank of Scotland to pay full legal costs.

There seem to be a growing number of successful cases.


  • JACK_72JACK_72 Forumite
    7 posts
    What’s interesting about this is that not only has the debt been written-off but the judge has ordered that the default is removed from the credit file.
    I don’t suppose the judge had much choice though as 1) there was no signed agreement (therefore under DPA no authority to share details with a 3rd party such as a credit reference agency) and 2) registering/keeping default would of been a way of trying to enforce a debt which had been declared irrevocably unenforceable

    1st June 2009

    1. I have to deal with an issue as to costs which has arisen on the informal discontinuance of an action.

    2. The action was commenced on 21st May 2008. The claimant bank had, in December 2003, issued a credit card to the defendant, and the claim was for £15,417.23, being the amount said to be due on the defendant's account. Judgment in default, for a total sum of £15,727.23, was obtained on 4th July 2008. The defendant subsequently applied to have the judgment set
    aside. That application came before District Judge Jordan on 29th January this year and was successful. The recitals to the District Judge's order say this:
    "And upon the defendant's proceedings on the basis of a breach of
    Section 61(1)(a) of the Consumer Credit Act, namely that the claimant
    failed to comply with the requirements to give copies of all the
    documents relevant to the agreement at the time of signing, and upon
    the defendant contending that notwithstanding Section 65 of the
    Consumer Credit Act 1974, Section 127(3) of the Act preventing the

    After those recitals it is ordered the court sets judgment aside, and it is ordered that there be, "A determination of the issue set out above". Various procedural directions then follow.

    3. What has been listed for trial today is, "The determination of issue", referred to in the order which I have just recited.

    4. The agreement made in relation to the defendant's credit card was a regulated agreement within the Consumer Credit Act 1974. Section 61(1)(a) of that Act provides:

    "A regulated agreement is not properly executed unless a document in
    the prescribed form, itself containing all the prescribed terms and
    conforming to regulations under Section 60(1), is signed in the
    prescribed manner, both by the debtor or hirer, and by or on behalf of
    the creditor or owner".

    Having regard to the date of the agreement made in this case, which was prior to amendments made to the Act which took effect from 5th April 2007, the result of non compliance with Section 61(1)(a) would be that the credit card agreement would be unenforceable against the defendant, see Consumer Credit Act 1974 Section 127(3).

    5. This morning I was informed by Miss Gardner, counsel for the bank, that the bank was withdrawing its claim against the defendant. This announcement has been accepted by Mr Berkley QC, who appears for the defendant, as equivalent to the service of a notice of discontinuance under the Civil Procedure Rules Part 38.3. By the Civil Procedure Rules Part 38.6.1:

    "Unless the court orders otherwise, a claimant who discontinues is
    liable for the costs which a defendant against whom the claimant
    discontinues incurred, on or before the date on which notice of
    discontinuance was served on the defendant".

    Miss Gardner contends that the court should, "Order otherwise", and make no order for costs as between the parties. Mr Berkley contends that the presumption in CPR 38.1.6 should operate, and further that the order for costs to be made in favour of his client should be an order for assessment on the indemnity basis.

    6. The thrust of Miss Gardner's submission is that the issue directed by the District Judge, and on which the evidence has been focussed, is whether the bank supplied the defendant at the time of signing the application form for credit with documents which contained all the terms of the agreement between them. I shall elaborate a little further on this. It has been the defendant's case that he was supplied with nothing more than the application form which he signed. It has been the bank's case that in accordance with the usual practice of the bank the defendant would have been, and must have been, supplied with other documents, including a pack which will have contained all the terms and conditions of the agreement made between the parties. Miss Gardner goes on to say that the defendant has at the last moment taken a new and radically different point, namely that the document signed by the defendant did not contain all the prescribed terms of the agreement. I must again elaborate on this. It is common ground that the only document signed by the defendant was the application form. It is also common ground that the application form did not, on its face, set out the prescribed terms of the agreement between the parties. The point which is treated by Miss Gardner as a
    new point is dealt with in paragraphs 22 and 23 of Mr Berkley's written argument, and it will, I think, be more economical if I simply quote those two paragraphs in full rather than attempt,in my own words, to expand on them:

    "The key words in Section 61(1)(a) are the reference to a document
    itself containing all the prescribed terms, and conforming to the
    regulations under Section 61. This language is clear and specific, and
    ensures that mere reference to terms contained in another document
    will not suffice. The document must contain the prescribed terms, just
    as the signed document referred to in Section 127(3), which might save
    the day, must however contain the prescribed terms. The construction
    contended for by the defendant is entirely consistent with the language
    of Section 61(1), and is also supported by Professor Good in his
    encyclopaedic work - see Good & Consumer Credit Law and Practice
    volume 2, 2B 5.121, and see also the comments at 2B 5.247. There the
    learned author draws a distinction between the language of paragraph
    (a) contain and paragraph (b) embody. It is respectfully submitted that
    the court should adopt the same reasoning in determining this issue in
    favour of the defendant, irrespective of whether or not it finds that the
    defendant was supplied with documents other than the credit
    agreement itself".

    7. In my judgment, the point with which I have just been dealing is not properly to be characterised as a new point on which the bank can present itself as being taken by surprise. I refer to four documents. First, on 3rd November 2008, when the defendant was acting as a litigant in person, in the request to have the default judgment set aside he said this:

    "As the court is aware, in the absence of all the prescribed terms being
    embodied, it will render a document unenforceable in court. These
    terms must be contained within the agreement, and not in a separate
    document headed 'Terms and Conditions', or words to that effect".
    Secondly, on 18th February 2009, solicitors, who were by then acting for the defendant, sent to the solicitors acting for the bank a copy of what they called an expert report setting out the reasons why the agreement was in breach of Section 61(1)(a), and they went on:

    "As you are aware it is our client's position that at the time he entered
    into the agreement he was not provided with a copy of the terms and
    conditions governing the agreement".

    If one goes to the so called expert's report, one finds that it is in effect an opinion prepared by another firm of solicitors, and the opinion contains the following:

    "Based on the information provided, it appears that the prescribed
    terms and conditions were not included in the document signed by the
    borrower. The agreement would appear to be in breach of the
    regulations in that it does not contain within the signed agreement itself
    all of the prescribed terms".

    Thirdly, that point having been taken on behalf of the defendant, it was robustly rejected by the solicitors acting for the bank in their reply of 19th March 2009:

    "Our client has sought counsel's opinion on this matter and her view is
    that the agreement is compliant. We note that your client is arguing
    that at the time of signing the agreement, the application for a credit
    card, he was not provided with the actual terms and conditions which
    were contained in a separate document to the application. Whilst our
    client accepts that the application itself does not comply with the
    requirements of the Consumer Credit Act 1974, and only becomes
    compliant by reference to terms and conditions, there are references in
    the agreement to the conditions in which it states that they are provided
    in the Halifax credit card application pack".

    Fourthly, going back in time a little, on 4th March 2009, in the defendant's witness statement made for the purpose of the trial of the issue, at the very beginning of the statement, in paragraph 3, he said this:

    "It is my position that the agreement is not enforceable by the claimant
    as it has failed to comply with its obligations under Section 61 of the
    Consumer Credit Act 1974 by failing to include within the document
    that I signed all the prescribed terms".

    8. The absence of further reference to the point in the evidence is hardly surprising, since the point is one of law, on which there was no controversy as to the facts.

    9. Miss Gardner has given no reason for the withdrawal of the action. She is in no way to be criticised for the omission. She is bound to act in accordance with her instructions, and those instructions were presumably to say no more than she has in fact said. But this does not prevent me from drawing what is in my judgment the only inference which can possibly be drawn from what has happened, which is that the bank realises that if the issue were to be
    contested it would either lose on the issue or be at serious risk of losing. There may be hundreds of similar cases and the bank would plainly not wish other defaulting customers to get wind of an adverse decision on the fundamental point which is embodied in the quotation from Mr Berkley's written argument, which I have already set out.

    10. Accordingly, I conclude, without hesitation, that there is no reason for displacing the presumption as to incidence of costs which is ordinarily applicable in a case of discontinuance. The bank will pay the defendant's costs of the claim, subject only to any existing order for costs in favour of the bank not being disturbed.

    11. Finally, I have to consider whether the costs of the defendant should be assessed on the standard or on the indemnity basis. In my judgment the assessment should be on the indemnity basis. The only realistic view of what has happened is that the bank has surrendered on a straightforward point of law, to which it has on several occasions been alerted by the defendant or his solicitors. A large commercial enterprise which proceeds with litigation in the face of warning signs of the kind which were erected here, adopts a high risk strategy. The point in question was a simple one. There was no relevant controversy as to the evidence. To choose to abandon the claim on the very day of the hearing is doing a serious disservice to the efficient administration of justice, and comes very close to constituting an abuse of process. At the very least, the bank's conduct of the litigation falls comfortably within the range of cases in which, on the modern authorities, an assessment of costs on the indemnity basis is appropriate.
  • AnsuAnsu Forumite
    67 posts
    Doesn't that just say that the BOS withdrew their claim against Mr Mitchell (out of court settlement?) and tried to request that they should not pay his legal costs?

    Which bit states that the default would be removed and the debt written off? I've scanned through but I'm unable to see it
  • It is a transcript, it wasn't meant to be anything else. It wasn't an out-of-court settlement as the case went to court. The judge awarded costs and ordered that reference to the debt be removed from the credit file.
  • bert&erniebert&ernie Forumite
    1.3K posts
    Ansu wrote: »
    Doesn't that just say that the BOS withdrew their claim against Mr Mitchell (out of court settlement?) and tried to request that they should not pay his legal costs?

    Which bit states that the default would be removed and the debt written off? I've scanned through but I'm unable to see it

    They discontinued the claim and the defendant had applied for costs - this is hardly what one would describe as an "out of court settlement". In the words of the judge "the bank realises that if the issue were to be contested it would either lose on the issue or be at serious risk of losing". This is not a settlement - its the claimant throwing in the towel!

    There is no reason for the judge to order that the default be removed or the debt be written off, although these are the likely outcomes as the claimant has effectively conceded the defendants argument that the agreement is unenforceable

    This is about as close to an explicit "win" for a consumer as you are likely to see. The judge spells out quite plainly why this is the case "There may be hundreds of similar cases and the bank would plainly not wish other defaulting customers to get wind of an adverse decision on the fundamental point which is embodied in the quotation from Mr Berkley's written argument..."
    The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.
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