Section 75, Retailer entered liquidation, Finance Co. rejects claim

Blox55 · 16 July 2019 at 10:59PM

Hi,

I have a question on Fixed Sum Credit Agreement and the breach of contract. If the pre-contract and contract specifically list the following parties:

- The consumer (purchasing the service)
- The retailer (as credit intermediary)
- The finance company (financing the specific purchase of that retailer)
- The service purchased, requiring the finance, to be delivered in 6 months time (purchased a training course), costing £5,000

The contract says "[FONT=&quot]The loan may only be used for the purchase of the goods or services that you have selected from the retailer who is the Credit Intermediary named in pre-contract[/FONT]."

And the consumer pays a deposit and further monthly instalments to the Finance Company.

But the retailer enters voluntary liquidation with debts over £200,000 prior to delivering the service (prior to purchased training course dates).

And the director of the liquidated retail company starts a brand new company offering the very similar training course.

The Finance Company refuses to pay back the consumer the deposit and the instalments paid so far when the Consumer claims under Section 75 of the Consumer Credit Act 1974, with the justification that the newly formed company will deliver the pretty much identical course instead.

My question is - is there any way that the Finance Company can force the Consumer to take the alternate course by a newly formed company rather than refund the consumer under Section 75?

Since the retailer in the credit agreement has entered voluntary liquidation - is this enough to claim against the Finance Company for a breach of contract under Section 75 and ask for refund of monies paid so far?

Basically, what I am asking is - has the contract been breached and is this enough to win this in Small Claims Court.

Many thanks.

molerat · 17 July 2019 at 12:02AM

What does the contract for the course state about who will provide the course and any rights to use an alternative provider ?

Blox55 · 17 July 2019 at 1:48AM

The retailer (LTD CO that has been liquidated) is named in the contract as "Credit intermediary". There is also the following wording in the pre-contract explanation:

"[FONT=&quot]The loan may only be used for the purchase of the goods or services that you have selected from the retailer who is the Credit Intermediary named in pre-contract credit information (PCI). The loan is not suitable for any other purpose[/FONT]."

(...)

"The loan must be used to finance the purchase of goods/services specified in the PCI. Those purchases are covered by section 75 of the Consumer Credit Act 1974..."

(...)

"The proposed credit will be linked to the supply of specific goods or the provision of a service. Description of goods/services: (here is given the name and the dates of the course, but not the name of course provider)"

There is also the following wording under the Terms of Agreement:

"The Amount of Credit will be advanced to the Credit Intermediary (the retailer) for the purpose of financing the purchase of the goods/services described in this agreement."

(...)

"You must pay the deposit shown on the preceeding page to the Credit Intermediary on or before the day that you sign this agreement."

(...)

"We may transfer any of our rights and duties under this agreement to any person or company and so long as we continue to service your loan account we shall not be obliged to give you notice of the transfer" - I believe this is to do with transferring the finance and not about transferring the goods purchased?

Thank you.

Gaz83 · 17 July 2019 at 9:44AM

Blox55 wrote: »

"The proposed credit will be linked to the supply of specific goods or the provision of a service. Description of goods/services: (here is given the name and the dates of the course, but not the name of course provider)"

Seems like they've covered themselves here. As long as the course is the same and it's on the same date it does not specify which course provider actually delivers the course. So it doesn't seem that the contract has been breached.

MEM62 · 17 July 2019 at 10:10AM

Blox55 wrote: »

"We may transfer any of our rights and duties under this agreement to any person or company and so long as we continue to service your loan account we shall not be obliged to give you notice of the transfer" - I believe this is to do with transferring the finance and not about transferring the goods purchased?

Your understanding is incorrect. They can transfer the obligation to provide the course to another provider.

What's your issue? You wanted the course and you are getting the course. Is there another reason that you are looking for an exit strategy.

Blox55 · 17 July 2019 at 10:31AM

The course had aftercare that was important part of the course. I do not trust course provider any more because they have not been transparent and the whole situation is making me uncomfortable.

The fact that the company has gone insolvent has been related to me by the whistleblower with a link to Companies House. I have found out the following:

- The company is likely to have traded insolvent when I booked the course. Their debt at liquidation is £300,000 and the accounts for December 2017 (filled in in October 2018, two monghs after I purchased the course) show the company was already £100,000 in debt. So in 11 months after the 2017 year end to the liquidation they have created another £200,000 debt and I have purchased the course 8 months after their 2017 year end.

- Their website has new T&C uploaded in December 2018, therefore after the liquidation, the website is the same, and the T&C still list the old (liquidated) company as the service provider. The website is taking bookings for 2019 and 2020.

- Nowhere is mentioned the new company name

- There is no mention either of ABC trading as XYZ.

It is a lots of money for me, I have specifically researched the course and I have gone with the original company because of reputation of the course provider and I believe that reputation is not there any more. I also feel I have been deceived.

I would have never purchased the course of the company that is only few months old and whose director has just entered into voluntary liquidation with high debts and kept this quiet, not notifying anybody and on the website pretending that the old company is still providing course.

This is why I want my money back and I do not want to do this course. If the facts were transparent, I would have never purchased it in the first place.

Can all this be taken into account on the Small Claims Court?

MEM62 · 17 July 2019 at 2:27PM

Blox55 wrote: »

The course had aftercare that was important part of the course. I do not trust course provider any more because they have not been transparent and the whole situation is making me uncomfortable.

I doubt that the contract has a clause allowing you to withdraw because you fell 'uncomfortable'.

The fact that the company has gone insolvent has been related to me by the whistleblower with a link to Companies House. I have found out the following:

- The company is likely to have traded insolvent when I booked the course. Their debt at liquidation is £300,000 and the accounts for December 2017 (filled in in October 2018, two monghs after I purchased the course) show the company was already £100,000 in debt. So in 11 months after the 2017 year end to the liquidation they have created another £200,000 debt and I have purchased the course 8 months after their 2017 year end.

Unfortunately, this is not unusual and companies do ghost themselves and then arise phoenix-like from the ashes. This is usually to get rid of debt and it is quite possible that the benefit of course will still be there. After all, you did your research and the reputation must be based on something.

- Their website has new T&C uploaded in December 2018, therefore after the liquidation, the website is the same, and the T&C still list the old (liquidated) company as the service provider. The website is taking bookings for 2019 and 2020.

- Nowhere is mentioned the new company name

- There is no mention either of ABC trading as XYZ.

It is a lots of money for me, I have specifically researched the course and I have gone with the original company because of reputation of the course provider and I believe that reputation is not there any more. I also feel I have been deceived.

Not quite sure what you expect here. Are you suggesting that they promote the fact that they have gone into liquidation? That ain't gonna happen as it would destroy the business.

I would have never purchased the course of the company that is only few months old and whose director has just entered into voluntary liquidation with high debts and kept this quiet, not notifying anybody and on the website pretending that the old company is still providing course.

This is why I want my money back and I do not want to do this course. If the facts were transparent, I would have never purchased it in the first place.

But you did and you are where you are with it. If you do not get what you have paid for then you will still have an opportunity to go back to the finance company for recourse. So, do the course and see what the outcome is. No point in cancelling because you think that you will have issues.

Can all this be taken into account on the Small Claims Court?

You can take it to court if you like but your chances of winning are less than slim. Litigation is risky even if you have a reasonable case. Nothing in your post suggests that you have any (legitimate or tangible) argument to support your case.

It is understandable that the situation might dent you confidence in the training provider but you don't have an exit from this contract based on the info you have provided. Do the course and, if it fails to deliver, then at least you have proven your case and you can go back to the finance company. At the moment your expectation is that you should be allowed to walk away based on your suspicion that it might not deliver all that was promised. That isn't going to happen.

Out of interest, what sort of course is it?

Blox55 · 17 July 2019 at 6:58PM

It is a Theatre Make Up Course lasting 4 weeks.

This is what I do not understand - the T&C on the website supposed to be legal, no?
If so, how can T&C say that the course is being delivered by a company that is liquidated? Isn't this missrepresentation? I understand that they should not advertise they have folded, but T&C is a legal document, isn't it? Shouldn't it be factual? There is no mention of the new company name anywhere on the website, I checked carefully. Not even in the smallest of the smallest print. T&C lists the old company, inclusive of the old company number.

If the new company would trade as the old company (without LTD at the end of the name), then I believe that the Companies House requires certain information to be disclosed on the company website, and this information should be correct and not haviing the old company info. I found the following:

The Companies Act requires you disclose certain information about the identity of your company on your website. This information doesn’t need to be on every page, but it does need to be easily found so it will typically go on your Contact Us page, or About Us page.

Company name
Company registered number
ABC LTD trading as XYZ (if applicable)
Place of registration, such as England and Wales
Registered office address
Your company name, postal address and company email address
How to contact your business via non-electronic means
Your VAT number, even if the website is not being used for ecommerce transactions

All these information that exist list the old company that is insolvent, yet courses are being sold for 2019 and 2020 and the new company is not mentioned anywhere not even in a small print.

So how can the Finance Company force me to take the course advertised on the website that appears to be breaking Companies Law?

Also, I have looked up info on trading whilst insolvent and wrongful trading. If the accounts for December 2017 show £100,000 debt and the company was liquidated in November 2018 with £300,000 debt + £100,000 overdrawn DLA, then surely the directors must have known in August 2018 that the company is insolvent. Would not this indicate wrongful trading and that they should not have been taking money from customers?

All these information only became public once the company published their accounts for 2017 which was in October 2018, which is after I have purchased the course (course purchased August 2018) - but the directors should know at any point if the company is solvent or not so the contract should not have been there in the first place.

Do the course and, if it fails to deliver, then at least you have proven your case and you can go back to the finance company. At the moment your expectation is that you should be allowed to walk away based on your suspicion that it might not deliver all that was promised.

The problem is that the course was in March 2019. I did not attend the course because I was waiting for Financial Ombudsman's reply, which only arrived last week despite me chasing them several times and despite me telling them about the course dates.

There is no another course in the same location available although there is a similar course on a different location.

Thank you on your patience in reading this

Blox55 · 17 July 2019 at 7:21PM

Here is also extract from the T&C on the website that has as a name OLD LTD CO (lets call it XYZ).

7. XYZ LIABILITY

7.1 Subject to clause 7.3, if XYZ fails to comply with these Terms, XYZ shall only be liable to the Client for the purchase price of the Courses and, subject to clause 7.2, any losses that the Client suffers as a result of XYZ ’s failure to comply (whether arising in contract, tort (including negligence), breach of statutory duty or otherwise) which are a foreseeable consequence of such failure.

7.2 Subject to clause 7.3, XYZ will not be liable for losses that result from XYZ’s failure to comply with these Terms that fall into the following categories:
(a) loss of income or revenue;
(b) loss of business;
(c) loss of profits;
(d) loss of anticipated savings;
(e) loss of data; or
(f) waste of management or office time.

However, this clause 7.2 will not prevent claims for loss of or damage to your physical property that are foreseeable or any other claims for direct loss that are not excluded by categories (a) to (f) inclusive of this clause 7.2.

7.3 Nothing in this agreement excludes or limits XYZ’s liability for:
(a) death or personal injury caused by XYZ ’s negligence;
(b) fraud or fraudulent misrepresentation;
(c) any breach of the obligations implied by section 12 of the Sale of Goods Act 1979 or section 2 of the Supply of Goods and Services Act 1982;
(d) defective goods under the Consumer Protection Act 1987; or
(e) any other matter for which it would be illegal for XYZ to exclude or attempt to exclude XYZ’s liability.

Isn't the fact that they are hiding new company name and present themselves as the old name the "misrepresentation"?

Should I be suing the retailer? The problem here is that the retailer folded and the new one is misrepresenting themselves. Are they in breach because T&C says that iut is XYZ LTD that is delivering the course, yet XYZ LTD is liquidated, but the website is still misrepresenting the NEWCO as "XYZ LTD"

It just does not seem right that on the one hand the OLDCO is protected from giving me the refund because it is liquidated with high debts (but not delivered service), and the money cannot be recovered from the NEWCO because the contract is with OLDCO, but the NEWCO is forced upon me to deliver the service - and yet the NEWCO is misrepresenting itself on the website breaking Companies Act.

Isn't Section 75 introduced exactly for these cases when the company stops trading?

Section 75, Retailer entered liquidation, Finance Co. rejects claim

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