Doyle v PRA (jan 2019)

[charitynjw]

But if the account has been closed, thus making it impossible to make any further payments, & the creditor or assignee is chasing for full payment of the entire sum outstanding, to my mind it has been terminated.

Whether lawfully so must be an issue?

[brass]

But if the creditor TELLS the debtor that it has terminated the agreement, then IT simply has actually terminated the agreement. The debtor is usually not a legal expert would rely on that. Can one un-terminate?
It surely is irrelevant if the termination is incorrect because the DN is bad.

Termination must surely also mean that the credit facilities are no longer available.

PT Surely there is therefore a clear distinction between something that is ineffective in law and the ACTUAL action that flows from it.

It is the ACTION by the creditor which puts them in a position to start action.

[R0b]

charitynjw brass

What you both are referring to is essentially a repudiatory breach. If the defective DN does not in fact terminate the agreement but the creditor, by their actions or conduct wrongfully terminates the agreement and pursues a course of action by demanding the accelerated balance, then it will more than likely be a repudiatory breach. Alternatively, if the creditor does something substantially inconsistent with what was agreed.

The debtor is entitled to elect to terminate the agreement by giving notice to the creditor and accepting the breach thus discharging the debtor of any future obligation to pay. The debtor then has the right to pursue a claim for damages as if the contract had been performed by both parties. Those damages usually end up being the loss of bargain, or expectation of something e.g. if you had a hire-purchase agreement and the creditor wrongfully terminated the agreement, the loss of bargain could be the purchase of the car at the end of the agreement, or alternatively the loss of use for the remainder of the hire period.

It would be wrong to say that the agreement is automatically terminated where a repudiatory breach occurs because the debtor has to take steps to accept the breach and terminate. If the debtor doesn't do anything or unreasonably delays their acceptance, then they would be deemed to have affirmed the contract and would only be entitled to damages for any losses suffered, if any.

The contract therefore continues as normal, though if it gets to a stage whereby the actions cannot be undone e.g. legal proceedings being issued, I think it would be fair to say it is terminated.

[brass]

Good point. However, something lurking in the old grey matter. If the creditor has served a termination notice (usually >14 days after service of the DN) then why would the debtor feel the need to terminate again. The "service" is provided by the creditor and terminated by the creditor. Non response to that by the debtor is surely acquiescence.

The only valid response I can see is if the debtor disputes (thereby negating) the termination.

[R0b]

Repudiatory breach can occur in many circumstances so it's not a one-size-fits-all kind of thing. Just to be clear, I set out the starting position for a repudiatory breach and that is on the assumption that it is possible to continue the contract e.g. where a seller is in repudiatory breach under a supply of goods contract, the buyer could have the option to terminate or affirm the contract and instead seek damages.

So the key point to note here is that the innocent party needs to take an additional step by giving some kind of notice or by conduct that the innocent party is accepting the repudiatory breach and treating the contract as at an end.

Applying the above to your question, if the creditor wrongfully terminates the contract, I don't think the debtor would need to say specifically say that he/she is instead terminating the contract, I think it would be sufficient to say, "You have wrongfully terminated the agreement by failing to comply with ... and such a failure amounts to a repudiatory breach on your part. On that basis, I am writing to let you know that I accept your breach and am treating the contract as having come to an end. "

What would happen if the debtor stays silent and doesn't accept the repudiatory breach but instead wishes to raise it as a defence where legal proceedings have been issued? Well, that would require some legal research as I don't know from memory if there is any authority on this and/or how the courts would address it. Possible scenarios could be:

1. Silence by the debtor means that the right to accept the breach is lost and so damages can't be claimed but at the same time, the creditor can't claim damages since it wrongfully terminated the agreement. Circumstances may be different if the debtor wasn't aware of the termination i.e. the debtor has moved home.

2. The debtor loses their right altogether and the creditor is entitled to rely on the wrongful termination as if it were validly given. The creditor is therefore entitled to seek damages against the debtor.

3. Despite the debtor not accepting the breach (assuming the debtor was aware), the court nevertheless accepts that there has been a repudiatory breach and the debtor is entitled to claim damages.

I would think, that a court is inclined to take option 3 and there may already be some case law on this point but I can't think of one from memory.

Perhaps PT has more knowledge from a consumer credit perspective on the above.

[brass]

IMO:
In the order above:
1) "right to accept" is not on "offer". Silence by the debtor means he has relied on the termination - acquiescence is the closest word i could find without using the word acceptance. The creditor is not "offering" termination, simply terminating its obligations under the contract/agreement, and that is their prerogative.
2) ?? Doesn't make sense. Its irrelevant that the creditor is entitled to rely on the wrongful termination - he simply has already relied on it by presenting the notice of termination and acting as if the agreement is terminated. Not sure how damages could arise against the debtor. Any wrongful act is against the doer not the affected party.
3) Again, I don't think acceptance is an issue here, neither is damages.

[brass]

The more I think about this the more I agree with PT's comment that its B******* (cant remember the word, but some similar spring to mind.

The Law should not be focusing on the expiry of the default notice as the cause of action, but the actual termination of the account. Then waiting >6years from termination for proceedings to start should be limited under the Limitation Act. The default notice is merely a formality, but the termination notice carries the weight of a complete breakdown in the agreement.

[R0b]

In repudiation cases, it is well established in law that the innocent party must act upon the breach, that is by using words or conduct to communicate to the breaching party that you are treating their actions as repudiatory and treating the contract as at an end. The effect of accepting the breach is that you discharge yourself from all future obligations under the contract and have a right to claim damages. It is perfectly possible for a debtor to wait until the supposed date of termination and write to the creditor stating that having treated the contract as ending on X date, you have wrongfully terminated and I am accepting it as a repudiatory breach and discharging my obligatin to pay any future amounts.

Silence is not acceptance of a repudiatory breach, case law has already established that a positive step action is required.

As to the three scenarios I mentioned, they were merely some routes that I think a court might take. Do I have the detailed answers to those points? No, because I only thought of them 5 minutes ago and it may very well be that they are all useless points I made. If it is not possible to continue performance of the contract, then the only other option might be treat the contract as having ended and allow the debtor a right to seek damages.

In my view, if a debtor knows the creditor has terminated the agreement and did not raise the repudiatory breach argument at any point and tries to rely on silence, then I think it might be open to the creditor to (rightly or wrongly and skilfully) argue to the court that it should be entitled to rely on it as the debtor has waived their right to accept the breach and treat the contract at an end.

Regardless of whether you think the law should or shouldn't be focusing on the DN as the cause of action, that's what the courts have determined and so we follow it until someone raises an issue not contemplated at the time of that decision, the law is updated as time moves on or new legislation is tabled to confirm that the DN is a formality and the cause of action is the date of termination.

[brass]

ok, lets follow the scenario through. A defective DN is served. 5 years later the debtor "accepts" the termination. When would limitation kick in?

[R0b]

In the usual circumstances for repudiatory breach, the debtor would be deemed to have waived their right to treat the contract as at an end and both sides would be required to continue their obligations under the contract.

However, having gone back through this thread I noticed your post with a reference to Eshun v Moorgate Mercantile Co. (something I missed) and I think that provides the answer to the question your looking for. In this case, Moorgate issued a default notice alleging a repudation of the contract when in fact there was no repudiation, rather Eshun had missed an instalment. The Court held that the DN was invalid because, amongst other things, there was no repudiatory breach and it didn't specify the consequences of the failure to pay (in accordance with the Hire-Purchase Act 1965). As a result of the defective DN, the court awarded Eshun all instalments paid to Moorgate.

Although in their judgment the court didn't explicitly state that there was a repudiatory breach by Moorgate, by awarding Eshun all of his money back you could argue that is the effect. A relevant extract of the judgment below:

This notice of default talks about repudiation. The owner says in effect to the hirer: “If you do not pay we shall assume that you are terminating by repudiation and will enforce our rights accordingly.” The owners had no right to make any such assumption. The mere non-payment of one or two instalments does not amount to repudiation ... It is inaccurate and misleading. It is defective and insufficient. It is not a good notice of default.

Similarly, in Woodchester Lease Management Services Ltd. v Swain & Co. the DN was invalid because the finance co. had claimed that the debtor was in arrears of £879.90 when in fact it was only £643.30. The court held that the Consumer Credit Act 1974 had been enacted to protect consumers who were mainly individuals at a disadvantage when contracting with a large financial organisation using relatively complex standard form contracts, its scheme would be frustrated unless a strict obligation was imposed on a lender not only to specify in a default notice precisely the nature of the alleged breach but also to state accurately what action needed to be taken to remedy it; that where the sum claimed exceeded the amount the hirer owed the notice was thereby rendered invalid; and that, accordingly, since the plaintiff had not complied strictly with the statutory provisions, it could not recover damages under the contract but was entitled only to the sum of £634.30 with interest.

The position in Woodchester is in line with the rules on repudiation, that the debtor is discharged from all future obligations although it does not affect their outstanding obligations i.e. the duty to pay sums due.

On that basis, I would say that the failure to comply with a DN in accordance with the CCA could amount to a repudiatory breach particularly where the creditor decides to treat the contract as being terminated and it wouldn't be necessary to 'accept' the breach as one would ordinarily expect. Applying Woodchester, the creditor is likely to be limited to recovering the outstanding arrears deducted from any damages claimed by the debtor (if any) as a result of the breach.

Just touching on Amethyst's point about whether a breach could be cured, I think the answer to that is a yes, provided the contract remains alive and kicking though I think PT's points about a delayed DN probably have some merit. In other words, the breach can be overridden by subsequent events but if those subsequent events amount to termination of the agreement, it is obvious that a breach can't be cured.

Does that answer the question brass?

[brass]

It does, but does not sit comfortably.

I think, equitably, long delays in taking action seems unfair. PT mentioned laches.

“Sometimes laches is taken to mean undue delay on the part of the plaintiff in prosecuting his claim and no more. Sometimes acquiescence is used to mean laches in that sense. And sometimes laches is used to mean acquiescence in its proper sense, which involves a standing by so as to induce the other party to believe that the wrong is assented to. In that sense it has been observed that acquiescence can bear a close resemblance to promissory estoppel..” (Goldsworthy v. Brickell [1987] Ch 378, 410A-C)

[R0b]

I agree. I would argue that any DN would need to be served promptly according to the facts i.e. where it's clear there is a breakdown in the relationship and the debtor hasnt paid a number of instalments despite repeated requests to do so.

I dont think you could say that in all circumstances a DN must be served within x days because it might be that the debtor is struggling, they are vulnerable or perhaps seeking legal/debt advice.

As always with most cases that run through the court system, they are fact sensitive so there may not always be a delay for the purposes of latches or S140 of the CCA

[brass]

Many thanks for your interaction on this. If you think of anything further on this I, for one, would gratefully appreciate it. In turn I will also post anything relevant.

And also thanks to Amethyst, PT and CHARITYNJW (I felt that his/her posts shared the same sentiment as mine. )

[brass]

sorry, something else occurred to me (being a bit like Columbo here).

The system could easily potentially be abused by Creditors/debt purchasers by deliberately sending out invalid DN's. The unsuspecting debtor, inexperienced in legal matters and with an untrained eye, would not notice.

Reminds me of the words of Lord Bingham in Director General of Fair Trading v First National Bank Plc (2001) UKHL 52.
Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, or weak bargaining position.

Ok, that was for unfair contract terms but the principal is the same.