Voluntary Termination, Excess Milage Charges

[SAH60]

Hi.

I have followed previous threads and used some of the advice in relation to a claim against myself. I would appreciate some advice & next steps - not sure I have anywhere to go with this ....

(Copy of the latest letter):

Background

By way of background, on 18 October 2016 our client entered into a regulated hire purchase agreement with you (“the Agreement”) in respect of a BMW F32 430d luxury coupe motor vehicle with
registration number XX (“the Vehicle”). Under the terms of the Agreement, the cash price for the Vehicle was £25,049.93 which you agreed to pay, together with charges for credit in the sum of £5,607.52 by 48 monthly instalments of £426.65 and an optional final payment of £10,178.25. It is not in disputed that you exercised your option to terminate the Agreement on or around 4 October 2019 both under the terms of the Agreement and in accordance with s.99(1) of the Consumer Credit Act 1974 (“the CCA 1974”). Under the terms of the Agreement, our client is, however, entitled to charges for excess mileage. Our client is claiming the sum of £8,424.44 in respect of excess mileage charges and £56.45 in respect of the late payment interest, plus additional interests and costs. We enclose a copy of the Agreement with this letter and respectfully refer you to the Excess Mileage Charges section at the bottom left of the first page, together with second paragraph of the Termination: Your Rights section at the bottom left of the second page.

Both of the aforementioned sections confirm that any excess mileage will be a charge accrued prior to termination and that you will remain liable to pay excess mileage even if you voluntarily terminate the
Agreement. We understand from our client that the actual mileage of the Vehicle when it was recovered was 154,825. Our client would like to highlight at this stage that you were aware of the terms regarding mileage limits when you entered into the Agreement. Aside from the terms set out above, being referred to in the Agreement itself, we understand from our client that the level of the mileage allowance is discussed and set by virtue of discussions with the customer. As such, the mileage was set at 32,667 over the course of the Agreement, or 8,000 per annum, with your full appreciation of this limit. The total mileage allowance for the full term of the Agreement (32,667) was exceeded by over 80,000 miles in the course of just three years. Had the Agreement not been voluntarily terminated and the same mileage had been accrued during the remaining year then the likely mileage would have been in the region of 100,000. The inclusion of an annual mileage figure is to protect the condition of the Vehicle and its value. A vehicle which has travelled 30,000 miles over the course of its lifetime is less likely to be involved in accidents and more likely to be in a decent condition. By comparison, a vehicle which has done in excess of 75,000 miles is more likely to have been damaged, be subject to additional wear and tear, will usually require servicing and is generally of less value compared to a lower mileage vehicle. Statutory provisions You rely in your Defence on s.99(1) and s.100(1) of the CCA 1974 specifically. On the basis that your voluntary termination of the Agreement was under the CCA 1974, you believe you are not required to pay the excess mileage charges. S.99(1) states: “At any time before the final payment by the debtor under a regulated hire-purchase or regulated conditional sale agreement falls due, the debtor shall be entitled to terminate the agreement by giving notice to any person entitled or authorised to receive the sums payable under the agreement.” S.100(1) states: “Where a regulated hire-purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not
provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before the termination.” Our client relies on s.99(2) of the CCA 1974, which states: “Termination of an agreement under subsection (1) does not affect any liability under the agreement which has accrued before the termination.” Under the terms of the Agreement regarding excess mileage, it is clearly stated that “your obligation to pay excess mileage charges will accrue immediately prior to termination”.
It is also not the case that under s.100(1) you are excluded from having to pay any penalty, compensation or damages for a breach. “Total price” is defined in s.189 of the CCA 1974 to mean “the total sum payable by the debtor under a hire-purchase agreement or a conditional sale agreement, including any sum payable on the exercise of an option to purchase, but excluding any sum payable as a penalty or as compensation or damages for a breach of the agreement” [emphasis added] As such, s.100(1) does not exclude you from having to pay any such penalty, compensation or damages. It simply states that when calculating the “total price” to determine what you have to pay to terminate under s.99(1) you do not include any penalty, compensation or damages. As mentioned above, it is not in dispute that the Agreement was terminated, but you are mistaken regarding the effect of the section of the statute you are relying on. We also refer you to s.100(2), which states: “If the debtor has contravened an obligation to take reasonable care of the goods or land, the amount arrived at under subsection (1) shall be increased by the sum required to recompense the creditor for that contravention, and subsection (2) shall have effect accordingly.” Notwithstanding that our client maintains that the excess mileage charges are payable in any event and not excluded by the CCA 1974, by exceeding the total annual mileage by such a significant margin you have contravened your obligation to take reasonable care of the Vehicle, and the sum calculated under s.100(1) may be increased to recompense our client for the contravention. The method of calculating that compensation is set out within the terms of the Agreement, as agreed by you.

In addition, the cases to which you refer are unreported cases and are not binding on County Courts in any event.

[R0b]

You mention that a claim against yourself, can you clarify what you mean? Have you issued a claim or has BMW issued a claim and what stage is it at?

Doesn't help asking us to give you some assistance if you are simply going to provide a letter response.

[SAH60]

Thanks, to clarify BMW have issued a claim against me in small claims court for £8424 for excess mileage charges. I have sent my defence based around similar threads I have seen and this above is their response to my defence.

[R0b]

Well you’ve filed a defence already, so what is it you need from us? I have to say unless you have a very good reason, going over you mileage by 30,000 is somewhat of a p-take so I am not surprised BMW are trying their chances at this.

[SAH60]

We all make mistakes, an oversight it was albeit a big one. Advice on anywhere left to go with my defence? They are not accepting any of the CCA references I have quoted from similar threads. Thanks

[Huxie]

Am I reading this right? Your pro rata mileage allowance for the almost 3 years you had the car was circa 24,000 miles and you exceeded this by circa 88,000 miles?

[R0b]

What we need to see are the particulars of claim and the defence you submitted as a start. It would also be helpful to know the firm of solicitors that is acting for BMW.

It’s not necessary to reply to that letter but depending on what you’ve said in your defence we can respond in some way. Doesn’t matter if they don’t accept your interpretation of the CCA because it isn’t there you have to convince, it is the judge.

[SAH60]

Hi. Particulars of claim:

The claimant and the defendant made a written hire purchase agreement for the supply of goods. The defendant exercised his right to terminate the agreement. 2 Agreement date 18/10/16 2.1 Agreement No XXX 2.2 Regulated by the Consumer Credit Act 1974 2.3 Goods: BMW XX 2.4 Total Charge for excess mileage £8480 2.5 Unpaid balance £8480

Weightmans are acting for BMW.

My defence was following based on previous threads:

I did indeed exercise my right to terminate the agreement XXX.

I do not accept the charge for excess mileage or any related costs inc interest and admin costs. The claimant has not provided me with a copy of the agreement detailing where I am specifically liable for additional mileage charges that can be applied and recovered.

When I returned the vehicle to the BMW representative, I was given a copy of the condition report dated 25/10/2019 which does not show any damage or that the vehicle is not in a reasonable condition. I have not signed any document accepting any charges relating to excess mileage. Report is attached.

The claimant has not provided me with evidence that the value of the sale of the vehicle after I had returned it to BMW was less than what was expected and that this had been impacted by excess mileage against comparable market value vehicles. The condition of the vehicle when I returned it was in good condition, it had a valid MOT certificate, it had a full-service record, there was no bodywork damage nor damage to any of the interior and this is confirmed by the condition report dated 25.10.19. I cannot see how I can be held liable for negligence or for the market value of the vehicle as the claimant has not provided evidence to the contrary.

Any excess mileage on the vehicle when I returned it does not itself relate to the value of the vehicle. In a recent Court of Appeal case Brady v St. Margaret's Trust [1963] 3 W.L.R 1162, Lord Denning says that the price of the vehicle is not evidence of the car's condition.

At the time of agreeing into this finance arrangement, I was specifically informed by the salesmen of BMW that if I were to Voluntary Terminate this agreement, any excess mileage would not be charged as in his words ‘’Excess mileage charges aren’t included in any Voluntary Termination’. The salesmen actually reduced the mileage in the agreement that I had suggested I would make in order to reduce my monthly payments in this agreement, I suspect that this was to help achieve selling me the vehicle.

I believe it is not fair and reasonable to levy these charges to me.

May I draw your attention to terms under the Consumer Credit Act 1974 Sections 99 and 100 of the CCA which permit a customer who has purchased goods on such an agreement as this is allows me to hand back the goods to the finance company and have no further liability under the credit agreement provided at least 50% of the total amount due under the agreement has been paid (I have exercised my right to Voluntary Termination). I had paid the total amount due.

Nowhere in agreement XXX does it state that excess mileage charges are not part of this total amount. I consider what the claimant is doing is applying an end of contract clause on me which is not permitted.

Furthermore section100(1) of the Consumer Credit Act 1974 also says "Where a regulated hire-purchase is terminated under section 99 the debtor shall be liable to one-half of the total price and the sums due in respect of the total price immediately before the termination". The definition of 'total price' under the CCA is "the total sum payable by the debtor under a hire-purchase agreement or a conditional sale agreement, including any sum payable on the exercise of an option to purchase, but excluding any sum payable as a penalty or as compensation or damages for a breach of the agreement". As excess mileage charges fall under the damages or compensation category, they are not included when calculating my liability under section 100(1). I believe that this point has been affirmed in Julian Hodge Bank Ltd v Hall [1998] C.C.L.R. 14 in which the Court of Appeal held that communication charges and interest for non-payment were excluded as part of the 'total price'.

In a recent County Court case between Mercedes-Benz Financial Services (UK) Limited v Cahalane (Willesden County Court, 26 February 2018) District Judge Ellington (as she was then) held that excess mileage charges were not recoverable. Her reasons included, that the definition of total price excluded the recoverability of these charges, the statement “Termination: Your Rights” was explicitly clear that liability was limited, and, in any event, she was bound by the Court of Appeal decision in Julian Hodge Bank v Hall[1997] EWCA Civ 1852, which established that “total price” excludes compensation and damages for breach of the agreement for the purposes of calculating the total price payable.

May I also draw your attention to the following:

• In the consultation paper, A Consultation on Voluntary Termination of Hire Purchase and Conditional Sale Agreements Under the Consumer Credit Act 1974, 2 September 2004, URN 04/1557, the paper sets out a basic definition of voluntary termination: “Sections 99 and 100 of the CCA permit a customer who has purchased goods on a HP agreement or CS agreement to hand back the goods to the finance company and have no further liability under the credit agreement provided at least 50% of the total amount due under the agreement has been paid. This is called voluntary termination (“VT”). ”and“ At the time of termination the customer is liable for any amount that has not been paid under the original agreement up to a maximum of 50% of the total amount due to be paid under the Agreement.”

For the above reasons I do not believe I am liable for the damages the claimant is seeking against me.

[SAH60]

Hi, any thoughts?

[R0b]

Well it's not a defence as such but reads more of a witness statement/legal arguments.

You've got the majority of the relevant content in there so it's a case of putting it all together and preparing for the hearing. I'm not sure where you are up to you but I would strongly suggest you start putting together your witness statement and preparing a trial bundle with all the relevant documents. This is the most time consuming part so I would not sit back and wait as you will almost certainly find yourself struggling to put forward a coherent argument with a judge. Bear in mind you have greatly exceeded your agreed mileage so you will already be on the backfoot where a judge is likely to take a negative view.

Where you are currently now in terms of the process, have you submitted your directions questionnaire and received further orders from the court?

[SAH60]

This is going down small claims court and they have suggested we go to mediation as a first step.

[R0b]

Sure I understand but that's not the question I had asked. Have you filed your questionnaire and awaiting further instructions from the court, or has the court already issued further directions with a court date etc?

Regardless, like I said above you need to start working on your witness statement and evidence as soon as possible. If you want feedback on it then I suggest you post it up on here for critique.