Contracts, Termination, Repudiation and Rescission

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

They have passed the debt on to a collection agency, and the agency are stating that payment of the full amount is overdue.

If all you have posted is correct SeeThumb and I'm sure it is then you probably need to look at s.140, as I really doubt you'll get anywhere with a 'repudiation' argument.

I think you are in a difficult situation.

If you do nothing, or just write letters to the OC that are ignored, then you may see your credit file trashed with a default marker probably followed by a claim for the balance, whether justified or not.

You cannot presumably keep paying, as I assume the OC has stopped sending monthly statements that tell you how much to pay.

There may be a breach of contract by the OC, in failing to send monthly statements and in restricting credit without notice, but s.170 scuppers all possibilities here.

You could start proceedings against the OC under s.140 and ask the court to discharge or reduce your liabilities, or even to force the OC to act according to contract.

Maybe a chat with your local trading standards is an idea? They can be quite helpful.

I think pt is correct - his Harrison judgement was seminal in resolving the issue of termination following a duff DN. For that reason I would for sure look for alternative arguments, and s.140 is probably your best bet.

[pt2537]

Re: Contracts, Termination, Repudiation and Rescission

I think much of the confusion derives from a misunderstanding of the relationship between the statute and the contract.

A section 87 notice is a requirement of statute, the remedy for an incorrect notice is contained within the statute, in that the creditor will not be allowed to terminate upon breach. No other sanction is permuted as stated.

d

Indeed which in my view restricts the right to claim recission notwithstanding that as a matter of law it wouldnt be available in such circumstances anyhow, but it is not around for someone with a bad default, the remedy as HHJ Chambers made clear is no termination

Re: Contracts, Termination, Repudiation and Rescission

point is, where in the Act does it provide recission for breach of statutory requirement in respect of failing to comply with s87?

Thats the point, show me the provision of the act, ill accept that what is being suggested can be done, and of course that the Court of Appeal is wrong.

However, im sorry to say that despite many people trying to argue this point, i have never seen it succeed.

I think much of the confusion derives from a misunderstanding of the relationship between the statute and the contract.

A section 87 notice is a requirement of statute, the remedy for an incorrect notice is contained within the statute, in that the creditor will not be allowed to terminate upon breach. No other sanction is permuted as stated.

d

[pt2537]

Re: Contracts, Termination, Repudiation and Rescission

point is, where in the Act does it provide recission for breach of statutory requirement in respect of failing to comply with s87?

Thats the point, show me the provision of the act, ill accept that what is being suggested can be done, and of course that the Court of Appeal is wrong.

However, im sorry to say that despite many people trying to argue this point, i have never seen it succeed.

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Wow Pt,

Thanks. I will have to get back to you on that!

I appreciate you posting it.

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

They have passed the debt on to a collection agency, and the agency are stating that payment of the full amount is overdue.

[pt2537]

Re: Contracts, Termination, Repudiation and Rescission

[5.330]-[5.340]
170 No further sanctions for breach of Act
(1) A breach of any requirement made (otherwise than by any court) by or under this Act shall incur no civil
or criminal sanction as being such a breach, except to the extent (if any) expressly provided by or under this
Act.
(2) In exercising [its] functions under this Act the [OFT] may take account of any matter appearing to [it] to
constitute a breach of a requirement made by or under this Act, whether or not any sanction for that breach
is provided by or under this Act and, if it is so provided, whether or not proceedings have been brought in
respect of the breach.
Page 498
(3) Subsection (1) does not prevent the grant of an injunction, or the making of an order of certiorari,
mandamus or prohibition or as respects Scotland the grant of an interdict or of an order under section 91 of
the Court of Session Act 1868 (order for specific performance of statutory duty).
Commencement
31 July 1974: see CCA 1974, Sch 3, Note.
Amendment
Sub-s (2): word "its" in square brackets substituted by the Enterprise Act 2002, s 278(1), Sch 25, para 6(1),
(35). Date in force: 1 April 2003: see SI 2003/766, art 2, Schedule; for transitional and transitory provisions
and savings see the Enterprise Act 2002, s 276, Sch 24, paras 2-6.
Sub-s (2): reference to "OFT" in square brackets substituted by the Enterprise Act 2002, s 278(1), Sch 25,
para 6(1), (35). Date in force: 1 April 2003: see SI 2003/766, art 2, Schedule; for transitional and transitory
provisions and savings see the Enterprise Act 2002, s 276, Sch 24, paras 2-6.
Sub-s (2): word "it" in square brackets substituted by the Enterprise Act 2002, s 278(1), Sch 25, para 6(1),
(35). Date in force: 1 April 2003: see SI 2003/766, art 2, Schedule; for transitional and transitory provisions
and savings see the Enterprise Act 2002, s 276, Sch 24, paras 2-6.
General effect
Subsection (1) is of very considerable importance since its effect, in general terms, is that a breach of the Act
(or of any regulations made under it) attracts only such sanctions as the Act itself specifies in relation to that
breach (together with the 'sanctions' presented by sub-ss (2) and (3). The consequences of this principle are
seen most clearly in relation to civil proceedings. First, sub-s (1) prevents any argument that an agreement
which is procured, negotiated or to be performed in breach of the Act is affected by illegality. For example,
although by CCA 1974, s 39 unlicensed trading is a criminal offence, an agreement made by an unlicensed
trader is not void or unenforceable at common law; the 'civil sanction' is restricted to unenforceability under
CCA 1974, s 40 (which permits the enforcement of agreements when the OFT has made an order under that
section). Similarly, sub-s (1) will not allow a breach of the Act to be set up as a defence per se to an action
by a creditor to enforce an agreement, nor is a breach of the Act actionable by the debtor as a breach of
statutory duty (cf Bowmaker Ltd v Tabor [1941] 2 KB 1, [1941] 2 All ER 72) except where the Act itself so
provides (see CCA 1974, s 92). Nor, finally, may a breach of the Act be treated as a breach of contract or as
giving rise to any liability to make restitution of property or money. The intention of the section is, therefore,
not merely to limit civil or criminal proceedings arising from a breach of the Act but (subject to sub-ss (2) and
(3)) to deprive such a breach of any legal consequences other than those provided by the Act itself.
OFT
The reference to the OFT was substituted by the Enterprise Act 2002, Sch 25, para 35. See the notes to s 1
above.
'A breach of any requirement'
Whilst the principle underlying CCA 1974, s 170(1) is clear enough the term 'requirement' is not defined in
the Act with the result that there remains considerable scope for argument as to when it actually applies. The
term 'requirement' (or a very similar expression) is actually used in relation to certain statutory obligations:
see in particular CCA 1974, ss 21, 44, 52, 53, 55, 58 and 61-64. But it can hardly have been intended to
confine the operation of CCA 1974, s 170(1) to these few provisions (important as several of them may be)
Page 499
and the moot point is when what may loosely be described as a 'breach of the Act' is properly to be treated
as a 'breach of any requirement made by or under the Act' when neither the word requirement nor any
cognate expression is used in the relevant provision.
In the first place, there is one category of provision which falls outside the scope of CCA 1974, s 170(1)
altogether, namely provisions which confer enforceable rights upon the debtor. See, for example, CCA 1974,
ss 69, 70(1), 71(2), 73(2), 75, 94, 95, 99, 100 and 101. These are rights which the court is clearly expected
to enforce, and whilst CCA 1974, s 173(1) prevents their exclusion CCA 1974, s 170(1) has no application to
them. But there is room for doubt as to how far this category extends. There are a few provisions of the Act
which do not clearly confer an enforceable right upon the debtor (or a surety) but which equally do not clearly
impose any requirement upon the creditor; rather they state a general rule or principle which is expressed in
general terms to apply to agreements or securities governed by the Act. Perhaps the most striking example
is CCA 1974, s 113(1) which provides that a security 'shall not be enforced' beyond the extent provided for.
This is drafted as a categorical rule, addressed not directly or solely to a creditor but to the world at large -
including the court. It is, accordingly, possible without doing any violence to the wording of that provision, or
of CCA 1974, s 170(1) itself, to construe it simply as a general restriction upon the scope of a security which
may be provided in relation to a regulated agreement (and, indeed, any agreement providing for a greater
security may fall foul of CCA 1974, s 173(1)). Consequently, the court may not merely refuse to assist a
creditor to enforce a security beyond the extent permitted by CCA 1974, s 113(1); it may treat any such
actual enforcement by the creditor as wrongful, vis-à-vis the surety, because it is an attempt to realise a
security which, in law, has not been provided. Thus the court may order restitution, etc, without 'sanctioning'
a 'breach' of CCA 1974, s 113(1). Similarly, CCA 1974, s 81(2) (appropriation of insufficient payments by a
multiple debtor) may perhaps be construed as a direction to the court (as well as to the parties) so that a
non-complying appropriation may be ignored or nullified by the court without any infringement of the principle
set out in CCA 1974, s 170(1). These arguments cannot be advanced or refuted with any degree of certainty,
however, until CCA 1974, s 170(1) has been the subject of judicial decision.
There is a further difficulty. Various sections are mentioned above which clearly, and expressly, impose
'requirements' upon a party. There are various other provisions which clearly impose positive 'requirements'
upon a party, although that expression is not used: see, in particular, CCA 1974, ss 77-79, 80, 85(1), 97, 103
and 107-110. But a 'requirement' may be negative in form or substance, ie a person may be required to
refrain from certain actions: see, for example, CCA 1974, ss 49-51 and 123 (on one view, contrary to that
canvassed above, CCA 1974, s 113(1) falls into this category). But there is probably a further category of
'requirement', where the Act does not compel a party to take any steps at all, but imposes a condition upon
him if he does propose to act (eg to serve a notice before enforcing an agreement or security (see ss 76, 87,
98 and 111)) or to apply to the court for enforcement (see, eg, CCA 1974, ss 80, 86(2), 90, 92 and 126). If
the creditor breaches any of these requirements, the debtor is powerless except to the extent that the Act
provides a remedy (or 'sanction'). This is the purpose of CCA 1974, s 170 and the breach is neither
actionable as such nor the basis of a claim for restitution: cf Orphanos v Queen Mary College [1985] 2 WLR
703 at 712-713. How much further the term 'requirement' extends is then a matter of doubt. The sections
referred to above all impose a specific primary obligation, and that obligation is the 'requirement' referred to
in CCA 1974, s 170(1). But CCA 1974, s 170(1) itself distinguishes the 'requirement' from the 'sanction' (if
any) imposed by the Act for breach of the requirements (as does CCA 1974, s 170(2)). This distinction is
easy to apply where the 'sanction' provided is in the nature of a penalty (whether civil, as in CCA 1974, s 91,
or criminal, as to which see generally CCA 1974, Sch 1). But what of the various requirements for which the
'sanction' provided itself takes the form of a rule or prohibition which can also be 'broken' by
non-observance? For example, CCA 1974, s 21 requires a person carrying on a consumer credit business to
be licensed. A criminal sanction is imposed by CCA 1974, s 39, and CCA 1974, s 40 imposes the further civil
sanction that 'a regulated agreement if made when the creditor ... was unlicensed, is enforceable against the
debtor ... only where the OFT has made an order under [s 40] which applies to the agreement'. If the creditor,
'in breach' of CCA 1974, s 40, enforces an agreement by means of self-help, and without reliance upon CCA
1974, s 173(3), the application of CCA 1974, s 170(1) is far from clear. On the one hand since CCA 1974, s
170(1) as observed above distinguishes a 'requirement' from a 'sanction', it may be argued with some force
that the section applies to the breach of CCA 1974, s 21, but not to the 'breach' of CCA 1974, s 40 since that
provision constitutes the 'sanction' and not the 'requirement'. On the other hand it may be argued that a
'sanction' may itself impose a 'requirement' (ie that a creditor who seeks to enforce an unlicensed agreement
Page 500
must obtain an order under CCA 1974, s 40) and that CCA 1974, s 170(1) applies to the breach of that
requirement as well as to the original breach of CCA 1974, s 21. The same question arises in relation to
other important provisions. In particular CCA 1974, s 65 provides that an improperly executed agreement is
enforceable against the debtor on an order of the court only (and, unlike CCA 1974, s 40, CCA 1974, s 65
specifically treats repossession of goods or land as an 'enforcement'). Like CCA 1974, s 40, CCA 1974, s 65
is clearly a 'sanction' within the meaning of CCA 1974, s 170(1) (as to the relevant 'requirements' see CCA
1974, ss 55, 58, 60-64 and 105(9)) and once again it is unclear whether CCA 1974, s 65 is also to be treated
as itself imposing a 'requirement' (cf CCA 1974, ss 105(7), 111(2), 113(2) and 124(1), (2)). It is unfortunate
that the quest for brevity and generality in s 170(1) has left scope for uncertainty and dispute on so
fundamental a question, for the section was inserted in the Act to avoid precisely this sort of uncertainty. For
if CCA 1974, s 170(1) does not apply to 'sanction-requirements', it by no means follows that the court will
allow redress to a debtor against a creditor who ignores the sanction. The court will be subject to competing
arguments, first that redress should be granted in order to give teeth to the statutory sanction, and secondly
that even if CCA 1974, s 170(1) on its true construction does not apply, an analogous rule should be applied,
denying relief in accordance with the general tenor of the section.
Sanctions
The sanctions referred to in CCA 1974, s 170(1) may be criminal (see generally CCA 1974, Sch 1) or civil.
Civil sanctions may take the form of liability in damages (see CCA 1974, s 92(3)) or to make restitution (see
CCA 1974, s 91). The commonest form of sanction, however, is a restriction upon enforceability of
agreements. In some cases an enforcement order must be sought from the court (see CCA 1974, s 127(1))
or an order must be obtained from the OFT (see CCA 1974, s 40). In other cases, a creditor 'is not entitled to
enforce' an agreement as a consequence of non-compliance with a statutory duty (see, eg, CCA 1974, ss
77(4), 78(6), 79(3), 85(2) and 97(1)): in yet other cases he 'is not entitled to enforce' the agreement if he has
failed to serve a statutory notice (see CCA 1974, ss 76 and 98) or must serve a notice before he 'can
become entitled' to take certain steps to enforce the agreement (see CCA 1974, s 87). Quite apart from the
question whether certain of these sanctions may be treated in themselves as 'requirements' for the purposes
of CCA 1974, s 170(1) (see the note 'A breach of any requirement' above) the question arises what
significance is to be read into the different forms of 'sanction' and the different words used to impose them. In
particular, where the Act provides that a creditor is 'not entitled' to enforce an agreement, or must serve a
notice before he can become entitled to do so, a natural inference is that any attempt to enforce the
agreement must be wrongful, vis-à-vis the debtor (for example, a contractual right to repossession of goods
will be suspended); if so, the debtor may resist judicial or extra-judicial enforcement (but if he is unable to
prevent the creditor from enforcing the agreement, eg by preventing further drawings on a facility, is he
entitled to redress for any consequent loss?)
As being such a breach
The CCA 1974, s 170(1) merely restricts sanctions (or remedies) in respect of the breach of a requirement
made by or under this Act. In so far as an act or omission is also wrongful in some other respect, eg it is a
breach of contract, or a tort, nothing in this section operates so as to prevent an action lying in respect of that
civil wrong. The position would be the same in respect of a breach of a requirement made by or under the
Act which is also a criminal offence under some other statute. Where an offence has been committed,
whether under this Act or the general law, this section does not directly affect the capacity in which the
accused is charged. Thus he may be charged with an inchoate offence (eg conspiracy or attempt) or as a
secondary party (with aiding, abetting, counselling or procuring): Brookes v Retail Credit Card Ltd (1985) 151
JP 131, [1986] CCLR 5.
The OFT
The OFT may take account of matters 'appearing to him' to constitute a breach of a requirement of the Act or
of regulations made under it for the purposes of his functions under the Act. In particular, such breaches will
Page 501
be relevant in relation to his licensing functions, as to which see generally CCA 1974, s 25. Where no judicial
proceedings have taken place in relation to an apparent breach, the OFT must nevertheless be satisfied that
the breach has occurred. He may wish to take account of matters which would, if prosecuted, require to be
proved beyond a reasonable doubt as constituting the commission of an offence. Semble, for the purposes
of his statutory functions the OFT is entitled to take account of matters which appear to him to constitute a
breach of the Act on a balance of probabilities.



thats what Goode says on s170

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

But how do you know the agreement is terminated SeeThumb?

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

The monkeys are out to get me me Lud!

There is no contractual termination clause in the agreement.

There was no notice of the termination.

And the naughty little thing are currently showing only a late payment in August (the most recent data I have available) on Equifax and Callcredit.

And for clarification, the account was paid up to Sept, and there are no other notices.

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Is there a termination clause in your agreement's T&Cs SeeThumb?

If you say that the termination "happened independently of the DN" it might be that the termination is contractual (and possibly OK) and the DN just a "mistake".

How were you notified of the termination? Was there a letter or notice of some sort?

And lastly have the monkeys recorded a default on your credit file? I am thinking that they may not have done if the termination was contractual (ie, non-default) and the DN a "mistake". If they have recorded a default then, perversely, that might help you...

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Thanks me Lud,

No insult taken. This is a very unusual case. I would be suspicious myself if it were not for the fact that I have first hand experience of it!

Don't have the wear with all to reproduce the DN here, but it was:

"Served under Section 87(1) of the Consumer Credit Act 1974"

The reason I feel it can be disregarded is that I believe it can be demonstrated to be a symptom of the overall error, part of a broken process that is, and that the termination happened independently of the DN. Somehow, I believe that an error has occurred on the account that triggered a retrospective false default, and the system has then generated everything it erroneously thinks was due - everything happened so quickly: Perfect customer to collection notices in two weeks. I received no notices of non payment before DN, and my first collection notice was sent five days before the deadline given for compliance. It is now their lack of action that is the biggest issue, and the longer they fail to act, I believe, the worse the courts will look upon them.

I have been sending letters (as I want everything in writing given the situation) almost every other day requesting they take action.

If the OC had responded to my original communications, warning them of the problem, this could have been resolved. But having ignored all my messages, and still not having responded, I feel it is now fair to accept their continued error as a fundamental breach.

Just to confirm, this is the only account I have with the OC. And thanks for the advice, I am trying to build a comprehensive list of all their errors in managing this situation.

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

SeeThumb

Are you sure it was a s.87 DN you received, and not a different type of notice? Apologies if this a little insulting but if you received a DN it must have identified a breach of your agreement - are you able to post the DN here? Perhaps they meant to send you a termination notice, assuming there is a contractual termination clause in your agreement.

If it is in fact a DN is the cause a breach of some other linked agreement? I know that some lenders link current accounts, loans and so on and a breach of one causes (according to them) a default on all accounts.

If neither of the above then I think you must look to s.140 and also refer (as that is all you can do) the OC to Reg 5 of CPUTR, as it would seem highly misleading to default a non-defaulting agreement.

Did the OC record a default on your credit file? If so, you have both s.10 and s.13 of DPA available for a claim, not to mention the ICO whose final report will help in a DPA claim.

LA

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Also of course, there is the restriction in s170 which precludes any sanction criminal or civil for a breach of the Act.

Hi Pt and thanks,

I have checked out s170, and - I'm probably being an idiot here - it makes it's statement without reference to either creditor or debtor, which would imply, given your interpretation of it, that it was equally applicable either way. Therefore, unless I have missed something important, it would suggest that any action by the creditor to recover monies due to breach would also be incorrect.

Is it possible that this restriction is only applicable when the agreement is in place, e.g. they have to terminate before seeking to take action? Or, in my case, I would have to accept rescission before taking action against them.

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

IMO a safer route is to claim that the DN was defective and that none of the 'next steps' should have been taken, including the registration of adverse data and for which a claim for compensation could be made (DPA s.13).

Thanks again me Lud,

I think there is a pretty unique thing going on here, in that for some reason, the OC's management systems have caused a cataclysmic failure, and I am now coming to suspect that somehow they have obliterated or fatally corrupted my records.

I say this because, as I mentioned before, this isn't a case of me having defaulted and now attempting to stop them from going down the recovery route, but a situation where I have made every payment properly - I was completely up to date, and still am technically as they terminated the account without me defaulting or even making a late payment.

They have done nothing to stop or rectify the situation. It is the most incredible, almost unbelievable failure of their systems that has caused them, without any reasoning or care on their part, to terminate the account and set the collectors on me. And they continue to do so despite clear warning and no . Thankfully I have everything I need to demonstrate that my payments were all made correctly and in a timely manner.

So my reasoning is not for a faulty DN, as that is insignificant compared to fundamental breaches in CCA74, DPA98, and (complete) failure to comply with OFT guidance on debt collection, and that through these failures of their management systems, and failures of their customer services, they have proceeded to voluntarily terminate my account.

Although it may have resulted from an admin error, they have failed to act with care despite warning. When it comes down to it, a simple check of the letters they have sent me over the last month would show that there is a serious error in their systems, but they choose to continue pursuing me.

As a result of this, they have removed the only benefit I had from the agreement, that is the credit, and are seeking to collect the full sum from me. I believe that in anybody's money, that represents a fundamental breach, which represents repudiation, which gives me the right to accept rescission.

I can find no similar example anywhere, but a worrying thing for the OFT is that if it can happen to me, it can happen to anyone else that has a loan with my lender.

I think they could be in big trouble.

NB, it has been mentioned by many that if I had spoke with them by phone when I received the completely erroneous DN, this could have been sorted - I do not agree entirely. I chose to use one of the lender's other channels, which I feel I have every right to do, as it was provided for complaints and inquiries on their website and provided a receipt, as I'd had some pretty unfruitful experiences with automated call management with the lender and in general in the days when this first occurred. But if the OC builds in a requirement for the customer to specifically have to call them in order to identify their administrative errors, then the OFT will not look upon them favourably.

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

I'm in total agreement with you pt, thanks

Just hoping that SeeThumb doesn't take this further as I don't think it will work. Your s.170 reference is probably the killer blow.

LA