Contracts, Termination, Repudiation and Rescission

[pt2537]

Re: Contracts, Termination, Repudiation and Rescission

Hmmm....not sure SeeThumb.

In a way I like the repudiation argument because it is so neat and tidy. But it's worth looking at the Brandon application for appeal here - Brandon argued that the DN was defective so the agreement could not be terminated, while Amex later argued that it didn't matter because there was a contractual termination clause in the contract which allowed termination notwithstanding a duff notice. The judge accepted this but didn't allow it as evidence because the original defence was based on default termination, the point being that there was nothing to later stop Amex serving a s.98A notice.

Any argument for 'repudiation' based on a duff DN and where a contractual termination clause exists is therefore likely to fail because it seems like a simple situation for a creditor to remedy, unless you can somehow argue for estoppel and make the case that the termination is binding. But a judge will have a hard time with that due to s.87, which states that termination is only effective where a DN conforms with s.88. A judge's hands are therefore likely to be tied due to the wording of the act.

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). If the creditor has been a pain, then you have s.140 available and for this it's worth looking at Harrison v Link. You could ask a court to discharge liabilities at s.140(B)(1)(c) and award compensation under DPA s.13 and any costs you have incurred such as loss of earnings due to the work you have put in. Note that s.140 also effectively offers a route to rescind the agreement (by getting the creditor to repay everything to you, and this was requested in Harrison (unsuccessfully)) and if you follow that route you will be on safer ground.

Just my view of course and if you use your repudiation argument instead please let us know how you get on as it will be an important outcome.

LA

There is no case law on this point when dealing with regulated credit agreements sadly.

While repudiation may well be available on breach, the difficulty is really that rescission which is often argued on the back of a bad default notice would have little mileage not least because the remedy is to put the parties in the position they would have been had the contract not existed.

Also of course, there is the restriction in s170 which precludes any sanction criminal or civil for a breach of the Act.
The Court of Appeal in Arrow v Devlin said that equitable remedies such as restitution of monies paid by mistake of law or fact are not recoverable due to s170

Applying the same ratio i think the rescission argument falls into difficulty

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Hmmm....not sure SeeThumb.

In a way I like the repudiation argument because it is so neat and tidy. But it's worth looking at the Brandon application for appeal here - Brandon argued that the DN was defective so the agreement could not be terminated, while Amex later argued that it didn't matter because there was a contractual termination clause in the contract which allowed termination notwithstanding a duff notice. The judge accepted this but didn't allow it as evidence because the original defence was based on default termination, the point being that there was nothing to later stop Amex serving a s.98A notice.

Any argument for 'repudiation' based on a duff DN and where a contractual termination clause exists is therefore likely to fail because it seems like a simple situation for a creditor to remedy, unless you can somehow argue for estoppel and make the case that the termination is binding. But a judge will have a hard time with that due to s.87, which states that termination is only effective where a DN conforms with s.88. A judge's hands are therefore likely to be tied due to the wording of the act.

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). If the creditor has been a pain, then you have s.140 available and for this it's worth looking at Harrison v Link. You could ask a court to discharge liabilities at s.140(B)(1)(c) and award compensation under DPA s.13 and any costs you have incurred such as loss of earnings due to the work you have put in. Note that s.140 also effectively offers a route to rescind the agreement (by getting the creditor to repay everything to you, and this was requested in Harrison (unsuccessfully)) and if you follow that route you will be on safer ground.

Just my view of course and if you use your repudiation argument instead please let us know how you get on as it will be an important outcome.

LA

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

In that situation the equitable remedy would be rescission of contract(ab initio)this would return the parties to their original position, and enable the innocent party to claim damages for additional losses, uncured by the breach.( loss of trade etc). This procedure would be prescribed by the court not either party in any case.

Cheers Davy,

I sense you do not hold out too much hope for me! Fair dos, you're probably right.

With regard to being prescribed by the court, I do agree that legally that is the case, but only where one party argues that they were not party to rescision. What is to stop both parties recognising that such will be the finding of the court, or simply wishing to get rid of a mutually undesirable contract, so accepting it as rescission and avoiding court costs and judgements? If they then record the contract as rescinded, it would be seen as binding, and would be recognised by a court as such were one of the parties then to insist that the other adhere to the contract. Therefore, rescission only requires the agreement of two parties, not the courts, in order to be proper.

Re: Contracts, Termination, Repudiation and Rescission

Thanks for that.
Please let us know how you get on

D

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

I don't know where the logic for this comes from. I have never heard of anyone claiming any of this against a creditor trying to reclaim a loan. I have heard of this in contract law where a party does not perform and the other side pursues damages caused by their repudiation of contract.

In that situation the equitable remedy would be rescission of contract(ab initio)this would return the parties to their original position, and enable the innocent party to claim damages for additional losses, uncured by the breach.( loss of trade etc). This procedure would be prescribed by the court not either party in any case.

In the case where performance had already been taken place under a contract(as in a credit agreement where monthly interest had been applied) if this remedy were applied. the rescission would be de futoro(in the future) this would mean that all existing actions up until the point of rescission would stand only future compliance would be rescinded. This is what I believe happened in pumpkinheads case.

D

Hi Davy and thanks,

I believe it is exactly the same logic applied by the OC for terminating the account before claiming back a full balance following default by the debtor. The law is applied to the creditor when they have breached just as it is to the debtor when they breach. The Consumer Credit Act 1974 would have no credibility if it did not allow the law to be applied equally to both parties. And a contract that contains any element that purports to override English Law is not worth the paper it is written on with respect to that part of the agreement. They may include it, but they cannot expect it to be respected in court.

Therefore, if one party can be demonstrated as having fundamentally breached (if debtor, then payments; if creditor, then failure to provide agreed credit, failure to comply with CCA 1974, failure to comply with DPA, etc.) the other party has the opportunity to terminate the agreement (if debtor, then acceptance of repudiation/fundamental breach; if creditor, then termination). The injured party can then either settle out of court (if debtor, then accept agreed damages; if creditor, receive an acceptable new agreement for repayment), or, if they feel that no realistic or fair agreement is arrived at, they can take it to court to present evidence. It is here that the court could, as you correctly described, prescribe rescission (return of all monies exchanged as part of the agreement so as to negate the rejected agreement), and if they did, the injured party, whoever they are, can seek appropriate damages (if debtor, then damages for loss of interest on the repayments; if creditor, then damages for projected future interest on the repayments). In futuro only invokes the realm within which the creditor's greater damages lie, and if the court could only act in futuro, costs such as interest since termination, default charges, etc. would not be applicable, and they clearly are. Damages can be sought whether ex post, in praesenti or in futuro, as they exist in all of these realms, there is no special concession for contract law.

If you have never seen case evidence of unlawful repudiation, it is likely because a creditor would always settle before it reached court if they were aware they had committed such (and there is little doubt when a true repudiation has occurred), as they risk not only possible losses, but also judgements on breaches of several very serious pieces of law. No legal department would allow things to progress far enough to receive judgement against them.

Re: Contracts, Termination, Repudiation and Rescission

IMO there is no such thing as "unlawful rescision" and I doubt "unlawful repudiation" would work either given s.170. If there is a termination clause pre-1/2/11 then there is no argument becuase the Act does not help you if you have a rolling credit agreement and repudiation/recission are just meaningless terms.

If there is actual case law to support the recission/repudiation angle in respect of a duff DN then please show us. As it is I just don't see how it can be effectively argued in court.

LA

Have to agree

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

But its unlawful rescission your claiming, therefore your not saying you accept the rescission, but waht you are saying is the agreement was unlawfully rescinded/repudated by the creditor thereforer without your agreement. Also if the DCA could issue a DN, as in your view, due the agreement not being terminated. That would mean that if the DCA issued DN was valid and the debtor repaid the arrears, that the DCA would then have to treat the default as not having occured, leaving the DCA with no choice but to continue to provide the Debtor, under the agreement with a credit fascility.

Er, no teaboy, I'm not claiming recission. It wouldn't make any sense. I doubt there's any such thing as "unlawful recission" as to rescind an agreement/contract requires consent from both parties.

I'm not saying a contract is "unlawfully repudiated" either, as a regulated agreement could be breached by the creditor but s.170 prevents any comeback. These terms, for me anyway, are just meaningless.

No, I did not say a DCA could issue a DN. I said that the lawfull assignee, assuming he has a credit licence, could issue a DN. A DCA would not be able to comply with s.89 unless it was licensed. You are misquoting me.

Now i can not see a DCA being able to do that, can you! Thats why once the argeement after the issuing of a DN (Valid or Invalid) is sold it is terminated. All a DCA has bought is the rights and entitlements to the Debt owed, they have not bought the rights and entitlements to carrying on providing the debtor with a credit facility under the agreement like the original creditor did. I mean come on how many DCA's do you know actually provide a running credit facility for a credit card. Fixed term loans probably not so much an issue as your paying back monthly. But credit cards lol - I think theres more chance of me visiting alpha centuri then their is of a DCA in this day an age being able to facilitate the running of a credit card facility. Put it this way, would it not also be unlawful repudiation of contract by the DCA if they refuse to provide such facility if the debtor paid the arrears on the DCA issued DN? Yes it would be unlawful repudiation. meaning they would not be entitled to the rest of the outstanding balance. So a DCA would be shooting themselves in the foot if they issued a new DN and the Debtor then paid. In fact, thats not a bad idea, let the original creditor sell the account of the back of a faulty DN, get the DCA to issue a Valid one then pay the arrears. If they then refuse to treat your default as not having occured you have them by the balls for unlawful repudiation and don't have to pay them another penny.

So in a way if what you said were correct, it wouldn't make the slightest bit of difference as its pretty clear before a debtor pays the arrears that the DCA has no intention of doing anything but repudiate the contract. Something that could be argued in court too on grounds of the DCA had no intention of treating the breach as having not occured even by issuing a valid DN, as they simply do not have the ability to facilitate a running account agreement for a credit card, therefore they would have not been able to comply with their duties and obligations under the contract if the arrears under the default had been paid. As such all they are entitled to claim is arrears. Off course thats unless they can prove they could facilitate the operation and running of a running credit agreement allow the debtor to continue to use the credit card as though no default had occurred. But the chance of them being able to prove that is very highly unlikely!

Again, I simply did not say this.

As I have said, if the agreement is assigned to an unlicensed body when there is no contractual termination clause in the contract, I have no idea at all what happens. If the agreement is assigned to a licensed body when there is no contractual termination clause then the duff DN cannot end the agreement and a new DN is possible. If the agreement is assigned to a licensed body and the termination is contractual then I do not see how a DN can be issued.

This argument is really about entitlements under the Act and within the contract.

IMO there is no such thing as "unlawful rescision" and I doubt "unlawful repudiation" would work either given s.170. If there is a termination clause pre-1/2/11 then there is no argument becuase the Act does not help you if you have a rolling credit agreement and repudiation/recission are just meaningless terms.

If there is actual case law to support the recission/repudiation angle in respect of a duff DN then please show us. As it is I just don't see how it can be effectively argued in court.

LA

Re: Contracts, Termination, Repudiation and Rescission

I don't know where the logic for this comes from. I have never heard of anyone claiming any of this against a creditor trying to reclaim a loan. I have heard of this in contract law where a party does not perform and the other side pursues damages caused by their repudiation of contract.

In that situation the equitable remedy would be rescission of contract(ab initio)this would return the parties to their original position, and enable the innocent party to claim damages for additional losses, uncured by the breach.( loss of trade etc). This procedure would be prescribed by the court not either party in any case.

In the case where performance had already been taken place under a contract(as in a credit agreement where monthly interest had been applied) if this remedy were applied. the rescission would be de futoro(in the future) this would mean that all existing actions up until the point of rescission would stand only future compliance would be rescinded. This is what I believe happened in pumpkinheads case.

D

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Rescission is not repudiation. Rescission is a mutual act that may be accepted by the injured party following unlawful repudiation. The rescission is not unlawful.



Repudiation is the unilateral rejection of a contract that can be lawful, if done with due process, and must be done before action to recover funds. But if for some reason it is not done properly, it is unlawful, but is still binding, as the party must take responsibility for their recorded actions.



So, it is repudiation that allows rescission, and rescission that requires that the situation is returned to the pre agreement. If you are the injured party of unlawful repudiation, you have the advantage as mentioned above.

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Not rescission as a cause, as that can only be by mutual consent. However, if any party repudiates, whether consciously or by fundamental breach, the other party is entitled to accept that act as an invitation to mutual rescission.



If an agreement reaches rescission, then no agreement exists, and as in my case, the OC is entitled to seek repayment of the original amount of the loan (but no interest as that was not handed across). The borrower then is also entitled to receive back all payments made whilst the agreement was in place, which included interest. However, as the injured party following the lender's fundamental breach, they may also claim damages, such as statutory interest. Thus if the agreement had reached any kind of maturity, the OC is likely to have to pay back more than they loaned out. They will then, if they havetaken this to court, also have to face the charges of breach, which could lead to further damages and finds.



For this reason, any serious case of unlawful repudiation will not make it to court as it is in the OC's interest to settle before such judgements are made. That is why so few cases of UR are on record.

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

But its unlawful rescission your claiming, therefore your not saying you accept the rescission, but waht you are saying is the agreement was unlawfully rescinded/repudated by the creditor thereforer without your agreement. Also if the DCA could issue a DN, as in your view, due the agreement not being terminated. That would mean that if the DCA issued DN was valid and the debtor repaid the arrears, that the DCA would then have to treat the default as not having occured, leaving the DCA with no choice but to continue to provide the Debtor, under the agreement with a credit fascility.

Now i can not see a DCA being able to do that, can you! Thats why once the argeement after the issuing of a DN (Valid or Invalid) is sold it is terminated. All a DCA has bought is the rights and entitlements to the Debt owed, they have not bought the rights and entitlements to carrying on providing the debtor with a credit facility under the agreement like the original creditor did. I mean come on how many DCA's do you know actually provide a running credit facility for a credit card. Fixed term loans probably not so much an issue as your paying back monthly. But credit cards lol - I think theres more chance of me visiting alpha centuri then their is of a DCA in this day an age being able to facilitate the running of a credit card facility. Put it this way, would it not also be unlawful repudiation of contract by the DCA if they refuse to provide such facility if the debtor paid the arrears on the DCA issued DN? Yes it would be unlawful repudiation. meaning they would not be entitled to the rest of the outstanding balance. So a DCA would be shooting themselves in the foot if they issued a new DN and the Debtor then paid. In fact, thats not a bad idea, let the original creditor sell the account of the back of a faulty DN, get the DCA to issue a Valid one then pay the arrears. If they then refuse to treat your default as not having occured you have them by the balls for unlawful repudiation and don't have to pay them another penny.

So in a way if what you said were correct, it wouldn't make the slightest bit of difference as its pretty clear before a debtor pays the arrears that the DCA has no intention of doing anything but repudiate the contract. Something that could be argued in court too on grounds of the DCA had no intention of treating the breach as having not occured even by issuing a valid DN, as they simply do not have the ability to facilitate a running account agreement for a credit card, therefore they would have not been able to comply with their duties and obligations under the contract if the arrears under the default had been paid. As such all they are entitled to claim is arrears. Off course thats unless they can prove they could facilitate the operation and running of a running credit agreement allow the debtor to continue to use the credit card as though no default had occurred. But the chance of them being able to prove that is very highly unlikely!

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

The issue of a credit licence is relevant because, if the assignee has a credit licence and there is no contractual termination, then a court may very well say that the DN can be reissued. I cannot see any restriction in CCA that prevents this from happening. Don't forget that a judge will just be intrepreting and applying the Act, nothing more. A judge will ask a debtor why he thinks an agreement is repudiated, and if the reason if a defective DN I can imagine how that will play out...

It is incorrect to say that only the original creditor can issue a DN where there is right of assignment in the contract.

I also think it is a mistake to place complex legal arguments without precedent in front of a DJ, unless the debtor is prepared for a lot of work and possibly cost. I would strongly suggest sticking to the two relevant acts and using them to your advantage.

If there is any case at all, small claims or not, where this argument has been used successfully then I would be very interested to see it.

For recission to be claimed the debtor would have to ask for it. You cannot use the recession argument without accepting repudiation otherwise it cannot take place. Recession only happens at the point prior to the contract. You would have to ask for the agreement to be rescinded, to attain recission, the cause being the creditor's repudiation.

I honestly see no practical benefit in this line of reasoning (in agreement with Davy), unless more has been paid in to the account than taken but there is still the problem of s.170...

Re: Contracts, Termination, Repudiation and Rescission

Yeah but thats why you should never accept rescission, as a golden rule, as doing so means you consent to it. So yeah she did shoot herself in the foot by stating she wished to accept rescission. Though claiming unlawful rescission/repudation is not acceptance of the rescission/repudation but merely enforcing that it was unlawful and the creditor is therefore not entitled to the full balance. Off course as she won on faulty DN, then she would have had no need to argue unlawful rescission and could have withdrawn any counter claim to such effect. So her mistake was the use of the word "Accept".

I think the reason why we have not seen a reported case of unlawful rescission being successful in the county court is because 1 - hardly anyone has tried, and those that have, as per your example, clearly have not thought it out probably and gone the wrong way about it, as you clearly demostrated in your example above lol.

Personally i think it is because it does not make a any real legal sense, but that is only my opinion of course.

D

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

I think that if a debtor had successively avoided repaying the creditor through a claim of rescission on a fault DN it would be well reported, other lesser issues certainly have, even in the lower courts.

I remember reading a case on CAg where a poster used this argument. The judge had already acknowledged that the DN was incorrect and that the creditor could not enforce.
However the debtor pressed that not only was the agreement unenforceable but that she wished to accept the repudiation of contract and subsequent rescission .

The judge agreed and ordered that the agreement be rescinded, which resulted in an order being given that the debtor repay all monies due under the contract back to the creditor.

Shot herself in the foot so to speak. I think it may have been the "pumpkinhead" case mentioned earlier if anyone would like to look it up.

D

Yeah but thats why you should never accept rescission, as a golden rule, as doing so means you consent to it. So yeah she did shoot herself in the foot by stating she wished to accept rescission. Though claiming unlawful rescission/repudation is not acceptance of the rescission/repudation but merely enforcing that it was unlawful and the creditor is therefore not entitled to the full balance. Off course as she won on faulty DN, then she would have had no need to argue unlawful rescission and could have withdrawn any counter claim to such effect. So her mistake was the use of the word "Accept".

I think the reason why we have not seen a reported case of unlawful rescission being successful in the county court is because 1 - hardly anyone has tried, and those that have, as per your example, clearly have not thought it out probably and gone the wrong way about it, as you clearly demostrated in your example above lol.

Re: Contracts, Termination, Repudiation and Rescission

I think that if a debtor had successively avoided repaying the creditor through a claim of rescission on a fault DN it would be well reported, other lesser issues certainly have, even in the lower courts.

I remember reading a case on CAg where a poster used this argument. The judge had already acknowledged that the DN was incorrect and that the creditor could not enforce.
However the debtor pressed that not only was the agreement unenforceable but that she wished to accept the repudiation of contract and subsequent rescission .

The judge agreed and ordered that the agreement be rescinded, which resulted in an order being given that the debtor repay all monies due under the contract back to the creditor.

Shot herself in the foot so to speak. I think it may have been the "pumpkinhead" case mentioned earlier if anyone would like to look it up.

D