Contracts, Termination, Repudiation and Rescission

[Guest]

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this would mean that all existing actions up until the point of rescission would stand only future compliance would be rescinded.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

[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claiming, therefore your not saying you accept the rescission, but waht you are saying is the agreement was unlawfully rescinded/repudated by the creditor thereforer without your agreement.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

[Guest]

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

[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.

[Guest]

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

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.

[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

[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

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

[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.

[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.

[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

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

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

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.