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And heres the Judgment
MR. P. MANTLE (instructed by Howell-Jones LLP) appeared on behalf of the Claimant.
MR. T. BRENNAN (instructed by Howlett Clarke Solicitors LLP) appeared on behalf of the Defendant.
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THE DEPUTY DISTRICT JUDGE:
1 This is a preliminary matter on which I have been asked to adjudicate
2 I have before me an application in respect of two preliminary points identified in an application on 18th November 2016 by the defendant seeking a trial of two preliminary issues, namely: is the claimant’s claim statute barred by the Limitation Act 1980; and, secondly, are the documents supplied by the claimant in the trial bundle compliant with s.78 of the 1974 Act? The application indicates that it is common ground between the parties that the last payment in relation to this debt was made on or about 10th April 2009 to a predecessor in title to the debt of the current claimant, MBNA, the original granter of credit within this.
3 Quite rightly, the application identifies that the court will need to look at these two questions as a preliminary point because if it decides as a matter of law that the claimant’s claim is statute barred, then clearly the case will go no further. Quite sensibly, counsel have invited me to look at that first matter and then, dependent upon my ruling in respect of that, we can move on and look at the issues about the documents supplied and compliance with s.78.
4 This claim arises from a running account credit agreement going back as far as 9th October 1997, when the original provider of credit was MBNA. The claimant’s claim arises from a chain of assignments and purchases of that account, firstly, to Varde International and then to AktivKapital and more latterly to PRA. The issue of whether or not notices in respect of those various transfers do not trouble me at this point but will be the point of the second part of today’s hearing. The issues within the case also deal with enforceability due to sufficiency of notice. That, again, is not the matter that I have had to consider today.
5 The terms of agreement I have read. I have not gone through the entirety of the bundle, but I have read sufficient it satisfy myself. So I have read all the relevant pleadings and the application, I have read the matters referred to in the reading lists of counsel and I have particularly looked at both the statement of claim and the defence and the terms of the agreement, which are set out in the appendices to the particulars of claim.
6 Very much in brief, the chronology is that the agreement was 9th October 1997. It was a rolling or running account agreement, a typical credit card agreement. The defendant appears to have made regular payments thereon up to 10th April 2009, which was the last time that he made any payment. As a result, a notice under s.87, a default notice, was issued on 4th December 2009, giving, interestingly, less than the fourteen days that is required by s.88 to comply with a notice, but otherwise setting out what is likely to happen if he fails to comply with that notice.
7 It is that notice then that is the matter of the greatest dispute between the parties. It is the defendant’s case that the limitation period runs not from that notice, either the date of the notice or probably more properly the expiry period (21st December) within that notice, but runs from the breach, that is 10th April 2009. The claimant’s case is that the limitation period runs from the expiry period allowed in the default notice, that is 21st December 2009. We, therefore, have differing limitation periods being placed before me either of 10th April 2015 or 21st December 2015.
8 It is common ground between the parties (and it is within the bundle) that the proceedings were commenced on 31st October 2015. Therefore, if the claimant is correct in their submissions, then the case proceeds; if I prefer the defendant’s version and submissions, then the case must perforce fail as being outside that primary limitation period.
9 The case turns on the interpretation and construction not only of s.87 of the Consumer Credit Act and notices given thereunder, but also the question of s.5 of the Limitation Act. The primary limitation period indicates that time runs for six years from the date a cause of action accrued. That is not defined in the Limitation Act. Very helpfully, I have been pointed to the case of Read v Brown, where Lord Esher, who also appears in the later Solicitors Act case Coburn -v- Colledge), who was then Master of the Rolls, gave a definition as follows:
“Every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his rights to the judgment of the court.”
10 So far as s.87 is concerned, it reads as follows:
“(1) Service of a notice on the debtor or hirer in accordance with section 88 (a ‘default notice’) is necessary before the creditor or owner can become entitled, by reason of any breach by the debtor or hirer of a regulated agreement...”
Then it lists a number of things that he can do: terminate under sub paragraph (1); demand earlier payment under sub paragraph (2), etc., etc.
11 Section 88 sets outs the contents and effect of the default notice, which must be: in a prescribed form; specify the nature of the alleged breach; if the breach is capable of remedy, what action is required; if it is not capable of remedy, the sum required to be paid as compensation; the date specified under subsection (1) must not be less than fourteen days; and if the date is not inserted therein, then no action can be taken until fourteen days have elapsed.
12 The wording, therefore, is important. Service of the s.87 notice is “necessary before the creditor can become entitled by reason of the breach”. The claimant argues very convincingly before me that, therefore, the breach is not the operative event for s.5 of the Limitation Act as it only gives rise to a right of arrears. As he rightly points out, the claimant is seeking the full amount, together with interest under the terms of the agreement. He says in order to do so he must serve notice and the notice is one, therefore, of the “every fact which it would be necessary for the plaintiff to prove” that Lord Esher mentions in Read v Brown. He presses upon me that mere default will not act to automatically terminate the account and the creditor may choose to terminate or may not and, therefore, until he makes his choice, which is shown by the notice, time does not and cannot run for the purposes of the Limitation Act.
13 Inter alia, as an aside, the defendant claims that this really is repugnant as the claimant could effectively, therefore, stretch out a limitation period indefinitely. That was a matter that I raised with counsel for the claimant and he conceded to me that as a narrow answer to an exam question that would have to be the position. But he points to a code of conduct, and particularly para.7.3.4R of the Consumer Credit Source Book which only came into force, I am told, in 2014. I did not have the benefit of that before me, but, in essence I am informed that, the whole tenor of what creditors must do is treat debtors with forbearance and they must enter into discussion, negotiation, point them in the direction of help, and invite them to involve themselves in trying to work out how to best remedy their position. As a result of that, whole ethos, the claimant, therefore, tells me that creditors are “on the horns of a dilemma”.
14 The claimant relies very heavily on a case of BMW v Hart. In that case, in the first instance the judge found himself to be bound by the case of Reeves v Butcher, indicating effectively that where there are two conditions precedent (that was argued both in that case and, indeed, is argued now in this case) time runs from the first condition precedent, not the second. The Court of Appeal overturned that and indicated:
“...as a matter of general principle where a remedy arises on the election of one party to the contract, the cause of action does not accrue until the election is made.”
15 Albeit that he concedes that Reeves is not a Consumer Credit Act case, the claimant claims that this falls very much on all fours and is a principle that can be rightly approved by this court and transferred in principle when considering the question of (a) default and (b) the issue of a s.87 notice. Therefore, if that is accepted, then the cause of action does not and cannot accrue until the claimant has made his election and the election can only be made by the s.87 notice.
16 The defendant’s case runs wholly contrary to that and indicates only (and seeks to persuade me) that s.87 is effectively only a procedural bar, that is that the cause of action has arisen on the breach but cannot be enforced until the procedural requirement is met.
17 Both parties cited and invited me to read the cases of Coburn v Colledge, an 1897 case, again where the Master of the Rolls Lord Esher adjudicated, and that relates to the Solicitors Act and the delivery of a bill; and Swansea City Council v Glass, a 1991 case in the Court of Appeal. In Coburn the issue was that the solicitor was suing on a bill and, under s.37 of that Act, no right of action accrues until one month after delivery of the bill. Accordingly, does limitation arise on the date of the bill or the one month thereafter? I need not go through that in great detail because all of the Lords of Appeal (Lord Esher in particular) indicated that this is a procedural bar only, that is to say that it is not a condition precedent within the terms of BMW, but rather simply that it is a restriction on the plaintiff then (claimant now) that he cannot do anything until in that case that time had elapsed.
18 Swansea City Council v Glass, a 1991 case, deals with a not dissimilar point but is more on point because it deals with interpretation of statute. It arises from an appeal from, Judge Michael Evans, sitting in Swansea County Court and he found himself bound in a way that the Court of Appeal overturned. In brief, in Swansea, the local authority were suing for monies due for work done on a property from the tenant who had failed to comply with a notice to undertake those works, that notice having been served under the Housing Act of 1957. The local authority argued that (for limitation purposes) time ran from the service of the notice and the defendant there argued that it ran from the date that the works were completed. That was crucial in that case (just as in this case) the proceedings had been issued after six years from the date of completion of the works but before six years from the relevant notice dates.
19 There appears, therefore, to be something of a conflict of authorities within the bundles provided to me. Counsel for the claimant seeks to distinguish on the basis that he says the service of a default notice under s.87 is an “essential element” without which the creditor has no entitlement to terminate, to demand payment or take any other steps as set out in (a), (b), (c), (d) and (e) of s.87.
20 The defendant points out quite rightly that BMW v Hart did not apply to a Consumer Credit Act case as the amount involved in that case was something in excess of Ł30,000, which was outside the then Consumer Credit Act limit of Ł25,000 and, therefore, does not fall within what both sides urge on me is quite a restrictive statutory framework for consumer credit.
21 Counsel for the claimant argues that it is highly persuasive and, in particular, he points to para.29 which I have already read, but I repeat:
“...as a matter of general principle where a remedy arises on the election of one party to the contract, the cause of action does not accrue until that election is made.”
What he seeks to persuade me is that election is the pertinent point herein.
22 I raised with counsel for the claimant the possibility that, as a result, the claimant could effectively sit on his hands for twenty years -- counsel for the defendant quite rightly pointed out that I picked that from the last paragraph of the Swansea Council case -- and it would be abhorrent that a creditor could carry on for that length of time. I am told that the whole ethos, particularly with rights to compensation, would not allow for that, but there is nothing in the statute, if what he tells me is correct, to prevent a creditor from acting in that way.
23 I have been pointed to and I find very persuasive what Lord Reid said in Central Electricity Generating Board v Halifax Corporation:
“No new right or liability came into existence at [the date of the minister’s decision]. It is quite clear, and it is now admitted by the appellants, that the effect of the minister’s decision was merely to prove that this sum had belonged to the appellants ever since the vesting date. It created no new right of property or chose in action; it merely enabled a pre existing right to be enforced.”
24 Lord Mackay is quoted at the top of page 852 at para.A:
“If he were to institute proceedings for infringement before the patent for the invention was sealed, the procedural requirement of the proviso would not be satisfied, but a statement of claim could not be struck out as disclosing no cause of action, although it might be liable to be struck out as an abuse of process of the court.”
25 Lord Justice Taylor says:
“Although not on all fours with the present case, these decisions show that a cause of action may well accrue before (for procedural reasons) the plaintiff can bring proceedings.”
He goes on to say in the last page of his judgment:
“I am fortified in this view by consideration of what could result if the local authority were right. Upon their argument the local authority could delay service of a demand indefinitely. Then, having served their demand long after the works were complete, they would have a further six years in which to take proceedings in the High Court or the County Court.”
He then quotes Lopes LJ in Coburn, which says:
“There is nothing in this section, so far as I can see, inconsistent with the view that the cause of action arises when the work is completed. It was urged that if this construction were adopted a solicitor would have a shorter time during which he may abstain from bringing his action forward than the rest of Her Majesty’s subjects. That may be so. On the other hand, if the plaintiff’s contention is correct, the solicitor may abstain from delivering his bill for twenty years and then at the end of that time he may deliver it and sue after the expiration of a month from its delivery. It seems to me that that would be a very anomalous and inconvenient result.”
26 I have to say that that weighs heavily on me. I appreciate and accept that we are not looking at anything like twenty years in this case, nor yet am I a court of record and therefore setting precedent. But that matter troubles me considerably and I am not convinced that that was the intention of Parliament.
27 I believe that this is a condition precedent to issuing proceedings that is a procedural requirement and I am satisfied that I prefer the defendant’s argument that the cause of action arose at the time of the breach. To use the words of Taylor LJ, “anything else could be repugnant”.
28 Accordingly, I find that the proceedings were issued after the relevant limitation period. The inevitable, I think, follows from that in that I do not think I need to hear from you gentlemen as to the second point because that effectively strikes this action out.
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MR. T. BRENNAN (instructed by Howlett Clarke Solicitors LLP) appeared on behalf of the Defendant.
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J U D G M E N T
(As approved by the Judge)
(As approved by the Judge)
THE DEPUTY DISTRICT JUDGE:
1 This is a preliminary matter on which I have been asked to adjudicate
2 I have before me an application in respect of two preliminary points identified in an application on 18th November 2016 by the defendant seeking a trial of two preliminary issues, namely: is the claimant’s claim statute barred by the Limitation Act 1980; and, secondly, are the documents supplied by the claimant in the trial bundle compliant with s.78 of the 1974 Act? The application indicates that it is common ground between the parties that the last payment in relation to this debt was made on or about 10th April 2009 to a predecessor in title to the debt of the current claimant, MBNA, the original granter of credit within this.
3 Quite rightly, the application identifies that the court will need to look at these two questions as a preliminary point because if it decides as a matter of law that the claimant’s claim is statute barred, then clearly the case will go no further. Quite sensibly, counsel have invited me to look at that first matter and then, dependent upon my ruling in respect of that, we can move on and look at the issues about the documents supplied and compliance with s.78.
4 This claim arises from a running account credit agreement going back as far as 9th October 1997, when the original provider of credit was MBNA. The claimant’s claim arises from a chain of assignments and purchases of that account, firstly, to Varde International and then to AktivKapital and more latterly to PRA. The issue of whether or not notices in respect of those various transfers do not trouble me at this point but will be the point of the second part of today’s hearing. The issues within the case also deal with enforceability due to sufficiency of notice. That, again, is not the matter that I have had to consider today.
5 The terms of agreement I have read. I have not gone through the entirety of the bundle, but I have read sufficient it satisfy myself. So I have read all the relevant pleadings and the application, I have read the matters referred to in the reading lists of counsel and I have particularly looked at both the statement of claim and the defence and the terms of the agreement, which are set out in the appendices to the particulars of claim.
6 Very much in brief, the chronology is that the agreement was 9th October 1997. It was a rolling or running account agreement, a typical credit card agreement. The defendant appears to have made regular payments thereon up to 10th April 2009, which was the last time that he made any payment. As a result, a notice under s.87, a default notice, was issued on 4th December 2009, giving, interestingly, less than the fourteen days that is required by s.88 to comply with a notice, but otherwise setting out what is likely to happen if he fails to comply with that notice.
7 It is that notice then that is the matter of the greatest dispute between the parties. It is the defendant’s case that the limitation period runs not from that notice, either the date of the notice or probably more properly the expiry period (21st December) within that notice, but runs from the breach, that is 10th April 2009. The claimant’s case is that the limitation period runs from the expiry period allowed in the default notice, that is 21st December 2009. We, therefore, have differing limitation periods being placed before me either of 10th April 2015 or 21st December 2015.
8 It is common ground between the parties (and it is within the bundle) that the proceedings were commenced on 31st October 2015. Therefore, if the claimant is correct in their submissions, then the case proceeds; if I prefer the defendant’s version and submissions, then the case must perforce fail as being outside that primary limitation period.
9 The case turns on the interpretation and construction not only of s.87 of the Consumer Credit Act and notices given thereunder, but also the question of s.5 of the Limitation Act. The primary limitation period indicates that time runs for six years from the date a cause of action accrued. That is not defined in the Limitation Act. Very helpfully, I have been pointed to the case of Read v Brown, where Lord Esher, who also appears in the later Solicitors Act case Coburn -v- Colledge), who was then Master of the Rolls, gave a definition as follows:
“Every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his rights to the judgment of the court.”
10 So far as s.87 is concerned, it reads as follows:
“(1) Service of a notice on the debtor or hirer in accordance with section 88 (a ‘default notice’) is necessary before the creditor or owner can become entitled, by reason of any breach by the debtor or hirer of a regulated agreement...”
Then it lists a number of things that he can do: terminate under sub paragraph (1); demand earlier payment under sub paragraph (2), etc., etc.
11 Section 88 sets outs the contents and effect of the default notice, which must be: in a prescribed form; specify the nature of the alleged breach; if the breach is capable of remedy, what action is required; if it is not capable of remedy, the sum required to be paid as compensation; the date specified under subsection (1) must not be less than fourteen days; and if the date is not inserted therein, then no action can be taken until fourteen days have elapsed.
12 The wording, therefore, is important. Service of the s.87 notice is “necessary before the creditor can become entitled by reason of the breach”. The claimant argues very convincingly before me that, therefore, the breach is not the operative event for s.5 of the Limitation Act as it only gives rise to a right of arrears. As he rightly points out, the claimant is seeking the full amount, together with interest under the terms of the agreement. He says in order to do so he must serve notice and the notice is one, therefore, of the “every fact which it would be necessary for the plaintiff to prove” that Lord Esher mentions in Read v Brown. He presses upon me that mere default will not act to automatically terminate the account and the creditor may choose to terminate or may not and, therefore, until he makes his choice, which is shown by the notice, time does not and cannot run for the purposes of the Limitation Act.
13 Inter alia, as an aside, the defendant claims that this really is repugnant as the claimant could effectively, therefore, stretch out a limitation period indefinitely. That was a matter that I raised with counsel for the claimant and he conceded to me that as a narrow answer to an exam question that would have to be the position. But he points to a code of conduct, and particularly para.7.3.4R of the Consumer Credit Source Book which only came into force, I am told, in 2014. I did not have the benefit of that before me, but, in essence I am informed that, the whole tenor of what creditors must do is treat debtors with forbearance and they must enter into discussion, negotiation, point them in the direction of help, and invite them to involve themselves in trying to work out how to best remedy their position. As a result of that, whole ethos, the claimant, therefore, tells me that creditors are “on the horns of a dilemma”.
14 The claimant relies very heavily on a case of BMW v Hart. In that case, in the first instance the judge found himself to be bound by the case of Reeves v Butcher, indicating effectively that where there are two conditions precedent (that was argued both in that case and, indeed, is argued now in this case) time runs from the first condition precedent, not the second. The Court of Appeal overturned that and indicated:
“...as a matter of general principle where a remedy arises on the election of one party to the contract, the cause of action does not accrue until the election is made.”
15 Albeit that he concedes that Reeves is not a Consumer Credit Act case, the claimant claims that this falls very much on all fours and is a principle that can be rightly approved by this court and transferred in principle when considering the question of (a) default and (b) the issue of a s.87 notice. Therefore, if that is accepted, then the cause of action does not and cannot accrue until the claimant has made his election and the election can only be made by the s.87 notice.
16 The defendant’s case runs wholly contrary to that and indicates only (and seeks to persuade me) that s.87 is effectively only a procedural bar, that is that the cause of action has arisen on the breach but cannot be enforced until the procedural requirement is met.
17 Both parties cited and invited me to read the cases of Coburn v Colledge, an 1897 case, again where the Master of the Rolls Lord Esher adjudicated, and that relates to the Solicitors Act and the delivery of a bill; and Swansea City Council v Glass, a 1991 case in the Court of Appeal. In Coburn the issue was that the solicitor was suing on a bill and, under s.37 of that Act, no right of action accrues until one month after delivery of the bill. Accordingly, does limitation arise on the date of the bill or the one month thereafter? I need not go through that in great detail because all of the Lords of Appeal (Lord Esher in particular) indicated that this is a procedural bar only, that is to say that it is not a condition precedent within the terms of BMW, but rather simply that it is a restriction on the plaintiff then (claimant now) that he cannot do anything until in that case that time had elapsed.
18 Swansea City Council v Glass, a 1991 case, deals with a not dissimilar point but is more on point because it deals with interpretation of statute. It arises from an appeal from, Judge Michael Evans, sitting in Swansea County Court and he found himself bound in a way that the Court of Appeal overturned. In brief, in Swansea, the local authority were suing for monies due for work done on a property from the tenant who had failed to comply with a notice to undertake those works, that notice having been served under the Housing Act of 1957. The local authority argued that (for limitation purposes) time ran from the service of the notice and the defendant there argued that it ran from the date that the works were completed. That was crucial in that case (just as in this case) the proceedings had been issued after six years from the date of completion of the works but before six years from the relevant notice dates.
19 There appears, therefore, to be something of a conflict of authorities within the bundles provided to me. Counsel for the claimant seeks to distinguish on the basis that he says the service of a default notice under s.87 is an “essential element” without which the creditor has no entitlement to terminate, to demand payment or take any other steps as set out in (a), (b), (c), (d) and (e) of s.87.
20 The defendant points out quite rightly that BMW v Hart did not apply to a Consumer Credit Act case as the amount involved in that case was something in excess of Ł30,000, which was outside the then Consumer Credit Act limit of Ł25,000 and, therefore, does not fall within what both sides urge on me is quite a restrictive statutory framework for consumer credit.
21 Counsel for the claimant argues that it is highly persuasive and, in particular, he points to para.29 which I have already read, but I repeat:
“...as a matter of general principle where a remedy arises on the election of one party to the contract, the cause of action does not accrue until that election is made.”
What he seeks to persuade me is that election is the pertinent point herein.
22 I raised with counsel for the claimant the possibility that, as a result, the claimant could effectively sit on his hands for twenty years -- counsel for the defendant quite rightly pointed out that I picked that from the last paragraph of the Swansea Council case -- and it would be abhorrent that a creditor could carry on for that length of time. I am told that the whole ethos, particularly with rights to compensation, would not allow for that, but there is nothing in the statute, if what he tells me is correct, to prevent a creditor from acting in that way.
23 I have been pointed to and I find very persuasive what Lord Reid said in Central Electricity Generating Board v Halifax Corporation:
“No new right or liability came into existence at [the date of the minister’s decision]. It is quite clear, and it is now admitted by the appellants, that the effect of the minister’s decision was merely to prove that this sum had belonged to the appellants ever since the vesting date. It created no new right of property or chose in action; it merely enabled a pre existing right to be enforced.”
24 Lord Mackay is quoted at the top of page 852 at para.A:
“If he were to institute proceedings for infringement before the patent for the invention was sealed, the procedural requirement of the proviso would not be satisfied, but a statement of claim could not be struck out as disclosing no cause of action, although it might be liable to be struck out as an abuse of process of the court.”
25 Lord Justice Taylor says:
“Although not on all fours with the present case, these decisions show that a cause of action may well accrue before (for procedural reasons) the plaintiff can bring proceedings.”
He goes on to say in the last page of his judgment:
“I am fortified in this view by consideration of what could result if the local authority were right. Upon their argument the local authority could delay service of a demand indefinitely. Then, having served their demand long after the works were complete, they would have a further six years in which to take proceedings in the High Court or the County Court.”
He then quotes Lopes LJ in Coburn, which says:
“There is nothing in this section, so far as I can see, inconsistent with the view that the cause of action arises when the work is completed. It was urged that if this construction were adopted a solicitor would have a shorter time during which he may abstain from bringing his action forward than the rest of Her Majesty’s subjects. That may be so. On the other hand, if the plaintiff’s contention is correct, the solicitor may abstain from delivering his bill for twenty years and then at the end of that time he may deliver it and sue after the expiration of a month from its delivery. It seems to me that that would be a very anomalous and inconvenient result.”
26 I have to say that that weighs heavily on me. I appreciate and accept that we are not looking at anything like twenty years in this case, nor yet am I a court of record and therefore setting precedent. But that matter troubles me considerably and I am not convinced that that was the intention of Parliament.
27 I believe that this is a condition precedent to issuing proceedings that is a procedural requirement and I am satisfied that I prefer the defendant’s argument that the cause of action arose at the time of the breach. To use the words of Taylor LJ, “anything else could be repugnant”.
28 Accordingly, I find that the proceedings were issued after the relevant limitation period. The inevitable, I think, follows from that in that I do not think I need to hear from you gentlemen as to the second point because that effectively strikes this action out.
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