Articles
Judgment: Basil Rankine vs American Express Services Europe Limited
| Release Date: |
16 May 2008 |
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
B e f o r e :
THE HONORABLE MR SIMON BROWN QC
____________________
Between:
(1) Basil Rankine v. American Express Services Europe Limited
(2) Amanda Rankine v. The Governor & Company of the Bank of Scotland
(3) Tesco Personal Finance v. Amanda Rankine
(4) Basil Rankine v. Halifax PLC
(5) Amanda Rankine v. HFC Bank Limited
___________________________________
JUDGMENT
___________________________________
- This is a Judgment upon five related claims concerning Mr and Mrs Rankine and their
financial affairs under the Consumer Credit Act 1974 and ancillary Regulations.
- Mr and Mrs Rankine profess to be financial advisors and have some limited
qualifications in the provision of financial services. They are the directors of two
apparently dormant limited companies, Momentum Network Limited and Mortgage
Love Limited. Since at least 1996 they have personally had credit from various
financial institutions under credit card agreements and personal loans.
- Recently eight (I believe) claims arrived in various courts in the Birmingham Civil
Justice Centre about the Rankine’ financial affairs. These are just five of them and an
undisputed schedule of debts amounts to £20,231.50 and £17,334.80 in the cases of
Mr and Mrs Rankine respectively. During evidence, Mr Rankine boasted to the court
that they had managed to wriggle out of a further £65,000 of similar debts by raising
Consumer Credit Act legal technicalities leaving the financial institutions to write
them off as bad debts rather than take the trouble and expense of litigating for dubious
reward by enforcement against two individuals who are apparently on income support
and exempt from paying court fees.
- It also emerged during evidence that Mr Rankine was seeking to make a business out
of this by offering his services to others for percentage reward as a credit card buster
with a website and publicity generated in the media about his “victory” in the Court of
Appeal in one of his cases against MNBA.
- Mr and Mrs Rankine have represented themselves throughout all these claims and
have been granted the usual indulgences to litigants in person by the court and the
advocates appearing for the financial institutions. However, Mr and Mrs Rankine have
misused those indulgences to a great extent in all these proceedings by producing
blizzards of lengthy, argumentative and incoherent pleadings and witness statements
that has meant that the overriding objective has been impossible to achieve. In an
effort to try to do so at pre trial review, the court ordered Mr and Mrs Rankine to
produce a comprehensible List of Issues to be tried. They produced a List of 9. Upon
reviewing them at the outset of the trial, it appeared that only 6 were pleaded issues.
The trial then proceeded with trying those 6 issues.
- All the claims had similar points but there were two claims with a variation. First, in
the Tesco claim, Tesco’s were the Claimants seeking payment of £5,889.30. Secondly
in the HFC claim, Mrs Rankine was additionally making a claim about a personal loan
under a personal loan agreement. HFC Bank has a counterclaim for sums due under
the agreement with sums due under the credit card agreement.
- This judgment will follow the issues that were live, rather than go case by case:
(2)
Copy Agreements under Section 78 of the CCA;
(4) Cancelable agreement;
(5) True
Copies;
(6) Default Notices;
(7) Default Charges;
(9) Declaration of Unenforceability
and finally the Personal Loan issues.
- The Court heard evidence from representatives of each of the financial institutions
involved. Needless to say, most of the evidence involved formally producing or
referring to documentation much of which had been electronically generated or
produced. Mr Rankine cross examined all these witnesses but I
am satisfied that all
the information they produced was an accurate contemporaneous record of events and
that all the financial institutions followed the standard procedures of the highly
technical CCA and ancillary regulations. They are all highly sophisticated financial
institutions whose systems and programmes have long since been well geared to the
mechanics Consumer Credit Act that has been on the statute book for over 30 years
and Regulations of some longstanding and development. Nevertheless, Mr and Mrs
Rankine have sought to challenge these procedures and contend that there are
loopholes in the Act and the Regulations that nobody else has detected before until
they have done so and that this enables consumers to run up debts and not pay for
them.
- It is worth remembering that the context and purpose of the CCA: the Consumer
Credit Act was introduced to protect the individual unsophisticated in financial affairs
in contracts with unscrupulous and sophisticated financial institutions. It was not
designed to help individuals in the financial services business make money out of
financial institutions through exploiting its undoubted technicalities.
- Issue 2 Copy Agreements untie, Section 78 of the CCA
- Section 78(1) of the Act provides as follows:
“The creditor under a regulated agreement for running-account credit, within the
prescribed period after receiving a request for in writing to that effect from the debtor
and payment of a fee of [£1], shall give the debtor a copy of the executed agreement
(if any) and of any other document referred to in it, together with a statement signed
by or on behalf of the creditor showing, according to the information to which it is
practicable for him to refer:
(a) the state of the account; and
(b) the amount, if any, currently payable under the agreement by the debtor to the
creditor; and
(c) the amounts and the due dates for any payments which, if the debtor does not draw
further on the account, will later become payable under the agreement by the debtor
to the creditor.”
Section 78(6) provides:
"if the creditor under an agreement fails to comply with subsection (1):
(a) he is not entitled while the default continues, to enforce the agreement; and
(b) If the default continues for one month he commits an offence.”
- Mr and Mrs Rankine assert that in the Tesco, Halifax, BOS and HFC cases that they,
or via their dormant limited company Momentum Network Limited through a “Mr
Smithson” requested a copy of the relevant credit card agreement but none was
supplied as it ought to have been under Section 78 of the Consumer Credit Act. I am
satisfied on the evidence of Rachel Hinchcliffe (BOS & Halifax), Mrs Glanville
(Tesco) and Manoj Dudrah (HFC) that copies were despatched as requested in each
case. The contemporaneously recorded electronic records of each company supports
and verifies their evidence. Mr and Mrs Rankine are being perversely and deliberately
untruthful to assert to the contrary. Mr and Mrs Rankine also sought to contend as a
new thought at trial that as only the front page was scanned in, therefore the entire
agreement had not been sent. The back only contained the standard conditions which
were sent separate anyway so that is a very bad point and perhaps it was not surprising
that it had not emerged until then.
- In any event, even if requests under section 78 of the Act have been complied with
this issue is irrelevant in the claims by the Rankines, against Halifax and HBOS as
there is no claim by the Defendants to enforce the agreements in these proceedings. The Rankines may well try to contend that section 78(6) acts as a bar to enforcement,
but the Court has no power to make a declaration in this regard under section 142 of
the Act.
- Section 142(1) of the Act provides as follows:
"Where under any provision of this Act a thing can be done by a creditor or owner on
an enforcement order only, and either:
(a) the court dismisses (except on technical grounds only) an application for an
enforcement order, or
(b) where no such application has been made or such an application has been
dismissed on technical grounds only, an interested party applies to the court for a
declaration under this subsection,
the court may if it thinks just make a declaration that the creditor or owner is not
entitled to do that thing, and thereafter no application for an enforcement order in
respect of it shall be entertained”
- Thus the power to make a declaration under section 142(1) exists only in a case where
the court could grant an enforcement order. The court cannot do so in a case where a
lender has failed to comply with a request made under section 78 and accordingly
there is no power to make a declaration in this regard even if the Court finds that the
Defendant did not comply.
- In the Tesco case, where they are seeking enforcement, section 78(6) of the Act does
not have the effect contended for by the Rankines. First, the prohibition is against a
creditor “under an agreement”. The agreement was at an end. Therefore there is no
reason why there cannot be enforcement. Secondly, the word “enforce” is not
descriptive of the commencement of proceedings. Bringing proceedings during a time
when the agreement has been brought to an end is only a step taken with a view to
enforcement. It is not actually enforcement. Sufficient information has been provided
during the proceedings to comply in any event, Thirdly, the proceedings cannot be
said to be a nullity or otherwise affected. The appropriate step to be taken by the
Rankines would have been to seek a stay of the proceedings pending provision of the
information. A cause of action had arisen when the proceedings were commenced.
An analogy can be drawn between section 78 and section 69(1) of the Solicitors Act.
The latter section provides that: “Subject to the provisions of this Act, no action shall
be brought to recover any costs due to a solicitor before the expiration of one month
from the date on which a bill of those costs is delivered in accordance with the
requirements mentioned in subsection 2)”. It can thus be said that had Parliament
intended that section 78 have the consequence of preventing the commencement of
proceedings the section would have so provided in the same way as section 69 of the
Solicitors Act does. Fourthly, and most significantly, the provisions of section 170(1)
of the Act support the contention that a failure to comply with section 78 does not of
itself give rise to the consequence that pending compliance with a request made under
section 78 any steps taken are in some way invalid. It provides so far as relevant as
follows:
“(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.
(3) Subsection (1)does not prevent the grant of an injunction."
It follows that where a breach of the Act occurs, such as one of section 78, where no
remedy is specified, the appropriate step is to seek an injunction. A view to this effect
is set out in the notes to section 170 by the editors of Goode Consumer Credit: Law
and Practice. In any event it is to be kept in mind, as the editors of Goode observe,
that any such breaches may lead to questions relating to the licence of the lending
body in question.
- In my Judgment the Rankines submissions on Issue 2 are unsound in fact and in law.
- Issue 4 Cancelable agreement
- Section 67 of the CCA provides that “A regulated agreement may be cancelled by the
debtor or hirer ... if the antecedent negotiations included oral representations made
when in the presence of the debtor or hirer by an individual acting as, or on behalf or
the negotiator, unless .... (b) the unexecuted agreement is signed by the debtor or hirer
at premises at which any of the following is carrying on any business (whether on a
permanent or temporary basis) (i) the creditor or owner; (ii) any party to a linked
transaction (other that the debtor of hirer of a relative of his); (iii) the negotiator in any
linked negotiations”
- This section is designed to protect the consumer against the persuasive doorstep sales.
It is not applicable in any of the claims here where it is common ground that there
were no “antecedent negotiations".
- The common feature in all of these cases is that the agreements are drafted as “cancelable” agreements. Section 67 of the Consumer Credit Act 1974 provides that
a regulated agreement will be cancelable if the borrower signed it away from trade
premises (e g. at home) and, before signing it, he had face to face discussions with the
lender (or his representative or agent) which included oral representations in relation
to the agreement. An agreement which meets these criteria has to contain certain
statements and notices of the right to cancel, in a form prescribed by the Consumer
Credit (Agreements) Regulations 1983 (“the Agreements Regulations") and the
Consumer Credit (Cancellation Notices and Copies of Documents) Regulations 1983
(“the CNC Regulations”). If it does not, the agreement will be wholly unenforceable,
by virtue of sections 64(1) and 127(4)(b) of the Act.
- The vast majority of credit card agreements are concluded with no face to face contact
between card issuer and borrower. They are therefore most unlikely to be cancelable
within the meaning of section 67 of the Act. Most such agreements are, however,
drafted as cancelable agreements. Lenders historically chose this course to avoid the
risk of unenforceability in relation to the relatively few cases where the criteria of
section 67 were met (such as a situation where a borrower takes an application form
from a branch after speaking to an advisor, and signs it at home). Such agreements
therefore grant a contractually right to cancel the agreement notwithstanding that there
is unlikely to be any statutory right to cancel.
- The Rankines argue that in such circumstances the Banks are to be taken to be bound
by the consequences of a failure to comply with the strict requirements as to the form
of notices of rights referred to above in just the same way as if the agreement was
truly cancelable within the meaning of section 67. They rely in making that assertion
on regulation 5(4) of the CNC Regulations, which provides:
“In the case of [an agreement]... .which is not a cancelable agreement within the
meaning of the Act and these Regulations but which may be cancelled by the debtor in
accordance with terms of the agreement conferring upon him similar rights as if the
agreement were such a cancelable agreement, the agreement may be treated for the
purposes of this Regulation as if it were a cancelable agreement within the meaning
of the Act and of these Regulations, and Regulation 2 shall then apply as if the
agreement were such a cancelable agreement” [emphasis added]
- The Rankines have already recently litigated this issue in a case involving MBNA
Europe Bank Ltd. They were unsuccessful, but notwithstanding this, they rely on the
judgments given by Recorder Corner QC at first instance, and by the Court of Appeal
in rejecting their application for permission to appeal, as being supportive of this
argument.
- In the Court of Appeal, Gage LJ took the view that regulation 5(4) means only that a
contractually cancelable agreement will be treated as cancelable for the purposes of
the CNC Regulations, not that it will be treated as cancelable within the meaning of
section 67 of the Act. As such, whilst any failure to include the correct notices of
cancellation rights would mean that the agreement was improperly executed (and thus
a court order would be required for enforcement), the absolute bar to enforcement in
section 127(4) of the Act would not apply This is clear binding authority against the
Rankines on this point and there is no basis on which to distinguish it.
- The commentary to regulation 5(4) in Guest & Lloyd: Encyclopedia of Consumer
Credit Law at paragraph 3—241 is explanatory:
“[Regulation 5(4)] enables agreements which are not cancelable agreements within
the meaning of the Act to confer similar rights of cancellation and to be treated as
cancelable agreements. As such (otherwise non-cancelable) agreements “may be
treated for the purposes of this Regulation as if it were a cancelable agreement”
[emphasis added], it would seem that they are not to be so treated for the purposes of
other provisions (in particular s.12 7(4) — rendering cancelable agreements "irredeemably unenforceable” if the copy requirements are not fulfilled)."
- The argument is therefore pure sophistry and it is perverse to seek to persuade this
court to the contrary when the matter has already been authoritatively ruled upon.
- Issue 5 True Copies
- A credit card issuer is required to provide three copies of agreement to a borrower.
The first copy (which is set out as an application form) is signed by the borrower and
sent to the lender. The borrower is given, with this application copy, a copy to keep
(in accordance with the requirements of section 62 of the Act. This is the requirement
to provide a copy of the unexecuted agreement (unexecuted because at that stage it has
not been accepted or signed by the lender). When the agreement is executed a credit
card is sent out, and usually this is attached to the “card carrier” copy of the
agreement. This copy has to be sent to the borrower by virtue of section 63(4) of the
Act and this is the executed copy. The requirement for such documents to be “true
copies” is set out in regulation 3(1) of the Consumer Credit (Enforcement, Default and
Termination Notices) Regulations 1983. Regulation 3(2) provides that the lender can
omit from this document any signature and/or signature box, so although the card
carrier is the executed copy, it does not have to (and invariably will not) bear the
parties signatures.
- This issue was not raised in the pleadings and there is no evidential basis produced by
the Rankines to support the contention that each of the financial institutions did not
provide the “copies" of the documents at the relevant times from electronically stored
and generated data bases.
- Again, the submissions of the Rankines are totally without factual or legal merit
- Issue 6 Default Notices
- Section 87 of the Act provides that service of a notice in accordance with section 88 “is necessary before the creditor or owner can become entitled, by reason of any
breach by the debtor or hirer of a regulated agreement” amongst other things "to
terminate the agreement”.
- Section 88 of the Act provides so far as material as follows:
“(1) The default notice must be in the prescribe form and specify:
(a) the nature of the alleged breach;
(b) if the breach is capable of remedy, what action is required to remedy it
and the date before which that action is to be taken;
(c) if the breach is not capable of remedy, the sum (if any) required to be
paid as compensation for the breach, and the date before which it is to be
paid.
(2) A date specified under subsection (1) must not be less than seven days
after the date of service of the default notice, and the creditor or owner
shall not take action such as is mentioned in section 87(1) before the date
so specified ...
(4) The default notice must contain the information in the prescribed terms
about the consequences of failure to comply with it.”
- Again, Mr and Mrs Rankine assert that there have been deficiencies in each case
concerning the provision of default notices. Again this is irrelevant in all the cases
apart from the Tesco and HFC claim as the other financial institutions are not seeking
herein to enforce and the Court has no power to order a declaration as to
enforceability in these circumstances. Section 87 of the Act requires a creditor to
serve a default notice before it can, by reason of the borrower’s default, become
entitled to take action, such as making a demand for earlier payment of any sum. The
default notice is required by section 88 of the Act to be in the form prescribed by the
Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983.
- The Court has no power to order a declaration as to the enforceability of the
agreement in these circumstances. Section 142(1) of the Act provides as follows:
“Where under any provision of this Act a thing can be done by a creditor or owner on
an enforcement order only, and either:
(a) the court dismisses (except on technical grounds only) an application for an
enforcement order, or
(b) where no such application has been made or such an application has been
dismissed on technical grounds only, an interested party applies to the court for a
declaration under this subsection,
the court may if it thinks just make a declaration that the creditor or owner is not
entitled to do that thing, and thereafter no application for an enforcement order in
respect of it shall be entertained".
- Thus the power to make a declaration under s.1 42(1) exists only in case where the
court could grant an enforcement order. The court cannot do so in a case where a
defective default notice has been served and accordingly there is no power to make a
declaration in this regard.
- In the Tesco case where enforcement is sought then the following is the situation.
- The default notice was sent under cover of a letter dated 18 January 2005. It. was
stated to enclose a default notice and required rectification of the situation within 10
days. It stated the current balance to be £5,978.66, arrears to be £347.00 and credit
limit £5,800.00.The default notice under the heading “Description of the breach” set
out the figures as in the previous paragraph and went on to say:
“The breach is capable of remedy if you make a payment sufficient to clear any
arrears and which leaves the balance within the credit limit.”
It went to provide the payment must be made by 1
February and that if payment
was not made “the Bank will terminate the agreement.”
The Defence is difficult to follow. However in her second witness statement, Mrs
Rankine makes a number of points. By paragraph 14 of her second witness statement
she asserts that in breach of section 88 of the Act and the Consumer Credit
(Enforcement, Default and Termination Notices) Regulations 1983 (“the Enforcement
Regulations”) the Default Notice failed to state the exact provision of the agreement
said to have been breached in “that all that is stated that (sic) the terms and conditions
have been breached”. It goes on to allege that the “whole document must be read as
one whole cohesive document and if one element is missing or misstated then the
whole document is rendered invalid”.
- The Enforcement Regulations provide by regulation 2(2) that:
“Any notice to be given by the creditor or owner in relation to a regulated
agreement to a debtor or hirer under section 87(1) of the Act (which
relates to the necessity to serve a default notice on the debtor or hirer in
accordance with section 88 before taking certain action by reason of any
breach of the agreement by the debtor or hirer) shall contain:
(b) the information set out in paragraphs 1 to 3, 6 and 8 of Schedule 2 to
these regulations."
Paragraph 3 of Schedule 2 provides as follows:
"Details of breach of the agreement and action required to remedy, or
compensation for, the breach. A specification of:
(a) the provision of the agreement alleged to have been breached; and
(b) the nature of the alleged breach of the agreement. specifying clearly
the matters complained of: and either
(c) if the breach is capable of remedy, what action is required to remedy it
and the date, being a date not less than seven days after the date of service
of the notice, before which that action is to be taken; or
(d) if the breach is not capable of remedy, the sum (if any) required to be
paid as compensation for the breach and the date, being a date not less
than seven days after the date of service of the notice, before which it
should be paid.”
- There is no merit in the contention that the default notice failed to specify the
precise term which D had breached fatal to the effect of the default notice served.
It was clearly stated when read as a whole what the breach was and what was
required to be done to remedy it. Second, even if there was a breach, it was a de
minimis breach of the provisions of the Enforcement Regulations and of no
significance. Thirdly as with Section 78 (supra) section 170(1) of the Act is
applicable.
- Next, Mrs Rankine asserts that in breach of “paragraph 2(3)(d)” to Schedule 2 of
the Enforcement Regulations Tesco failed to state the exact sum required to be
paid to remedy the breach. The breach was capable of remedy. That paragraph
was not relevant. Rather it is paragraph 2(3)(c) which is relevant. It set out the
steps that were required to remedy the breach. In her witness statement at
paragraph 11 Ms Glanville demonstrated why the content of the notice is correct
in terms of the amount that is sought. In any event it cannot be said that the sum
sought was in excess of that due, and accordingly had Mrs Rankine complied with
the notice she would no longer have been in default.
- Next it is said that the notice was not in the correct form because words were
included “contrary to regulation 6 Schedule 2” of the Enforcement Regulations.
There is no such requirement by that paragraph. Even if there were, the same
principles apply by reason of section 170(1) as have already been discussed.
- Finally an allegation of a breach of paragraph 8(2)(a) of Schedule 2 is made. It is
not a relevant consideration It is concerned with the early payment of money.
Tesco was not seeking early payment of money.
- If it be said that there was a breach of the regulations because the amount said to
be owed was overstated by £10, for reasons discussed below under Issue 7, it
would be a de minimis breach, given the size of the debt and the amount required
to be repaid. Further it is clear from the evidence of Mrs Rankine she could not
meet it, and the overstatement did not have an effect in that regard. Such a breach
does not invalidate the notice: see
Woodchester Lease Management Services Limited v Swain & Co [1999] 1 WLR 263 at 268.
- Again the contentions of Mrs Rankine are factually and legally flawed.
- Issue 7 Default Charge
- It is contended that there have been deficiencies in all cases to make good default
charges wrongly made.
- In fact, in the BOS and AMEX case, they have been refunded. In Tesco, there is
only £10 outstanding. In HFC, Mr Dudrah has demonstrated that such minimal
charges were justified. In my judgment, this is immaterial and a trivial matter of
no significance.
- Issue 9 Declaration of Un enforceability
- Again, although it is raised in all cases, it simply cannot apply to those cases
brought by the Rankines. The Court has no power to make such a declaration.
- Section 127(1) of the Act provides as follows:
“In the case of an application for an enforcement order under (a) section 65(1)
(improperly executed agreements)... .the court shall dismiss the application if, but
only if, it considers it just to do so having regard to:
(i) prejudice caused to any person by the contravention in question, and the
degree of culpability for it; and
(ii) the powers conferred on the court by subsection (2) and sections 135 and
136.”
- In the Tesco case, the Court has the residual discretionary power under Section
127 of the CCA to order enforcement notwithstanding any technical breaches of
the Act or Regulations. For the reasons above, the Court does not consider it
necessary to invoke these powers but for the avoidance of any doubt it would have
no hesitation in doing so if required in this case. The benefits have all been to the
advantage of the Rankines, their personal lives and even their business interests
and there is no prejudice to them apart from those entirely brought upon
themselves by their deliberate actions.
- Residual Matter Personal Loan
- Mrs Rankine contends that an agreement for a Personal Loan to buy computer
equipment she is still using was misrepresented to her by the staff of PC World as
being an agreement with a limited company. The agreement itself makes it
abundantly clear that the borrower was the Claimant, and not any limited
company, and that the Claimant chose to take optional payment protection
insurance. The Claimant does not suggest that she did not sign the agreement.
She did not put forward any positive case as to the alleged oral misrepresentation
in her witness statement and when she was given thc opportunity to do so in cross
examination she once again failed to put forward any case at all as to what she alleged to have been said. The salesman can be identified but not surprisingly he
did not give evidence as he would have been of no evidential value even if he had
been called as he could not reasonably be expected to add to anything that the
documents themselves say. There is no evidence of any misrepresentation.
- Mrs Rankine also asserts that there are errors in the form of the default notice and
that the sums quoted were incorrect because they included default charges which
were unfair. By her witness statement she makes further contentions as to alleged
inaccuracies in the figures quoted.
- The default notice is dated 2O December 2005. In my judgment, it cannot
invalidate a default notice if elements of the sums claimed in that notice are
subsequently found to be irrecoverable by virtue of other legislation, such as the
Unfair Terms in Consumer Contracts Regulations 1999. The obligation imposed
on the lender is to state the sums due on the face of the agreement. To impose any
other requirement would remove any certainty from the process, since it would
require lenders to anticipate and calculate, in advance, a Court’s likely view as to a
fair sum to levy in respect of default charges. This is a virtually impossible task
which Parliament cannot have intended that lenders would have to carry out when
issuing default notices.
- In my judgment, Mrs Rankine was deliberately seeking to be perverse and
untruthful in seeking to avoid a substantial debt despite having all the benefits of
equipment she expects the credit company to pay for on her behalf. Her behaviour
in Court was perverse, argumentative and obstructive.
- ConclusIon
- In my judgment, the Claims by the Rankines do stand dismissed and the Claim by
Tesco and counterclaim by HFC be allowed.
His Honour Judge Simon Brown QC
Sitting as a High Court Judge at Birmingham Civil Justice Centre
Authorised by Section 9 of the Supreme Court Act 1981
16th May 2008
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