Consumer credit – Credit agreement – Section 77A of the Consumer Credit Act 1974 – Claimant bank making unsecured credit agreements with defendant borrowers – Parties formulating agreements as if subject to statutory regulation – Bank statements failing to comply with legislative provisions – Whether statutory rights and remedies being imported into unregulated agreements – Whether claimant being liable for non-compliance – Whether claimant breaching obligations – Judgment in favour of defendants
The claimant was the successor company to which Northern Rock Building Society transferred its business in 1997. In February 2008 it was nationalised, since when it had not undertaken any new lending but held a substantial book of historic residential mortgages and unsecured lending, dating back before nationalisation. Between 1999 and March 2008, the claimant entered into a large number of unsecured credit agreements, which allowed borrowers to borrow up to 95% of the value of their home on a secured basis, and take out a fixed sum unsecured loan of up to 30% of the value of their home, capped at £30,000. It was an advantageous feature of the product that, for so long as the secured loan remained outstanding, interest on the unsecured loan was charged at the same rate as in respect of the secured loan. The defendants were two of those borrowers, their unsecured loan being the maximum of £30,000.
Prior to 6 April 2008, by virtue of section 8(2) of the Consumer Credit Act 1974, a consumer credit agreement was regulated if the amount of credit provided under it did not exceed £25,000. From 1 October 2008, section 77A of the 1974 Act provided for periodic statements to be provided to the debtor by the creditor under a regulated agreement for fixed sum credit. The form and content of such statements were prescribed by the Consumer Credit (Information Requirements and Duration of Licences and Charges) Regulations 2007 (SI 2007/1167).
The claimant failed to implement the requirements of section 77A and the Regulations correctly. The paperwork for the unsecured credit agreements entered into between 1999 and March 2008 did not differentiate between regulated and unregulated agreements in that the same documentation was used for both. An issue arose as to the effect of the unregulated agreements having been documented as though they were regulated by the 1974 Act. The question was whether the rights and remedies available under the 1974 Act, or equivalent protections, had been imported into such agreements notwithstanding that they fell outside the statutory scheme.
Held: Judgment was given in favour of the defendants.
(1) On the proper construction of the loan agreements, as contended by the defendants, it had been agreed, whether or not they were regulated, that the agreements were to be treated as such, so that the over £25,000 loans and under £25,000 loans would all be treated the same. The court was satisfied that, on the proper construction of the agreements, whether by reference to the concept of incorporation or by implication, the defendants had been given the rights under and benefits of a regulated agreement, whether or not they were regulated agreements. Accordingly, the defendants were entitled to recover, pursuant to contract, the section 77A repayments: Rogers v Hyde (1951) 157 EG 96, Tomlin v Reid (1963) 185 EG 913, Brett v Brett Essex Golf Club Ltd [1989] 1 EGLR 154, Daejan Properties Ltd v Mahoney [1995] 2 EGLR 75 and Wroe v Exmos Cover Ltd [2000] 1 EGLR 66 considered.
(2) Furthermore, there was a shared assumption capable of giving rise to an estoppel by convention, and/or a contractual estoppel, by reference to the content of the agreements. A shared assumption for the purposes of such estoppel could include an erroneous assumption of law. What could not be done by agreement could also not be achieved by estoppel. However, the shared assumption in question was that, whether or not the agreement was regulated, it would be treated as such and, so far as possible, the defendants would have the protection and rights conferred by the legislation. Just as an agreed assumption for the purposes of estoppel by convention need not be of facts but might be of law, the same applied also to estoppel by representation. The representation by which the claimant would be estopped in the present case was that the defendants were entitled to the rights and benefits endowed on a party to a regulated agreement, insofar as that party could take advantage of them: Zoan v Rouamba [2001] 1 WLR 1509 and Gleeds Retirement Benefits Scheme [2014] Pens LR 265 considered.
(3) Accordingly, the court was satisfied that the rights and remedies in relation to section 77A of the 1974 Act had been imported into the agreements. The claimant had breached section 77A by issuing the defendants with statements which did not comply with that provision and by not repaying or re-crediting to the defendants interest or default sums paid by them during the alleged period of non-compliance. The claimant was in breach of its obligations under the agreements by virtue of its failure to indemnify the defendants in respect of its breaches of section 77A.
Malcolm Waters QC and Patrick Goodall QC (instructed by Ashurst LLP) appeared for the claimant; John Taylor QC and James McClelland (instructed by Simmons & Simmons LLP) appeared for the defendants.
Eileen O’Grady, barrister
