Technical defect not
fatal to default notice.
A minor
technical defect in a default notice will not necessarily assist a
debtor in invalidating the notice if it can be shown that the
debtor has suffered no prejudice as a result of the
non-compliance.
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In American Express
Services Europe PE Limited vs Brandon, Brandon failed to make
payments on his credit card. Amex served a default notice under
section 87(1) of the Consumer Credit Act 1974 (CCA). Such a notice
has to be served before a creditor can:
- Terminate the
agreement; - Demand earlier payment of
any sum; - Recover possession of land
or goods; - Treat any right conferred on
the debtor by the agreement as terminated, restricted or deferred;
or - Enforce any
security.
The default notice was sent
to Brandon on 19 June 2007 and required a minimum payment to be
made “within 14 calendar days from the date of this default
notice”.
The notice also provided that
if the outstanding balance was not paid within 28 days, Amex would
register a default with credit reference agencies. Additionally,
late payment charges of £25 and over-limit charges of £25 (the
default charges) were applied to the balance.
No payment was made. On 11
July 2007, Amex wrote to Brandon terminating the agreement and
demanded the unpaid balance. At first instance, Amex obtained
summary judgment against Brandon. Brandon appealed on the basis
that:
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By GlobalDataSection 88(2) CCA provides
that a notice given after 1 October 2006 must give the debtor at
least 14 days after service to remedy the breach.
The notice here was served on
19 June 2007 and demanded payment within 14 calendar days from the
date of the default notice.
Service is deemed to take
place two days after sending and Brandon alleged the notice period
was therefore too short, the notice was consequently invalid, and
Amex could not rely on it. The default charges were penalties and
therefore irrecoverable.
Dismissing Brandon’s appeal,
Judge Denyer QC held that, while he agreed with the argument on
service in principle, as Amex did not take any enforcement action
until 11 July 2007, Brandon had not been prejudiced by the
technical breach. The enforcement action taken was therefore
valid.
As to the default charges
being penalties, the judge agreed with the findings at first
instance that lenders do suffer loss when borrowers fail to make
payment on time, or exceed the agreed limit, and that default puts
pressure on cash flow and reserves.
He held that the charges
applied here were a reasonable pre-estimate of loss and therefore
recoverable.
Comment
This is a further High Court
decision which will bind County Courts and is a useful precedent
for motor finance companies faced with minor technical challenges
from debtors.
So long as no prejudice to
the debtor can be shown, the courts are willing to overlook minor
technical breaches.
I understand that Brandon is
seeking leave to appeal this judgment in the Court of
Appeal.
The author is a partner
at Wragge & Co LLP’s Finance, Insolvency, Recoveries and Sales
team
