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A sheriff at Glasgow Sheriff Court has dismissed a mortgage repossession action concerning two 'second charge' secured loans for failing to comply with sections 87-88 of the Consumer Credit Act 1974 (CCA) and the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 as amended.In the case of Citifinancial Europe plc v. Rice, Sheriff Deutsch pronounced a judgment which found that the section 87 default notice served under the CCA was defective and incompetent because it failed to properly identify the loan agreements, the parties to the agreements, and failed to provide clear specification of the matters complained of.
The court distinguished the present case from American Express v. Brandon, where a defect in a default notice was overlooked as de minimus and non-prejudicial. While such arguments were possible in Sheriff Deutsch's opinion, in the present case the errors were 'fundamental' and the action for possession fell to be dismissed.
The pursuers were represented by Aberdein Considine & Co., Solicitors (Gordon), while the defender was represented by Govan Law Centre (Dailly).
I am not surprised by the decision in this case – it seems pretty obvious to me that if there are two agreements in default, there should be default notices in respect of each agreement.
ReplyDeleteIn the case of Brandon v American Express, the English High Court, on appeal, held that while a defect in a default notice provided the debtor with a technical defence, the defect did not prejudice him and upheld the first instance decision to enter summary judgment for the creditor.
The defect in question was that the default notice did not give the debtor the required 14 days to repay the arrears and this was held not to be prejudicial because he was in no position to repay the arrears even if he had been given more time.
However, on a further appeal, the English Court of Appeal overturned the High Court decision. The reason for this was that the High Court had said that the debtor’s defence based on the defective default notice could not be dismissed as unreal and that it was realistically arguable that the failure of the default notice to give the debtor 14 days to repay the arrears could not be said to be de minimis or be ignored because it caused no prejudice [2011] EWCA Civ 1187.
See also the English High Court case of Harrison v Link Financial Limited [2011] EWHC B3 (Mercantile) where, as in Brandon, a default notice did not give the debtor the required 14 days to pay the arrears. The Court held that:
‘The notice of enforcement was a statutory pre-condition of enforcement. It was a bad notice and enforcement cannot be attempted in dependence upon it. However, bad notices can often be remedied by the service of good notices and I see no reason why that should not be so in respect of credit agreements.’
Finally, there has been a recent English County Court case where a default notice understated the arrears owed by the debtor. The claim was defended on the basis that the default notice was defective but summary judgment was entered for the creditor and this was upheld by the County Court on appeal (HFC Bank Limited v Moody (Central London County Court, 7th February 2013, Mr Recorder Male QC, (unreported)).
See also Woodchester v Swain [1999] 1 WLR 263 in which the English Court of Appeal held that a default notice that seriously overstated the arrears was defective but said, obiter, that it might be appropriate to over look a de minimis overstatement of arrears (http://www.bailii.org/ew/cases/EWCA/Civ/1998/1209.html).
This is what happened in the English High Court case of Rankine v American Express (www.mishcon.com/assets/managed/docs/downloads/doc_2304/Judgment%20of%20HH%20Brown.pdf).
Guy Skipwith
Citizens Advice Specialist Support (England and Wales)