Between: PHOENIX RECOVERIES (UK) LIMITED. Claimant. - and - DR IAN C. Defendant

HHJ WORSTER: IN THE BIRMINGHAM county court Civil Justice Centre, The Priory Courts, Bull Street, BIRMINGHAM. B4 6DS Monday, 25 January 2010 Before: HIS HONOUR JUDGE WORSTER Between: PHOENIX RECOVERIES (UK) LIMITED Claimant - and - DR IAN C Defendant MISS YASSERI appeared on behalf of the Claimant MR VAUGHAN appeared on behalf of the Defendant JUDGMENT Tape Transcription by Audrey Jones Transcription, 49 Hill Rise, Romiley, Stockport, Cheshire SK6 3AP Tel: 0161 430 4705 0161 430 4705 Fax: 0161 217 9626 DX 23710 Marple 1. In this case Phoenix Recoveries (UK) Limited SARL brings a claim against Dr Ian C. The matter has been listed for trial today and I have been asked in the course of argument to deal with one specific issue at this point. The question in issue is whether there is an irredeemable breach of the Consumer Credit Legislation such that the agreement upon which Phoenix rely is not enforceable. 2. The factual background is this. On the 20th October 1999 Dr C signed an application form for a Marbles card. He accepts that he signed the application. There is a microfiche copy is at page 61. It bears his signature dated the 20th October 1999 and what appears to be a signature on behalf of HFC, as it was then, dated the 26th October 1999. As a consequence of the signing of the application form and its acceptance by HFC, Dr C was issued with a card, which he began to use. Copies of his monthly statements are produced in the trial bundle between pages 65 and 195. 3. The records retained by HFC and its successor in title, Phoenix (which I assume for the purposes of this argument is a proper successor in title), do not include the terms and conditions of the agreement between the parties. I assume there were some on the reverse of the application form. I say I assume there were some, but there is a paucity of evidence on that. 4. Dr C says that at this distance in time he simply cannot say. At paragraph 16 of his witness statement, page 218, he says he has no recollection of terms and conditions being on the rear of the

document which he signed: It is, however, a considerable time since I signed the document but the terms which were supplied to my solicitors appear to be from a different agreement to mine because my card is a Freeserve card, the supply terms are from a standard Marbles card product. I do not recall the terms and conditions being with the agreement which I signed. However, it may well be possible that the terms supplied are those from my agreement and that my recollection may be wrong. Furthermore, I note that for over two years HFC Bank were unable to confirm what was on the rear of the document which I signed. I also note that the claimant themselves struggled to provide these terms and conditions. I am advised by my solicitors that only when they threatened the claimant with an application to strike out this claim did this documentation appear. 5. The Claimant has produced a document which it asserts set out the terms and conditions which would have applied to Dr Cs application form; see page 63 of the bundle. The issue is whether those terms and conditions comply with Schedule 6, paragraph 4A of the Consumer Credit (Agreements) Regulations 1983. 6. Schedule 6 to those regulations prescribes terms for the purposes of section 61A and 127(3) of the Consumer Credit Act 1974. Paragraph 4A provides that in agreements for running account credit, there must be a provision which states the rate of interest on the credit to be provided under the agreement. What I understand the Claimant to be saying is that the document at page 63 does provide a statement of the rate of interest, or a term stating the rate of interest, on the credit to be provided under the agreement. 7. Paragraph 4A of the terms and conditions is headed Charges. It says this: The interest rate for transactions and balance transfers is.37% per month, equivalent to an APR of 4.5% (I think it is, although it is difficult to read), fixed for a period of six months (could be eight) after opening of the account, after which it will revert to the standard variable interest rate which applies at that time. Clause C provides the standard variable interest rate is 1.17% per month and the equivalent APRs are, (I think it is) 16.7% for cash advances other than balance transfers, and 14.9% for transactions and balance transfers after the expiry of the six, (or it might be eight), month period referred to in condition 4A above. 8. So, on the face of it page 63 has a statement of what the charges are. But it is perfectly plain that the rate set out on page 63 does not correspond with the charges which were made and are as shown on the monthly statements beginning on page 65. Indeed that is the case for a substantial period after the statements begin. They statements set out the interest rate under a heading The current monthly interest rates are. The interest rates appear to be differentiated between retail and cash. For retail, the rates given are 0.49% (5.9% APR). Those are plainly not the rates that are set out in paragraph 4(a) on page 63, which were 0.37 and 4.5. Under the heading Cash the rates are 1.17% and 16.7% APR, which are the rates provided at paragraph 4C. 9. In making her submissions, Counsel for the claimant has been driven to accept that, if she is right, the Defendant would have a claim for the breach of the agreement because he was charged too much. The nature of that concession, in my judgment, underlines the central difficulty with her position. The document at page 63 does not set out the terms which the Claimant applied o this agreement in October 1999. 10. Interest rates would have been a matter of concern to the Defendant, who was paying, and to the Claimant. I do not accept (on the balance of probabilities or otherwise), that there would have been this mistake from the start in relation to rates of interest payable by the Defendant on his card.

11. In my judgment, the requirement of Schedule 6, paragraph 4 is such that the agreement should provide for the accurate rate of interest. It does not. Certainly the document the Claimant has produced does not. On the basis of that finding of fact the Defendant s argument that there is, as a consequence, an irredeemable breach of the provisions of section 61(1A) of The Consumer Credit Act is bound to succeed. 12. The consequence of a breach of 61(1A) at the material time was that the court was required not to make an enforcement order. The discretion otherwise given to the Court in circumstances where there has been an improperly executed agreement, providing for the court to make an order if it is just to do so (on terms in some circumstances), is over-ridden by section 127(3). That subsection provided that the court shall not make an enforcement order under section 65(1) if section 61(1A) (signing of agreements) was not complied with unless a document, whether or not in the prescribed form and complying with its regulations under section 60(1) itselfcontaining all the prescribed terms of the agreement, was signed by the debtor or hirer whether or not in the prescribed manner. There is no such document. 13. The only evidence that the Claimant has adduced to the court is a witness statement from a man called Fisher, beginning at page 56. Mr Fisher is a director of Phoenix and has authority to make a statement on behalf of the Claimant. At paragraph 1 of his witness statement he says this: The facts set out in this statement are true insofar as they are within my own knowledge, otherwise they are true to the best of my knowledge and belief and are derived from documents and computer records held by HFC Bank Limited and provided to me by my solicitors. I pause to say that neither the computer records he refers to, nor print-outs of the computer records, are exhibited to Mr Fisher s statement. Nor are they provided in what is a voluminous trial bundle. Counsel is unable to say whether Mr Fisher has looked at the Claimant s records or whether he has looked at records provided to him by his solicitors. Mr Fisher has not come to court to be crossexamined on his witness statement. 14. At paragraph 2 and 3 of his witness statement Mr Fisher says this: 2. By a credit card agreement dated 26th October 1999 the defendant entered into contracts for the provision of credit services with HFC Bank Limited. Due to the length of time since its inception, no copy of the agreement is available for review. Enclosed is a copy of the application form for the said agreement dated the 20th October 1999 made by the defendant. 3. HFC Bank gave the defendant a Marbles credit card to purchase goods and services. and he sets out the account number. At paragraph 4 he says this: 4. I also attached marked MF2 a copy of HFC Bank Limited s standard terms and condition which apply to all their Marbles agreements entered into with their customers at the time of the agreement and which were attached to the agreement. 15. I am surprised that the Claimant has not sought to obtain better and more direct evidence on this central point. It was raised by the Defendant in August 2007 when he asked for a copy of his agreement. It was not until April 2009, after the issue of proceedings and in response to an application to strike out, that the document at MF2 (that is at page 63 of the bundle) was produced. It was perfectly obvious that one of the key factual disputes would be what was on the back of the application form. The Claimant must have known that it had to deal with this matter. Yet all I have is Mr Fisher s general and, I am bound to say, unconvincing description of what his understanding is. He does not even say that these terms were printed on the back; he says they were attached to the agreement. 16. I have already referred to what Dr C says about this matter in his witness statement. It may well be there was something on the back of his agreement. But in cases such as this it is for the Claimant

to prove what. The document that it has produced sets out terms as to the rate of interest which plainly differ from the terms which were subsequently imposed. I am bound to say I cannot believe that HFC simply imposed terms as to the rate of interest that were different from the ones which were agreed. And having seen Dr C give evidence, and noted the care that he took when this matter came into dispute, nor can I imagine that error would have escaped his attention. 17. I find not only that there is an irredeemable breach by virtue of the application of Schedule 6, paragraph 4A of the 1983 Regulations, but also that the document at page 63, whatever it is, does not set out the terms which applied to Dr C s card in October 1999. The failure of the Claimant to respond in detail and with direct evidence on this central issue, despite the fact that it has been centre stage for so long, is a matter that I am plainly entitled to take account of when it comes to the weight I can give to the assertions made in Mr Fisher s witness statement. It will be apparent that I have given them very little weight indeed. 18. The consequence of a ruling such as this is to provide Dr C with a windfall and I am conscious of the unfairness in one sense that that may lead to. I was taken in the course of argument to the speech of Lord Nicholls in the case of Wilson and Others v The Secretary of State for Trade and Industry [2003] UKHL, 40. At paragraphs 71 and 72 he recognises that the consequences of the provisions of section 127(3) can indeed lead to drastic, even harsh, consequences for a lender who loses all his rights under the agreement. It is an unattractive feature sometimes, for it involves punishing the blameless pour encourager les autres. But Lord Nicholls view was that Parliament had singled out some obligations as having such importance that non-compliance would lead automatically and inflexibly to a ban on the making of an enforcement order whatever the circumstances, and that those obligations were specified in sections 127(3) and (4). Parliament, he said, had chosen deliberately to exclude consideration of what is just and equitable in the particular case. Lord Scott echoed what he said at paragraph 164 of his speech. 19. If there are any other matters that counsel for either party wish me to deal with in the course of this relatively short judgment in what I concede is not a simple case in terms of its legislative background, those are my reasons. I am perfectly prepared to deal with other findings of fact if either party wishes me to do so at this stage should those be of relevance to any future applications. MR VAUGHAN: Your Honour, I am grateful for your Honour s judgment. I think the only thing - so far as the judgment is concerned, forgive me, there is obviously nothing further I would ask you to determine or decide upon. So far as today s hearing is concerned, there are just two outstanding issues, that is the form of the order and the issue of costs. JUDGE WORSTER: Right. Shall I hear from Miss Yasseri first? MISS YASSERI: On the issue of costs, if I can deal with that and then I have another application to make. JUDGE WORSTER: Are there any other findings you want me to make. There was the issue of the default notice. My provisional view was you have not got any evidence of its service and it would seem to me that the doctor is the sort of man who would have picked up on figures which did not make any sense and written back. That would not make it irredeemably unenforceable but it would make it unenforceable today. MISS YASSERI: Yes. Your Honour, I do not think I do need any other findings to be made. JUDGE WORSTER: All right.

MISS YASSERI: I think I am going to have to make this application now because it just seems to make sense to make it now. Your Honour, I am instructed to ask for permission to appeal. JUDGE WORSTER: Well, that is why I raised the question of other factual matters because, if this case went to appeal and you were successful, the matter would then be remitted for a trial. One of the factual issues that would then have to be determined is the issue of enforceability in these proceedings. That is often a problem with these good ideas about deciding single issues. The Court of Appeal may say Well, why didn t the trial judge deal with the factual matters while he was sitting there? which it seems to me would be a perfectly valid point for them to make. That is why I raise the issue now. If you are going to ask for permission to appeal absent my decision on that, it seems to me that what I should do is determine all the other factual matters in this case. The Court of Appeal are entitled to require the trial judge to do that. MISS YASSERI: Your Honour, I would ask for that to happen then. JUDGE WORSTER: All right. So what are the other issues then? Service of default notice is the key one, I think, is it? MR VAUGHAN: Yes, it is service of default notice and whether you conclude that the other issue is whether he was provided with the provisions which you have actually determined. JUDGE WORSTER: I have determined it seems to me perfectly plain he was not. MR VAUGHAN: That must follow. JUDGE WORSTER: Perfectly plain he was not provided with the document at page 63 because the interest rates are different. I mean that is a summary of what I have said. MR VAUGHAN: Yes. JUDGE WORSTER: And I do not see that the evidence from Mr Fisher really goes very far at all and, whatever the likelihood of there being something on the back, it is not page 63. MR VAUGHAN: Yes. Sir, my own view, and I do not know if the court is at variance with that view, is effectively that you have dealt with that issue and I do not think an elaboration of that point would assist. MISS YASSERI: I am quite happy, I agree, I think that has been dealt with. I think the only issue that remains is in relation to the default notice. JUDGE WORSTER: The default notice, right. I have indicated what my provisional view is. Do you want to try and talk me out of that? I ought to give you the chance. MISS YASSERI: Your Honour, the position is I have made the submission already, I am bound with the evidence that I have got, I cannot do any more. JUDGE WORSTER: No, I appreciate your position. I will give a short judgment on that issue. JUDGMENT 20. It is a requirement of the Consumer Credit Legislation that a default notice is issued and served on a debtor before an agreement can be enforced. Counsel have taken me to the relevant provisions

in the course of their submissions. The default notice in this case is at page 197 and is dated the 14th November 2007. It is addressed to Mr XXXXXXXXXXXX (Edited to protect identity). Dr C points out that it is misaddressed in that it says Mr rather than Dr. And I pointed out that it is West Midcands rather than West Midlands. But the post code is correct and Dr C has not moved his property since October 1999. He says that he has no recollection of receiving a default notice from the bank. 21. Paragraph 14 of Dr C s witness statement on page 217C says this: I now understand that the claimant has disclosed a default notice to my solicitors. My solicitors have advised me that there are issues with this document as amongst others. The figures make no logical sense. This is an issue that I find confusing considering that the default notice would surely have been issued by a responsible bank who should be accurate with its accounting. It is plausible that HFC Bank served a default notice as they clearly claim, however I have no record of such a document being received and I consider myself to be a meticulous record keeper and so consider this to be unlikely. 22. I was taken to Dr C s file of correspondence which he passed on to his solicitor. He was somebody who wrote letters to the bank and responded to the letters that they sent to him. I have no reason to doubt what he says about not receiving a default notice from the bank. Further it seems to me he would have recalled it. On the balance of probabilities I find that he would have responded to it, for the figures were incorrect. Having seen the correspondence he has written in the past, it seems to me the first thing he would have done is raise the inconsistent figures with the bank. Even today Counsel for the Claimant is unable to explain one of the figures and why it comes, as it does, in the section under Further Action on page 198. The best she can do is to suggest that the bank were requiring a repayment of less than in fact they were entitled to, which I regard as somewhat unlikely. 23. The question of whether or not the default notice had been served was a matter which was raised early on by Dr C in the course of a long and detailed defence settled by his lawyers. Notwithstanding that, by a statement made in September 2009 Mr Fisher of Phoenix Recoveries deals with the question of the default notice at paragraph 9 on page 57, in this way: Prior to November 2007 the defendant had continued to breach the terms of the agreement by failing to make the minimum monthly payments specified within the monthly statements sent to him. Accordingly on 14th November 2007 HFC sent to the defendant a default notice pursuant to section 87(1) of the Act. A copy default notice which the claimant has obtained from HFC is attached to this witness statement marked MF4. 24. Mr Fisher has no direct knowledge of these matters. Nor are any of the records that he has referred to as being the source of his information disclosed or in the bundle. Nor is he here to deal with the issue today. 25. On balance I conclude that the default notice was not served on Dr C, and in those circumstances, if the agreement could be enforced in because the prescribed conditions were complied with, it could not be enforced absent service of the default notice. Is that sufficient for your purposes? MISS YASSERI: Yes. MR VAUGHAN: It is for mine, your Honour, thank you. Would you just allow me to turn my back?

JUDGE WORSTER: Yes. MR VAUGHAN: Your Honour, so far as the court s order is concerned, I think the only order we require, obviously subject to what my learned friend says, is obviously dismissal of the claimant s claim. JUDGE WORSTER: Yes. MR VAUGHAN: There was a counterclaim for a number of declarations but I am not sure that they are necessary in the light of your Honour s judgment. JUDGE WORSTER: Right. MR VAUGHAN: And the only other issue is that of costs. There is a cost schedule but can I just place this reflection before the court; it is a fairly significant cost schedule, base costs are 000 for my solicitor. The reality is I can endeavour but I do not genuinely think I can do those who instruct me justice in justifying that because I am aware of the fact that there has been a huge amount of correspondence in this case, there has been a huge amount of foot dragging on the part of the claimant, and I do not lay that at the door of my learned friend in any way, shape or form. JUDGE WORSTER: No, no, of course not. MR VAUGHAN: Who has been entirely fleet of foot, of course, but I would find it difficult on a summary basis to address you realistically. This is a case also that you ought to know that is funded by way of a conditional fee agreement. JUDGE WORSTER: Yes. MR VAUGHAN: In those circumstances the only application I make if the court is amenable not to do summary assessment is for an interim payment, the sum I would ask for is 0000. That may again seem, however, bearing in mind my instructing solicitor is on a hundred percent uplift, it may not be as high as at first seems. JUDGE WORSTER: Right. Detailed assessment? MISS YASSERI: Yes, please. JUDGE WORSTER: Yes. MISS YASSERI: In terms of the sum that is being sought by way of interim payment, your Honour I draw immediately to the court s attention that obviously the principle on costs is that of proportionality, something that the costs practice direction specifically says... JUDGE WORSTER: I have 000 in mind, is that nearer what you are submitting? MISS YASSERI: Yes. There ought to have been, your Honour, a statement. When those costs are 20% more than what the estimate is, there ought to be a statement explaining that by the claimant s solicitors. Here they are 80% more than what were estimated in the allocation questionnaire and there has been no explanation. JUDGE WORSTER: Well, I think one of the points Mr Vaughan is making is that this is a case where there is some explaining to do.

MR VAUGHAN: Yes. JUDGE WORSTER: And I think detailed assessment is the right place to do that, but it does seem to me that an interim payment of 000 would reflect, if you like, what they are certain to recover and I am going to make an order for a payment on account in that sum. 21 days? MR VAUGHAN: Sir, of course. JUDGE WORSTER: Any other applications? MISS YASSERI: Er... JUDGE WORSTER: You need not apologise for it, it should be others apologising, not you. MISS YASSERI: Your Honour, I am instructed to seek permission to appeal. JUDGE WORSTER: Yes. MISS YASSERI: The basis of that application is that there is a real prospect of success in terms of there has been a mistake of the court s discretion in terms of the finding that the fact there was a mistake in the interest calculations from the very beginning means that it was misstated. JUDGE WORSTER: Miss Yasseri asks for permission to appeal on the basis that there is a realistic prospect of success. The central point is that it is not open to me to conclude that there was a mistake, or that I have put inappropriate weight on aspects of the evidence. So far as the point about the interest provision is concerned, it seems to me the evidence that I have heard or read points inexorably to the conclusion that I came to. Issues of fact are essentially matters for the trial judge and whilst an appeal court would be able to see from the statements what the evidence was and be able to assess that evidence, I have had the opportunity to see Dr C give his evidence and to take that evidence into account. It seems to me there is no realistic prospect of success on appeal on the argument advanced by the Claimant this morning so I refuse that permission. Thank you both very much.