This is an update on American Express
Services Europe PE Limited v Brandon which featured in Casebook in
November2010. It was a useful case for motor finance companies
about a technical error in a Consumer Credit Act default
notice.
It has now come before the Court of
Appeal on two points:
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• The validity of a default notice if
the statutory 14 days’ notice is not provided for; and
• Whether a creditor can rely upon an
alternative route to termination to that initially relied upon to
get round a technical default.
On 19 June 2007, Amex served a default
notice under s87(1) of the Consumer Credit Act 1974 (CCA) on
Brandon, who had failed to make payments on his credit card. The
default notice required a minimum payment to be made “within 14
calendar days from the date of this default notice”.
No payment was made. On 11 July 2007,
Amex wrote to Brandon terminating the agreement and demanding the
balance.
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By GlobalDataAmex subsequently obtained summary
judgment (SJ) against Brandon at first instance and then on appeal
in the High Court.
Brandon’s defence to the SJ
application was that S88(2) of the CCA provides that a notice must
give the debtor at least 14 days after service to remedy the
breach. The notice served on him demanded payment within 14
calendar days from the date of the default notice, not service,
making the demanded period too short and the notice technically
invalid.
The High Court judge held that,
although the point was arguable, 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.
On appeal to the High Court, Amex also
successfully raised for the first time the fact that it did not
need to rely upon the defective default notice to terminate the
agreement. It contended that it could rely upon the contractual
right to terminate at any time contained within the agreement.
Brandon appealed.
The Court of Appeal allowed Brandon’s
appeal because this was a SJ application and all he had to show was
a “real prospect of a successful defence”.
On the construction of the default
notice it held it was arguable Amex had not given sufficient
notice. If it had not, Brandon had an arguable case the defect
could not be overlooked as negligible, whether or not it caused him
prejudice.
As to termination, the Court of Appeal
held that all of Amex’s correspondence with Brandon had referred to
“breaches” and “defaults”, and nothing had referred to contractual
nondefault termination. Therefore it was not fair on a SJ
application to allow Amex to change its case on appeal and rely on
an alternative route to termination.
Comment
The case needs to be understood in the
context of being a SJ application and not a final decision. The
Court of Appeal did not definitively determine the question of
whether an error in a default notice can be overlooked if the
debtor is not prejudiced by it. It simply means that Brandon lives
to fight another day back in the lower courts. It also demonstrates
the importance of picking and choosing the right cases to take down
the summary judgment route.
Perhaps more importantly, the previous
High Court decision is no longer available for lenders arguing
similar points.
Greg Standing is a partner in
Wragge & Co’s motor finance litigation team
