AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

[Never-In-Doubt]

AMEX Europe PE Limited v Ian Karl Robert Brandon - Judgment Case Notes

You know if a default notice is defective, usually we can use that to our defence in court - seems not so, anymore, as a result of the above case. In a nutshell, the case went like this...

The case involved a credit card agreement between American Express Services Europe PE Limited (AMEX) and Ian Karl Robert Brandon (the Debtor) dated 28 March 1998. In June 2007, the Debtor failed to make the required minimum monthly payments on the credit card, which by that time held a balance in the region of £6,000.

On 19 June 2007, AMEX gave to the Debtor a Default Notice pursuant to s.87(1) of the Consumer Credit Act 1974 (‘the Act’). The Default Notice required the Debtor to make a minimum payment of £275.80 within 14 calendar days of the date of the notice. The Debtor failed to make the payment and so on 11 July 2007 AMEX wrote to him terminating the agreement and demanding the outstanding balance in full.

In the demand, AMEX stated that if the outstanding balance was not settled in full within 28 days, it would register a default with credit reference agencies. A Late payment charge of £25 and a charge of £25 for exceeding the credit limit (the Default Charges) were added to the outstanding balance. At first instance in the County Court, the Deputy District Judge gave summary judgment in favour of AMEX for a sum just over £6,500. The Debtor appealed that decision and on 25 May 2010 the matter went before His Honour Judge Denyer QC sitting as a High Court Judge in the Bristol County Court.

The Issues
Two issues were of significant importance to lenders in the consumer credit industry. These issues were:

1. The validity of the default notice given to the debtor under s.87(1) of the Consumer Credit Act 1974 (‘the Act’); and
2. Whether the Default Charges applied to the account amounted to penalties and therefore irrecoverable unless they were a reasonable pre-estimate of AMEX’s loss.

The Arguments
Before becoming entitled to bring enforcement action against a debtor by virtue of s.87(1) of the Act, a creditor must give to a debtor a Default Notice in the form prescribed by s.88 of the Act and by Regulations made thereunder. This is required before the creditor is entitled to:

a. Terminate the agreement;
b. Demand earlier payment of any sum by the debtor;
c. Recover possession of land or goods;
d. Treat any right conferred on the debtor by the agreement as terminated, restricted or deferred; or
e. Enforce any security.

The Default Notice must give a debtor 14 clear days from the date of service to remedy the breach before any of the actions specified above can be taken. The Default Notice served by AMEX on the Debtor said, as follows:

“...To remedy this breach the payment due on your account of £275.80 must be received within 14 calendar days from the date of this default notice.”

Given the time required to effect service (the courts assume two days from the date of sending) the Debtor argued that technically by the time he received the default notice, he had not been given the required 14 clear days to remedy the breach.
Whilst the Judge agreed with this argument, in principle, he observed that AMEX had not taken enforcement action within 14 days of 19 June 2007 (the date on the default notice). In fact, they did not take any further action until 11 July 2007. For this reason, the Debtor had suffered no prejudice as a result of the technical breach of the Act and the validity of the enforcement action taken was not called into question.

With regard to the default charges applied to the Debtor’s account, he argued that they were penalties and therefore unenforceable against him. During the litigation, the Debtor sought to rely on Guidance from the Office of Fair Trading, the Unfair Terms in Consumer Contracts Regulations 1999 and the House of Lords’ decision in Dunlop Pneumatic Tyre Company Limited –v- New Garage Motor Company Limited [1915] AC 79.

His Honour Judge Denyer QC endorsed the view taken by Deputy District Judge Gisby at first instance, where he said:

“I do not accept that the claimant [AMEX] suffers no loss when a borrower fails to make payment on time or goes over the agreed limit. I accept he continues to be entitled to charge interest but the failure to pay an unauthorised borrowing puts pressure on cash flow. Financial Institutions are regulated and are required to keep reserves. If borrowers do not pay it puts pressure on reserves. If a sufficient number of borrowers fail to pay that can put the lender in breach of its regulatory requirements...”

Following on from this, the Deputy District Judge determined that the Default Charges were a genuine pre-estimate of AMEX’s loss and therefore enforceable. According to His Honour Judge Denyer this was a view that the Deputy District Judge was perfectly entitled to adopt.

The appeal was dismissed.

Conclusion
This is a very useful precedent for creditors operating in the consumer credit market and who may be facing a plethora of technical challenges from debtors, such as that seen with the default notice in this case. It provides clear evidence that the courts are prepared to look behind such a technical oversight and to what prejudice has actually been caused to the debtor. If no prejudice has been caused, it is unlikely to come to a debtor’s rescue.

The decisions that a lender suffers loss when a debtor fails to make payment and that the Default Charges were lawful are especially welcome. Word has it that an application for permission to appeal has been made to the Court of Appeal. Given this is a very useful decision for lenders, those with an interest should keep their eyes peeled for further developments in any such further appeal.

Taken from: ---> LightFoots

Update - 25 October 2011 ---> http://www.bailii.org/ew/cases/EWCA/Civ/2011/1187.html

Victory to Brandon

[Never-In-Doubt]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

Here is the full judgment

[Paul.]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

Brandon has been granted leave to appeal by the Court of Appeal on the papers.

The arguments which are employed are very very good and i would expect this judgment to be overturned on Appeal

Lets not forget the actual appeal was not about the Default notice but about the granting of summary judgment. Many banks have misrepresented this ruling.

[Never-In-Doubt]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

Cheers mate

[Never-In-Doubt]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

Brandon has been granted leave to appeal by the Court of Appeal on the papers.

The arguments which are employed are very very good and i would expect this judgment to be overturned on Appeal

Lets not forget the actual appeal was not about the Default notice but about the granting of summary judgment. Many banks have misrepresented this ruling.

I agree, from other reading on this matter that it could well be overturned but we all know a lot of that depends on whom would be at the bench, so to speak!

Is the argument discussion on LB sorted yet, after a certain posters refusal to accept common principles of the act?

[nattie]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

I knew I'd seen the appeal date so here is the link to it:

http://www.hmcourts-service.gov.uk/l...se_id=20101463

[Paul.]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

I happen to have a good background knowledge of the Brandon appeal and i happen to have had sight of the skeleton which got leave to appeal.

All i am able to say is this case has a real potential to hammer home the default notice issue. I cannot say anymore for now,

[pompeyfaith]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

NID

AMEX Europe PE Limited v Ian Karl Robert Brandon - Judgment Case Notes

You know if a default notice is defective, usually we can use that to our defence in court - seems not so, anymore, as a result of the above case. In a nutshell, the case went like this...

The case involved a credit card agreement between American Express Services Europe PE Limited (AMEX) and Ian Karl Robert Brandon (the Debtor) dated 28 March 1998. In June 2007, the Debtor failed to make the required minimum monthly payments on the credit card, which by that time held a balance in the region of £6,000.

On 19 June 2007, AMEX gave to the Debtor a Default Notice pursuant to s.87(1) of the Consumer Credit Act 1974 (‘the Act’). The Default Notice required the Debtor to make a minimum payment of £275.80 within 14 calendar days of the date of the notice. The Debtor failed to make the payment and so on 11 July 2007 AMEX wrote to him terminating the agreement and demanding the outstanding balance in full.

In the demand, AMEX stated that if the outstanding balance was not settled in full within 28 days, it would register a default with credit reference agencies. A Late payment charge of £25 and a charge of £25 for exceeding the credit limit (the Default Charges) were added to the outstanding balance. At first instance in the County Court, the Deputy District Judge gave summary judgment in favour of AMEX for a sum just over £6,500. The Debtor appealed that decision and on 25 May 2010 the matter went before His Honour Judge Denyer QC sitting as a High Court Judge in the Bristol County Court.

The Issues
Two issues were of significant importance to lenders in the consumer credit industry. These issues were:

1. The validity of the default notice given to the debtor under s.87(1) of the Consumer Credit Act 1974 (‘the Act’); and
2. Whether the Default Charges applied to the account amounted to penalties and therefore irrecoverable unless they were a reasonable pre-estimate of AMEX’s loss.

The Arguments
Before becoming entitled to bring enforcement action against a debtor by virtue of s.87(1) of the Act, a creditor must give to a debtor a Default Notice in the form prescribed by s.88 of the Act and by Regulations made thereunder. This is required before the creditor is entitled to:

a. Terminate the agreement;
b. Demand earlier payment of any sum by the debtor;
c. Recover possession of land or goods;
d. Treat any right conferred on the debtor by the agreement as terminated, restricted or deferred; or
e. Enforce any security.

The Default Notice must give a debtor 14 clear days from the date of service to remedy the breach before any of the actions specified above can be taken. The Default Notice served by AMEX on the Debtor said, as follows:

“...To remedy this breach the payment due on your account of £275.80 must be received within 14 calendar days from the date of this default notice.”

Given the time required to effect service (the courts assume two days from the date of sending) the Debtor argued that technically by the time he received the default notice, he had not been given the required 14 clear days to remedy the breach.
Whilst the Judge agreed with this argument, in principle, he observed that AMEX had not taken enforcement action within 14 days of 19 June 2007 (the date on the default notice). In fact, they did not take any further action until 11 July 2007. For this reason, the Debtor had suffered no prejudice as a result of the technical breach of the Act and the validity of the enforcement action taken was not called into question.

With regard to the default charges applied to the Debtor’s account, he argued that they were penalties and therefore unenforceable against him. During the litigation, the Debtor sought to rely on Guidance from the Office of Fair Trading, the Unfair Terms in Consumer Contracts Regulations 1999 and the House of Lords’ decision in Dunlop Pneumatic Tyre Company Limited –v- New Garage Motor Company Limited [1915] AC 79.

His Honour Judge Denyer QC endorsed the view taken by Deputy District Judge Gisby at first instance, where he said:

“I do not accept that the claimant [AMEX] suffers no loss when a borrower fails to make payment on time or goes over the agreed limit. I accept he continues to be entitled to charge interest but the failure to pay an unauthorised borrowing puts pressure on cash flow. Financial Institutions are regulated and are required to keep reserves. If borrowers do not pay it puts pressure on reserves. If a sufficient number of borrowers fail to pay that can put the lender in breach of its regulatory requirements...”

Following on from this, the Deputy District Judge determined that the Default Charges were a genuine pre-estimate of AMEX’s loss and therefore enforceable. According to His Honour Judge Denyer this was a view that the Deputy District Judge was perfectly entitled to adopt.

The appeal was dismissed.

Conclusion
This is a very useful precedent for creditors operating in the consumer credit market and who may be facing a plethora of technical challenges from debtors, such as that seen with the default notice in this case. It provides clear evidence that the courts are prepared to look behind such a technical oversight and to what prejudice has actually been caused to the debtor. If no prejudice has been caused, it is unlikely to come to a debtor’s rescue.

The decisions that a lender suffers loss when a debtor fails to make payment and that the Default Charges were lawful are especially welcome. Word has it that an application for permission to appeal has been made to the Court of Appeal. Given this is a very useful decision for lenders, those with an interest should keep their eyes peeled for further developments in any such further appeal.

Did you type this out, if so thank you as it is written and laid out in a way that is easily understandable.

[Never-In-Doubt]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

NID


Did you type this out, if so thank you as it is written and laid out in a way that is easily understandable.

I copied it - under each judgment I try and offer a layman version as best I can! Glad it's easy to understand,

[pompeyfaith]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

Then THANK YOU SIR!!!!!!! that is so important to many of us specially those that have had mental illness.

[Miss Molly]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

If a judgment such as this one, is subject to appeal, can clamiants still rely on the original judgment ?

[Paul.]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

Well the trouble is the judgment the banks rely on is not the judgment that was handed down.

The judgment was summary in nature and the judge went outside of what he was entitled to do. Thus Brandon appealed, the appeal judge decided matters which he was not entitled to do.

So i expect in the next few weeks this will be clarified properly.

[Miss Molly]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

Thank you will look forward to the final outcome

[Undercover Elsa]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

In case it's of additional use, appended is a transcript of the original appeal judgement, which I typed out ages ago as the faxed version is so hard to read or copy from.

Useful if, like me, you should have gone to Specsavers....

[Wishfull]

Re: AMEX LIMITED v IAN KARL ROBERT BRANDON [2010]

any news on the appeal