CRUTCHLEY v GO DEBT [2008]

[Paul.]

Another helpful case

IN THE HIGH COURT OF JUSTICE Claim No: 8LV51821
CHANCERY DIVISION
LIVERPOOL DISTRICT REGISTRY
[2009] EWHC (CH)
BEFORE ANTHONY ELLERAY QC
SITTING AS A DEPUTY HIGH COURT JUDGE ON 20th OCTOBER 2008, AT LIVERPOOL, AND ON 12th NOVEMBER 2008 AND 12th JUNE 2009, AT LIVERPOOL

B E T W E E N:

JAYNE CRUTCHLEY Claimant

and

GO DEBT LIMITED Defendant



JUDGMENT




Application
1. This is my reserved judgment on an application by the Defendant (“Go Debt”), represented before me by Mr Shivji. The application is for strike out of the claim or for summary judgment dismissing it in favour of Go Debt. In the alternative the application is for strike out or summary judgment in relation to paragraphs 7 to 12 of the Particulars of Claim, which I shall call the secret commission claim.

2. The application is opposed by the Claimant (“Mrs Crutchley”), represented before me by Mr Brant.

The Agreement
3. An agreement dated 16th June 2004 was made between Mrs Crutchley and Direct Auto Financial Services Limited (“DAFS”). It had been signed on 15th June 2004 by Mrs Crutchley and was signed on 16th June 2004 by DAFS. It was an agreement numbered 912261. It related to a Peugeot 406 1.8 estate, Registration No. W951 RBH. It was on a standard form of DAFS, completed with details of the particular transaction.

4. It was expressed to comprise two agreements regulated by the Consumer Credit Act 1974 (“the Act”). First, there was a Conditional Sale Agreement by which the Peugeot was conditionally sold for £5,329, on terms that the cash price would be financed and paid over four years by 48 monthly instalments of £157.31 each. The total payable was £7,550.88, finance charges of £2,071.88 and an administration fee of £150, being added to the cash price.

5. Second, there was a Credit Agreement relating to additional optional non‑cancellable insurances. There were premiums for payment protection (“PPI”), mechanical breakdown and GAP insurances. The total insurance premium cash price was £2,959.06, including £1,950.06 for the PPI. £50 was deducted from the cash price as a down payment provided by Mrs Crutchley. The net £2,909.06 was also payable over the four years, by 48 monthly instalments of £85.87. Mrs Crutchley signed a declaration that she applied for the insurances and had received a leaflet with details of them.

6. By further contract dated 15th June 2004 on a standard DAFS form headed Transaction Checklist, Mrs Crutchley certified that she was the purchaser of the Peugeot and that she agreed the £50 she was being allowed for a part exchange of her Ford, Registration No. G808 KWD, was a down payment to be applied towards any optional insurances and that she agreed to pay the down payment forthwith.

7. APR in relation to both the conditional sale and credit agreements was stated to be 19.9%.

8. Mrs Crutchley signed a direct debit instruction to her bank in relation to the monthly instalments.

The Supplier
9. By Clause 1.1 of the Agreement, DAFS was described in reference to company registration no. 3444409. By Clause 1.3 the supplier was defined as “Direct Auto Finance Limited, our associate company, or such other company as shall have sold the Vehicle to us so that we may sell the Vehicle to you on credit terms under this agreement”. By Clause 4.1, it was recited in relation to additional insurances that “the supplier will receive your down payment as our agent and will account to us”.

10. However the supplied invoice from “Yes Car Credit” defined Yes Car Credit as a trading style of DAFS, giving DAFS’ company registration number, rather than Direct Auto Finance Limited. However, the supplier also completed a DAFS instalment calculator recording “dealer commissions” in relation to the insurances totalling £659.77.

11. The instalment calculator also recorded the £50 as being a deposit for the car but the same document recorded the absence of a vehicle deposit and the £50 as an insurance down payment.

Non-Payment
12. Mrs Crutchley made 5 months’ payments of the agreed monthly instalments, the first by direct debit and then four by credit card. She then ceased payments.
Repossession
13. On 9th June 2005, DAFS repossessed the Peugeot. Under the Agreement, it had retained ownership (Clause 2.3). By Clause 6.1.1 of the Agreement the non-payments were an event of default. By Clause 6.2.1 and subject to service of a necessary Default Notice, it was entitled to repossess. DAFS resold the Peugeot for £2,400.

Assignment
14. On 13th July 2005, DAFS assigned to Go Debt, Mrs Crutchley’s debt to it, which it calculated at £8,241.74 after crediting the monthly payments and the resale price. DAFS apparently sold Go Debt a portfolio of similar debts. Go Debt contends that the assignment simply related to the debt and was not of the terminated agreement. The relevant assignment has not however been disclosed.

15. Go Debt describes itself as a debt acquisition and realisation specialist in a similar position to a debt factor.

16. On 8th August 2005, Go Debt served a Notice of the assignment of the debt by sending its notice in standard form to the Walsall address of Mrs Crutchley, which had appeared on the Agreement. It has not kept a copy of the Notice sent to her but has produced a standard form it used in such cases and its internal record of sending it to her on 8th August 2005.
17. Go Debt is apparently owned by Geldards LLP, a division of which acts as its solicitors under the name Hollis Briggs.

18. By an unanswered letter to the Walsall address dated 8th November 2005, Go Debt chased the £8,241.74 and stated that it was instructing solicitors to issue a County Court Claim. By a further unanswered letter to that address dated 1st February 2006, couched in the terms of a solicitor’s letter, there were threats of the issue of legal or bankruptcy proceedings. Mrs Crutchley was also chased unsuccessfully by telephone calls. By March 2007, Go Debt understood that Mrs Crutchley had a Stafford address. By letter dated 15th March 2007 it wrote to that address threatening to instruct Hollis Briggs to make a statutory demand in bankruptcy. It sent a reminder on 18th March 2007. By letter dated 3rd April 2007, it said that it was instructing Hollis Briggs. By letter dated 18th May 2007, Go Debt wrote that in the absence of a response to its letters it was unclear whether the debt was disputed or that Mrs Crutchley simply could not pay. It offered to settle for £4,000. There was no reply to its correspondence to the Stafford address, as there had not been to the Walsall address.

Statutory Demand
19. On 14th June 2007, Go Debt through Hollis Briggs made a Statutory Demand under section 268(1)(a) of the Insolvency Act 1986 (“the 1986 Act”). The Demand was for £8,326.74. Go Debt alleged that the debt owed by Mrs Crutchley to DAFS had been assigned to it. They claimed the sum “pursuant to” the Agreement and said the sum was the debt due under the Agreement of £8,241.74 plus £85 legal costs and was due to it.

20. The Demand was served by ‘substituted service’ on the Walsall address. Under rules 6.3 and 6.11 of the Insolvency Rules 1986 (“the 1986 Rules”), there are requirements for service of a Statutory Demand and provision is made in relation to proof of service and of giving particulars of steps taken with a view to serving the demand personally. Those steps must be such as would have sufficed to justify an order for substituted service.

21. For the purposes of sub-section 268(1)(a) of the 1986 Act, a debtor appears unable to pay his debts, if at least 3 weeks have lapsed since the demand was served and the demand has not been complied with or has been set aside in accordance with the Rules. If he so appears unable to pay his debts, the creditor has a ground for issuing a Bankruptcy Petition. The debtor has 18 days to apply to set the Demand aside (Rule 6.4(1) of the 1986 Rules). Time for compliance with the demand ceases to run, if application is made to set it aside (Rule 6.4(3)). The Court’s powers to set aside a demand include where the debt is disputed on grounds which appear to the Court substantial (Rule 6.5(4)(b)).

22. Service of a statutory demand is a standard step made in debt collection. It may prompt settlement. If the debtor is unable to pay, then the creditor in the interests of creditors of the same class, can issue a Bankruptcy Petition. If the debtor can raise a dispute on substantial grounds then he has a statutory route for seeking of the setting aside the demand, a risk the creditor takes. If the creditor knows of the dispute when serving the demand, then it would be an abuse to make the demand. Such might be condemned on a set aside, with indemnity costs.

23. It is not suggested that Go Debt had in making the particular Statutory Demand any reason to know that it would be disputed on substantial grounds.

Dispute
24. On 18th July 2007, Mrs Crutchley wrote through her solicitors, Stephensons, to dispute the debt. No issue was taken as to service. The letter took two 1974 Act unenforceability grounds. First, it was alleged that the PPI was not optional and was part of the total charge for credit and the Agreement accordingly mis-stated the credit and was irredeemably unenforceable. Second, it was alleged that the £50 was a deposit for the Peugeot rather than an insurance premium down payment, leading again to a mis‑statement of credit and the irredeemable unenforceability of the Agreement. The letter also sought disclosure including as to whether commission was paid to any party in relation to the PPI. A commission disclosure was sought, as now appears, to pursue a claim to rescind the Agreement. The letter did not challenge the repossession of the Peugeot.

1974 Act
25. It is convenient that I should now refer to provisions of the 1974 Act and attendant regulations, which informed the unenforceability points.

26. Section 8 defines a personal credit agreement between an individual (“the Debtor”) and any other person (“the Creditor”) and a Consumer Credit Agreement in reference to it which, unless an exempt agreement, would be a regulated agreement. Personal credit and consumer credit agreements are defined in Section 189 of the Act in reference to Section 8. A regulated agreement is there defined as including a consumer credit agreement. A debtor and a creditor are also there defined as respectively receiving and providing credit under a consumer credit agreement and the debtor is further defined as an individual. There is common ground before me that the conditional sale and credit agreements in issue, were regulated agreements as the Agreement recited.

27. It was further common ground before me, for the purposes of this application, that each of the conditional sale and credit agreements fell to be treated as a multiple agreement pursuant to Section 18(1)(a) and (2) of the 1974 Act.

28. Section 61(1) provides that:

“A regulated agreement is not properly executed unless -
(a) a document in the prescribed form containing all the prescribed terms and conforming to regulations under Section 60(1) is signed in prescribed manner both by the debtor or hirer and by or on behalf of the creditor or owner …”

29. By Section 65(1), an improperly executed regulated agreement is enforceable against the debtor or hirer on an order of the Court only, and by Section 65(2) retaking goods to which a regulated agreement relates is an enforcement of the agreement.

30. Provisions relating to a default notice appear in Section 88.

31. Section 127 deals with enforcement orders. By Section 127(3) it is provided that:

“The Court shall not make an enforcement order under Section 65(1) if Section 61(1)(a) (signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under Section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner)”

32. By Regulation 6(1) of the Consumer Credit (Agreements) Regulations 1983 SI No. 1553 (“the 1983 Regulations”), “the terms specified in Column 2 of Schedule 6 to these Regulations in relation to the type of regulated agreement referred to in Column 1 (and no other terms) are hereby prescribed for the purposes of Section 61(1)(a) of the Act (the terms which must be contained in a document if a regulated agreement is not to be improperly executed) and of Section 127(3) (the terms which must be contained in a document before any enforcement order can be made under Section 65(1), if Section 61(1)(a) was not complied with)”. Schedule 6 sets out a number of prescribed terms, described by Mr Brant as “golden” terms, the absence of which renders a regulated agreement irredeemably unenforceable. Under the heading “Amount of Credit” paragraph 2 of Column 1 refers to agreements of fixed term sum credits not falling within paragraph 1 (paragraph 1 not being material in this case). The prescribed term is “a term stating the amount of the credit”. Under the heading “repayments” paragraph 5 refers in Column 1 to consumer credit agreements. The prescribed term in Column 2 is:

“a term stating how the debtor is to discharge his obligations under the agreement to make the repayments, which may be expressed by reference to a combination of any of the following:
(a) Number of repayments;
(b) Amount of repayments;
(c) Frequency and timing of repayments;
(d) Dates of repayments;
(e) The manner in which any of the above may be determined;
Or in any other way, any power of the creditor to vary what is payable.”

33. Under Regulation 4(c) of the Consumer Credit (Total Charge for Credit) Regulations 1980 SI No. 51, items which have to be included in the Total Charge for Credit under a regulated agreement include:

“a premium under a contract of insurance, payable under the transaction by the debtor or a relative of his, where the making or maintenance of the contract of insurance is required by the creditor -
(i) As a condition of making the agreement;
(ii) For the sole purpose of ensuring complete or partial repayment of the credit, and complete or partial payment to the creditor of such of those charges included in the total charge for credit as are payable to him under the transaction, in the event of the death, invalidity, illness or unemployment of the debtor.”

34. Paragraphs 9 and 15 of Schedule 1 to the 1983 Regulations require the total charge for credit and the current APR to be stated in agreements for fixed sum credit such as the agreement in issue in this case. Those paragraphs of the Schedule provide exceptions which are not relevant to this case.

35. The dispute raised by Stephensons on behalf of Mrs Crutchley in relation to the PPI being compulsory, contrary to the “optional” nature recited in the agreement, would if made out, mean that the PPI was part of the total charge for credit under Regulation 4(c) of the 1980 Regulations and as a result the conditional sale agreement would mis‑state the total charge for credit and fail to state the current APR contrary to paragraphs 9 and 15 of the Schedule 1 to the 1983 Regulations. That would mean that the repayment terms were incorrectly stated in the conditional sale agreement (contrary to paragraph 5 of Schedule 6 of the 1983 Regulations). It is to be inferred that similar criticisms could address the credit as stated in the credit agreement.

36. The dispute raised on behalf of Mrs Crutchley as to misapplication of the £50 to the credit agreement rather than the conditional sale agreement, would mean if made out, the amount of credit was overstated by £50 in the conditional sale agreement and understated by that amount in the credit agreement, in either case contrary to paragraph 2 of Schedule 6 of the 1983 Regulations and the repayment obligations set out in both the conditional sale agreement and the credit agreement would each be mis‑stated by £50 contrary to paragraph 5 of Schedule 6 of the 1983 Regulations.

37. There is common ground before me, that if the £50 or compulsory PPI point was made out, the Agreement would have been, and be, irremediably unenforceable.

Correspondence
38. On 6th August 2007, Hollis Briggs replied:

“We note the comments made. Our client remains of the view that the debt is due and owing by Mrs Crutchley.
However, we are instructed that no immediate legal process will be employed regarding recovery of the debt. If and when our instructions change, we will notify your firm in advance of such legal process as we are instructed to take, is taken.
In the meantime, in the interests of saving costs for both parties, our client does not propose disclosing the documents requested, and the issue of disclosure of documents can be referred to if and when we have instructions to pursue collection of the debt”.

39. On 14th August 2007, Stephensons wrote a letter “without prejudice save as to costs” making an offer to settle any claim by Mrs Crutchley on the basis of:

“(1) Your client cancels all outstanding liability between themselves and our client;
(2) Your client to remove all adverse credit references against our client;
(3) For the avoidance of doubt your client would pay all of our client’s costs to be assessed if not agreed.”

The letter went on to make observations about consequences which the letter might have whether under CPR Part 36 or otherwise if Mrs Crutchley were to obtain an order or a judgment which was more advantageous than the terms she had offered. On this application, the parties have waived privilege in relation to ‘without prejudice’ correspondence, such as that letter and many of its successors.

40. On 30th August 2007, Hollis Briggs replied to that letter and to earlier letters of 6th and 8th August (not before me). That letter observed:

“We note the requests made on behalf of your client that our client agrees to set aside the statutory demand. We confirm that our client will not take any steps to advance the insolvency process. We have no instructions to issue a bankruptcy petition and in the circumstances there is no need for an application to set aside a statutory demand to be made. If you make an application of that nature following this assurance from our client without further prior notice to your firm, no additional steps under the bankruptcy process are to be taken, then we are instructed to apply that any costs incurred through that application be the responsibility of your client or your firm.”
In relation to the offer made in the letter of 14th August:

“Our client maintains the debt is due and owing, but at the present time has no further instructions for us to take any action in relation to the recovery of the debt.”

41. On 3rd September 2007, Stephensons wrote:

“We note your comments with regards to not taking any steps to advance the insolvency process against our client. However, as the Statutory Demand remains in effect, it has a continuing effect and stigma against our client’s credit rating. Therefore, our client is justified in making an application to set it aside. Should you not agree to set aside, our client is entitled to seek costs, should an application be made.”

42. On 19th September 2007, Hollis Briggs wrote:

“Our client and ourselves remain of the view that there is no need in all these circumstances for an application to set aside the statutory demand to be made. However, if your client wishes to make such an application, at her own expense, and not seek the costs of the application, Go Debt Limited will consent to the application and not seek any costs from your client.”

43. On 9th November 2007, Stephensons wrote:

“We write in relation to all cases where we are instructed regarding disputes with your client.
We note that to date, your position in relation to these cases has been not to provide substantive responses to our client’s letters of claim. You have simply stated that you have no instructions to pursue recovery of any debts at this time.
This does not allow our clients the opportunity to progress their cases, and is therefore not in the interests of justice. As a result of your non‑cooperation in this matter, we now intend to issue proceedings in each case.
Before doing this, we would like to give you the opportunity to agree to write off all the credit agreements relating to our clients, and pay our costs, within the next 14 days. This is an attempt to reduce your client’s costs outlay in these matters.
In the event that we do not hear from you within 14 days, we will proceed to issue proceedings.”

44. On 23rd November 2007, Hollis Briggs wrote:

“3. It is not currently Go’s intentions to pursue these individuals. We have told you previously that should that position change we will notify you accordingly in advance of any action to be taken.
4. We fail to see how this stance prejudices your clients. Unless and until Go instructs us to pursue the various debts your clients will not pay any debt nor need they incur legal costs in pointless proceedings.
5. Go cannot “write off all the credit agreements” because the agreements were made between your clients and DAFS. Consequently, we fail to see how you can legitimately involve Go in any proceedings in relation to these agreements, especially where Go has not chosen to enforce their obligations created by the agreements.
6. This contemplated litigation is clearly litigation for litigation’s sake and will be seen as such by the Courts. It is certainly not a proportionate response to the stance delivered by Go.”

45. On 23rd November 2007, Stephensons replied:

“We fail to see how your client’s stance does not prejudice ours. Many have had their credit rating affected by the debts which have been assigned to your clients. As you are aware, many have also had statutory demands issued against them, which you have not consented to set aside, albeit you have agreed not to enforce.
Until these agreements have been written off, our clients remain liable to repay them. The debt is taken into account on any of our clients’ applications, mortgages and/or other credit. The stigma of the debt appearing on their credit rating is unacceptable given our contention that the agreements are unenforceable.
Your assertion that the agreements cannot be written off by your clients is wrong. Your client has had the debt assigned to them. With that assignment comes the rights and obligations under the credit agreement and those provided by the Consumer Credit Legislation. If it is your position that your clients do not have the right to write off the agreements, then you cannot also argue that they have the right to enforce them.
Our clients are entitled to seek a declaration pursuant to Section 127(3) of the Consumer Credit Act 1974, and have complied with the pre-action protocols by providing a letter of claim to this effect. As no substantive response to these has been received, our clients are clearly entitled to issue proceedings.”

46. On 29th January 2008, Hollis Briggs wrote disclosing in reference to a schedule what it believed to be the list of cases where Stephensons was instructed on behalf of a debtor pursued by Go Debt in respect of a debt assigned by DAFS. They sought agreement to provide draft proceedings on a minimum of 21 days notice prior to issue. That it is understood, was agreed.

47. On 11th March 2008, Hollis Briggs wrote again, and as follows:

“1. All of your correspondence to date has proceeded on the misunderstanding of the relationship between the parties. As you should be fully aware, our client is merely the assignee of debts owed by your clients to (“DAFS”). It was not a party to the original agreement between your clients and DAFS.
2. In the circumstances, it is not a proper party to your proposed claims insofar as they relate to the validity and consequences of the relevant agreements. The issue between our respective clients is simply whether your clients are indebted to our client.
3. Similarly, the offers that you have made thus far are misconceived because the terms of the offers go far beyond what our client has the power to give and what the Court has a power to order.
4. Thus, as a result of the contractual relationship between the parties identified above, it is not within our client’s power to agree to your clients retaining any vehicle, when one is still in their possession.
5. In addition, since our client is not a credit reference agency and does not control such agencies, it does not have the power to remove all adverse credit references in relation to your clients. Similarly, the Court does not have jurisdiction in proceedings between our respective clients to determine the title to any vehicles in your clients’ possession or dictate what is stated in your clients’ credit reports.
6. In that context, in your contemplated proceedings, it will be impossible for your clients to beat the offer contained in your letters.
7. In addition, please note the offers that you have made are not valid Part 36 Offers ...
8. Notwithstanding the matters set out above, the chain of correspondence between our firms has given our client an opportunity to consider the debts owed by your clients and the commercial realities of your proposed claim. In the circumstances our client makes the following offer, in full and final settlement of all claims that each of your clients may have against our client:
a. Our client agrees not to pursue each of your clients, as listed in the attached schedule, in relation to the debts assigned to it by DAFS: (the schedule contained approximately 80 cases including Mrs Crutchley’s case);
b. Each party bears its own costs.
…
11. For the reasons identified above, we consider that this offer reflects the best that your clients could hope to achieve at Court. Please note that it would now be an abuse of process for your clients to bring proceedings against our client (see, on this point, Evans v Secretary of State for the Environment [2006] EWHC 322 at para 33 - 36).
12. If your clients decide, nevertheless, to bring proceedings against our client, we reserve the right to refer to this letter (notwithstanding the fact that it is “without prejudice save as to costs”) in applying to strike out those proceedings or to obtain summary judgment (as indeed, happened in Evans (supra))”

48. On 14th March 2008, Stephensons replied:

“1. We note what you say. No doubt you will disclose the Deed of Assignment to us so that we can check the position.
2. We disagree that you are not a proper party to proceedings.
3. We disagree that the offers are misconceived.
4. You have not identified a contractual relationship between the parties, as you have not disclosed the Deed of Assignment to date.
5. We cannot understand your position here. Surely your client can use reasonable endeavours to remove adverse credit references. We have settled hundreds of cases against lenders and assignees on this basis.
6. We are of the view that it is possible for our clients to beat the offers. You appear to be ignoring the point regarding payment protection insurance reclaim. Our clients would be entitled to a refund of the entire PPI premium on the following basis:
(a) Hidden commission.
(b) Mis-selling.
(c) The compulsory nature of the policies.
…
8. We cannot recommend acceptance of your offer to our clients. Our clients will require security in relation to their position for retention of vehicles. Our clients will also require payment of their costs.
…
11. If you make an application to strike out the case, we will seek wasted costs from yourselves.”

49. On 27th March 2008, Hollis Briggs replied:

“1. We are satisfied that our client is the assignee of the relevant debts. We note that your clients have never disputed the fact that our client’s claims arise by way of assignment.
2. You have not identified a cause of action against our client.
3. Noted.
4. We do not need to identify a contractual relationship between parties. Our client’s claim against your clients are claims in debt.
5. The point is that our client does not have the power to alter the contents of any credit report that may relate to your clients. Your previous offer made no mention of our client using its reasonable endeavours to achieve that end.
6. Our client did not sell the policies to your clients and indeed did not receive commission on those policies. In the circumstances, we cannot see how you have any claim against our client to “reclaim” payment protection insurance or a claim for mis‑selling. Our client is the assignee of the debts; it was not the party with whom your clients entered their agreements.
…
8. Our client does not claim title to the vehicles in question. Insofar as your clients have a dispute with (“DAFS”) regarding the title to any vehicle that is a matter for them and DAFS.
9. We enclose an open offer which does not require a confidentiality clause.
…
11. There are no grounds for a wasted costs order against this firm and your threat is misguided. We will draw this point to the Court’s attention in dealing with the question of costs against your clients.”

50. Hollis Briggs then sent an open offer on 27th March 2008 that:

“(a) Our client agrees not to pursue each of your clients as listed in the attached schedule in relation to the debts assigned to it by (DAFS)
(b) each party bears its own costs.”

51. On 16th April 2008, Stephensons replied and made inter alia these points:

“5. It is our understanding that insofar as your client has entered any adverse credit references, then it is within their power to remove them. In relation to any adverse credit references imposed by DAFS prior to the assignment, we would insist that you take all reasonable endeavours to instruct DAFS to rectify the same.
…
9. We cannot advise our clients to accept your client’s offer as this is wholly insufficient. The offer does not prevent our clients’ debts being sold on to another debt company. Our clients would therefore have no protection against future enforcement. Furthermore, we have previously confirmed that our clients are not prepared to settle without provision for their costs being paid. Our clients are entitled to their pre-action costs of this dispute and we are confident that these are both reasonable and recoverable. We are also confident that the Court would award costs in our clients’ favour, especially given your clients’ previous stance that the sums were owed, and the now apparent concession that they are not.”

That letter enclosed a draft of the Particulars of Claim.

52. The draft Particulars produced a response on 7th May 2008 from Hollis Briggs which included the following comments:

“1. Your draft Particulars of Claim fails to identify the claimants and it is unclear from your letter to which clients the claim relates.
…
2. We have emphasised on a number of occasions, that our client is not a party to the written regulated agreements between your clients and (“DAFS”). Our client is merely the assignee of the debts owed to DAFS. You appear to recognise this fact in paragraphs 1 and 2 of the draft Particulars. In the circumstances the Court cannot grant you the relief that you seek without DAFS being the actual defendant in the proceedings. Given that you contend that DAFS acted as the agent of the claimant, and that you allege that DAFS acted in breach of duties, there is no legal basis for our client as defendant.
3. In addition there are a number of factual inaccuracies and defects with your draft Particulars.
(a) You state at paragraphs 1 and 2 that “Yes Car Credit” was the trading name of DAFS. You contend at paragraph 9(i) that our client paid DAFS a secret commission in order to procure the Claimant’s business. This is allegation is wholly untrue and there is no evidence to substantiate it. You have never mentioned this point in the past.
(b) Paragraph 12 contains a particularly odd allegation “... the Defendant is put to strict proof in respect of the payment of any secret commissions relating to the policies of insurance referred to on the face of the credit agreement”. Notwithstanding your pleading, the burden of proof to establish the claim rests on your clients rather than ours. Given that we have not paid any secret commissions, please explain what proof the Court will require and identify the factual basis on which your claim is brought.
(c) You assert at paragraph 1 that the debts in question were assigned to our clients by a “statutory demand”. That is also incorrect. As we have stated in numerous letters, the debts were assigned by Deeds of Assignment.
(d) If as you contend in paragraph 11, your client is entitled to rescind or void the regulated agreement and has done so, it is unclear why the proceedings are necessary. We have already agreed not to pursue each of your clients as stated in our letter of 27th March 2008.”

53. That letter at paragraph 4 indicated that it was appropriate to bring proceedings in the High Court given that Stephensons were acting for a significant number of clients and that since the claim was based at least in part on a claim for breach of fiduciary duty, they recommended the Chancery Division.

54. By open letter dated 9th May 2008 Hollis Briggs wrote:

“We believe that your clients have no claim against our client. We have already offered you our agreement not to pursue the debts in question.
In addition, we have written off the debts and, out of courtesy, will notify (DAFS) that we have done so. For the avoidance of doubt, we do not intend to and will not assign the debts.
Please also note that we do not assert and have never asserted any claims over vehicles in your clients’ possession.
Given that you act for a significant number of clients, if your clients insist on bringing their misconceived claim against our client, the proceedings should be brought in the High Court. If the proceedings are brought in a different court, we will apply to the court to transfer the proceedings to the High Court and to seek that your clients pay our costs of the application on the indemnity basis.”

Claim
55. The claim was issued on the 6th June 2008 in the County Court. The Claimant’s address was given as the Stafford address.

56. By paragraphs 1 - 6 of the Particulars of Claim, Mrs Crutchley takes the irredeemable unenforceability points, that are the subject of the disputes raised by Stephensons on her behalf in response to the statutory demand. Thus she takes the mis-statement of the PPI insurance total credit charge point, her case being that the insurance was not optional, and the mistaken attribution of the £50 to the credit agreement rather than conditional sale agreement point. The wrong date is given for the agreement at paragraph 2, reflecting a mistake that was also in the statutory demand. The attached agreement however makes clear the actual date. The relief sought is first, a declaration that Mrs Crutchley is not indebted pursuant to the conditional sale and credit agreement and secondly, a declaration that they are improperly executed. The relief gives the wrong number for the agreement namely 1018299 rather than 912261.

57. By paragraphs 7 - 12 of the Particulars of Claim, Mrs Crutchley makes her secret commission case. At paragraph 7 she says she was referred to DAFS “by the car dealership trading as Yes Car Credit, who in the circumstances were acting as credit broker and agents for (Mrs Crutchley)”. At paragraph 8 it is alleged that such brokerage and agency gave rise to fiduciary duties. At paragraph 9 breaches are alleged in relation to the commissions of £659.77 shown in the DAFS calculation dated 1st June 2004, and failure to disclose and account to her for the commissions. At paragraph 10 it is said that DAFS had actual or constructive knowledge of the secret commissions and their non‑disclosure. At paragraph 11 Mrs Crutchley claims to be entitled to rescind and/or void the conditional sale agreement and credit agreement and at paragraph 12, puts Go Debt to proof in respect of the payment of any secret commissions. At paragraph 3 of the relief Mrs Crutchley seeks a declaration that she is entitled to and has rescinded her agreement (again mis-numbered).

58. Go Debt acknowledged service disputing liability on 19th June 2008. On 11th July 2008 it issued this application, which included an application for the transfer to the High Court. The transfer application was heard by District Judge Smedley on 6th August 2008. A case summary prepared on behalf of Mrs Crutchley made no objection to the transfer and directions were sought to adjourn the balance of the application for listing before the High Court. I understand that an unsuccessful attempt had been made to persuade Go Debt and perhaps the District Judge, that the District Judge should be asked to resolve simply the outstanding costs issues, in the County Court.

59. At paragraph 28 of Mr Rhodes’ first witness statement in support of the application, Mr Rhodes, the Managing Director of Go Debt, asserts that paragraph 1 of the Particulars of Claim is based on a fundamental error. That paragraph refers to the claim by the statutory demand of Go Debt to be the assignee of a debt owed by Mrs Crutchley to DAFS (“t/a Yes Car Credit”). Mr Rhodes’ point is that Go had written off the debt and so informed Mrs Crutchley some time before the proceedings were issued. Reference is made to its offer not to pursue the debt (on the basis of each side bearing its own costs).

60. On 5th August 2008, Hollis Briggs wrote “our clients position is (as stated in our letter of 9th May 2008) and remains that it does not claim to be a creditor of Mrs Crutchley.” Stephensons’ replied on 6th August 2008 and observed that by the letter of 9th May, Go Debt simply stated that it would not enforce the debt (rather than it did not claim to be a creditor). Stephensons review of correspondence suggested that prior to 5th August 2008, Go Debt had not accepted Mrs Crutchley’s case that no debt was owed under the relevant legislation. They referred to an assertion that the debt had been written off as an internal industry term suggesting an internal accounting treatment by Go Debt. They alleged that the promise regarding assignment inferred that the debt was in existence and the promise was merely an unenforceable statement of intent or promise. They contended that there was no suggestion that Mrs Crutchley did have a valid acceptance of discharge of any alleged debt and suggested that Mrs Crutchley remained vulnerable to a change of mind by Go Debt and to the leaving of any adverse credit reference data in place. By that letter Stephensons sought in relation to all their clients dealing with DAFS’ debts:

“1. That any statutory demands are withdrawn or County Court judgments set aside;
2. That our clients are given release from their debt by deed;
3. That your client will use its reasonable endeavours to ensure any adverse credit references entered by your client against ours will be removed;
4. That your client will pay our clients costs, to be assessed if not agreed.”

61. On 15th August 2008, Hollis Briggs replied:

“For the avoidance of doubt there has been no change in our client’s position and we have not conceded your client’s claim. Indeed, given that we are still pursuing our strike out application, it is evident that we do not accept your client’s claim.
…
11. Our client’s position is (as stated in our letter of 9th May 2008) and remains that for entirely commercial reasons, it does not claim to be a creditor of your client. We consider that our client is bound by that position, and that the statement operates as a release, as a result of your client’s forbearance to apply to set aside the statutory demand. As a result of that statement, our client has waived its claim against your clients and further, it would be estopped from resiling from its position.”

Practice
62. Under CPR 3.4 (2):

“The Court may strike out a Statement of Case if it appears to the Court -
(a) that the Statement of Case discloses no reasonable ground for bringing or defending the claim;
(b) the Statement of Case is an abuse of the Court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or
(c) that there has been a failure to comply with a rule, practice direction or Court order.”



63. Under CPR 24.2

“The Court may give summary judgment against a Claimant ... on the whole of the claim or on a particular issue if -
(a) It considers that -
(i) That the Claimant has no real prospect of succeeding on the claim or issue; ...; and
(b) There is no other compelling reason why the case or issue should be disposed of at a trial.”

(Rule 3.4 makes provision for the Court to strike out a Statement of Case or part of a Statement of Case if it appears that it discloses no reasonable grounds in bringing or defending a claim)

64. The overlap between Part 3.4 and Part 24 is noted for example in CPR 3.4.6.

65. “No real prospect” may be equated in a given case with no reasonable grounds for bringing the claim (regard is regularly and appropriately had to the speech of Lord Hope in Three Rivers District Council and others v. Bank of England (No. 3) [2003] 2 AC 1 and in particular paras 94, 95).

66. The notes in CPR 3.4.2 add in reference to Bridgeman v. McAlpine-Brown [2000] LTL January 19 CA “a Statement of Case is not suitable for striking out if it raises a serious live issue of fact which can only be properly determined by hearing oral evidence”.

67. Abuse of the Court’s process is not defined in the Rules or Practice Directions. As noted at CPR 3.4.3, it was explained in another context as “using that process for a purpose or in a way significantly different from its ordinary and proper use” citing Attorney General v. Barker [2001] 1 FLR 759 per Lord Bingham of Cornhill. The notes at CPR 3.4.3 point out the categories of abuse of process are many and are not closed. Those notes cite amongst other authorities Jameel v. Dow Jones & Co [2005] QB 946 and matters there set out by Lord Phillips at paragraphs 54, 69 and 70, and as to when it could be demonstrated on application, that the benefit obtainable by the Claimant in an action is of such limited value that “the game will not merely not have been worth the candle, it will not have been worth the wick” and the costs of litigation will be out of all proportion to the benefit to be achieved. Further those notes refer to Evans v. Secretary of State for the Environment Transport and the Regions[2006] EWHC 322, the case cited by Hollis Briggs in correspondence and cited before me by Mr Shivji. There HH Judge Mackie QC sitting as a Judge of the High Court struck out the balance of the claimant’s case as an abuse of process, having given summary judgment against him in relation to other matters, and where the relevant defendant had made an open offer to waive a costs order in its favour and the claimant’s remaining heads of damage amounted to less than that offer. The offer was still current at trial. The Judge regarded a continuation of the claim as a pointless waste of time, costs and other resources.

68. Go Debt does not seek to allege that Mrs Crutchley has no real prospect of establishing at trial her points as to the miscredited £50 and the mis-statement of the PPI total amount of charge. It is fair to note that Mrs Crutchley’s case relating to unenforceability is as Mr Shivji submits extremely weak on the documents. The agreement on its face made clear the £50 was an insurance premium down payment not a deposit on the car. The credit agreement stated in terms that the PPI was optional not compulsory. Mr Brant takes the point that the instalment calculator does refer to a £50 deposit against the invoice price. But as I have noted, the same document later suggested there was no vehicle deposit and the £50 was a down payment provided by the customer relating to additional insurances. Further it was a document internal to DAFS. Nonetheless Go Debt understands, as Mr Shivji accepts, that the Court will not adjudicate on the two unenforceability issues raised by Mrs Crutchley on a summary judgment/strike out application. That appears to me a correct concession. Mrs Crutchley would, without more, be entitled to give evidence at an oral hearing about what was in fact agreed between her and DAFS , when the latter conditionally sold her the Peugeot, and concerning the use of the £50 and whether she had any choice not to agree to make the insurance payments, if the deal was to be made for her to acquire the Peugeot.

69. Go Debt’s first point is that Mrs Crutchley is not entitled to a declaration against it, since it was not a party to the Agreement. Mr Shivji submits that the Court should not adjudicate on the validity of the agreement in the absence of DAFS.

70. It is of course correct that Mrs Crutchley made the agreement with DAFS. She pleads that Go Debt claimed to be the assignees by assignment dated 13th July 2005 of a debt owed by Mrs Crutchley to DAFS.

71. It may be recalled that the first two heads of relief have sought declarations of want of indebtedness under the conditional sale and credit agreements and a declaration that they were improperly executed. In general terms, the Court is reluctant to make declarations relating to rights under a contract or to construe a contract in the absence of a relevant party to it that would be affected by the declaration (note London Passenger Transport v. Moscrop [1942] AC 332 at 345 per Viscount Maughan and Zinc Corp Limited and Romaine v. Skipworth [1914] 31 TLR 107).

72. In context, Go Debt makes the point that it is a bare assignee of the debt rather than an assignee of the benefit or burden of the agreement. Mr Rhodes by his first statement and Mr Shivji in argument, refer to a passage in Salinger on Factoring: “although a factor may have his own claim against a debtor reduced or extinguished by the debtor’s countervailing rights, he incurs no positive liability to the debtor under the contract that gave rise to the assigned debt. As the bare assignee of the amount payable by the debtor, he is not party to the contract”.

73. The declaration of non‑indebtedness under the conditional sale and credit agreements is sought pursuant to Section 142 of the 1974 Act. Mr Shivji observes first that that would not save other heads of relief. He submits further that relief under Section 142 is only available “where (under the CCA) a thing can be done by creditor or owner on an enforcement order only”. Given the nature of the irredeemably unenforceable case run by Mrs Crutchley, no enforcement order would be available. Accordingly it is submitted as was held by HH Simon Brown QC in Rankine v. American Express 8 BM 4009 - 13 at 15, there would be no power to make a declaration under Section 142. Further as was found by HH Simon Brown QC at paragraph 51 in Rankine, save for section 142, there is no general power for the Court to grant declarations in relation to the CCAA because of the operation of section 170(1) which provides “a breach of any requirement made (otherwise than by any Court) by or under this Act shall incur no civil or criminal sanction as being such a breach, except to the extent (if any) expressly provided by or under this Act”.

74. It is further submitted by Go Debt that Go Debt is not a creditor within the meaning of Section 189 of the 1974 Act since it is merely an assignee of the debt from DAFS and not the assignee of the rights and duties of DAFS under the agreement. In answer, Mr Brant submits and cites Goode on Consumer Credit Law and Practice para 23-31 as confirming that the definition is thought to refer to the assignee of a debt, and that the Court would or should construe ‘rights’ and ‘duties’ in the alternative.

75. Thus far, I accept Go Debt’s submission that the Court would not grant the relief currently sought by the Particulars of Claim, in the absence of DAFS. The latter would not be bound by a declaration of rights as between Mrs Crutchley and Go Debt, but it would be unfortunate to make a declaration as to the rights of DAFS, which the latter might then challenge in separate proceedings. However, by letter dated 10th October 2008, Stephensons on behalf of Mrs Crutchley wrote to assert that following the issue of proceedings there had been a significant shift by Go Debt and its previous position and that Go Debt had accepted substantive elements of her claim. They suggested that Mrs Crutchley would be content simply with a declaration: “It is agreed and declared that the Claimant is not indebted to the Defendant pursuant to an assignment dated the 13th July 2005 from (DAFS) to (Go Debt) arising pursuant to Agreement No. 912261” and agreement to pay the costs of the claim. A declaration is a matter for a Court on reading and hearing of evidence; a declaration of want of indebtedness as between the parties before it, would be limited to that evidence and would avoid difficulties relating to the relief sought by the Particulars of Claim relating to the enforceability of the agreement by DAFS. It does not appear to me that an alleged debtor disputing the demand or claim of an assignee of the creditor’s debt, needs as respondent or defendant, to join the creditor. Rather it will be for the assignee to determine whether it needs responsive evidence from the creditor, or needs to join the creditor as a party.

76. Mr Shivji, however, makes the further point that the Court will be reluctant to grant a negative injunction in ordinary private law when it would suffer no useful purpose, citing Messier-Dowty v. Sabena [2000] 1 WR 2040 at 2051D. In that case, the Court of Appeal dismissed an appeal from a dismissal of a claim against Sabena for a declaration of want of liability to it. Sabena owned an aircraft whose landing gear had failed causing loss. The claimant group was the manufacturer of the landing gear and sought a negative declaration relating to liability. As a matter of pragmatic approach of the Court to the exercise of its discretion and in answer to such a claim by the claimant, the question raised the interests of justice and on the relevant facts, a claim for the negative injunction was not justified in that case. Lord Woolf at 2050 cited the judgments of Lord Denning MR in the Court of Appeal and Lord Wilberforce in the House of Lords in Camilla Cotton Oil Co v. Granadex SA [1975] 1 Lloyd’s Rep 470, 474-5, [1976] 2 Lloyd’s Rep 10, 14, to the effect that a declaration as to non-liability can be made when it would serve a useful purpose and the enquiry was as to whether the grant of a negative declaration would be useful. They qualified earlier authority that negative declarations are hardly ever granted (Guaranty Trust: New York v. Hannay & Co [1915] 2 KB 536, 564. Mr Shivji relies on the latter and observations of Joyce J in North Eastern Marine Engineering Co v. Leeds Forge Co [1986] 1 Ch 324 to the effect that it is for a creditor to decide whether or not to bring a claim rather than a debtor to seek a negative declaration that money is not owed.

77. In my judgement a claim with real prospects should not be struck out or be made the subject of adverse summary judgment because the particular relief sought could not be granted in the absence of a third party. It should be recalled that it is not contended that there has been no real prospect in Mrs Crutchley’s case on enforceability arising in relation to the £50 and PPI issues of fact. In a well known passage in the judgment of Gibson LJ in Cobbold v. Greenwich London BC[1999] CA transcript 1406, he observed,

“The overriding objective is that the Court should deal with cases justly. That includes, so far as practicable, ensuring that each case is dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party or parties caused by the amendment can be compensated for in costs and the public interest in the efficient administration of justice is not significantly harmed”.

If for example, by case management, a trial can be saved by the addition of a necessary party (see eg. Ruttle Plant Ltd v. Secretary of State for Environment Food and Rural Affairs (No. 2) [2009] 1 All ER 448 at 462E - 464H) or by permitting the amendment of a prayer for relief to seek a more limited declaration as between the parties already before the Court, then the Court is likely to ensure or permit that course rather than to deprive the claimant of his or her day in Court.

78. Accordingly, I do not consider that the fact that the Court would not in the absence of DAFS, declare want of indebtedness under the Agreement (to DAFS) or declare that the agreement was improperly executed (by Mrs Crutchley and DAFS), be an answer to Mrs Crutchley establishing at trial that as between Go Debt, as assignee of a debt alleged due to it by DAFS, and Mrs Crutchley, that Mrs Crutchley has a good defence to the debt sought to be enforced by Go Debt. In other words if a declaration of want of indebtedness to Go Debt were useful, I would permit the claim to continue.

79. Both in informing that view and the background to consideration to which I shall next turn as to Mr Shivji’s second main point, I have regard to what might happen in relation to a creditor seeking to enforce an alleged debt. It may properly issue, as has happened here a statutory demand, if it is unaware the debt is disputed. If the debt is then disputed by the debtor on substantial grounds, the debtor has a short period under the rules namely 18 days to apply to set aside the statutory demand. If the District Judge is satisfied that the dispute is on substantial grounds the statutory demand is likely to be set aside, the Court determining that the creditor, if it wishes to pursue its claim, should proceed by ordinary claim in the Civil Courts. In a given case, the creditor, if properly advised, may recognise a substantial dispute has been raised and may informally agree with the debtor to “withdraw” the statutory demand a course which I understand is commonly done, despite the want of provision in the rules for formal withdrawal. It is a course that can be taken to avoid the unnecessary costs of an application to set aside the statutory demand. If for whatever reason the debtor does not apply to set aside the statutory demand, the creditor could issue its bankruptcy petition but would be aware that the debtor might raise the same substantial dispute, in answer to the bankruptcy petition. The creditor taking the course of issuing the petition in those circumstances would be well advised only to do so, if it had evidence to undermine the substance of the ground of dispute that the debtor had raised. If the creditor issues an ordinary claim to recover the debt, then again it is only likely to seek summary judgment if it has evidence to undermine the substance of the grounds of dispute and to show that there is no need for a trial. It has long been established that it is no answer to an application for summary judgment that the debtor had prevented insolvency process by way of bankruptcy or winding up by the raising of what appeared a substantial dispute, if on the evidence that can be deployed on the summary judgment application, there is in fact no substance in it. But if the creditor on reflection given the dispute raised by the debtor determines that the costs and risks of pursuing the debtor by ordinary claim are not worth it, it may simply drop its claim and that may be an end of matters.

80. But if in a given case a debtor raising a dispute to the statutory demand does not for whatever reason seek to set it aside, then it is left in the hands of the claimant to decide whether or not to pursue the debt whether by bankruptcy petition or ordinary action. That will mean that the debtor remains at risk of such a petition or claim until the debt becomes statute barred under the Limitation Act 1980. My attention was drawn to the 1986 Rule 6.12(7) and provision that where Bankruptcy Petition is based on a Statutory Demand and more than 4 months has elapsed between service of the demand and the presentation of the petition, the creditor’s affidavit verifying the petition must state the reasons for the delay. Where creditors generally are concerned, it is unattractive that a statutory demand should be left in the air without good reason. Nonetheless it is not understood that there is a rule which prevents reliance on a statutory demand, despite its having some age and the debtor may only be entitled to allege that it is too late to rely on the statutory demand, once the relevant debt has become statute barred.

81. It follows in my judgement, that there can be circumstances in which a debtor who has not obtained the setting aside of a statutory demand and has not obtained in effect the release of his debt may have good reason or need to seek a negative declaration of want of debt. One would trust that the circumstances in which that would arise would be relatively exceptional. Nonetheless if such a declaration would be useful, the Court should not in my view seek to strike out or summarily dismiss the claim for it, based on an argument which has a real prospect of success.

82. It follows from matters that I have discussed, that I would not without more and in effect demonstration of “no useful purpose”, strike out or summarily dismiss Mrs Crutchley’s claim on the first ground of Mr Shivji that it would be DAFS rather than Go Debt that should be a party, given Mrs Crutchley would have an argument by amendment to pursue simply the negative declaration of absence of debt owed to Go Debt.

83. Mr Shivji’s second principal point is that the claim is an abuse of process as Go Debt does not claim to be owed a debt by Mrs Crutchley and the pursuit of a claim for a negative declaration where a creditor is not asserting a claim, is a waste of costs and abuse of process.

84. It is asserted by Mr Rhodes and by Mr Shivji, that paragraph 1 of the Particulars of Claim is based on a fundamental error in that Go Debt does not claim to be owed a debt by Mrs Crutchley. Paragraph 1 in fact only recites that Go Debt claims to be the assignee of the debt pursuant to the assignment dated 13th July 2005. However, the inference from the assertion by the claim seeking the relief originally sought or a negative declaration that there is no debt, is that Go Debt does claim it is a creditor of Mrs Crutchley. Mr Shivji relies, as Go Debt had through Hollis Briggs in correspondence and does in the statement of Mr Rhodes, on the Evans case noted at paragraph 67 above. If it were right that Go Debt does not claim a debt from Mrs Crutchley then I would agree that there would be no useful purpose in these proceedings and they could be categorised as an abuse of process justifying striking out or summary judgment rather than permitting the incurring of further costs and a trial of the claim.

85. It is Mrs Crutchley’s case that it was only after the proceedings were issued that Go Debt stated they did not claim to be the creditor of Mrs Crutchley. The view of Mrs Crutchley, expressed by Mr Brant, is that the only substantive issue outstanding between the parties is one of costs and that that should have been dealt with by the District Judge. In my view the issue as to whether Go Debt still claimed to be a creditor needs to be resolved as a matter of careful construction of the correspondence preceding the issue of the claim, which I have already cited.

86. Before proceeding to that construction, I would make two preliminary points. First, debtors met with a statutory demand are advised in the standard form to consult the Citizens Advice Bureau. It can be extremely helpful that such bureaux can refer potentially disputed consumer credit agreement claims to solicitors and Mr Brant informs me that Stephensons receive a number of such references, which indeed included some of the portfolio of clients for whom Stephensons have been acting in relation to DAFS agreements. The giving of advice to such debtors will inevitably involve some cost. However, an agreement of a creditor informally to withdraw a statutory demand or a consent to an application to set aside the statutory demand, does not carry with it an agreement that the creditor will pay the relevant costs. If those are to be resolved on an application to set aside a statutory demand they will be resolved in accordance with the usual principles applying to costs relevant to that application.

87. There is as I understand matters, no power to bring costs only proceedings in relation to costs a party has incurred in advance of any proceedings, including where matters have been agreed before the proceedings are issued, unless there is an agreement by one party to pay relevant costs of the other party in effect to avoid proceedings (cf. CPR 44.12A). As a general comment I would note that from the first Stephensons’ letter to the last to which I have referred (seeking simply the negative declaration) there has been a settlement requirement that Stephensons’ costs shall be met by Go Debt. That is a matter which Go Debt has at all times refused to agree.

88. It does not however appear to me that even if one can think that a party to negotiations about a claim, ought reasonably to agree to meet certain costs to buy off the claim, that would mean that the other party might be justified in issuing proceedings, where there is no issue between the parties, simply to seek to recover some costs. A costs only claim in those circumstances could only in my view be permitted, if there were further amendments to the CPR.

89. The initial exchange of correspondence simply involved Go Debt agreeing not to take legal process for recovery of the debt, otherwise than on notice (6th August 2007). In context it had as early as its letter to Mrs Crutchley on 1st February 2006 distinguished “legal or bankruptcy proceedings”. A fair reading of the letters of 6th and 30th August 2007 is that Go Debt was agreeing not to proceed by the bankruptcy route as opposed to making a claim to recover the debt on notice. It refused to agree to pay costs (as sought on 14th August 2007 including costs of any application to set aside the statutory demand).

90. I do not think that Mrs Crutchley could have justified proceedings by reason simply of the outstanding statutory demand that had been made on 14th June 2007. In the absence of service issues Mrs Crutchley had 18 days to set it aside under Rule 6.4 of the 1986 Rules. She may have already been out of time by the time her dispute letter was sent on 18th July 2007. Go Debt did not agree the requirement on 6th or 8th August 2007 to consent to an application to set aside, at least on the basis that a costs order be made against it. In the absence of an effective application to set aside the demand, Mrs Crutchley must be taken in my view, to have accepted the risk that Go Debt might seek to rely on the demand in issuing a Bankruptcy Petition, which she would then have to oppose on the basis of her irrecoverability case and contention that she had substantial grounds for disputing the debt.

91. Mrs Crutchley by letter of 14th August 2007 wanted Go Debt to cancel the debt. By that letter and Stephensons’ letter of 3rd September 2007, she expressed concern as to adverse credit ratings and their stigma. By the letter of 9th November 2007 Mrs Crutchley and a number of portfolio clients of Stephensons threatened the issue of proceedings absent agreements by Go Debt to “write off” the agreement and to pay costs. Go Debt did not agree and took the point that it (as opposed to “DAFS”) could not write off the agreement. By their letter of 23rd November 2007 Stephensons took issue with the contention that Go Debt could not write off the agreements and also amplified the stigma in reference to the problems with any application by a client for credit. On 11th March 2008 Go Debt took the point that Mrs Crutchley (as seems had other clients) had failed to take into account that it was merely an assignee of the debt and not a party to the agreement. Indeed, the dispute letter of 14th July 2007 had begun by refereeing to Go Debt’s agreement with Mrs Crutchley rather than DAFS agreement with her. By Go Debt’s without prejudice letter of 11th March 2008 and open letter of 27th March 2008, Go Debt’s position was that it would agree not to pursue debts against Stephensons’ clients including Mrs Crutchley in relation to the debts assigned to it by DAFS on the basis of each side bearing its own costs. On 9th May 2008, it wrote further to say that it had written off the debts and would not assign them to third parties.

92. Against that background the question arises as to whether the issue of the proceedings on 6th June 2008 could be justified.

93. I have already expressed my view that costs only proceedings cannot be justified in the absence of an agreement to pay costs and any alteration of the Civil Procedure Rules.

94. Contrary to Mr Brant’s submission I do not consider that Go Debt’s position has changed since the issue of proceedings in that it no longer claims to be a creditor. Consistently, before and after issue, it has maintained that for commercial reasons it agrees not to pursue Mrs Crutchley (and the other Stephensons’ clients) for the debt and has written it off.

95. I do not consider that “stigma” at least on its own, could justify the issue of proceedings for a negative declaration. I am not prepared to take judicial notice that Mrs Crutchley has any adverse credit ratings. She has not given any evidence of such an adverse rating or how it has arisen. I can see that it is likely that were Mrs Crutchley to make an application for further credit, she might have to disclose to the lender Go Debt’s claim to have been an assignee of the DAFS debt. But again she has given no evidence of making any such application or being prejudiced by Go Debt’s claim. The position is that she would presumably have had to say to any such creditor that Go Debt was willing to write off its claim on the basis of each side bearing its own costs.

96. I have come to the conclusion that the only, but sufficient, justification for the issue of these proceedings for a negative declaration is that Go Debt could change its mind and seek to enforce or assign the debt. It might only seek to do so in practice if there were change in Mrs Crutchley’s apparent circumstances, whether by way of a lottery win or otherwise but there has remained a risk that it might do so. That would be a matter that it might be necessary to disclose, if Mrs Crutchley were making a credit application.

97. Mr Brant in his submissions makes the point that a parole release whether orally or in writing without valuable consideration amounts to a “nudum pactum” (Chitty on Contracts 30th Edition, para 22 - 003/4) and it is my view sufficient for Mrs Crutchley to contend that she should not be in a position in which she has to run some form of estoppel claim to avoid the absence of a Deed of Release which had not been offered (or sought) prior to the issue of proceedings.

98. For the reasons under discussion I conclude that Go Debt in correspondence prior to the issue of proceedings had failed to make in effect an irrevocable offer to release the debt in regards to which it could not change its mind. Accordingly, I am not willing to strike out the claim or give summary judgment against Mrs Crutchley.


Secret Commission Claim
99. By the secret commission claim, Mrs Crutchley takes the point that where a credit broker for a debtor is going to be paid a commission by a creditor, it owes a fiduciary duty to the debtor to disclose the commission. She argues through Mr Brant that absent disclosure, the debtor has a claim to rescind the credit agreement or to assert it is void. Further, the debtor may have it is argued, at the lowest a claim to account for the commission. In Wilson v. Hurstanger[2007] 1 WLR 2351, a case of partial disclosure, the debtor was able simply to recover the relevant commission rather than to upset the agreement.

100. It was apparent from the dispute letter of 18th July 2007 that Stephensons were aware of the possibility of commission being paid for the PPI or other insurances, when seeking disclosure. DAFS internal instalment calculator document did record the right to dealer commissions in relation to the insurances, commissions totalling £659.77.

101. It may be observed that DAFS standard agreement in Mrs Crutchley’s case, foreshadowed that the car dealer or supplier might be the associate company Direct Auto Finance Limited or some other third party.

102. If Mrs Crutchley’s general secret commission case is correct, and Mr Shivji does not for present purposes seek to dispute it, and Mrs Crutchley is correct that car dealers owe fiduciary duties to the motorist, then it is surprising that the DAFS standard agreement did not provide for relevant disclosure. Whilst not taking judicial notice of any given practice, it would not surprise me that a car supplier selling insurances on behalf of a creditor would be paid a commission by the creditor.

103. However, the short difficulty in this case had appeared to me that the supplier was DAFS “t/a Yes Car Credit” itself, namely the company whose registration number is 3444409. It had followed that DAFS was supplying the car it was conditionally selling to Mrs Crutchley.

104. When on 14th March 2008, Stephensons made the general hidden commission point amplifying the commission disclosure that it had sought by the dispute letter of 18th July 2007, Go Debt replied on 27th March 2008 raising the point that it was not the seller of the policies and did not receive a commission. That reply rather begged the point that Mrs Crutchley might have a claim against DAFS in relation to the commission, arguably reducing or extinguishing the debt that had been assigned to Go Debt.

105. When on 7th May 2008 Hollis Briggs commented on the draft Particulars of Claim, they made the point that it was wholly wrong to suggest that Go Debt had paid DAFS a secret commission. As issued, the Particulars of Claim referred to DAFS as the payer of the commission.

106. Stephensons did not address the point in issuing the proceedings that the claim referred on reading the only definition of Yes Car Credit, to DAFS as the supplier of the Peugeot as well as being the creditor under the conditional sale agreement. It observes that Hollis Briggs had not made that point crystal clear in commenting on the draft claim.

107. By this application, Go Debt wrongly suggests that the first time that the secret commission was raised was in the Particulars of Claim. It had been raised in the correspondence I have cited but Go Debt does submit, making what had appeared to me an obvious point, that on Mrs Crutchley’s conditional purchase from DAFS, there was no third party credit broker or agent of Mrs Crutchley, who might earn a commission.

108. Mr Brant submits that the commission was paid to the car dealer and the purchase invoice was a nonsense in suggesting the Peugeot was sold by DAFS to DAFS. That might not be right. I can readily imagine DAFS in generating a purchase invoice in its standard legal draft form on the sale of one of its own cars would not by the relevant employee question the sense of the invoice if it was itself conditionally selling on the car to Mrs Crutchley, though the invoice was there to explain the sale off the given branch forecourt, of a DAFS’ car.

109. In circulating a draft of this judgment in anticipation of handing it down on 9th March 2009, I set out that I did not see that there was any ground for Mrs Crutchley assuming and submitting through Mr Brant that there was a separate car dealer, also trading as Yes Car Credit, who was her agent owing her duties. I said that I could see no real prospect of establishing such a separate car dealer. Insofar as in background, Direct Auto Finance Limited had had any involvement with the Peugeot, as to which I had no evidence, the documented position on 15th and 16th June 2005, was that it was DAFS which was selling, as dealer, its own car. It appeared to me that that was the Yes Car Credit in issue, where Mrs Crutchley was concerned. I also observed that though the position might be different in respect of group companies, it would normally be wrong for two companies to trade under the same name, and that I would be surprised and concerned if the associated company had the same trading name.

110. Mr Shivji on 6th March 2009, proposed by e-mail, corrections to the then draft of that last paragraph. He observed that Go Debt’s position as articulated by him was that Direct Auto Finance Limited was the ultimate supplier of the vehicle (clause 2.1) and that both DAF and DAFS traded under the name Yes Car Credit and that neither of them was the agent of Mrs Crutchley in respect of the credit (clause 4.1). He suggested I corrected my judgment to record that there was no real prospect of establishing a separate car dealer who was the agent of Mrs Crutchley owing her duties and delete my comments relating to two companies trading under the same name. I was initially attracted by the suggestion that I should add to the last paragraph a finding that if DAFS were selling its own car and insurance, the associated company could not be said to be the agent of Mrs Crutchley, even if DAFS might subsequently share part of the price or premiums, within the group.

111. In response, Mr Brant submitted by e-mail that Mr Shivji was changing the basis of the judgment to conclude that Direct Auto Finance Limited, the supplier could not be said to owe Mrs Crutchley fiduciary duties as agent or credit broker.

112. The circulating of a draft judgment is not the occasion for allowing further argument about the case. Nonetheless where handing down of a draft leads to a mistake being drawn to the Judge’s attention, the Judge can take account of the matter. The points made by Mr Shivji and Mr Brant, led me to re-list the matter for further submission. That was not possible until today, by reason of other commitments of Counsel.

113. I have to observe that the evidence of Mr Rhodes for Go Debt was that Yes Car Credit was the trading name of DAFS and that Mrs Crutchley’s secret commission claim was nonsense because the alleged secret commission was paid by DAFS to itself. Neither of his statements referred to the associated company and Mrs Crutchley filed no evidence.

114. In relation to Mr Shivji’s ‘articulation’ of the case relating to the associated company, I recall him informing me that it did supply DAFS but I understood that simply to mean that in background DAFS did source cars from it, but that in this case DFS was the supplier where Mrs Crutchley was concerned. I did not understand him to say that the associated company also traded as Yes Car Credit. I did note him in opening to have submitted that the associated company was an agent of DAFS and that there was no authority that a car dealer is the agent of the customer in context.

115. Upon reconsideration, I must accept that by concession rather than evidence, Go Debt accepts it is arguable that the associated company sold the Peugeot to DAFS, which then conditionally sold it to Mrs Crutchley. I was wrong to conclude that there was no ground for saying there was a separate car dealer, also trading as Yes Car Credit. There was apparently. I remain concerned that associated companies have the same trading name. I accept of course that group companies will tend to use the group name, distinguishing themselves by including in their individual names, some particular description in reference e.g. to location or venture or activity. But the same trading name is a recipe, perhaps intended, for confusion. I do however, now understand that the ‘Yes Car Credit’ referred to at paragraph 7 of the Particulars of Claim is not the Yes Car Credit (DAFS) referred to at paragraph 1 and 2.

116. It follows that the issue as to whether the associated company was the agent of Mrs Crutchley owing her fiduciary duties, is live. That company was arguably if not clearly, the agent of DAFS to sell the Peugeot and the insurance. Without more, it would not be the agent of Mrs Crutchley. Thus far I had thought that if DAFS was selling its own car and insurance, the associated company could not be said to the agent of Mrs Crutchley. Again that would be so even if DAFS might subsequently have shared part of the price or premiums, within the group.

117. I have some difficulty with the concept at common law that the motor dealer selling as agent for the finance company, the car and insurance, also owes what may be conflicting duties to the motorist or that the motorist could doubt that the dealer is selling the car and finance for his profit. Mr Brant submits that the motorist may know that the dealer will have been making an undisclosed profit on the car but may not know that he is receiving a commission from the finance company. That I accept is arguable. However that does not make the dealer an agent or broker with fiduciary duties. It is difficult to imagine a car dealer shopping around for finance as a broker for the motorist, albeit that in a ‘tied’ sense, a dealer will commonly offer car finance products.

118. Traditionally, one recognised insurance and mortgage brokers and their acting for and owing duties to the assured or borrower. Wilson is an example of a mortgage broker owing fiduciary duties to the client borrower. But equating the car dealer with such a broker is difficult. Nonetheless, the term ‘broker’ ‘has subsequently been applied to a much wider range of occupations, starting with stockbrokers but extending much further’ (Chitty on Contracts 30th ed. At 31-009). Further whilst the secret commission claim here does not raise a question of breach of any statutory duty, a motor dealer can be a credit broker for the purposes of the 1974 Act (Chitty at 28-217).

119. Mrs Crutchley does upon reflection have a real prospect of showing that the initial dealer in this case on 15th June 2005 was the associated company which sold to DAFS, which on paper then sold to itself before dealing with Mrs Crutchley and that it was the associated company dealer which arranged those onward sales and in a limited sense may be said to have acted at Mrs Crutchley’s request, in putting forward the DAFS offer of finance for the Peugeot and insurance. But I cannot think that the car dealer acting as agent of the finance company, owes duties to act in the motorist’s best interests. An estate agent may deal extensively with the purchaser in relation to a property, but he is the agent of the vendor. He must not misrepresent matters but I cannot see that he owes fiduciary duties to the purchaser. The car dealer appears to me in a similar position.

120. There is apparently no authority on the point. That may be because the car dealer has simply not been thought to owe duties to the motorist, save perhaps of care in making representations on his and the finance company’s behalf. Mr Brant reminds me of the guidance noted at CPR 3.4.2 that the court should be reluctant to give summary judgment in an area of developing jurisprudence. But the relevant development has in my judgment, been statutory in relation to consumer credit. If the dealer is a credit broker for the purposes of the 1974 Act, I would have expected any obligation, for example, to account for commission profit to have been dealt with instruments and regulations made under the Act, and draft agreements such as the DAFS’ insurance credit agreement, to provide for such account. If it were right that dealer commissions should be disclosed, then regulations can be made by Parliament. It is not in my judgment correct that the car dealer owes at common law, fiduciary duties to the motorist. Their positions are opposed and effectively those of seller and buyer, with the intervention as here, of the finance company on the seller’s side.

121. Mr Shivji also makes the forceful point that the remedies for secret commission would lie against the associated company and DAFS, who are not before the Court, and should not be adjudicated in their absence. The distinction with matters discussed at paragraph 78 above, he argues, are that a set off could only arise following an adverse finding affecting the rights of non-parties. I suspect he is right but if I felt there should be a trial of the secret commission case, I would afford the opportunity for application to be made to add DAFS and the associated company and to amend the Particulars of Claim to add them and particularise the second ‘Yes Car Credit’ company. However, I do not consider there should be that trial.

122. It does not therefore appear to me that Mrs Crutchley has no real prospect of establishing a case whether for declaratory relief or otherwise based on paragraphs 7 - 12 of the Particulars of Claim. The problem had appeared to me simply another instance of issuing a standard form, in this case draft Particulars of Claim drawn up for debtors under credit agreements with DAFS, without properly considering whether the given part of the claim makes sense on the facts of the case. But Yes Car Credit as I have sought to explain, is the trading name of two companies and the associated company might prove to be the supplier. However he supplier did not in my judgment owe fiduciary duties. Accordingly, I do strike out paragraphs 7 - 12 of the Particulars of Claim. I see no need separately to order summary judgment in regard to those paragraphs.

Costs
123. Before I reserved judgment on 12th November 2008, Mr Shivji and Mr Brant made costs submissions, necessarily dependent on given outcomes of the application. Neither submitted grounds for the departure from the general rule that costs should follow the event. Mr Shivji made the point that should he succeed on one of his first two grounds and obtain the striking out of or summary judgment on the whole of the claim, he would seek indemnity costs.

124. I consider that I should make no order as to costs. Go Debt has failed in its application to strike out or for summary judgment in relation to the whole of the claim, It has, however, succeeded in relation to paragraphs 7 - 12 of the Particulars of Claim. I consider it would not be fruitful or proportionate to make discrete orders in favour or against Go Debt in relation to the parts of its application, which have respectfully succeeded or failed and that there should in practical terms be a set off of costs that in the event flow in opposite directions.

125. I do not consider that the fact that Mrs Crutchley has had a certificate affording legal assistance for the purpose of her claim makes any difference to that conclusion, though the order should reflect any standard provision Mrs Crutchley is entitled to for assessment of her costs as against the funder.

Order
126. I would ask Mr Shivji and Mr Brant to agree a form of order consequent upon this Judgment. In case of any issue arising as to the terms of the order, either party can seek resolution of that issue, by an application in writing to me.



Permission to Appeal
127. In reserving judgment, I indicated that I was prepared to assume that the loser would seek permission to appeal. In relation to Go Debt and its failed application to strike out or summary judgment in respect of the whole claim, I do see that it raised points of some general interest in relation to enforceability points under the 1974 Act that may flow following an assignment of debt by the creditor to a party such as Go Debt, in the position of acting similarly to a factor. It is as I understand, quite common for debts to be sold by a trader, to assist cash flow. Ultimately however Go Debt’s application in relation to the whole of the claim has failed because on the facts I have determined that Mrs Crutchley could justify an application for a negative declaration given that before the issue of proceedings Go Debt’s willingness not to pursue the debt was on the basis of each side bearing its own costs and pertinently was not or was arguably not, irrevocable. In the round I consider that a decision as to whether there are real prospects in any appeal is best left to a single Lord Justice of Appeal in considering whether I have in effect misconstrued relevant correspondence between Stephensons and Hollis Briggs. As to Mrs Crutchley and the secret commission claim I have struck out, I do not consider there is a real prospect as a matter of fact of establishing that the associated company was a credit broker or agent owing her fiduciary duties, the breach of which might entitle her to rescind the Agreement with DAFS or to seek an account of dealer commission.


Claim No: 8LV51821
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LIVERPOOL DISTRICT REGISTRY
BEFORE ANTHONY ELLERAY QC
SITTING AS A DEPUTY HIGH COURT JUDGE ON 20th OCTOBER 2008, AT LIVERPOOL, AND ON 12th NOVEMBER 2008 AND 12th JUNE 2009, AT LIVERPOOL

B E T W E E N:

JAYNE CRUTCHLEY Claimant

and

GO DEBT LIMITED Defendant



JUDGMENT