Timing is everything:

[transformer999]

Timing is everything: Court of Appeal hands down decision on when claims under hire purchase agreements are time-barred



On 10 October 2012, the Court of Appeal handed down an extempore judgment in BMW Financial Services (GB) Limited v Hart (2012) on an issue which will be of considerable interest to consumer and asset finance providers: when does the limitation period for bringing a claim for the unpaid balance expire? In a pragmatic and sensible decision, the Court of Appeal decided that the cause of action to recover the unpaid balance did not start until the lender had served a termination letter or accepted the debtor’s repudiation of the agreement.


The Facts
BMW Financial Services (GB) Limited ("BMWFS") entered into a hire purchase agreement (the "Agreement") with Mr Hart. It does not appear that the Agreement was regulated by the Consumer Credit Act 1974 (the "CCA"). In July and August 1999, Mr Hart failed to pay two monthly instalments. By a letter dated 26 August 1999, BMWFS accepted Mr Hart’s repudiation of the Agreement and terminated it. BMWFS demanded payment of the unpaid balance.


Mr Hart left the UK without paying. BMWFS issued a claim on 26 August 2005. Default judgment was obtained. On returning to the UK, Mr Hart became aware of the judgment. He successfully applied to have it set-aside by arguing that the claim had been issued outside of the limitation period. His Honour Judge Halbert, sitting in the Chester County Court, decided, following Reeves v Butcher [1891] 2 QB 509, that the limitation period started when Mr Hart did not pay the instalment in July 1999 and that the claim was time-barred.


Court of Appeal
BMWFS appealed to the Court of Appeal arguing that HHJ Halbert had erred in his interpretation of Reeves and the terms of the Agreement. After hearing submissions, the Court of Appeal allowed the appeal and decided:

• In Reeves, the agreement stated that the monies would not be called in so long as the borrower regularly paid interest. If, however, the borrower missed a payment, the balance of the loan (including interest) would become due 21 days after default.
• Under the terms of the Agreement, BMWFS had no right to make a claim for the unpaid balance until it had given notice of termination or accepted Mr Hart’s repudiation of the Agreement.
• It was only when BMWFS had given notice of termination or accepted Mr Hart’s repudiation that the sums due under the Agreement became due. Until that point the only sums Mr Hart had to pay were the outstanding instalments.
• Mr Hart’s failure to pay the instalment did not, on its own, accelerate the obligation to pay the whole amount due under the Agreement.
• The Court of Appeal therefore distinguished the earlier decisions of Reeves and Hemp v Gardland 114 E.R. 994 (which Reeves followed).

Comment
The Court of Appeal’s decision is both pragmatic and commercially sound. The Agreement, like many others, stated that the balance became due upon termination. If the Agreement had been regulated by the CCA, termination is subject to the lender serving (where appropriate) a notice under the CCA (most commonly a default notice or, for non-default cases, a combined enforcement and termination notice). Notice is specifically required before a lender can become entitled to (amongst other things) demand "earlier payment of any sum".


If the Court of Appeal had come to any other conclusion it would have been contrary to the wording of the CCA. This envisages that the balance does not become due (and cannot be demanded as being due) until after the expiry of the notice period. The Court of Appeal’s decision can also be used in appropriate circumstances by lenders wanting to stop the limitation period running. It seems clear that, subject to an argument that the lender has affirmed the agreement by not taking steps to accept a debtor’s repudiation, termination could be delayed until the end of the term of the agreement. This would allow lenders to delay (most obviously where the debtor is in a difficult financial position or cannot be located) issuing proceedings until the last moment, like BMWFS did, and avoid being time-barred.


Timing is everything: Court of Appeal hands down decision on when claims under hire purchase agreements are time-barred - Lexology

[mystery1]

Re: Timing is everything:

Interesting. How did the court have jurisdiction if he didn't live in England ?

M1

[transformer999]

Re: Timing is everything:

I was thinking that myself too mystery....I mean if someone is not in the UK to defend a claim then how can the lender go ahead and obtain a judgment by default.

Hope others will shed some light on this who know more?

[Undercover Elsa]

Re: Timing is everything:

The CCA was set aside after the defendant returned to the UK, on the basis that he'd been abroad when it was issued, and that it was Stat Barred. The creditor then appealed against the date of accrual of cause of action.

Interesting and somewhat disturbing, in particular the para about this enabling lenders to delay termination in non payers in order to extend the time barring period

[jen_br]

Re: Timing is everything:

Car finance is also very different.

However, just because you are NOt in the country doesn't stop the process.
Did he actually leave the country and do the proper forms inform people that had left for a temp residency in another country?

I am interested to read the entire judgement I think there are points missing from above.

let me contact someone who is more in the know about this situation I have heard of another similar case.

[oscar]

Re: Timing is everything:

Interesting and somewhat disturbing, in particular the para about this enabling lenders to delay termination in non payers in order to extend the time barring period

Which is nothing new with CCA. Am sure I have read on the forum were termination has occured some time after default.

[Never-In-Doubt]

Re: Timing is everything:

But whilst this is all good, statute barred in itself does not rely on termination does it. It relies on the expiration of X years from last acknowledgement of the debt. Whether its terminated or not matters little.

[Never-In-Doubt]

Re: Timing is everything:

Car finance is also very different.

However, just because you are NOt in the country doesn't stop the process.
Did he actually leave the country and do the proper forms inform people that had left for a temp residency in another country?

I am interested to read the entire judgement I think there are points missing from above.

let me contact someone who is more in the know about this situation I have heard of another similar case.

Car finance is not different. Who said that? They're lying to you.

The entire judgment is there, nothing is missing and few know more than appeal judges. If you actually have a point please state it and stop talking riddles cos it confuses matters. This was also exempt from cca1974. Let's not forget that

Thanks.

[Riz]

Re: Timing is everything:

But whilst this is all good, statute barred in itself does not rely on termination does it. It relies on the expiration of X years from last acknowledgement of the debt.

You have to understand that there are two slightly different processes at work when it comes to time limits.

1st is the "initial cause of action". That is when the 6 years to make a claim first starts. This need not be the date of last payment. In fact, usually under any construction is some time later than that.

2nd is the effect of subsequent acknowledgement once that initial cause of action has accrued. Each payment or acknowledgement restarts the 6 year limitation period from that date. This is the origin of the conventional statement "a debt is statute barred 6 years after acknowledgement or payments".

That statement is very very often true, as people usually struggle on and try to pay and acknowledge for some time after getting into difficulty.

However, should someone make a contractual payment/acknowledgement and then on the next due date just stop out of the blue, never to acknowledge or pay again then you would have the situation where the "initial cause of action" accrued some time (maybe months) after the last payment.

i.e. the clock has started ticking by the accrual of the cause of action, but by never acknowledging or paying after that the debtor has not reset the clock ever again.

While that may all seem a bit academic, where you are taking about fine time limits such as in this case, then even a difference of a month/week/days could be vital.

[Never-In-Doubt]

Re: Timing is everything:

Thanks Rizzle. Makes purrrrrfect sense

[Riz]

Re: Timing is everything:

Thanks Rizzle. Makes purrrrrfect sense

Good. Usually when I try to explain that to people, I end up confusing the issue more.

[Never-In-Doubt]

Re: Timing is everything:

I can see why lol but this explains it pretty basic which is all we needed.

Cheers mate

[mystery1]

Re: Timing is everything:

In Scotland the initial writ should establish Jurisdiction. Does this not need to happen in England and Wales ?

M1

[gravytrain]

Re: Timing is everything:

Did the transcript of this judgement ever become available ?

This still seems very poorly understood, although thankfully not on here.

Issues are arising where current account overdrafts, are being enforced despite no actions(payments) being made , some times for 10s of years.

Obviously the above supports this view.
D,oh
Just noticed "Unreported"

[Meerkat Mob]

Re: Timing is everything:

http://www.bailii.org/cgi-bin/markup...method=boolean