Heading the Right Way!

[garlok]

Re: Heading the Right Way!

yep Niddy it was one the sites i studied as both them and Gannons London Sols were/are giving advice to creditors and I thought it might be a wise move to find out what the consequences were for their actions in these things. I know that may sound silly but better to know your enemy as they say

regards
Garlok

[Never-In-Doubt]

Re: Heading the Right Way!

Lol wise move mate! I can relate

[garlok]

Re: Heading the Right Way!

Hi guys this is the full tect of what I did to help someone else although as DS knows I did not include Fry in this as it could have confused at this point:-

Hi All,

At last after much promising, here is Garlok’s take on Full & Final settlements. First of all let me say that there is some excellent material on this site about Full & Finals (Cetelco et al) however on reading around, there does seem to be some loose ends and misapprehensions which I feel could lead to troubles in the future for those who are a little unwary with particular concern about holding these things watertight. I would never lay claim to being an expert, this is just what we did to achieve a result.

We have just had a little success with F & F at a figure of 10% with a business overdraft and the remnants of a business loan. I will try to pull together all the comments I have made on other threads so that they are all in one place and open for comment and discussion. There are some little practical things that we picked up along the way as well which have proved of value.

When we first considered a Full & Final settlement offer the prerequisite was that should any deal be accepted then it had to be absolutely watertight with no get out for the creditor now or in the future. We had disputes/complaints with four credit cards with the same bank where the business account was held which had been ongoing for some two years. The cards were fully paid up to date at the time but the account, already in OD was stripped up to and above its agreed overdraft limit by the card company subsidiary and for which they tried to charge us for the privilege. We did get the money back after a load of histrionics in a crowded branch one Saturday morning. However we could no longer trust the bank to behave correctly if we paid money into the account or to make payments on the loan account without covering paperwork etc. I expected to pay about 70 to 80% on a F & F but any saving would have been of help. I started a “reading round” to find out what I could and to see if there really was any mileage in offering the F & F and closing the account(s) down completely, making that the end of the matter and ensuring there was no further comeback and dealing with the CC issues separately which we had in the hands of specialist litigation solicitors anyway. I just did not need the hassle any longer and needed to tick at least one box.

The first thing that came out was that the legal mechanism for F & Fs is deceptively elegant and simple, can I just emphasise the word deceptively. The underlying, and underpinning law is definitely not, in fact you have stepped away from the relatively simple arena of CCA Law into the absolute minefield of the Common Law of Contract which carries the baggage of very expensive litigation if things go wrong.

Case law, which is often quoted and goes back to the infamous Pinnel case of 1602, does NOT provide any hard and fast rules, which you can use to guide your thinking. Every case appears to stand or fall on its own particular merits should you, heaven forbid, end up in a court of law. I tackled my studies perhaps a little differently from the norm by taking a look first at what the obligations of a creditor are in these circumstances, what he may or may not do and what the consequences are for those actions. I found a couple of legal websites to start with, which provided fairly comprehensive answers to my mind’s questions.

Firstly for those interested in the Pinnel (1602) case (aka Penny v Cole) Sir Edward Coke opined that a debt could NEVER be discharged by a partial settlement. There is much case law since and a source of reference is “wikipaedia” putting “Pinnel’s case” into the “wiki” search engine and a whole raft of reference source material comes up.

However more recent material came to light from the two websites I mentioned and a repeat of the quotes I have made elsewhere might be useful.

Quote 1.

“The first thing to look at is whether the cheque comes from the debtor itself, or from some other person (e.g. a director, a group company). If it comes from a third party then you must not cash the cheque unless you really are going to accept it in settlement. Doing so would make an agreement with the third party which will be binding on you.
Assuming that the cheque does in fact come from the debtor, the question if you cash it will be whether there was in fact any agreement between you and the debtor that you were accepting the cheque in settlement. You can therefore pay the cheque in provided that at the same time you make clear to the debtor that you are not accepting it in full and final settlement.
You should do this immediately the cheque is received - holding it for a time could be taken as agreement to the terms. It is not necessary to tell the debtor before you actually pay it in. It is enough if you write at the same time, so that it is clear afterwards that you were never intending to settle the debt. The letter should make clear that you do not accept the cheque in full and final settlement but that you are paying it in as a part payment of the debt, and you expect to receive the balance.
If there are claims of breach of contract the position could be different. Assuming there is no dispute as to the amount due, then there is no dispute which needs settling - paying in the cheque could not count against you. However, it would still be prudent to use the procedure outlined above.”
Quote 2
“If there is to be accord and satisfaction the debtor must prove that there was agreement between the parties as to settlement. This requirement for 'agreement' is overridden somewhat once time has passed. Lloyd LJ stated that , "what matters is not what the creditor himself intends, but what, by his words and conduct, he has led the [debtor] to believe" (7).
In Stour Valley there was some disagreement over the amount outstanding after some building works had been carried out. The customer decided to send a cheque for a lower amount than that claimed by the builders and stated in his letter that the amount was in full and final settlement of all claims. The cheque arrived on day 1. The builders cashed the cheque and it cleared on day 5. On day 7 the builders spoke to the customer and told him that the amount could not be accepted in full and final settlement. This delay of seven days was not considered fatal and it was held that the builders were entitled to treat the cheque as a payment on account.
Lloyd LJ considered that cashing the cheque would always be strong evidence of acceptance, especially where an immediate rejection of the offer is not forthcoming. As far as a creditor is concerned, therefore, the communication of the rejection must occur "within a few days" for it to be valid. In this case a delay of one week fell within this band. In another case a delay of seven weeks (8) was found to be too long and accord and satisfaction was established. It appears, therefore, that the correct question to ask is whether the creditor's conduct caused the debtor to think that the money was accepted in satisfaction.”

It should be remembered that these two quotes are based on advice given to creditors as to the consequences of any actions they take. Lloyd LJ also made reference to settlements made directly between client/creditor and those made by “lawyers”. I do not understand quite the distinction in law but my humble opinion on this is that more weight would attached by the courts to settlements dealt with by lawyers in the debtors favour.

Cases referred to by the above quotes were:-
Croft v Lumley (1858)
Upfield v Marshall (1976)
Bracken v Billingshurst (2003)
The Commissioners of the Inland Revenue v Fry (2001)
Joinery Plus Ltd v Laing (2005)
Stour Valley Builders V Stuart (1993)
Day v McLea (1889)

My conclusions after all this and more:-

• It is not necessary for a dispute to be in place prior to making an offer of F & F.
• There is a definite distinction between a debtors own cheques and those of a third party.
• Timing is of the absolute essence, a delay of a few days by the creditor after cashing F & F cheques is usually not fatal to his case, a delay of two weeks or more usually is fatal to his case, although seven weeks is on surer ground.
• Delay by the creditor in informing the debtor (if the cheques are the debtors own) of his refusal to accept the offer is fatal to his case as above.
• If this is attempted by the debtor acting alone then they must be prepared to “lose” the money offered in F & F as only monies taken on account, the remainder of the debt still being owed and shall we say enforceable now or in the future. The question to ask yourself is really can you afford to have this money taken as only monies on account and still continue making payment as before or have the debt still outstanding
• Third party cheques are essential components of succeeding with F & Fs below the actual figure of the original debt. If they are then cashed by the creditor then there exists a fully legally binding agreement between the creditor and the third party benefactor NOT the debtor.
• It is not entirely necessary to establish “accord” with the creditor prior to the F & F offer being made.
• The covering correspondence must state exactly the terms and conditions under which the creditor may cash the cheques.
• The correspondence must give the creditor the opportunity to refuse the offer and return the cheques uncashed.
• It would be a wise move to state that a friend/relative/benefactor was prepared to make an ex-gratia payment to settle your debt on your behalf.
• Insist that no adverse entry is made on any credit reference file i.e. settled in full or satisfied. Nothing else will suffice
• Insist that the debt is settled and that no one will pursue this matter (OC, DCA, assignee or other agent) now or in the future (when you die think of your estate).

It became my opinion after all of the research that it would be unwise to tackle this problem alone particularly if significant sums are involved (see 5 above). This is not relatively simple Statute Law and has all of the complexities of a Common Law of Contract issue and all of the pitfalls that go with that. Every case stands or falls on its own merits. Hence our decision to ask our solicitors if they could take it up on our behalf. I would have thought a higher offer would be required but it was their decision that the opening offer only be 10% in total. If they wanted more then the bank would have to return the cheques and ask for a higher figure. To deal with this all only three letters were required.

It is my feeling that many successful F & Fs have little to do with the law, they are rather more to do with endemic systems failure and a weak management structure within these large sophisticated financial institutions. They only wake up to what has happened far too late, accord and satisfaction have been established as per Lloyd LJ. They have concerns about bringing actions under Contract Law. a failure would be embarrassing and could be disastrous for the other institutions as well.

One final point is that it is essential that you keep “proof” on a daily basis. Once those cheques have been cashed it will only take a few days before you will not be able to access all of your statements on line. Ours were cut off to the day postdating the day of the cheques being cleared. We could access nothing previous including the cashing of the cheques (but we had hard copy)/ Therefore it is wise counsel to print down your on-line statements on a daily basis until you have your “proofs”. If you are dealing with solicitors, they WILL require this proof as well as a copy statement from your benefactor which can have all else blocked out except the relevant transactions of the cheques clearing their account. It is most unlikely that you will receive any further hard copy statements from your creditor once this has gone through.

I thinks that it, much of it is old hat but relevant. Pick the bones. Sorry about the length of it.

Hope that it helps people to make clearer decisions.

Best regards
Garlok.

[The Debt Star]

Re: Heading the Right Way!

Garlok good buddy, your PM text includes the following. Do you have a copy of the letter your sol sent to the OP? Would be a useful precedent mate. Otherwise, it looks like the benefactor states that he ismaking an ex gratia payment for me, as opposed to me writing to the OC.

"Third party cheques are essential components of succeeding with F & Fs below the actual figure of the original debt. If they are then cashed by the creditor then there exists a fully legally binding agreement between the creditor and the third party benefactor NOT the debtor.

"It is not entirely necessary to establish “accord” with the creditor prior to the F & F offer being made.
The covering correspondence must state exactly the terms and conditions under which the creditor may cash the cheques.

"The correspondence must give the creditor the opportunity to refuse the offer and return the cheques uncashed.

"It would be a wise move to state that a friend/relative/benefactor was prepared to make an ex-gratia payment to settle your debt on your behalf.

"Insist that no adverse entry is made on any credit reference file i.e. settled in full or satisfied. Nothing else will suffice

"Insist that the debt is settled and that no one will pursue this matter (OC, DCA, assignee or other agent) now or in the future (when you die think of your estate). "

[Never-In-Doubt]

Re: Heading the Right Way!

Garlok, can I start a new thread in offers section with this info?

It's quite relevant

[The Debt Star]

Re: Heading the Right Way!

Will this letter do the trick?

****

Dear Sirs

Re: Your Account Number: xxxxxxxxxxxxxxxxxxxxxxxx

I write with reference to the above mentioned account number.

I confirm that I am prepared to make an ex-gratia payment to you on behalf of Anakin Skywalker (hereinafter referred to as “the Debtor”) to settle the above numbered account on his behalf. I am e unable to offer the full amount repayable to you but I am however able to raise a total of £XYZ and wish to offer this as an ex-gratia payment in full and final settlement of the above numbered account.

This offer is made on the clear understanding that, if accepted, neither you nor any associated company will take any other action to enforce or pursue this debt in any way whatsoever against the Debtor and that he will be released from all liability.

For the avoidance of doubt the terms and conditions under which you may cash my enclosed cheque are as follows:

1. You have the opportunity to refuse my offer and return the cheque uncashed to me;
2. I insist that that, if accepted, you inform the relevant credit reference agency and mark the Debtor’s file relating to the above account as "satisfied”;
3. I insist that the debt is settled and that no one will pursue Debtor in this matter (neither yourself, an agency you instruct, assign the debt to or attempt to sell the debt to) now or in the future;
4. If my cheque is cashed by you then there exists a fully legally binding agreement between us that the enclosed payment is made in full and final settlement of the debt owed by the Debtor;

I will regard any delay by you in responding to me as your acceptance of this full and final offer.

I look forward to receiving your reply.

Yours faithfully,

Wilhuff Tarkin

[Never-In-Doubt]

Re: Heading the Right Way!

The problem herein is that although garloks logic does come into play; encashment of cheque will not be sufficient to remove default notice as per the recent McGuffick case - ie it was a true reflection of account status and should therefore remain for the natural progression (ie 6yrs)!

So although you can ask for this you'd have no legal recourse to argue it if they refuse to remove the DN.

well that's my take on it.

[The Debt Star]

Re: Heading the Right Way!

In my case the accounts have all defaulted and are on the CRFs anyway so I don't care about that. What I do want to do is pay the debts off, preferably before I die of old age

Is the letter ok to go do you think?

[Never-In-Doubt]

Re: Heading the Right Way!

Looks fine to me mate

Do spell check first - there's a stay letter "e" in there

[garlok]

Re: Heading the Right Way!

Right First of all no problem, Niddy, use it at will and edit and add as you wish. There is another case which is useful but I am struggling at the moment, my usual route into MoJ seems to have changed. The other case not mentioned in the text is Cantor Index and neither seems to be on www.bailii.org either.

DS you are close but I think that you to say something like:-
Account number:xxxxxxxxx
"I am, due to circumstance, unable to make payment in full on this account. However a benefactor has agreed to make an offer to settle this account on my behalf in full and final settlement. Please find enclosed cheque for the value of XXXXX.

The terms and conditions under which he is prepared to make this offer are:-

1. (the default issue) i.e. all Crfs to be marked settled, partial settlement is not acceptable.
2. There is to be no pursuit now or in the future by you (the bank) or any agent appointed by or acting by representation on behalf of (the bank) of anything in connection with this matter.
3. the account balance is to be returned to zero.
4. if this offer is unaccepable to you then the cheque(s) must be returned uncashed by return of post as they belong to my benefactor.

yours etc. (don't sign unless electronically)

This is the gist of the text of our sols letter but of course they were able to use terms "like our client" etc signed of course "Solicitor Advocate". And please do note what I said about Lloyd LJ and deals done by lawyers and not by client creditor. The letter itself was again deceptively simple.

If you are going to do it this way on your own then do it with the least risky account both financially and legally first.

Exercise caution my friend, there is always always risk involved when in Common Law. the mantra is: Every case stands or falls on its own merits"

hope that this helps and will keep looking for you
regards
Garlok

[Never-In-Doubt]

Re: Heading the Right Way!

TDS - what Garlok is warning is that you "could" end up paying a chunk off and still having a balance to repay. Civil (especially common) cases can be expensive; not sure id want to fight a claim let alone start one, which you'd have to do if they cashed it and ignored your claims.....

I'd maybe test it on a small debt first, a really small one!!

[garlok]

Re: Heading the Right Way!

Back again for a short while.

Can't get at the case properly but the reference is:-
Inland Revenue Commissioners v Fry - (2001) All ER (D) 434 (Nov)

And from my very brief notes:- Sarah Fry's husband sent a cheque to the Revenue in f & f of tax debt which was of some significant amount less than the debt. The cheque was cashed immediately and a significant time went by. The reveue then pursued the outstanding debt balance through the courts. They lost and the case was found in favour of the Frys. The Revenue appealed. two background pints I sem to have made when looking at the judgment. Firstly there is a natural bias in the higher courts towards Government depts particularly the Revenue and secondly the Revenue as minor point were able to argue that husband and wife of long standing were one and the same person. The major point of law on which the case went the way of the Revenue was that they successfully argued that it was routine for all cheques to be removed from any accompanying paperwork and cashed immediately whilst the paperwork was read and ealt with at later date ona first come first served basis, hence there could be long delays. accord and satisfaction were not achieved. However in our cases if there is nothing to identify the cheque only a payment to bank XXXXXX and the money which it must ends up in the correct i.e. your account even if they are trying to establish payment on account only then they can NEVER argue on the basis of Revenue v Fry. How would they know what account to pay it into if they had not read the documentation? Hence any statement of truth as this would not and could not be a statement of truth.

something to discuss at any rate.
regards
Garlok

[Never-In-Doubt]

Re: Heading the Right Way!

Garlok - very devious; I love it

So do the old red herring; send money in without a reference number thus forcing them to read the letter which in turn means they cannot hide behind the separation of documents as per hmrc did in fry

Clever

[garlok]

Re: Heading the Right Way!

I would back that completely Niddy in your last but one post. I looked and would n't risk it alone unsupported. Plus DS if you already have defaults then it probably is less of a problem with the letter. Ours was for a business OD and the remnants of a business loan hence it was important enough for us to insist as part of the terms of settlement.

I'm not sure about McGuffick Niddy, I would have to give that thought as we are talking about a totally seperate agreement here under Common Law and not to do with CCA. It is as I said an accounting asset that is changing hands and under Common Law you can put anything you like into a contract as long as it is "signed" if you know what I mean.

I would welcome any input you have.
regards
Garlok

[Never-In-Doubt]

Re: Heading the Right Way!

I'm not sure about McGuffick Niddy, I would have to give that thought as we are talking about a totally seperate agreement here under Common Law and not to do with CCA. It is as I said an accounting asset that is changing hands and under Common Law you can put anything you like into a contract as long as it is "signed" if you know what I mean.

I would welcome any input you have.
regards
Garlok

Hiya, I am specifically trying to explain that you couldn't argue default removal as part of any demand or repayment offer. The thing is the moment you mention the "unlawful cra entry" then you're bringing both the cca1974 & the dpa1998 into the equation.

You can still relate to statute legislation as the element of the default would be via civil case that the debtor would surely have to initiate. If the debtor paid a f&f as per the detailed instructions then a dca may continue to chase the balance. Point is the debtor would HAVE to initiate proceedings as the creditor would take it down the civil road with an N1 claim for recovery of balance!

Therefore if it then ended up fighting a common law the default would remain UNLESS the debtor sought additional action against their belief of cca/DPA breach which would fail as per mcguffick.

Does that make sense lol? On phone so hard to type properly!!