This case1 concerned a challenge to a High Court judgment which was entered against Mr Hanley for failure to repay monies borrowed pursuant to a loan agreement. Mr Hanley asserted that he had never received a letter of demand for repayment of the loan monies borrowed. The Court noted that the notice of demand went, in error, to another Mr Hanley that had no connection to the Defendant.

Start Mortgages put forward a number of defences including that: (i) the loan agreement did not require a demand to be made; (ii) if a notice of demand was required, that the proceedings commence sufficed as notice; (iii) that it was empowered by the loan agreement to commence post-default proceedings whenever it wanted.

The Judge reviewed the relevant term of the loan agreement (clause 4) which stated:

"on the occurrence of any….events, the obligation of the Lender to complete the advance shall absolutely cease and determine and if the advance has been drawn down on foot of the Undertaking referred to the Lender may demand repayment thereof on giving seven days' notice in writing to the Borrower…" [emphasis added]

Start Mortgages argued that the word "may" did not mean "shall" and on that basis, it was not obliged to serve a notice. The Judge rejected this argument and stated that the effect of the clause was that a repayment of the loan could only be demanded upon the giving of seven days' notice in writing.

The Judge also dismissed the suggestion that the summons was a form of notice of demand – the Judge noted that there was a substantial difference between a notice of demand for the repayment of a loan and the issuance of court proceedings to recover monies owed.

Mr Hanley also submitted that even if clause 4 of the loan agreement extinguished the requirement to serve a notice, that such clause should be classified as an unfair term in breach of the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995. If it was determined that clause 4 was an unfair term, it would be struck out and leave Mr Hanley in the same position i.e. entitled for a notice of demand to be served on him.

The Judge determined that Mr Hanley had an arguable defence to his claim i.e. that Start Mortgages had not commenced enforcement proceedings in accordance with the term of the loan agreement, and referred the matter for plenary hearing.