Unfair Terms and Consumer Contracts Review

On the 25 July the Law Commission and the Scottish Law Commission published the scope of a consultation to consider the scope and effectiveness of unfair terms management in consumer contracts including which terms should be capable of being assessed for fairness.

The consultation follows on from work undertaken by the Commissions in 2005. In particular they consider the issue of whether terms relating to the price or main subject matter of a contract, which are currently exempt from review for fairness under the Unfair Terms and Consumer Contracts Regulations 1999, should be capable of being assessed unless they are phrased in sufficiently transparent and prominent terms. This is an issue which is a hangover from the Bank Charges Cases and it has been obvious that at some stage further discussions would be had as to the nature of regulation in this area. The Government do not have a free hand given the Unfair Terms and Consumer Contract Directive of 1993.

The consultation could lead to quite a material change in approach for those dealing with the consumers especially in the default/administrative fee charging areas and potentially in connection with packaged accounts.

The consultation is open until the 25 October 2012 and needs to be the subject of quite robust consideration and review by the industry and trade associations given its potential impact.

The consultation is available here.

Undue Influence

In the High Court case of Davies v. AIB Group (UK) plc [2012] EWHC 2178 (Ch) a claimant was unsuccessful in her attempt to have her liability under a personal loan agreement with a bank set aside on the basis of undue influence by her late husband. Her acceptance of the loan offer had not been in complete ignorance of the true situation, brought about by some legal or equitable wrongdoing by her husband.

Mrs Davies had signed a facility letter for a loan to be advanced jointly by AIB to herself and her husband jointly. Mr Davies owned a business. He had restructured the business on its incorporation in 1994 and its borrowing, with another bank, was rearranged with the consent of Mrs Davies – who was a director of the company. Property assets were transferred from the company into Mrs Davies’ name during a further reorganisation of Mr Davies’ business affairs between March and May 2001. Finally in June 2001 the facility was entered into with AIB.

Solicitors were instructed by AIB to advise Mrs Davies in relation to the security she was providing for the AIB advances. Those solicitors requested and received information from Mr Davies’ solicitors about the restructuring.

Mr Davies died during the term of the loan. Mrs Davies claimed that she had accepted the facility because of undue influence exerted by Mr Davies whom she described as domineering, with a propensity to lose his temper if questioned on financial matters. She stated that her understanding had been that she was liable under the personal guarantee for up to £1.45 million, but was unaware that the loan facility, and her personal liability, also related to separate and concurrent lending to the company of up to £1.38 million.

Mr Justice Norris found that:

  1. In circumstances where Mr Davies had died before a challenge to the arrangements was raised there were limitations on the Court’s ability to assess the personalities involved and the greatest weight had to be given to the contemporary documents, and the realistic inferences which could be drawn from them and the surrounding circumstances.
  2. On the facts the important question was whether Mrs Davies had entered into the loan with a basic but real grasp of it; or in complete ignorance of the true situation brought about by some wrongdoing of Mr Davies.
  3. He considered Mrs Davies had understood at the time of accepting the loan that there was company and other borrowing even if she had not grasped all the detail and had “lost” that understanding by the time of Mr Davies’ death – when the extent of indebtedness became apparent to her.
  4. Further he did not consider that her intention to sign the loan documents had been brought about by wrongdoing by Mr Davies given that his findings included:
    1. In broad terms, this was the very sort of transaction that might be accounted for by the ordinary motives of parties to a marriage where the family’s assets were mortgaged throughout and where the history of transactions included the transfer of assets to Mrs Davies.
    2. The evidence was that Mr Davies was concerned to ensure that Mrs Davies (through her solicitors) had all the relevant information, including the fact that there were two facilities, and the opportunity to obtain proper advice – and on that basis could not be criticised for not explaining the transactions to her himself.

If Mr Justice Norris had found that the transaction was tainted with undue influence then he indicated he would have found that the usual Etridge defence would not have saved AIB’s security because of the insufficient instructions it gave to Mrs Davies’ solicitors. However it would have been saved by Mrs Davies later accepting new and extended facilities from AIB (applying Springwell Navigation v JP Morgan Chase [2010] EWCA Civ 1221).

County Court Money Claims Centre Update

On 27 June 2012 the County Court Money Claims Centre published a stakeholder letter, to clarify specific matters that which have been raised by court customers.

The first issue covered by the letter is the definition of a Designated Money Claim. This does not cover money claims that are associated with some other form of claim. For ease of reference the letter contains a list of the types of claims that should not be sent to CCMCC. Possession claims are clearly excluded.

Secondly the letter goes on to cover the issue of limitation.  Where claimants are unable to post proceedings in sufficient time to arrive at CCMCC before the limitation period, the claim can be submitted to any county court where the claim will be date-stamped by the court and sent by DX to CCMCC. The date received and stamped by the county court will be the date the claim is ‘brought’ for limitation purposes.

As well as a reminder of how the ‘preferred court’ arrangements operate, the letter also clarifies where to send claims. CCMCC claims should never be sent to Northampton County Court despite claims being nominally issued there.

The letter goes on to explain how to commence enforcement where a judgment has been entered at CCMCC without the claim being transferred to another court, and also has a reminder of the appropriate payee for cheques and the contact details of CCMCC.

County court – pilot scheme for reduced counter opening times

Reduced county court counter opening times (10 am to 2 pm) commenced on 3 September for a six-month pilot period (full copy here). There will be no reductions in the opening times for the counter services at the Royal Courts of Justice or for the specialist jurisdictions located in the seven regional trial centres at Cardiff, Bristol, Liverpool, Manchester, Leeds, Newcastle and Birmingham.

Urgent business will always be processed by the staff whenever the courthouse is open.  Urgent business is defined as an application or document(s) which meets one of these four criteria:

  • It requires judicial intervention within 24 hours
  • It needs to be issued within 24 hours
  • It will reach limitation within 24 hours
  • The party will suffer significant detriment if it is not registered as being received at a particular time or date.

Unavailability of a witness

In the unreported case of Jumani v Mortgage Express (2012) a refusal to adjourn a trial due to the unavailability of a critical witness (because of the criticism of aspects of the Respondent’s conduct of the case) was reversed by the Court of Appeal where the judge had failed to properly consider the question of whether a fair trial could be had in the witness's absence. The Court of Appeal emphasised that it would only rarely interfere with a case management decision but the case was an exceptional one where it was right to interfere with the first instance decision.