This case considers whether it was appropriate for a debtor to have a default registration registered against his name under the Consumer Credit Act 1974 in circumstances where the credit agreement is found to be irredeemably unenforceable. It also briefly considers the application of s.32 of the Limitation Act 1980.
After entering into a regulated Hire Purchase Agreement under the Consumer Credit Act (the “CCA”) the First Claimant fell into arrears and CTP (the defendant’s predecessor in title) issued proceedings and obtained default judgment. Following a series of County Court hearings it was subsequently found that the HPA was irredeemably unenforceable with the result the default judgment against the First Claimant was set aside. Nevertheless, CTP added the costs of the proceedings to the First Claimant’s debt and filed a default registration with various Credit Reference Agencies noting that the First Claimant had defaulted in the repayment of a loan.
In the meantime, the First Claimant’s partner (the “Second Claimant”) had entered into a separate Hire Purchase Agreement for the purchase of a static caravan, incurring an APR of 17.9% (the “Second HPA”). The Second Claimant found out that the higher APR was as a result of the default registration.
The Claimants issued a claim for breach of statutory duty on the basis that the default registration constituted a breach of data protection principles which had caused each of them damage: in the First Claimant’s case the inability to obtain banking facilities and in the Second Claimant’s case an increased APR. The Defendant counter claimed for arrears under Second HPA and sought delivery up of the caravan.
The First Instance Decision
At first instance, the judge ordered delivery up of the caravan and dismissed the Claimants’ claims on two grounds. Firstly, they were in the main statute barred and, secondly, although the default registration had involved a breach of data protection principles and had been the cause of their alleged loss, the loss was not attributable to the breach of those principles. This was on the basis that the Defendant could have registered the default registration without any breach of the DPA. The Claimants appealed.
The Limitation Issue
On appeal, it was common ground that the majority of the claims were statue barred. However, it was argued that s.32 of the Limitation Act 1980, which provides for a postponement of running time in cases of fraud, concealment or mistake, applied. The Claimants argued that the Defendant’s registration of a debt, which had been declared irredeemably unenforceable, was a deliberate breach of duty which was unlikely to be discovered for some time. However, the Court of Appeal held that it was neither pleaded nor proved at trial that the breach was committed deliberately. Additionally, the Claimants’ were clearly made aware of the breach more than six years before the proceedings were commenced. The Appeal on the limitation issue failed.
The Causation Issue
On the basis of the decision of McGuffick v Royal Bank of Scotland  EWHC 2386 (Comm),the judge’s analysis of causation proceeded on the basis that it would have been lawful for the Defendant to have registered as a default any arrears incurred by the time of the default registration. The judge found that the only reason the default registration was a breach of the DPA was because it inaccurately recorded the amount or the arrears. Accordingly, had the amount of arrears been accurate there would still have been a default registration against the Claimants and they would have suffered the same damage. However, the Court of Appeal considered that this analysis did not answer the specific question as to whether a default registration of unpaid amounts under an unenforceable agreement amounts to a breach of the DPA. On appeal, it was said that personal data should be accurate and it was not accurate to stigmatise a debtor who had declined to make payments under an unenforceable agreement without at least stating the agreement was unenforceable. The Court of Appeal held that the First Claimant was not a defaulter once it was found that the agreement was irredeemably unenforceable and therefore the appeal succeeded on this limited ground.
This case considered many principles, but is the first authority to find that a debtor who has an irredeemably unenforceable credit agreement under the CCA 1974 may not have a default registration registered against his name.