Chadwick v Lloyds TSB Bank

This is Mr Graham Chadwick’s renewed application for permission to appeal against a judgment of HH Judge Worster sitting in the Birmingham Civil Justice Centre dated the 8th December 2008. He has appeared before me in person, assisted by his wife and his son, David Chadwick.

At the heart of the dispute is a loan of £20,000 from the Bank in 2003. The agreement (dated 24^th October 2003) provided for a loan of £20,000 with monthly repayments of £327.09. There was also a premium for “Optional Loan Protection Insurance” of £4,623.01. This was added to the loan, and interest was charged upon it, by way of an additional monthly premium of £75.61. The Loan Agreement required monthly repayments from a current account over 7 years. The agreement stated that it was regulated by the Consumer Credit Act 1974.

Clause 4 of the terms and conditions of the agreement stated:

“(a)

We may require you to pay us everything you owe us… if any of the following occurs: …

- You do not pay any sum due under this Agreement on time.

(b)

We will send you a formal notice under the Consumer Credit Act 1974 before we require such payment. The amount you owe us will include the loan and interest for the period up to the time of the notice and any charges.”

On 29th December 2005 the Bank issued a default notice under section 87(1) of the Consumer Credit Act 1974, and on 18^th January 2006, they made a formal request for repayment of the sums outstanding on the account. The present proceedings were begun in November 2006, which put the balance owed at £18,300.92 plus costs.

The trial was fixed for 22nd September 2008. Mr Chadwick was represented by his son, David, as his “lay representative”. The main issue on the pleadings before the trial related to Mr Chadwick’s claim to have taken served notice within a “cooling off” provision in respect of the loan insurance policy in November 2003. Under the Policy, if notice was given in writing within 30 days that the insurance was not required, the cover would be cancelled and the premium returned. In the Loan Protection policy document (but not in the Loan Agreement), the following was stated:

“Please be aware that your Loan Protection insurance forms part of your Loan Agreement and cannot be cancelled without terminating your loan.”

The judge accepted the Chadwicks’ evidence that they wrote and delivered to the Bank a letter dated 23rd November 2003, and held that the letter had the effect of cancelling the insurance policy. The Bank accepted that if the Loan Protection Insurance had been cancelled the default notice was invalid.

However, that was not the end of the matter. A skeleton argument, provided by Mr Petts, Counsel for the Bank, some 10 to 15 minutes before the trial began, put forward an “alternative claim”: if the default notice was invalid, then the agreement should be treated as subsisting, with the result that Mr Chadwick was indebted to the Bank for the sums contractually due under the agreement so far as not paid.

The judge rejected Mr Petts’ argument that the alternative claim was covered by the existing pleadings, and required them to be amended. He recorded that Mr Chadwick “did not object to that course”. He observed that this was “extremely helpful” and that many litigants would have objected to a “well-represented claimant” being indulged in that way. He ruled that if the case were to succeed only on the alternative claim the Bank should not have its costs. It seems (though not recorded in the judgment) that Mr Chadwick was permitted to put in a “Further Amended Defence and Counterclaim” dated 23^rd September 2008 (which appears at page 47 of my bundle). That included the following:

“The Default Notice being invalid could be taken as an unlawful rescission of the Agreement and releasing the Defendant and Claimant from any further obligations including the continuation of the repayment of the monthly sums now being claimed as owing.”

Judgment was not given until 8^th December 2008. Paragraphs 9 to 50 of the judgment dealt with the grounds for rejecting the primary claim. The alternative claim was dealt with relatively shortly. Paragraphs 51-2 stated:

“The Defendant has not made any payments to the Claimant pursuant to the Agreement since October 2005. He accepts, and has always accepted, that he is indebted to the Claimant for that money, subject to his counterclaim.

The mathematics of the claim were not fully explored at the hearing. Appendix 2 of Mr Pett’s skeleton argument provides for credit to be given for the overpayment of insurance premiums, and to 21 September 2008 for a debt of £9,633.51. Two further payments of £327.09 will have become due and owing by the time this Judgment is given. I find that there is a debt of £10,287.69 at judgment.”

Mr Chadwick’s counterclaims were then dismissed. He had alleged that the actions of the Bank had caused him and his family anxiety and stress, and that the loss of standing with credit reference agencies caused him financial loss. The judge clearly had sympathy for their “frustration at a human level” in dealing with a Bank which supposedly “encouraged telephone contact”, and noted that Mrs Chadwick had rung some 30 numbers over the years. However, he held that there was no evidence of financial loss, and that the law of contract does not recognise a claim for anxiety for breach of a banking contract. Further the Appellant’s action in defamation was struck out as there was a lack of particulars as required by CPR Part 53.

The Judge ordered judgment for the Claimant for £10,287.69 on the alternative claim. It is necessary to look further at the alternative claim.

Mr Chadwick’s application for permission to appeal came before me on 9^th June, having been refused on the papers by Buxton LJ. The statement of grounds runs to 35 paragraphs. I fear that in the time available for such an oral application, I did not find it possible to do justice to the detail of the case. I was conscious that the amounts involved could hardly justify the costs of a full appeal hearing. I was however very concerned at the manner in which the alternative claim had been allowed to proceed, in circumstances in which (as the judge acknowledged) an application for an adjournment could not have been resisted. I noted also that the judge did not appear to have dealt at all with the claim that the invalid default notice could be taken as an “unlawful rescission” of the contract, or perhaps as a repudiation which Mr Chadwick accepted. Alternatively, as I understand the argument, it is suggested that under the terms of the arrangement (cited above), the cancellation of the insurance policy automatically brought the loan to an end. The consequence would be that (contrary to the judge’s assumption) the Bank could not base any continuing claim on the terms of the contract. It was unclear to me in any event whether the financial consequences had been accurately worked out.

I invited the Chadwicks to write setting out a clear statement of their current position. I indicated that I would adjourn the application on notice to the Bank to enable it to assist the court, but without risk of an adverse costs order against Mr Chadwick even if the application were ultimately dismissed. The Chadwicks’ letter (dated 14^th June 2009) should be supplied to the Bank with this judgment. I trust that on receipt of this judgment and the letter, the Bank will make arrangements for someone with appropriate authority to discuss the matter with the Chadwicks. I sincerely hope that this will result in an agreed solution. If not, I would strongly advise the Chadwicks to obtain some legal advice (possibly through the Citizens’ Advice Bureau) before the matter comes back to court.

Accordingly, I order that the application be adjourned on notice to the Bank (with a time estimate of one hour). I direct that the application be reserved (if reasonably practicable) to myself.