A recent Court of Appeal case dealt with statutory default notices and contractual termination in relation to credit card agreements.

Mr Brandon owed over £5,000 to Amex. The Court of Appeal in Brandon v. American Express Services Europe Limited [2011] EWCA Civ 1187 recorded that Mr Brandon had never said in a witness statement in response to Amex’s summary judgment application that he did not owe Amex money and that it was indisputable that he had not at any time any intention of reducing, still less extinguishing, the sum outstanding.

Amex applied for summary judgment. Amongst many other points not ultimately pursued, Mr Brandon said that the default notice under sections 87 and 88 of the Consumer Credit Act 1974 did not provide the minimum statutory period of 14 days following the date of service to rectify the breach. The District Judge said that any error was de minimis. There was an appeal to the Circuit Judge who upheld the judgment but also relied upon an alternative argument that Amex did not need to rely upon any default notice in order to terminate the agreement since the terms of the agreement provided both parties with wide powers to terminate which were not contingent upon default. The duty to serve a non-default notice of termination which would otherwise arise under section 98 of the Act did not apply because the agreement had no specified duration. The Court of Appeal allowed Mr Brandon’s further appeal. The underlying “merits” undoubtedly favoured Amex but the de minimis argument could not be relied upon for the purposes of summary judgment and the contractual termination point had not been taken before the District Judge such that allowing it to be taken on the first appeal was outside the proper ambit of the Circuit Judge’s discretion.

Since it was an appeal dealing with summary judgment, many points were left open but they are of importance:-

  • It is at least realistically arguable that the defect in question could not be overlooked as de minimis.
  • Amex’s arguments on sections 76 and 98 (that those sections were inapplicable because credit card agreements are not of fixed duration) should not be determined summarily in the Court of Appeal but the court was inclined to agree with them.
  • The court was not attracted to the arguments on Mr Brandon’s behalf that the contractual termination provision was unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
  • The District Judge was correct to dismiss the counterclaim based on matters such as reporting to credit reference agencies because Mr Brandon is a bad credit risk and for this he has only himself to blame.
  • Amex had in any event before the appeal contractually terminated by giving two months’ notice under the new section 98A provision.

In procedural terms, the case is important because it emphasises the stringent test to be applied on summary judgment applications and highlights the need to raise all “alternative” points at first instance, or at least in a respondent’s notice, in order to avoid the risk that they will not be permitted on appeal. In consumer credit terms, it keeps alive the de minimis argument on default notices and tentatively endorses the argument, which it is submitted must be correct, that if credit card agreement has no contractually fixed duration it is not subject to sections 76 and 98.

James Ross
Gough Square Chambers
6-7 Gough Square
London EC4A 3DE
26th October 2011