The House of Lords held that as the terms of the agreement stipulated that the company’s right to recover the hire charges was to be deferred, credit had been granted to D with the result that the agreement was a regulated agreement for the purposes of CCA 1974. As the agreement had been improperly executed and was therefore unenforceable by the company against D, D had not been unjustly enriched by not having to pay the hire charges since the CCA contemplated that a debtor might benefit from the improper execution of an agreement. In the circumstances, D was not entitled to recover damages for the hire as she was not obliged to pay for it.

Durkin visited a PC World store (DSG) in Scotland to purchase a laptop, making clear that he wanted one with an internal modem. A sales assistant identified a laptop but said that he was unsure whether it had an internal modem. He agreed that Durkin could take the laptop home and return it if it did not. Durkin paid a £50 deposit and signed a credit agreement with HFC for the balance of £1,449. The following day he found that the laptop did not have an internal modem so he returned it to the store and asked for his deposit back and for the credit agreement to be cancelled. The store manager refused to accept his rejection of the goods and took no steps to cancel the credit agreement. Durkin did not pay any money to HFC under the credit agreement, explaining to them that he had rejected the laptop and had rescinded both his contract of sale and the credit agreement. HFC warned him that if he did not make payments he might have difficulty obtaining future credit and threatened to serve a default notice on him under the CCA 1974. Without making any enquiries, HFC issued a default notice and intimated to credit reference agencies that he had been in default of his obligations under the credit agreement. Although Durkin recovered his £50 deposit in an out-of-court settlement, he claimed that the adverse credit register entries caused him loss. Durkin sought a declarator that he had validly rescinded both the contract of sale and the credit agreement and also claimed damages. The sheriff declared that he had validly rescinded the contract of sale (this was not challenged on appeal). Although his claim succeeded, Durkin appealed the quantum of damages awarded and HFC cross-appealed against the decree of declarators.

For present purposes, three key issues arose which were heard by the Supreme Court:
• whether there was a valid loan agreement between Durkin and HFC;
• whether the right to rescind the loan agreement was a ‘like claim’ under s 75(1) CCA 1974. If not, whether the loan agreement survived rescission of the supply agreement;
• what obligations HFC had to investigate the existence of the debt or dispute.
Lord Hodge (who delivered the judgment of the court) held that Durkin was entitled to rescind the credit agreement and validly did so when he gave notice to HFC. His Lordship held, however, that this was not as a result of the ‘like claim’ provision in s 75(1), as this section conferred no such right, but via an altogether different and less obvious route. Lord Hodge explained (at [26]) that ‘It is inherent in a debtor–creditor–supplier agreement under s 12(b) of the 1974 Act, which is also tied into a specific supply transaction, that if the supply transaction which it financed is in effect brought to an end by the debtor’s acceptance of the supplier’s repudiatory breach of contract, the debtor must repay the borrowed funds which he recovers from the supplier. In my view, in order to reflect that reality, the law implies a term into such a credit agreement that it is conditional upon the survival of the supply agreement. The debtor on rejecting the goods and thereby rescinding the supply agreement for breach of contract may also rescind the credit agreement by invoking this condition. As the debtor has no right to retain or use for other purposes funds lent for the specific transaction, the creditor also may rescind the credit agreement. It appears to me that similar reasoning would apply to a section 12(c) agreement where the credit agreement tied the loan to a particular transaction.’ As to the conduct of HFC, since it knew of Durkin’s assertion that the credit agreement had been rescinded, it was under a duty to investigate that assertion in order reasonably to satisfy itself that the credit agreement remained enforceable before reporting to the credit reference agencies that he was in default. HFC made no such enquiries, accepting without question DSG’s position that Durkin had not been entitled to rescind the contract of sale. Lord Hodge held that HFC was under an obligation to investigate whether a debt properly existed prior to making any report to credit reference agencies. In the case of a disputed debt, it should not have made a report to the credit agencies until the existence of the debt was determined. For practical purposes, this means that creditors must not threaten to report bad debts to the credit agencies as a means of forcing payment from consumers until the existence of any such debt has been properly established.

The buyer entered into an ¬agreement with a dealer to purchase a car to be financed by F. One year later, he agreed to purchase a newer model from a second dealer. This dealer agreed to take the first car in part--exchange and to discharge the balance that was outstanding to F. A new agreement was made with a second creditor for the second car. The second dealer went into liquidation, having failed to pay F as promised. F sought to recover the money directly from the buyer. The buyer argued that s 56 CCA 1974 meant that the second creditor was bound by the second dealer’s promise to discharge the amount owed to F and therefore he had no liability.

The Court of Appeal held that where goods which would be the subject of a D–C–S agreement were sold or proposed to be sold by a broker, then any negotiations relating to those goods would be deemed to have been made by the negotiator as agent for the creditor. The second creditor was therefore liable.

C was a car dealer who did not usually extend credit to his customers. He sold a car to his friend and entered into a ‘one-off’ hire purchase agreement with him. The case concerned whether he needed a consumer credit licence.

The Court of Appeal held that a person who enters into occasional regulated agreements is not carrying on a consumer credit or a consumer hire business by virtue of s 189(2) CCA 1974, which provides that a person is not to be treated as carrying on a particular type of business merely because occasionally they enter into transactions belonging to a business of that type. Therefore, as he did not carry on a consumer credit or consumer hire business, he did not need a consumer credit licence.

L was an issuer of credit cards. The question for the appeal was whether the protection provided under s 75 CCA 1974 applied also to foreign transactions. L argued that if it did apply to foreign transactions, the implication would be that it would make UK credit card issuers the potential guarantors of some 29 million foreign suppliers with whom they would not have any direct contractual relations.

The House of Lords held that s 75, consistent with the policy behind the Act of protecting consumers, was applicable as much to foreign as to domestic supply transactions and contained no words of territorial limitation. Therefore, s 75 governed agreements between UK credit card issuers and their customers without territorial limitation. The sole limitation on the territorial scope of s 75 was that the credit agreement had to be a UK credit agreement.

Mrs Plevin took out a personal loan through LLP Processing (UK) Ltd. LLP proposed that she borrow £34,000 from Paragon, repayable in instalments over ten years, and that she take out a payment protection insurance policy for five years with Norwich Union, which was Paragon’s designated insurer. The PPI premium of £5,780 was payable at the outset and added to the amount of the loan. Commission of 71.8 per cent of the premium was taken: LLP retained £1,870 and Paragon retained £2,280. Although the Financial Industry Standards Association guide which LLP gave to Mrs Plevin told her that ‘commission is paid by the lending company’, she was not told the amount of the commission or the identity of the recipients. Mrs Plevin argued that the relationship between herself and Paragon was unfair under s 140A(1)(c) because of the non-disclosure of the commissions and also because of the failure of anyone involved to advise on the suitability of the PPI policy for her needs. Insofar as LLP committed these defaults, Mrs Plevin argued that it did so ‘on behalf of’ Paragon. The Insurance Conduct of Business Rules, which are the statutory rules regulating the insurance industry, do not require insurance intermediaries to disclose commissions to their customers but do require an insurance intermediary which makes a ‘personal recommendation’ to a customer to buy an insurance contract to take reasonable steps to ensure that the recommendation is suitable for the customer’s demands and needs.

The Supreme Court has handed down its first judgment on what amounts to an unfair relationship for the purposes of ss 140A–140D CCA. Lord Sumption (who delivered the sole judgment) held that the non-disclosure of the amount of commissions and the identity of the recipients did make Mrs Plevin’s relationship with Paragon unfair under s 140A(1)(c) but the failure to conduct a needs assessment of Mrs Plevin did not. Lord Sumption stated that the non-disclosure of the commissions did make the relationship between Paragon and Mrs Plevin an unfair one. He stated that at some point the commissions may become so large that the relationship cannot be regarded as fair if the customer is kept in ignorance and concluded that Mrs Plevin would have questioned whether the PPI policy represented value for money if she had been aware of the commission amounts and might not have taken out the policy at all. This unfairness was the responsibility of Paragon, the only party which knew the size of both commissions. However, the court held that Paragon’s failure to conduct its own needs assessment of Mrs Plevin did not make its relationship with her unfair. The absence of a regulatory duty under the Insurance Conduct of Business Rules was not conclusive, although it was highly relevant: Paragon could not reasonably be expected to perform a duty which the relevant statutory code assigned to someone else, namely, LLP. LLP’s failure to conduct a needs assessment of Mrs Plevin could not be treated as something done ‘by or on behalf of’ Paragon because LLP was not acting as Paragon’s agent. The ordinary and natural meaning of the words ‘on behalf of’ imports agency, and that is how the courts have ordinarily construed them. Nothing in this case demands a broader interpretation. The phrase ‘by or on behalf of’ suggests that the act or omission must be done by the creditor itself or by someone else whose acts and omissions engage the creditor’s responsibility as if the creditor had done or not done it itself. Further, the CCA 1974 makes extensive use of the technique of imputing responsibility to the creditor for the acts or omissions of other parties who are not (or not necessarily) the creditor’s agents, including in s 140A(3), and when it does so, it does so in clear terms. Finally, there would be no coherent criteria for determining what connection other than agency would be required between the creditor and the acts or omissions causing the unfairness. In the result, the case was remitted to the Manchester County Court to decide what, if any, relief under s 140B should be ordered.

W borrowed £5,000 from a pawnbroker, using her car as security. The agreement was a regulated agreement and was correctly documented save that a documentation fee of £250 was erroneously entered in the wrong box and thereby noted as part of the loan. This had the effect of misstating the total charge for credit. The Court of Appeal held that as the document fee was not credit within the meaning given in the CCA 1974, one of the prescribed terms had been incorrectly stated and, pursuant to s 127(3), the agreement was unenforceable. As a result, W was entitled to keep the loan amount, pay no interest, and also recover her car. The Secretary of State appealed, arguing that the restriction on the enforcement of improperly executed credit agreements given in s 127(3) was incompatible with the Human Rights Act 1998.

The House of Lords upheld the Court of Appeal’s decision. The fact that a regulated agreement was not enforceable unless a document containing all the prescribed terms was signed by the debtor constituted a restriction on the scope of the rights a creditor acquired under a regulated agreement but did not bar access to the court to decide whether the case was caught by the restriction. The inability of the court to make an enforcement order was a limitation on the substantive scope of a creditor’s rights but did not offend the rule of law or the separation of powers. The Human Rights Act 1998 did not apply as it was not in force at the material time and the court’s inability to enforce the agreement did not engage Art 6(1) European Convention on Human Rights, which guarantees procedural fairness. Further, if the court’s inability to enforce the agreement deprived the lender of its rights under Art 1 of the First Protocol, then that interference was justified. As Lord Nicholls of Birkenhead explained, ‘one would not expect a statute promoting human rights values to render unlawful acts which were lawful when done. That would be to impose liability where none existed at the time the act was done.’