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Case No: 6HM02742 IN THE MAIDSTONE COUNTY COURT 8th May.2009 JUDGE CADDICK: 1. This is the court's short judgement given at the end of a fast track trial of the claim by American Express Services (Europe) Limited [“Amex”] against the defendant, Terry Armstrong [“D”]. The claim was originally In respect of monies owing under two separate credit card accounts held by D with Amex from as long ago as 1989/1990. The first was a Gold card account and that has been dealt with, summary judgment in favour of Amex being given on 2nd July 2008. The second and larger claim is under an Optima card account, the agreement for which was in June 1990. The original sum claimed under the Optima card was £12,529. That sum was reduced in August 2008 by, as Amex put it, a part admission and a part concession, to £6,809.83. They arrived at that figure by admitting certain matters raised in the defence and stripping out some £5,720 of interest charges (both simple and compounded interest) and various other late payment and other charges, so as to leave a sum which represents simply the balance of any monies advanced under the card or the price of goods and services purchased with the use of the card. That is the sum of £6,809.83 for which Amex seeks judgement and D denies liability. 2. I have heard very little oral evidence in the matter. While I have the written statements of an officer of Amex and of D himself, short oral evidence only was given by one Jack Collins, an officer of Amex's fraud and enforcement department; Amex did not seek to cross-examine D. Apart from that, of course, I have had the trial bundle of other documents that have been referred to and detailed submissions from counsel for both parties. 3. The issues before me essentially come down to these. First, is the Optima agreement enforceable at all? If it is not, then Amex get nothing. If it is, then the second question is: how much in fact does D properly owe under that agreement? Is it the £6,809.83, as Amex claims, or some lesser sum (if any at all) as D submits in that event. 4. As to the first point, D says that it is not enforceable at all because, while he accepts that he signed the relevant agreement back in 1990 and is bound by its conditions, Amex is prevented from enforcing it by recovery of any balance otherwise properly due thereunder because of defects in the agreement. These make it fall foul of the relevant legislation and render it unenforceable. Section 127 of the Consumer Credit Act 1974, as applies to pre-April 2007 agreements, says at the relevant part, which is the old s. 127(3):
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In this case the issue arises in that all or nothing way: was an agreement in the prescribed form and containing all the prescribed terms made? Section 61(1) deals more particularly with the agreement:
The rest of that
sub-section and section I need not concern myself with. Focusing
on
The requirement, I note, is couched in those general terms—unlike the post-2005 agreement provisions, which are more detailed and particular, and hence more onerous 5. Plainly, charging interest at a compound rate in the case of default, for example of payment of what is due under the credit card agreement at any required time, would be such a term and not merely a charge for credit; hence it should be set out in the agreement. That is common ground. D's argument runs on thus: charging compound interest in default being a term that should be set out in the agreement, the absence of such a term means that the agreement does not contain a prescribed term; a regulated agreement that does not contain all the prescribed terms is improperly executed; hence the agreement as a whole is unenforceable by Amex. 6. However, Amex submits that in fact there was no express agreement between it and D for Amex to charge default compound interest. It is common ground that there was no such implied term: indeed even if there had been it would not breach section 61(1) because of the terms of 61(1)(b). It is further common ground that there were no oral discussions in which such an express agreement was made; nor are there other documents recording or evidencing such an agreement. The only agreement, and its terms and conditions, is to be found in the document setting out the terms and -3- © Crown Copyright 2009
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conditions on which the card was issued. Close inspection of that written agreement shows that there was, indeed, no term in the agreement allowing Amex to charge compound interest in case of default. That was so pleaded by D and it was formally conceded by Amex in the Reply of August 2008. That, it seems to me, is correct. On the words of the agreement itself, there is no express term allowing Amex to charge D default compound interest. Without going through the terms at length, the relevant ones are paragraphs 8 to 11. It is plain from paragraph 8 that interest will be charged on a daily basis at the annual rates applicable to the agreement. It goes on to say the rates may be varied from time to time at the claimants' discretion. Cash advances will bear interest on a daily basis on the balance of the advance outstanding as from the date each advance is taken until repayments are credited to the account. Transactions will bear interest on a daily basis on the balance outstanding on the account from the day they are processed until payment is credited to the account. No interest will be charge if the card member pays the whole of the account within 25 days and so on. So, plainly, no provision for compound interest in paragraph 8. Paragraph 9 provides for minimum payments of the larger of £5 or 3% of the outstanding balance shown in the and then there is a right reserved to impose a £15 late payment charge, etc. Paragraph 11, at the relevant part, provides: “Payments will be deemed to have taken place when they are received by Amex and credited to the account and will be applied in the following order....” and it then deals with paying fees, costs and charges first and then interest shown on the statement and only then does it go to payment of other things. 7. So, nowhere in those conditions, or indeed in any of the other conditions in the agreement, is there anything that provides for compound interest. It is interesting that, when one looks at the conditions that applied to the Gold account [page 69 in the trial bundle—at condition 8.4]. it is obvious that it was within the wit of Amex to have provided for charging compound interest, because they clearly spelt out a condition saying just that. The Optima account could be viewed as ambiguous on the point in this way: if D elected to pay the minimum payment in any month( which could be 3% of the outstanding balance) and interest is charged later on the next month's outstanding balance, that could be taken as involving interest upon interest i.e. compounded. However that would not hold up; such ambiguity would be construed against Amex and it would not be able to say that such term entitled it to compound interest. Again, D pleaded no such term entitling Amex and Amex rightly conceded. 8. It follows from that, it seems to me, that any claim that Amex did make for compound interest was wrongly made—whether by simple mistake or by deliberate action----because Amex was not so entitled. But on the face of it D also cannot say that Amex is not entitled to enforce otherwise, because there was no breach by Amex of section 127. D here submits that he is assisted by relying on estoppel. His argument is that Amex cannot now deny the existence of an agreement to pay default compound interest, which was then wrongly excluded from the agreement, because Amex over a number of years have acted as if that was indeed a term of the agreement. It charged compound interest. It rendered accounts including compound interest, although it did not express it as such and so it was very difficult to see that it was indeed compound interest. We know now that compound interest was included because a number of examples have been identified, Mr Hills on behalf of Amex, acknowledged in evidence that that was what was happening and Amex have so conceded. So over a long period Amex have been rendering accounts with compounded interest in them, D from time to -4- © Crown Copyright 2009
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time up to 2008 has been paying part of them and compound interest was continuing to accrue to the account, so that amount originally sought by Amex from D contained a substantial amount of compound interest, which should not have been charged. We do not know the exact amount because Amex has not provided a breakdown of what they deducted. 9. D says that Amex cannot be allowed to now deny the existence of an agreement, because it was the party with the computers and the sophisticated record keeping, and he would expect to rely upon----and Amex would expect him to rely upon---and act upon their representation. That is their effective statement of mixed fact and law: “You owe us this amount of money in accordance with the terms of our agreement with you.” D was intended to act upon it, and he did act upon it to his detriment. Amex should not be allowed to now deny the truth of the representations it made before. 10. I accept that the objection by Amex that this estoppel point was not pleaded should not preclude its consideration now. It was made plainly in the skeleton argument prepared for trial last December and Amex have had plenty of time to consider it. They are not prejudiced. The amount involved in the case is not great and it would have been a disproportionate expense to insist on the pleadings being amended. However, although a superficially attractive approach by D, the estoppel argument does not in my view properly meet this case. The fact remains that there was no agreement between the parties for compound interest. D has never claimed that there was or that he thought there was. It never occurred to D that he had been paying or was being charged compound interest until he was so advised in the course of these proceedings. His pleaded position was that no such interest was properly claimable and Amex so conceded. The most apt explanation, it seems to me, for what has happened here is that there indeed was never any agreement to pay compound interest. It was charged in error by Amex. D explicitly does not claim that there was a deliberate course of conduct by Amex to defraud D. While any such position----or indeed even overcharging by human error if it were widespread---would be a matter for reference to the regulatory authorities, D is content to proceed on the basis that it was the product of simple human error in his case. Even so, it should not have happened; Amex are the ones with the sophisticated computer equipment which they can and should program to charge the proper interest in accordance with the contract; but, nevertheless, it is still a mistake. The circumstances require the court to be vigilant to ensure that no more than a proper sum is paid by D and as necessary to make allowances when it comes to costs considerations, but not to find an estoppel. 11. Amex is entitled to have judgement for what, in accordance with the contract, it is entitled to. £6,809 is an appropriate starting point. The admission/concession by Amex had taken out all of the improper things (essentially the compounded interest from 2001 to-date). Indeed, I think that it goes further, but that is the concession; so that is the starting point, £6,809. However, it is not the finish of the matter because I still have to consider the period of about 11 years before that when this account was operative. The only sensible inference I can make in respect of that period is that compound interest was debited to the account-just as it was after 2001-when it should not have been. It is up to Amex to prove what is due, on the balance of probabilities. -5- © Crown Copyright 2009
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12. Amex have not produced any evidence for the period up to 2001, just a copy statement showing the opening balance carried forward at the beginning of the period from 2001 for which they have records. The reason for that, I am told, is that Amex has a policy of keeping documents only for seven years and then they promptly destroy them. I do not know in detail whether it is done on a monthly basis or a six monthly basis or whatever. The Amex witness did not seem to know himself, except that he certainly agreed that it was done very regularly, so that around seven years' documents before any given date would be what Amex kept and anything older than that would have been destroyed. For part of that period, that was a very cavalier approach to take; for surely there came a time when Amex could foresee that documents could well be needed if court action was required. For example, at least at the point of serving a notice of default one might expect a system to be in place to stop or suspend the routine destruction of documents, Moreover, where as here it is a running account, it must be obvious that in the event of litigation the need could well arise to go back into the account to its inception. Unfortunately, Amex did destroy about three years' worth of relevant documents; certainly they have not got them from a point seven years before the notice of default. In all nothing by way of statements pre 2001. That was a deliberate course of action by Amex, albeit one essentially driven by a blanket policy of destruction rather than a considered course of action specific to the case. The lack of consideration of the particular circumstances of the case in that way is culpable on one level: an organisation such as Amex should have appropriate systems in place to avoid it. On the other hand, it is not a case of deliberate destruction of documents to avoid disclosure in this litigation. 13. So, we can never know exactly how much compounded interest was charged and paid by D in that period of 11 years or so years pre 2001; nor how much compounded interest is included in the starting figure for 2001, from which point the detailed calculations have been carried out [see the spreadsheet calculations at pages 135 and 136 for the period August 2001 through to the present time]. How does the court approach that? Counsel for D rightly draws my attention to two authorities. First, Landau v. Commins & Co. a Court of Appeal case of 14th May 1991, an appeal from Medway County Court (Judge Russell-Vick QC) and the other Infabrics v Jaytex [1985] FSR 75. The very robust course taken by Judge Russell-Vick in Landau and approved by the Court of Appeal in the circumstances of an extreme case of destruction of evidence was that the whole claim should be dismissed forthwith, even though it concludes that the claimant was not acting out of any dishonest motive in disposing of the evidence. Putting it another way, it was a case where the maxim of making a very strong presumption against the despoliator of evidence was applied. A less draconian course was taken in far less extreme circumstances of disposal by a single judge of the Chancery Division in the Infabrics case; that was to allow the claim to proceed, but applying the strong presumption, rebuttable only by compelling evidence to the contrary, and to approach the matter in that way. 14. It seems to me that the fairest way of dealing with this case is to make a robust deduction in respect of the pre-2001 period in favour of D. In doing so I keep in mind that it is the fault of Amex for not having the exact figures and so I err in favour of D. However I also do not lose sight of the fact that the figures for actual amounts of compound interest in the post 2001 period were actually quite modest where I have seen examples of computation; and I should not be blinded by the amount of the Amex -6- © Crown Copyright 2009
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concession post 2001, which as I have already observed went well beyond stripping out compound interest. I propose making a deduction of £2,000 (which equates to about £200 per year over the period in question). That leaves a balance of £4,809.83 and I give judgement in that sum. ---------------------------------------------------------------------------- -7- © Crown Copyright 2009
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