Humberclyde Finance Limited v Anthony Granville Thompson & Eileen Marjorie Thompson (t/a A.G. Thompson a firm)

To set aside a regular default judgment, an applicant must show both a defence with a reasonable prospect of success and a proper case for exercising the court’s discretion. Under the Consumer Credit Act 1974, a charge payable under a single agreement forms part of the total charge for credit. An optional payment-waiver fee was therefore not credit supplied and did not take the agreement above the statutory threshold. Delay is relevant but not decisive: the court must assess the explanation, prejudice and risk of injustice. The appeal was allowed, the default judgment set aside and the defendants given liberty to defend.

Humberclyde obtained regular default judgment against the appellants for money due under a conditional sale agreement financing a vehicle. The appellants later applied to set it aside, arguing that the agreement was regulated under the Consumer Credit Act 1974. The District Judge held that the finance and payment-waiver fee exceeded £15,000. His Honour Judge Barber upheld that conclusion, treating the waiver as ancillary and outside the total charge for credit. The appeal concerned the statutory classification of the waiver fee, whether the vehicle had been repossessed without consent, and whether the court should exercise its discretion despite the delay in applying to set aside the judgment.

Lord Justice Aldous delivered the leading judgment, and Lord Justice Brooke agreed with the conclusion and the central construction of the regulations.

1. A regular default judgment should be set aside only where the applicant shows a defence with a reasonable prospect of success and establishes that the court’s discretion should be exercised in the applicant’s favour, applying [1986] 2 LL R 221.
2. Under sections 8 and 9 of the Consumer Credit Act 1974, credit includes financial accommodation but excludes items forming part of the total charge for credit. The agreement was not exempt and was regulated if the credit supplied did not exceed £15,000.
3. Regulation 4(1)(b) of the Consumer Credit (Total Charge for Credit) Regulations 1980 covers charges which the debtor is liable to pay under the agreement. The car finance and payment-waiver arrangement formed one agreement. The waiver fee was therefore part of the total charge for credit, not additional credit, and the statutory threshold was not exceeded.
4. Assuming that repossession occurred without consent, the conditions in section 90 of the Consumer Credit Act 1974 appeared capable of being satisfied. The appellants’ evidence gave them a real prospect of establishing that the statutory protection had been breached and that section 91 consequences followed.
5. The conflicting evidence on consent could not be resolved at this interlocutory stage. The delay of 14 months was unfortunate, but the appellants had explained the failure to defend and the subsequent delay. Following [1995] 1 WLR 1254, the explanation had to be considered fully, but that authority concerned want of prosecution and was materially different from a default judgment case. The court applied the approach in [1878] 3 QB 722: lateness should not defeat relief where refusal could cause injustice and setting aside would cause no prejudice incapable of being addressed.

The appeal was allowed. The District Judge’s order and the default judgment were set aside. The appellants had liberty to defend and were required to file a defence within 21 days. Costs and the sums held as security were ordered as stated in the formal order.

• Court of Appeal (Civil Division) allowed the appeal, set aside the District Judge’s order and the default judgment, and granted liberty to defend.
• Bridlington County Court: His Honour Judge Barber, on 22 November 1995, upheld the District Judge’s refusal to set aside the default judgment.
• Bridlington County Court: District Judge Hill, on 2 March 1995, dismissed the appellants’ application to set aside the regular default judgment.