Chadwick v Lloyds TSB Bank

A renewed application for permission to appeal may properly be adjourned where an alternative claim was introduced shortly before trial, the lower court did not resolve material issues arising from it, and the financial consequences remain uncertain. The respondent should receive notice and an opportunity to assist before the application is determined. The judgment left open whether an invalid default notice amounted to unlawful rescission or accepted repudiation, or whether cancellation of linked insurance automatically ended the loan agreement.

A borrower challenged a county court judgment concerning a £20,000 regulated loan and optional loan protection insurance. The county court accepted that the insurance had been cancelled, but, after permitting the bank to advance an alternative claim raised shortly before trial, entered judgment for the outstanding contractual debt. It dismissed the borrower’s counterclaims and struck out a defamation claim.

On a renewed application for permission to appeal, the central questions were whether the invalid default notice operated as an unlawful rescission or accepted repudiation, whether cancellation of the insurance ended the loan, and whether the balance had been correctly calculated.

The Court of Appeal did not determine the merits of the proposed appeal. It adjourned the renewed permission application because material contractual and financial issues had not been properly addressed.

1. The county court accepted that the borrower’s letter had cancelled the loan protection insurance. The Bank accepted that, if so, the default notice issued under section 87(1) of the Consumer Credit Act 1974 was invalid. The trial judge nevertheless entered judgment for the contractual debt on an alternative claim advanced by the Bank in a skeleton argument served only 10 to 15 minutes before trial.
2. Although the alternative claim was permitted to proceed after amendment, and the borrower did not object, the trial judge had acknowledged that an adjournment application could not have been resisted. On the renewed application, the Court was concerned that the judgment had not addressed whether the invalid default notice amounted to an unlawful rescission or a repudiation accepted by the borrower. It was also unclear whether the contractual arrangements meant that cancellation of the insurance automatically ended the loan, and whether the debt had been accurately calculated.
3. Those unresolved matters justified further consideration with the Bank on notice. The application was adjourned for one hour. The Bank was to receive the judgment and the borrower’s letter setting out his position. The application was reserved, if reasonably practicable, to Lord Justice Carnwath, without risk of an adverse costs order against the borrower if the application was ultimately dismissed.

1. Court of Appeal (Civil Division): Buxton LJ refused permission to appeal on the papers. On renewal, Lord Justice Carnwath adjourned the application on notice to the Bank: [2009] EWCA Civ 726.
2. Birmingham County Court: HH Judge Worster, on 8 December 2008, entered judgment for the Bank for £10,287.69 on the alternative contractual claim, dismissed the counterclaims, and struck out the defamation claim.