Kotecha v Phoenix Recoveries (Rev 1)

For a request under section 78 of the Consumer Credit Act 1974, the creditor must provide a copy of the whole regulated agreement, including incorporated terms. A reconstructed copy may be supplied, but it must reproduce the agreement’s original terms, including the original interest-rate provisions.

The creditor must prove that the documents supplied are the correct version. Material discrepancies left unexplained mean that compliance is not established. The statutory consequence is suspensory: proceedings may be started, but judgment cannot be obtained while the default continues.

The respondent creditor claimed sums due under a credit-card agreement regulated by the Consumer Credit Act 1974. Following a request under section 78, it supplied the signed application form and later two pages said to contain the incorporated terms. The appellant challenged whether those terms were the correct version, relying on contemporaneous interest rates and the creditor’s identity.

The Leicester County Court, before Her Honour Judge Hampton, found on the balance of probabilities that the documents were the agreement and entered judgment for the creditor. The appeal concerned whether the evidence established compliance with section 78 and, if not, what order should follow.

The Court of Appeal unanimously allowed the appeal and set aside the county court’s order.

1. Content of the required copy. Section 78(1) requires the creditor to supply the whole regulated agreement, including any incorporated terms and conditions. Supplying only the signed application form or part of the terms is insufficient. The court took account of the approach in Carey v HSBC Bank plc [2009] EWHC 3417 (QB), that the copy need not reproduce the original physical document and may be reconstructed from other sources. It must, however, reproduce the agreement’s actual original terms.
2. Original terms and proof. The obligation includes the original interest-rate terms, even where the rate was variable. Later variations cannot substitute for the terms applicable when the agreement was made. The creditor bore the burden of proving that the documents supplied were a true copy of the agreement.
3. Application to the evidence. The difference in creditor name might have been explained by the merger and the use of “Beneficial” as a trading name. The discrepancies in interest rates were materially different. Contemporaneous documents referred to lower rates than those in the supplied terms. A promotional explanation was possible, but required evidential support. The creditor had not proved that the documents in evidence contained the original terms or that section 78 had been satisfied.
4. Effect of non-compliance. The effect of section 78 is suspensory. Non-compliance does not prevent proceedings from being started, but prevents judgment while the default continues. The court considered that further evidence might justify remitting the case, particularly because the point had not been taken below and compliance might still be established. The formal order stated in the judgment was “Appeal allowed”; no final remittal order was recorded.

• Court of Appeal (Civil Division): On 26 January 2011 the appeal was allowed and the county court’s order was set aside.
• Leicester County Court: On 12 January 2010 Her Honour Judge Hampton found for the creditor on the balance of probabilities and entered judgment under a credit-card agreement regulated by the Consumer Credit Act 1974.