HSBC Bank Plc v Brophy

For running-account credit, a signed application form can constitute the debtor’s offer to be bound by its terms. The creditor may accept by countersigning it, creating an executed agreement for the purposes of the Consumer Credit Act 1974.

Section 59 does not invalidate an offer merely because it may mature into a regulated agreement. A credit-limit term is sufficient where it states that the creditor will determine the limit from time to time and notify the debtor. The agreement need not state the initial limit, the decision-making factors, or their weighting.

Mr Patrick Brophy appealed against the dismissal by Flaux J of his appeal from judgment in favour of HSBC Bank Plc for a credit-card debt. The High Court decision is reported at [2010] EWHC 819 (QB).

He argued that the signed application form was only an invitation to treat, or an agreement to enter into a prospective regulated agreement void under section 59 of the Consumer Credit Act 1974. He also argued that the agreement lacked the prescribed credit-limit term required by section 61 and the Consumer Credit (Agreements) Regulations 1983. The central issues were whether the countersigned form was an executed agreement and whether its credit-limit clause satisfied the statutory requirements.

The Court of Appeal unanimously dismissed the appeal. Moore-Bick LJ gave the judgment, with Sullivan and Sedley LJJ agreeing.

1. Formation of the agreement. Read as a whole, the application form was an application for running-account credit. By signing and returning it, Mr Brophy offered to be bound by the stated terms. The Bank accepted that offer by countersigning the form. The countersigned form therefore became an executed agreement within the meaning of section 61. It was neither a mere invitation to treat nor an agreement binding the applicant to enter a future regulated agreement.
2. Section 59. Section 59(1) concerns an agreement that purports to bind a person to enter into a prospective regulated agreement. It does not apply to an offer which may, or may not, mature into a binding agreement.
3. Prescribed credit-limit term. The information requirements in Schedule 1 and the prescribed-term requirements in Schedule 6 serve different purposes, but there is no reason why one clause cannot satisfy both. Schedule 6 paragraph 3 is deliberately broad. A term stating that the creditor will determine the credit limit from time to time and notify the debtor states the manner in which the limit will be determined.
4. No initial limit required. Section 61 is concerned with the form and contents of the agreement, not with steps preceding its formation. The statute does not require the initial credit limit or a formula enabling the debtor to calculate it. Nor must the agreement identify the factors considered by the creditor or the weight given to them. Clause 3 therefore complied with the prescribed requirements. The discussion of the wider purposes of the regulations in Hurstanger Ltd v Wilson [2006] WL 4402848 did not alter that conclusion.

• Court of Appeal (Civil Division): dismissed Mr Brophy’s appeal on 2 February 2011.
• High Court of Justice, Queen’s Bench Division: Flaux J dismissed Mr Brophy’s appeal from the judgment below; the decision is reported at [2010] EWHC 819 (QB).
• Earlier judgment: His Honour Judge Million gave judgment for HSBC Bank Plc for the credit-card debt.