Grace & Anor v Black Horse Ltd

An irremediably unenforceable consumer credit agreement continues to exist, with its contractual rights and obligations intact. However, once a competent court has declared that the agreement cannot be enforced, it is generally inaccurate under the fourth Data Protection Principle to register the consumer as a defaulter unless the same entry records the debt’s unenforceability.

For deliberate concealment under section 32(2) of the Limitation Act 1980, the defendant must know that its conduct constitutes a breach of duty. Awareness merely of the conduct is insufficient.

An oral court order takes effect when pronounced and can constitute an order permitting recovery of protected goods under section 90 of the Consumer Credit Act 1974.

A lender registered Mr Grace as having defaulted under a regulated hire purchase agreement. A county court had already dismissed the lender’s enforcement claim because the agreement was irremediably unenforceable under the Consumer Credit Act 1974. Mr Grace and his partner claimed damages under section 13 of the Data Protection Act 1998 for losses allegedly caused by the registration.

HHJ Halbert held that most of the claims were time-barred. He also held that the inaccurate registration had caused no recoverable loss because the lender could lawfully have registered the correct amount owing under the unenforceable agreement. The judge separately ordered delivery up of a caravan acquired by the partner under another hire purchase agreement.

The appeal concerned limitation, whether registering default under an irremediably unenforceable agreement was accurate, and whether the oral delivery-up order authorised recovery of the caravan.

1. Disposition. The appeal was allowed on causation but dismissed on limitation and in relation to the caravan. The unbarred part of Mr Grace’s damages claim was remitted to Chester County Court for quantification.
2. Section 32(2) of the Limitation Act 1980 did not postpone limitation. Deliberate commission of a breach requires proof that the defendant knew at the time that its conduct was a breach of duty. The appellants neither pleaded nor proved that knowledge. Moreover, the evidence showed that Mr Grace discovered the registration more than six years before proceedings began. The same inference probably applied to his partner.
3. Irremediable unenforceability under the Consumer Credit Act 1974 does not extinguish the underlying agreement or its rights and obligations. The Act distinguishes unenforceability from voidness and expressly provides for release from liability where that consequence is intended. The contrary dicta in Wilson v First County Trust Ltd (No 2) were obiter and did not displace the earlier authorities.
4. Nevertheless, the continued existence of the agreement did not make the default registration accurate. Once a competent court had declared that the consumer should not have to pay because the agreement was irremediably unenforceable, it was generally inaccurate and stigmatising to register continued non-payment as a default without also recording the statutory liberty not to pay. Limitations in credit-reference systems could not excuse an inaccurate entry. Accordingly, no lawful alternative default entry could have caused the same loss, and the county court’s causation analysis failed.
5. The court left open whether the same reasoning applies during periods of remediable unenforceability.
6. The oral delivery-up order was valid. Mrs George was represented by Mr Grace, who had express authority and raised no objection. Section 131 of the Consumer Credit Act 1974 empowered the court to protect the caravan pending judgment. An oral order is an order of the court for section 90 because court orders ordinarily take effect when pronounced. Recovery pursuant to it therefore did not trigger section 91.

Briggs LJ delivered the judgment. Beatson LJ and the Master of the Rolls agreed.

1. Court of Appeal (Civil Division): By [2014] EWCA Civ 1413, allowed the appeal on causation, dismissed it on limitation and delivery up, and remitted quantification of the surviving damages claim.
2. Chester County Court: HHJ Halbert dismissed the appellants’ claims, upheld the enforceability of the later caravan agreement, and ordered delivery up of the caravan. No neutral citation is stated.