Boyo v Lloyds Bank Plc

A creditor is not required to serve a default notice under section 87(1) of the Consumer Credit Act 1974 before reporting a default to credit reference agencies. A defamation claim may be extended under section 32A of the Limitation Act 1980 where the balance of prejudice and all the circumstances make that just, and the merits of substantive defences are not themselves the measure of prejudice. Accurate credit reporting may be protected by truth and common-law qualified privilege. A bank may close an account in accordance with its contractual terms while remaining obliged to act reasonably after closure.

The claimant sued her bank in defamation, malicious falsehood, breach of contract and breach of common-law duty concerning the reporting of an overdraft default to credit reference agencies in January 2013. The bank accepted that no default notice had been served, but denied that one was legally required. It relied on truth, qualified privilege and limitation, and denied contractual or tortious breach. Following a trial of preliminary issues, the court determined whether the report was actionable, whether the contractual obligation had been breached, and whether the bank had breached its duty of care.

1. Default notice. Section 87(1) of the Consumer Credit Act 1974 restricts specified enforcement actions without a default notice. Reporting information to credit reference agencies is not one of those actions. Following McGuffick v RBS [2009] EWHC 2386 (Comm), such reporting is not enforcement for the purposes of the Act. The bank therefore had no legal obligation to serve a default notice before reporting the default.
2. Limitation. The defamation claim was brought outside the one-year period under section 4A of the Limitation Act 1980. Section 32 did not apply because there was no fraud, concealment or mistake. The court nevertheless exercised the broad discretion under section 32A to disapply the primary limitation period. The claimant had not known of the report until 2016, had not deliberately delayed vindication, and had relevant health difficulties. The merits of the truth and other substantive defences were not themselves a measure of prejudice.
3. Defamation. The report was substantially true. The claimant was in default under the account terms and in the credit-reporting sense because the banking relationship had broken down, the account remained overdrawn after demand, and no repayment arrangement had been reached when the report was made. The reasoning in Gatt v Barclays Bank Plc [2013] EWHC2 (QB) was applied.
4. Qualified privilege. Alternatively, reporting through the regulated credit-reference system attracted common-law qualified privilege. The claimant did not establish express malice. The test in Horrocks v Lowe [1975] AC 135 and the corporate-malice requirement described in Broadway Approvals v Odhams [1965] 1 WLR 805 were not satisfied.
5. Contract and duty of care. The bank was entitled to close the account on two months’ notice under its terms. It acted reasonably after closure, reported an outstanding and overdue balance before any repayment arrangement was agreed, and complied with the relevant ICO guidance. Applying the approach in Gatt v Barclays Bank Plc and the duty recognised through Spring v Guardian Assurance [1995] 2 AC 296, the court found no breach of contract or common-law duty of care.
6. The claims in defamation, breach of contract and breach of duty of care or negligence therefore failed.