FIRST DIVISION, INNER HOUSE, COURT OF SESSION

 

Lord President

Lord Eassie

Lord Mackay of Drumadoon

 

.

[2010] CSIH NO.49

 

OPINION OF THE COURT

 

delivered by

 

LORD MACKAY OF DRUMADOON

 

in the cause

 

by

 

RICHARD DURKIN

 

Pursuer and Appellant;

 

against

 

DSG RETAIL LIMITED

 

First Defenders and Respondents:

 

and

 

HFC BANK PLC

 

Second Defenders and Respondents;

 

_______

 

 

AppellantAct: Paterson, Solicitor Advocate, and McLean, Solicitor Advocate; Tods Murray LLP (Appellant)

First RespondentsAlt: Dawson; Peterkins (First Respondents)

Second RespondentsAlt: Clark, Q.C. and , McShane; Andersons LLP for Patten & Prentice (Second Respondents)

 

[Date of Issue]15 June 2010

 

Introduction 

 

[1] The pursuer and appellant ("the appellant") raised an action for declarator and reparation against the first and second defenders and respondents in Aberdeen Sheriff Court. The action relates to a contract of sale between the appellant and the first defenders and respondents ("the first respondents") and a credit agreement between the appellant and the second defenders and respondents ("the second respondents"). After proof, and by interlocutor dated 26 March 2008, the sheriff pronounced decree of declarator against each of the respondents and decree for payment of damages against the second respondents. The appellant has appealed and the second respondents have cross appealed against that interlocutor of 26 March 2008. The appeal and cross appeal raise a number of issues, including a question of law as to the construction of section 75(1) of the Consumer Credit Act 1974 ("the 1974 Act").

 

Background

[2] The appellant is an off-shore construction surveyor. Throughout the material time, between 1998 and the proof, which was heard on a number of dates between February and June 2007, the appellant owned a house in Aberdeen. During 1998 and 1999 he lived in that house when he was not working off-shore. Thereafter, when not off-shore, he lived partly in Aberdeen and partly in rented accommodation in Spain.

[3] The first respondents trade under the name of PC World and specialise in the sale of computers and associated equipment. On 28 December 1998 they did so from retail premises in Aberdeen. The second respondents are a bank, which in December 1998 provided credit facilities to consumers purchasing computers from the first respondents.

[4] On 28 December 1998, the appellant visited the retail premises of the first respondents in Aberdeen. He wanted to purchase a laptop computer with an inbuilt modem. Whilst the appellant was at the first respondents' premises, Robert Slorance, an employee of the first respondents, identified a Hitachi laptop computer as meeting the appellant's requirements. The laptop was in a sealed box. Mr Slorance was not permitted to open the box and allow the appellant to examine the laptop. For that reason it was not possible to check whether the laptop had an inbuilt modem. However, Mr Slorance suggested to the appellant that he should buy the laptop and indicated that if, on taking the laptop home, the appellant ascertained it did not have an inbuilt modem, he could return it. The appellant decided to purchase the laptop. He did so on the understanding that if it transpired that the laptop did not have an inbuilt modem, he could return the laptop to the first respondents and rescind the bargain.

[5] On 28 December 1998, the appellant paid the first respondents 50 towards the purchase price under the contract of sale. He also signed a consumer credit agreement with the second defenders for 1449 ("the credit agreement"), to cover the balance of the purchase price of the laptop. Mr Slorance, the first respondents' employee, dealt with the paperwork relating to the credit agreement on behalf of the second respondents. That paperwork, although signed by the appellant on 28 December 1998, was not completed by the first respondents on behalf of the second respondents until the following day and was dated 29 December 1998.

[6] When the appellant got home on 28 December 1998, he discovered that the laptop did not have an inbuilt modem. At 9 am the following morning the appellant returned to the first respondents' premises in Aberdeen. He rejected the laptop as being disconform to contract and he rescinded his contract of sale with the first respondents. He sought repayment of the 50 he had paid and cancellation of the credit agreement with the second respondents. On that occasion the appellant dealt with Andrew Taylor, another employee of the first respondents. Mr Taylor refused to accept the appellant's rejection of the laptop, to repay 50 to the appellant or to take any steps to cancel the credit agreement. The appellant left the laptop with the first respondents and left their premises.

[7] The appellant then went to work off-shore. On his return to Aberdeen, approximately two weeks later, he discovered that the first respondents had delivered the laptop to his house in Aberdeen. The appellant again returned the laptop to the first respondents' premises, where it remained. The appellant subsequently sought repayment of 50 from the first respondents. They failed to repay that sum until sued by the appellant in a small claims action. On repayment of that sum by the first respondents the small claims action was settled and dismissed.

[8] The appellant made no payments to the second respondents in respect of the credit agreement. In or about March 1999, following a request for payment from the second respondents, the appellant telephoned them. He advised the second respondents that he had rejected the laptop and had returned it to the first respondents, because it did not conform to his contract of sale. He informed the second respondents that because he had rejected and returned the laptop he was not going to make any payments to them under the credit agreement.

[9] The second respondents insisted on the appellant making payments in terms of the credit agreement. By letter dated 22 July 1999, they advised the appellant of the possible consequences if he failed to do so. They indicated that on a monthly basis they reported to national credit reference agencies on the status of customer accounts. They suggested that might lead to his having difficulty in the future in obtaining a mortgage or other credit. The second respondents subsequently served a default notice on the appellant, in terms of the provisions of section 87(1) of the 1974 Act, and caused entries to be made in the registers of Experian Limited and Equifax Limited, the two largest credit reference agencies in the United Kingdom. Those entries were to the effect that the appellant was in default to the extent of 1499 (sic) in his obligations to the second respondents under a fixed term loan from the second respondents.

[10] Following the appearance of those entries in the registers of the credit reference agencies, the appellant repeatedly telephoned the second defenders and sought to persuade them to remove the adverse entries. The second defenders refused to do so. They made no enquiries into the appellant's claim that he had been entitled to and had in fact rescinded his contract of sale with the first respondents.

[11] Although the appellant registered notices of correction with Experian and Equifax, explaining that the second respondents' entries related to a bad debt which was "the fault of PC World who have processed a finance agreement for a computer after (he) had rejected it within 2 hours of signing the agreement", the entries relating to the appellant, which the second respondents caused to be registered, remained on the registers of the credit reference agencies until at least 2005.

 

Action raised by appellant

 

[12] Early in 2004, the appellant raised the present action in Aberdeen Sheriff Court against the first and second respondents. The appellant sought declarator that he was entitled to rescind and had validly rescinded (i) the contract of sale between himself and the first respondents dated 28 December 1998, by giving notice to the first respondents on 29 December 1998 and (ii) the consumer credit agreement between himself and the second respondents dated 29 December 1998, by notice to the second respondents in or around February 1999. The appellant also sought payment of an award of damages of 250,000, together with interest, against the second respondents.

[13] The crave for declarator proceeded on the basis that it had been an express term of the contract of sale between the appellant and the first respondents that the laptop computer would have an internal modem. It did not. The appellant averred that he was entitled to rescind the contract of sale in terms of section 15B of the Sale of Goods Act 1979. It was a matter of agreement that the credit agreement was a debtor-creditor-supplier agreement falling within section 12 (b) of the 1974 Act. The appellant averred that accordingly, by virtue of the terms of section 75(1) of the 1974 Act, he was also entitled to rescind the credit agreement. The appellant averred he had rescinded both contracts. The contract of sale had been rescinded during his visit to the first respondents' premises in Aberdeen on 29 December 1998. The credit agreement had been rescinded, in or around February 1999, during a telephone conversation between the appellant and the second respondents.

[14] The appellant sought damages from the second respondents for the loss and damage he had suffered by reason of their fault and negligence. He averred in Cond 5:

"... It was the second defenders' duty to take reasonable steps to satisfy themselves as to whether the pursuer had validly rejected the laptop and rescinded the contract of sale, and not merely to adopt the first defenders' position without further inquiry when they knew it to be in dispute. It was the second defenders' duty to accept the pursuer's lawful rescission of the credit agreement. In relation to each and every occasion on which they made representations to credit reference agencies relating to the pursuer, it was the second defenders' duty to take reasonable care to avoid giving false information of a sort that they knew or should have known would harm the pursuer's credit. It was the second defenders' duty to take reasonable care not to tell credit reference agencies that the credit agreement was still in force when they knew or should have known that it had been rescinded. It was the second defenders' duty to take reasonable care not to tell credit reference agencies that the pursuer was in default in relation to that agreement, when they knew or should have known that it had been rescinded. In any event it was the second defenders' duty not to make such representation to credit reference agencies without having taken reasonable steps to satisfy themselves of the truth thereof, when they knew it to be in dispute. Having made such misrepresentations, it was the second defender's duty to take reasonable care to withdraw and correct them forthwith. Separatim it was the second defenders' duty to accept the pursuer's lawful rescission of the credit agreement. As a consequence of the pursuer's rescission of his supply agreement with the first defenders, the second defenders were not entitled, given the provisions of the said Section 75, to treat the pursuer as in default of the credit agreement. In all of the foregoing duties the second defenders failed and thereby caused the pursuer to suffer loss and damage."

[15] As respects the causation and quantification of damages, the appellant averred that had it not been for the second respondents' breach of duty his credit record would have been clear. Instead it had purported to show that the appellant was in default in relation to the credit agreement. As a result the pursuer had suffered injury to his credit. The first head of loss was in respect of that injury to his credit.

[16] The pursuer sought to recover damages in respect of two further heads of loss. It is convenient to outline them in the order in which it is claimed they arose. The second head of loss was alleged to have been incurred from around September 2000 onwards by reason of the appellant having been unable to consolidate what he averred to have been "his significant debts". It was averred that during September 2000 the appellant had applied to the Clydesdale Bank for borrowing facilities. The Clydesdale Bank had rejected this application in reliance on a credit report from Experian. This had led to the appellant incurring bank charges to the Clydesdale Bank, which would not otherwise have been imposed. The appellant had also suffered such loss by reason of the refusal of numerous applications he had made to lenders offering credit card facilities, at zero per cent rate of interest for a fixed period, on balance transfers. Each application the appellant had made to such lenders, seeking to transfer outstanding debit balances on his credit cards, had been rejected on the ground of the information registered against him with the credit reference agencies Experian and Equifax by the second respondents. That had led to the appellant paying additional interest on his borrowings than he would otherwise have required to do.

[17] The third head of loss was alleged to have arisen in or around October 2003, when the appellant had attempted to purchase a newly built semi-detached villa in Malaga in Spain. This was to be a matrimonial home for the appellant and his wife. In October 2003, the price of the house had been 300,936 (including 7% IVA), with fees and outlays on that sum of 6% being due on any purchase. It was averred on behalf of the appellant that if, for any reason, he had not been able to purchase that particular property in October 2003 he would have purchased a similar property at similar cost in the same locality.

[18] The appellant averred that in October 2003 his purchase of the property would have been effected by means of a 30% deposit, with the balance being provided by means of a secured loan over the property, which he would have been able to obtain from a lender in Spain. It was averred that had the second respondents not been in breach of their duties to the appellant, he would have been in a position to obtain that deposit by means of a further advance from the Northern Rock Building Society, secured over his property in Aberdeen. It was averred that as a result of his being unable to transfer all his credit card debt to zero per cent interest rate credit card accounts, and in order to deal with that debt, the appellant had required to use the equity in his Aberdeen property to obtain further advances from the Northern Rock Building Society. Had that not been necessary, the equity would have provided the 30% deposit required for the property in Spain.

[19] The appellant averred that when the credit agreement was entered into and when the second respondents served a default notice on the appellant, it was within their reasonable contemplation that in the event of their being in breach of their duties to the appellant he would suffer loss by reason of his inability to obtain a mortgage.

[20] Damages under this head were claimed on the basis of a comparison between what it would have cost the appellant to purchase the property in Spain in 2003 and the costs that would have been incurred in his purchasing the same or a similar house in October 2006, 584,220 (including 7% IVA), with fees and outlays on that sum of 6%. The increase in price was averred as being 283,284 (200,910). By October 2006 the entries relating to the appellant on the registers of Experian and Equifax had been removed.

[21] A schedule was produced setting out the quantification of the appellant's three heads of loss, which were estimated as totalling 250,000.

[22] The appellant's action was defended by both the first and second respondents. After proof, the sheriff, in his interlocutor of 26 March 2008, sustained the first, second and third pleas in law for the appellant and granted decree of declarator against each set of respondents in the terms sought by the appellant. The sheriff also sustained the fourth and fifth pleas in law for the appellant, held that the appellant had suffered loss and damage as a result of the fault and breach of duty of the second respondents and awarded the appellant damages of 116, 674, together with interest. The damages were the total of the sums of 8,000, 6,880 and 101,794 awarded under the three heads of loss sought. The Sheriff reserved to a subsequent hearing all questions relating to the rate and dates from which interest would run and expenses.

[23] On 10 April 2008, the Sheriff dealt with issues relating to the rates of interest and the dates from which it should run on the three sums mentioned. The detailed terms of his ruling on interest are not of relevance to this appeal. At the same hearing, the Sheriff dealt with the expenses of the action. In particular he found the respondents jointly and severally responsible to the appellant in the expenses of the action, in so far as not already dealt with, and ordered that those expenses should be apportioned 40%/60% as between the first respondents and the second respondents. The Sheriff also certified the cause as suitable in terms of the Act of Sederunt (Fees of Solicitors in the Sheriff Court)(Amendment and Further Provisions) 1993, Regulation 5(b), for a percentage increase in the appellant's fees of 50%.

 

The present appeal

[24] The appellant appealed. As amended the grounds of appeal lodged on his behalf raised three issues relating to the assessment of damages. In Ground 1 it was contended that the Sheriff had erred when assessing the sum recoverable under the third head of loss, relating to delay in the appellant being able to purchase a property in Spain. The Sheriff had erred by discounting from the damages awarded an estimate of the costs associated with a notional sale of the property by the appellant during 2006. During the proof the appellant had given unchallenged evidence that in 2003 he had intended to purchase the property as a family home. There had been no evidence that he had intended to sell the property in 2006 or at any other time.

[25] Ground 2 contended that the Sheriff had erred in discounting from the amount recoverable under the third head of loss, the interest charges the appellant would have required to pay in respect of the Spanish property during the period between 2003 and 2006.

[26] Ground 3 contended that the Sheriff had erred in the detail of his calculations, when comparing the cost of purchasing the property in Spain during 2003 and the cost of doing so in late 2006.

[27] Ground 4 was directed against the Sheriff's decision on expenses in so far as it limited the percentage increase in the appellant's solicitors' fees to 50%. In the event that ground was not insisted upon. As a consequence the first respondents played no part in the hearing of the appeal.

[28] The second respondents cross-appealed. The grounds of appeal on behalf of the second respondents fell into two chapters. Chapter 1 raised issues relating to the granting of decree of declarator that the appellant had been entitled to rescind and had validly rescinded the credit agreement. It was contended that the Sheriff had erred in holding (i) that a claim for the rescission of a credit agreement was a "like claim" in terms of Section 75(1) of the 1974 Act; and (ii) that, even if it was a "like claim", intimation by the appellant to the first respondents of his rescission of their contract of sale had also constituted intimation by the appellant to the second respondents of rescission of the credit agreement. It was also contended that on the evidence the sheriff had heard he could not make a finding in fact that the appellant had intimated directly to the second defenders his rescission of the credit agreement.

[29] Chapter 2 of the second respondents' grounds of appeal was directed against the award of damages in favour of the appellant. It was contended that the Sheriff had erred in holding (i) that the second respondents owed a duty of care of the scope contended for by the appellant, the economic loss suffered by the appellant not having been a foreseeable consequence of any incorrect information made available by the second respondents; (ii) that a duty of care of the nature averred by the appellant had been proved to exist; (iii) that if a duty of care of such scope and nature existed, the second respondents had acted in breach of that duty of care; (iv) that such a breach had occurred on the basis that the credit agreement had been validly rescinded by the appellant; (v) that in 1999 the appellant routinely made use of credit cards with a zero per cent rate of interest; (vi) that the appellant sustained loss in relation to the payment of credit card interest; (vii) that the appellant would have purchased a house in Spain but for the fault and negligence of the second respondents: (viii) that the appellant's economic loss in failing to purchase a house in Spain was the result of his having to re-mortgage his house in Aberdeen to service credit card interest payments; and (ix) that the appellant's economic loss in respect of interest et separatim the loss arising from his failure to purchase a house in Spain had been satisfactorily established in evidence as having been caused by the second respondents' breach of duty.

 

The legislation

[30] The Consumer Credit Act 1974 provides as follows:-

"Section 11.- Restricted-use credit and unrestricted-use credit.

(1) A restricted-use credit agreement is a regulated consumer credit agreement-

(a) to finance a transaction between the debtor and the creditor, whether forming part of that agreement or not, or

(b) to finance a transaction between the debtor and a person (the "supplier" ) other than the creditor, or

(c) to refinance any existing indebtedness of the debtor's, whether to the creditor or another person,

and " restricted-use credit" shall be construed accordingly.

(2) An unrestricted-use credit agreement is a regulated consumer credit agreement not falling within subsection (1), and "unrestricted-use credit" shall be construed accordingly.

(3) An agreement does not fall within subsection (1) if the credit is in fact provided in such a way as to leave the debtor free to use it as he chooses, even though certain uses would contravene that or any other agreement.

(4) An agreement may fall within subsection (1)(b) although the identity of the supplier is unknown at the time the agreement is made.

 

Section 12.─ Debtor-creditor supplier agreements.

A debtor-creditor-supplier agreement is a regulated consumer credit agreement being-

(a) a restricted-use credit agreement which falls within section 11(1)(a), or

(b) a restricted-use credit agreement which falls within section 11(1)(b) and is made by the creditor under pre-existing arrangements, or in contemplation of future arrangements, between himself and the supplier, or

(c) an unrestricted-use credit agreement which is made by the creditor under pre-existing arrangements between himself and a person (the " supplier" ) other than the debtor in the knowledge that the credit is to be used to finance a transaction between the debtor and the supplier.

....

Section 19.- Linked transactions.

(1) A transaction entered into by the debtor or hirer, or a relative of his, with any other person ("the other party"), except one for the provision of security, is a linked transaction in relation to an actual or prospective regulated agreement (the "principal agreement") of which it does not form part if-

(a) the transaction is entered into in compliance with a term of the principal agreement; or

(b) the principal agreement is a debtor-creditor-supplier agreement and the transaction is financed, or to be financed, by the principal agreement; or

(c) the other party is a person mentioned in subsection (2), and a person so mentioned initiated the transaction by suggesting it to the debtor or hirer, or his relative, who enters into it-

(i) to induce the creditor or owner to enter into the principal agreement, or

(ii) for another purpose related to the principal agreement, or

(iii) where the principal agreement is a restricted-use credit agreement, for a purpose related to a transaction financed, or to be financed, by the principal agreement.

(2) The persons referred to in subsection (1)(c) are-

(a) the creditor or owner, or his associate;

(b) a person who, in the negotiation of the transaction, is represented by a credit-broker who is also a negotiator in antecedent negotiations for the principal agreement;

(c) a person who, at the time the transaction is initiated, knows that the principal agreement has been made or contemplates that it might be made.

(3) A linked transaction entered into before the making of the principal agreement has no effect until such time (if any) as that agreement is made.

(4) Regulations may exclude linked transactions of the prescribed description from the operation of subsection (3).

....

Section 56.- Antecedent negotiations.

(1) In this Act " antecedent negotiations" means any negotiations with the debtor or hirer-

(a) conducted by the creditor or owner in relation to the making of any regulated agreement, or

(b) conducted by a credit-broker in relation to goods sold or proposed to be sold by the credit-broker to the creditor before forming the subject-matter of a debtor-creditor-supplier agreement within section 12(a), or

(c) conducted by the supplier in relation to a transaction financed or proposed to be financed by a debtor-creditor-supplier agreement within section 12(b) or (c),

and "negotiator" means the person by whom negotiations are so conducted with the debtor or hirer.

(2) Negotiations with the debtor in a case falling within subsection (1)(b) or (c) shall be deemed to be conducted by the negotiator in the capacity of agent of the creditor as well as in his actual capacity.

(3) An agreement is void if, and to the extent that, it purports in relation to an actual or prospective regulated agreement-

(a) to provide that a person acting as, or on behalf of, a negotiator is to be treated as the agent of the debtor or hirer, or

(b) to relieve a person from liability for acts or omissions of any person acting as, or on behalf of, a negotiator.

(4) For the purposes of this Act, antecedent negotiations shall be taken to begin when the negotiator and the debtor or hirer first enter into communication (including communication by advertisement), and to include any representations made by the negotiator to the debtor or hirer and any other dealings between them.

....

Section 75.- Liability of creditor for breaches by supplier.

(1) If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor.

(2) Subject to any agreement between them, the creditor shall be entitled to be indemnified by the supplier for loss suffered by the creditor in satisfying his liability under subsection (1), including costs reasonably incurred by him in defending proceedings instituted by the debtor.

(3) Subsection (1) does not apply to a claim-

(a) under a non-commercial agreement, or

(b) so far as the claim relates to any single item to which the supplier has attached a cash price not exceeding [100] or more than [30,000].

(4) This section applies notwithstanding that the debtor, in entering into the transaction, exceeded the credit limit or otherwise contravened any term of the agreement.

(5) In an action brought against the creditor under subsection (1) he shall be entitled, in accordance with rules of court, to have the supplier made a party to the proceedings.

....

Section 87.- Need for default notice.

(1) Service of a notice on the debtor or hirer in accordance with section 88 (a "default notice") is necessary before the creditor or owner can become entitled, by reason of any breach by the debtor or hirer of a regulated agreement,-

(a) to terminate the agreement, or

(b) to demand earlier payment of any sum, or

(c) to recover possession of any goods or land, or

(d) to treat any right conferred on the debtor or hirer by the agreement as terminated, restricted or deferred, or

(e) to enforce any security.

(2) Subsection (1) does not prevent the creditor from treating the right to draw upon any credit as restricted or deferred, and taking such steps as may be necessary to make the restriction or deferment effective.

(3) The doing of an act by which a floating charge becomes fixed is not enforcement of a security.

(4) Regulations may provide that subsection (1) is not to apply to agreements described by the regulations.

....

Section 102.- Agency for receiving notice of rescission.

(1) Where the debtor or hirer under a regulated agreement claims to have a right to rescind the agreement, each of the following shall be deemed to be the agent of the creditor or owner for the purpose of receiving any notice rescinding the agreement which is served by the debtor or hirer-

(a) a credit-broker or supplier who was the negotiator in antecedent negotiations, and

(b) any person who, in the course of a business carried on by him, acted on behalf of the debtor or hirer in any negotiations for the agreement.

(2) In subsection (1) "rescind" does not include-

(a) service of a notice of cancellation, or

(b) termination of an agreement under section 99 or 101 or by the exercise of a right or power in that behalf expressly conferred by the agreement. "

....

Section 158. ─ Duty of agency to disclose filed information

A credit reference agency, within the prescribed period after receiving, ─

(a) a request in writing to that effect from a consumer,

....

shall give the consumer a copy of the file relating to it kept by the agency.

....

Section 159. ─ Correction of wrong information

Any individual (the "objector") given ─

(a) information under section 7 of the Data Protection Act 1998 by a credit reference agency, or

(b) information under section 158,

who considers that an entry in his file is incorrect, and that if it is not corrected he is likely to be prejudiced, may give notice to the agency requiring it to remove the entry from the file or amend it."

 

Findings in fact

[31] Both the appellant and the second respondents sought amendments to the findings in fact made by the Sheriff. The papers before us included transcripts of the evidence of the appellant, Philip Nott (a project manager in Spain), David Young (a bank manager with Northern Rock) and Andrew Clark (a financial adviser approved by the Financial Services Authority). It is appropriate to note that our consideration of the transcripts of witnesses who gave evidence during the proof was not assisted by the fact that the parties did not include in the appendices prepared for the hearing of this appeal a significant number of the documents to which those witnesses made detailed reference during the course of giving evidence.

[32] Having reviewed the submissions made by parties as to the findings in fact and the passages in the transcripts of the evidence to which we were referred, we intend to amend the Sheriff's findings in fact as follows:

a) Delete finding in fact 16 and renumber the existing finding in fact 18 (as amended) as finding in fact 16.

b) Amend existing finding in fact 18 to read as follows:

i. "16. A short period before 8 March 1999, on which date the appellant wrote to the first defenders, the second defenders telephoned the pursuer and required him to make payment under the credit agreement with them, which he had entered into. The pursuer explained to them that he had been told by the first defenders on the day he purchased the laptop that if it did not have an inbuilt modem he would have the right to reject the computer the following morning. He made it clear to the second defenders that he had rejected the laptop because it did not have an inbuilt modem and did not conform to his contract with the first defenders. He advised the second defenders that he had returned the laptop to the first defenders. Although he did not explicitly state to the second defenders that he had rescinded the credit agreement, he made it clear to them that he did not intend to make any payments under that contract.

17. When the pursuer was in contact by telephone with the second defenders in or about March 1999, he advised them that the first defenders were refusing to cancel the contract of sale." and

ii. renumber the existing finding in fact 18 (as amended) as findings in fact 16 and 17.

c) Renumber existing finding in fact 17 as finding in fact 18.

d) Amend finding in fact 19 by deleting " 16 and 18" and substituting "17".

e) Amend finding in fact 21 by adding at the end:

" At all material times, including throughout the proof, the second defenders accepted without question the position adopted by the first defenders, namely that on 29 December 1998 the pursuer had not been entitled to rescind his contract of sale with the first defenders."

f) Amend finding in fact 23 by (i) deleting the second sentence and the word "This" in the third sentence and (ii) substituting "Such use of credit cards continued after January 1999. The entries the second defenders caused to be added to the registers of the credit reference agencies had the immediate effect that any application by the pursuer for 0% interest free credit on transferred debit card balances would have been unsuccessful. Such 0% interest free credit was at all relevant times available from many financial institutions in the United Kingdom. By June 2001, at the latest, the pursuer would have sought to have made use of 0% interest free credit. Any use of such credit by the pursuer would have".

g) Amend finding in fact 26 by

(i) deleting the words "amount of loss sustained" and substituting the words "additional interest paid" and

(ii) at the end of the finding in fact adding the words "which he would have done from at least mid-2001."

h) Amend finding in fact 31 by deleting the words "As a result of the non-availability to him of 0% credit cards the" and substituting "The".

i) Amend finding in fact 35 by deleting from the words "and his loss ..." to the end of the finding in fact.

j) Amend finding in fact 36 by deleting the words "As a consequence ..." to "....to them" and substituting "On the hypothesis that the second defenders are liable in damages to the pursuer,".

[33] The amendments to findings in fact 16, 17 and 18 arise from a detailed consideration of the appellant's evidence. The detail of the evidence given by the pursuer and the contents of those documents before us, which he spoke to, were also of importance to the amendment to findings in fact 21 and 26. No evidence was led on behalf of the second respondents. The amendments to findings in fact 26, 31, 35 and 36 follow on from our assessment of the approach the Sheriff took to the issues of causation of loss, with which we deal later.

 

Cross appeal

[34] It is appropriate to deal first with the cross appeal, because the submissions in relation to the cross appeal are logically prior to the remaining issues and took up the major part of the hearing.

 

Submissions for second respondents

[35] The first chapter of the grounds of appeal advanced in support of the second respondents' cross appeal challenged the decision of the Sheriff to grant declarator that the appellant had validly rescinded his credit agreement with them. What were described as "three rescission issues" arose: (i) whether the appellant's rejection of the laptop and his rescission of his contract of sale with the first respondents also operated as rescission of his credit agreement with the second respondents; (ii) if it did, what had been the consequence of the appellant's failure to give written intimation to the first respondents of his rescission of the credit agreement with the second respondents; and (iii) whether the appellant had ever intimated directly to the second respondents his rescission of the credit agreement.

 

Section 75(1) of the 1974 Act

[36] Parties' representatives were agreed that the first of these issues was the critical one, involving as it did a dispute as to the correct construction of section 75(1) of the 1974 Act and the related question of whether that section had been correctly construed by Sheriff Principal Reid in United Dominions Trust Ltd v Taylor 1980 SLT (Sh Ct) 28. In the present action the only basis on which the appellant has sought declarator that he had been entitled to rescind the credit agreement is that having validly rescinded his contract of sale with the first respondents, the provisions of section 75(1) of the 1974 Act entitled him to rescind the credit agreement and sue the second respondents for a declarator to that effect. It was a matter of agreement that if United Dominions Trust Ltd v Taylor had been incorrectly decided, the appellant had not pled any alternative legal basis for his having rescinded the credit agreement. Nor had any alternative argument for his having been entitled to do so been advanced during the proof. In particular, the appellant had not sought to argue, either in the written pleadings or during evidence and submissions, that any breach of contract or misrepresentation on the part of the second respondents justified his rescission of the credit agreement.

[37] Before summarising the submissions advanced in respect of this important issue, it is helpful to look again at the terms of section 75(1) and to examine the approach the Sheriff Principal took to the construction of that provision in United Dominions Trust Ltd v Taylor.

[38] Section 75(1) provides:-

"If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor."

[39] In United Dominions Trust Ltd v Taylor the pursuers, a finance company, had lent money to the defender to purchase a car. They subsequently raised an action against the defender for payment of the balance of the loan, together with interest. The action was defended on the basis that the defender had rescinded his contract of sale with the suppliers of the car. He had done so on the ground of misrepresentation on the part of the suppliers as to the condition of the car and on the ground of their breach of contract. It was a matter of agreement between the pursuers and the defender that the provisions of the 1974 Act applied to the contract of loan between them. The defender contended that the words "any claim against the supplier" in section 75(1) included a claim of rescission of his contract with the suppliers. The pursuers contended that there were two contracts and that the grounds for rescinding the contract of sale with the suppliers, namely, misrepresentation and breach of contract on the part of the suppliers, could only apply to that contract. There was therefore no "like claim against the creditor" in respect that the contract of loan had not been induced by misrepresentation or breach of contract. At first instance the Sheriff rejected the defender's argument, refused to admit to probation the defender's averments relating to the alleged misrepresentation and breach of contract by the suppliers and allowed a proof before answer.

[40] On appeal, the Sheriff Principal reversed the decision of the Sheriff excluding the defender's averments from probation. In allowing a proof before answer, he held that the words "a like claim" in section 75(1) were wide enough to be construed as including a claim for rescission of the contract of loan at the instance of the defender against the pursuers, even although the pursuers themselves had not given any grounds for rescission of the contract of loan. The Sheriff Principal's construction of section 75(1) of the 1974 Act did not require that the debtor's claim against the creditor should be justiciable on like grounds to the debtor's claim against the supplier. In the course of his opinion the Sheriff Principal said:-

" The subject-matter of the section is 'any claim against the supplier in respect of a misrepresentation or breach of contract'. The claims which leap to mind are claims to rescind the contract, to claim restitution of any sums paid to the supplier and to claim any damage which the debtor has sustained. It would be odd, to say the least, if the right to rescind was not available against the creditor and the right to restitution, which depends on rescission, was available. The section goes on to provide that, where such claims against the supplier exist, the debtor shall have 'a like claim against the creditor'. The section does not require that the claim against the creditor shall be justiciable on like grounds to the claim against the supplier, merely that it shall be the same sort of claim. The words 'a like claim' are thus wide enough to include a claim for rescission although the creditor has given no grounds for rescission of the loan contract.

This view of the subsection has been confirmed by a consideration of other provisions of the Act, particularly as they relate to debtor-creditor-supplier agreements. The long title of the Act narrates inter alia that the Act establishes a new system of licensing and other control of traders concerned with the provision of credit and their transactions. A reading of the Act discloses that it has created a completely new system of classifications and remedies to take effect whenever consumer credit is associated with contracts of sale and hire. These statutory remedies have been superimposed on existing contractual remedies. One of the innovations of the Act is to treat two or more contracts which are economically part of one credit transaction as transactions which are legally linked. Where these linked transactions contain two contracts the fate of each contract depends on the other, even where the parties to the contracts are different. This approach leaves no room for the idea of privity of contract which is fundamental to the common law of contract. It is for that reason that I am unable to agree with the learned sheriff's use of the principle of privity of contract to throw light on the meaning of the subsection.

The present contract between the parties is agreed to be a debtor-creditor-supplier agreement under the Act, i.e. a consumer credit agreement regulated by the Act of the type in which credit is given for a restricted purpose or use in a transaction between a debtor and the supplier (who is not also the creditor) and made by the creditor under pre-existing arrangements between himself and the supplier (ss. 11 (1) (b) and 12 (b)). In such circumstances the contract of sale between the debtor and the supplier is a transaction linked to the credit agreement (s. 19 (1) (b)). Withdrawal from the credit agreement operates as withdrawal from the contract of sale and cancellation of the credit agreement as a similar effect on the contract of sale (ss. 57 (1), 69 (1)); and there are other circumstances in which a credit agreement and the transaction linked to it stand or fall together (see Goode on Consumer Credit Act 1974, para. 19.9). All these are instances of cases in which events affecting the credit agreement operate also in the transaction linked to it. In precisely the same way s. 75 (1) ensures that rescission of the contract of sale shall operate as rescission of a credit agreement linked to it where both form part of a debtor-creditor-supplier agreement."

[41] Sheriff Principal Reid's decision in United Dominions Trust Ltd v Taylor was followed by Sheriff Simpson in Forward Trust Limited v Hornsby and Another 1995 SCLR (Notes) 574. It has however been the subject of criticism in certain textbooks and academic journals (viz Encyclopaedia of Consumer Credit Law, edited by Guest and Lloyd, p 2074/4; The Missing Link Transaction, Davidson (1980) 96 L.Q.R. 343; and Missing Link Transactions - Further Observations, by Lowe (1981) 97 L.Q.R. 532). No other authorities were cited to us in which Sheriff Principal Reid's construction of section 75(1) has been approved and followed.

 

Submissions for second respondents

[42] Before this court it was argued on behalf of the second respondents that United Dominions Trust Ltd v Taylor had been wrongly decided. The Sheriff Principal had laboured under fundamental misapprehensions as to the meaning and effect of two key expressions found in the 1974 Act. First, the Sheriff Principal had failed to notice that the statutory expression "linked transaction", which is defined in section 19(1), is given effect to only in relation to certain of the provisions of the 1974 Act in which it is expressly mentioned and for specific purposes. It is not to be read into other provisions, such as section 75(1), in which no reference to section 19(1) is made. Moreover the expression "linked transaction" refers to a transaction, such as a sale agreement, linked to a "principal agreement", such as a credit agreement to which the linked transaction does not form part. When the principal agreement, the credit agreement, falls the linked transaction, the sale agreement also falls; not the other way round (cf section 67 of the 1974 Act). Secondly, the Sheriff Principal had erred when he took the view that the debtor's contract of sale with the suppliers was part of the debtor-creditor-supplier agreement (as defined by section 12(1)(b)), namely the credit agreement - the contract of loan, between the defender and the pursuers. The Sheriff had treated them as parts of the same agreement. They were not. They were separate contracts.

[43] The construction of section 75 (1) advanced by counsel for the second respondents was one that limited the words "a like claim" to a claim for repetition of the price or for damages at the instance of a debtor for either or both of which his creditor is jointly and severally liable with his supplier. A claim by the debtor relating to the rescission of his contract of loan with the creditor was not "a like claim" to any claim the debtor might have against his supplier, even a claim against the supplier for rescission of their contract of sale.

[44] It was submitted that such a construction was consistent with the terms of the head note to section 75 "Liability of creditor for breaches by supplier", which are open to consideration as part of the 1974 Act (cf R v Montila [2004] UKHL 50, [2004] 1 WLR 3141); the reference in subsection (1) to "joint and several liability"; and the reference in subsection (2) to the creditor being "indemnified by the supplier for loss suffered by the creditor in satisfying his liability under subsection (1)". As against that, the construction of section 75(1) advanced on behalf of the appellant would not give effect to the ordinary use of the language to be found within the sub-section. It would be unusual to apply the term "claim" to the rescission of a contract, which was an act rather than a claim. Similarly it would be difficult to talk meaningfully about a creditor in a loan transaction being jointly and severally liable in respect of the rescission of a sale contract to which the creditor was not a party.

[45] In support of their submissions, counsel for the second respondents referred to the overview of the 1974 Act to be found in the judgment of the court delivered by Waller LJ in Office of Fair Trading v Lloyds TSB Bank plc [2007] QB 1, at paras 15-45; and the annotations to section 75(1) to be found in the Encyclopaedia of Consumer Credit Law, edited by Guest and Lloyd, at p 2074/4.

[46] After the submissions of junior counsel for the second respondents, the court drew the attention of parties to certain materials relating to the enactment of the 1974 Act. These were Chapter 6.6 of the Report of the Committee in Consumer Credit (the Crowther Report) and a number of excerpts from reports in Hansard of the parliamentary debates leading to the enactment of the 1974 Act (H of L Deb 30 April 1974 vol 351 cols 33-82, H of L Deb 2 May 1974 vol 351cols 199-263, H of C Deb 17 June 1974 vol 875 cols 46-92 and H of C Deb 19 July 1974 vol 877 cols 883-886). Prior to the adjourned hearing of this appeal, the appellant lodged the report in Hansard of the second reading debate in the House of Commons of a previous Consumer Credit Bill, which had also been based on the Crowther Report ( H C Deb 14 November 1973 vol 351 cols 509-98).

[47] During his submissions, senior counsel for the second respondents took the opportunity to comment on all those parliamentary materials. When doing so, he submitted that there was nothing of substance in the Crowther Report or in the excerpts from Hansard which supported the arguments being advanced on behalf of the appellant. In any event there were limitations on the extent to which it was appropriate to rely on parliamentary materials in the construction of statutory provisions. Reference was made to Pepper (Inspector of Taxes) v Hart [1993] AC 593, R v Secretary of State for Environment ex p Spath Holmes [2001] 2 AC 349 and Melluish v MBI (No 3) Ltd [1996] AC 454. It was pointed out that the parliamentary materials before the court did not include any discussion of the effect on a credit agreement of the debtor returning goods to the supplier and rescinding his contract of sale. Nothing said in Parliament supported the construction of section 75(1) favoured by Sheriff Principal Reid in United Dominions Trust Ltd and followed by the sheriff in the present action. The words used in section 75(1) were not ambiguous or obscure or liable to lead to uncertainty. Nothing said in Parliament suggested that any unusual meaning of the term "a like claim" had been intended. No particular expression and in particular the term "a like claim" had been given any clear meaning by the Government minister during any of the debates. In such circumstances the words and expressions to be found in section 75(1) should be given their ordinary meaning.

 

Submissions for appellant

[48] The submissions in response on behalf of the appellant stressed that the word "claim" was not a term of art. It commonly meant something like "demand or assert a right" (cf Oxford English Dictionary). The 1974 Act could have included the term "cause of action", but it must be assumed that Parliament had used words with a wider meaning. Whilst it was accepted that the phrase " joint and several" usually brought to mind monetary claims, it was possible for obligations other than monetary obligations to be undertaken on a "joint and several basis". Moreover section 102 of the 1974 Act made provision for persons to be deemed to be agents of the creditor or owner "where the debtor or hirer under a regulated agreement claims to have a right to rescind the agreement". In such circumstances to include a claim to a right to rescind an agreement within the meaning of section 75 would be consistent with the wide meaning of the non-technical word "claim".

[49] It was argued that the construction sought by the second respondents would allow the creditor to sue the debtor under a credit agreement, even though the contract of sale was at an end and the debtor was no longer in possession of the goods. In England, it might be possible for the debtor to plead equitable set-off in response to such an action by the creditor. However, even if such an option was available to a debtor in Scotland, that would be of no practical assistance to a debtor, such as the appellant, who was not sued by his creditor. That was because, if the construction of section 75(1) argued for by the second respondents was correct, the creditor, instead of suing the debtor for his debt, could use the "formidable weapon" of service of a default notice on the debtor, accompanied by notification to credit reference agencies of an allegation of breach of the contract of loan on the part the debtor. Such action could be taken even although the contract of sale was at an end and there was no possibility of the debtor being able to bring the contract of loan to an end. As this case demonstrated, a debtor who had been entitled to rescind his contract of sale with the supplier would have no effective remedy as a weapon against such action on the part of his creditor. The commercial reality was that the use of a default notice, accompanied by intimation to credit references agencies, was the primary remedy used by a creditor in such a situation.

[50] It was argued that the parliamentary material supported the construction argued for by the appellant. Particular reliance was placed on the speech made by Sir Geoffrey Howe, then Minister for Trade and Consumer Affairs, during the second reading debate on the Consumer Credit Bill on14 November 1973. When dealing with clause 71, the precursor to section 75 of the 1974 Act, the Minister had referred to the connected lender liability, under which, when goods or services are supplied on credit arrangements made between the supplier and the granter of credit, the latter should be jointly liable with the supplier for any misrepresentation or breach of contract on the part of the supplier. It was argued that reference to that particular debate, and to the debates on the later bill which subsequently gave rise to the 1974 Act, revealed that (a) the terms used in the 1974 Act were intended to have a wide meaning to enable the Act to keep pace with developments, (b) in cases of doubt the 1974 Act was intended to protect the consumer rather than the supplier or creditor, and (c) the 1974 Act was intended to prevent a creditor from claiming payment in cases where the consumer has either been provided with defective goods or no goods at all.

[51] The solicitors advocate for the appellant recognised that there was a tension within the provisions of section 75, with the court being faced with a choice between restricting the wording of the section by implying the word "monetary" between "any" and "claim", or by implying the words "where necessary" after the words "jointly and severally liable to the debtor". The court was invited to prefer the construction which preserved a wide meaning for the phrase "any like claim". The case of United Dominions Trust v Taylor had been correctly decided and should be followed.

 

Discussion

[52] We have reached the conclusion that the construction of section 75(1) argued for by the second respondents is the correct one. In reaching that conclusion, we proceed on the basis that we are dealing with a situation in which the appellant was entitled to rescind his contract of sale with the first respondents because the laptop did not have an inbuilt modem and that the appellant rescinded that contract of sale on 29 December 1998.

[53] The Sheriff dealt with the issue of whether the appellant was entitled to rescind his credit agreement with the second respondents in findings in fact 13 - 22, findings in fact and law 37 - 42, finding in law 42 and paragraphs 82 - 92 of his judgment. Put shortly, he held that by virtue of his finding that the first respondents had been in breach of the terms of the contract of sale, the provisions of section 75(1) of the 1974 Act entitled the appellant to rescind his credit agreement with the second respondents.

[54] We agree with counsel for the second respondents that the report in United Dominions Trust Ltd v Taylor discloses that the Sheriff Principal misunderstood the scope and statutory consequences of the term "linked transaction" (cf section 19(1)). We also agree that the Sheriff Principal erred when he took the view that the defender's contract of sale with the seller of the car was part of his contract of loan with the pursuers. In our opinion, that did not follow from a proper construction of section 12 of the 1974 Act. We agree that the contract of sale and contract of loan were separate agreements.

[55] In our opinion, such misunderstandings on the part of the Sheriff Principal undermine the reasoning on which his construction of section 75(1) was based. So also does the failure of the Sheriff Principal to deal, in those paragraphs of his opinion in which he sets out his reasons for his decision, with that part of section 75(1) which provides that the supplier and creditor shall be jointly and severally liable to the debtor in respect of like claims against them. In our opinion, it is difficult to envisage Parliament imposing, or indeed intending to impose, joint and several liability on both supplier and creditor in a situation in which the debtor had elected to seek rescission of his credit agreement with the creditor and to sue the creditor for his own acts and omissions. On the contrary, since the right to rescind a contract can only be exercised by one contracting party against the other party to the same contract, one would expect that there would be no joint and several liability relating to a declarator of the rescission of a contract, whether a contract of sale or a credit agreement.

[56] In our opinion, the parliamentary material to which we have referred is of limited assistance. It is of course correct that the general policy which lies behind the 1974 Act involves the protection of consumers. That is clear from the terms of the Crowther Report and the long title to the 1974 Act and those excerpts of the debates that were before us. However what those materials do not provide is any support for the contention that the words " a like claim" are ambiguous or obscure, or that they fall to be given a particular construction by the court, on account of the meaning placed on them by Government ministers during the legislation's passage through Parliament. On the contrary, what is of significance is that nowhere in the debates to which we have referred was any suggestion made that the words " a like claim" were intended to have any relevance to the validity of a debtor's credit agreement with his creditor or the acts or omissions of the creditor in relation to that contract. Moreover, whilst there was some debate about what might happen in the event a debtor wished to rescind his contract of sale and return the goods purchased to his supplier, there was no mention of such events giving rise to the rescission of the credit agreement, whether automatically or at the discretion of the debtor. On the contrary, whilst the parliamentary materials make frequent reference to the association between suppliers and financiers, who are willing to provide credit to those purchasing goods from suppliers, the recurrent theme is that the statutory provision which is now section 75(1) (and the terms of the amendments to it that were debated) were intended to ensure that when a debtor has a claim against his supplier he shall have the like claim, in sense of a similar claim, against the creditor, who has lent funds to finance the contract of sale, not a different or distinct claim against that creditor. In these circumstances we are not persuaded that there is any reason why section 75(1) should not be construed according to the intention expressed in the language used by Parliament in section 75(1).

[57] For these reasons, we have reached the conclusion that the words "a like claim" should be given their ordinary meaning in the context in which they are to be found. In our opinion that leads to the term being construed as entitling a debtor to pursue against his creditor claims he could have pursued against his supplier, in respect of the supplier's misrepresentation or breach of contract. The claims that the appellant has sought to pursue in the present action against the second respondents do not fall within that category.

[58] In these circumstances, we have reached the conclusion that the factual circumstances which entitled the appellant to rescind his contract of sale with the first respondents did not provide a factual basis which also enabled the appellant to invoke the provisions of section 75(1) and rescind his credit agreement with the second respondents. That is not to say that factual circumstances could never exist that would warrant a debtor seeking the reduction of both his contract of sale with his supplier and his credit agreement with his creditor. By way of example such circumstances might arise when misrepresentation on the part of the supplier, during antecedent negotiations of the contract of sale, on his own behalf, and as agent for the creditor (cf section 56(1) and (2)), was held to have induced both the contract of sale and the credit agreement. However in that situation the debtor would not require to rely on the provisions of section 75(1) in seeking rescission of his credit agreement with the creditor. In the present action, the sole basis on which the appellant has sought rescission of the credit agreement involves reliance on section 75(1). No case of misrepresentation on the part of the first respondents, or by an employee of the first respondents, as agent of the second respondents was advanced at proof or before us. On our construction of section 75(1) the case advanced by the appellant was not open to him. It follows, therefore, that the Sheriff erred in law holding that the appellant was entitled to decree of declarator in respect of the credit agreement between the appellant and the second respondent in terms of crave 1(ii).

[59] Having identified what we consider to be the correct construction of section 75(1) we are reassured by the fact that in a case such as the present a debtor who has validly rescinded his contract of sale with his supplier can take steps to recover what he has paid to his supplier. He can do so by suing his supplier or by virtue of the provisions of section 75(1) his creditor, or both of them. He can also seek to recover damages from his supplier and from his creditor, to compensate him for any loss he has already incurred, or is liable to incur, by reason of his obligations under the credit agreement to make payments to the creditor. We recognise that from a lay consumer's point of view such remedies to recover damages are not as obvious or as readily enforceable as a right to rescind the credit agreement itself. However, had Parliament intended that breach of the contract of sale should, of itself, entitle the consumer to rescind the credit agreement (or that rescission of the credit agreement would automatically occur if the contract of sale were rescinded), it would, in our view, have used different language than is to be found in section 75. The decision and reasoning of the Sheriff Principal in United Dominions Trust v Taylor must accordingly be disapproved.

 

Other rescission issues

[60] In light of our conclusion that the appellant was not entitled to rescind his credit agreement with the second respondents, the other two rescission issues that were focused cease to have any practical significance. For that reason we can deal with them briefly.

[61] Section 102 of the 1974 Act deems a supplier who has acted as agent for the creditor in antecedent negotiations (cf section 56) to be the agent for the creditor for the purposes of receiving any notice rescinding the credit agreement which is served by the debtor. In Section 189 "notice" is defined as meaning "notice in writing". That means that when a debtor gives notice to his creditor of rescission of his credit agreement, by intimating such notice to his supplier, as agent of his creditor, the notice requires to be in writing. On that basis, had the appellant been entitled to rescind his credit agreement with the second respondents, his letter of 8 March 1999 to the first respondents would have constituted such written notice. Moreover, there is nothing in the 1974 Act or in the common law of contract that required any notice of rescission to the second respondents to be in writing. In our opinion, had the appellant been entitled to rescind his credit agreement, the necessary notice of his having done so would have been given during the telephone conversation between the appellant and the second respondents, which took place before the appellant wrote the letter of 8 March 1999. That is the telephone conversation referred to in the revised finding in fact 16.

 

Delictual issues

[62] We now turn to the delictual issues that were raised in Chapter 2 of the grounds of appeal lodged by the second respondents in support of the cross appeal. As we have indicated, the appellant never made any repayments to the second respondents. Accordingly in July 1999, when the second respondents caused entries to be made in the registers of the two credit reference agencies, the appellant was in default of his credit agreement with the second respondents, unless he had by that date validly rescinded his contract of sale with the first respondents and his credit agreement with the second respondents.

[63] The Sheriff held the appellant validly rescinded his contract of sale with the first respondents on 29 December 1998 and his finding to that effect was not challenged before this court. However, for the reasons we have given, it was not open to the appellant to rescind the credit agreement, by invoking the provisions of section 75(1) of the 1974 Act. No other basis for rescinding the credit agreement has been advanced on behalf of the appellant. It follows, therefore, that throughout the period of time the entries posted by the second respondents remained on the registers of the credit reference agencies they were factually accurate, apart from the arithmetical error of referring to 1499 when it should have been 1449.

[64] The Sheriff dealt with the delictual issues which arose in this case in paras 93 - 121 of his judgment. Standing the conclusion we have reached on the rescission issues that also arose, it is unnecessary for us to deal with them in detail. Indeed it was recognised on behalf of the appellant that if we found against the appellant on the issue of whether he had been entitled to rescind his credit agreement by relying on the provisions of section 75(1), it would not open to him to successfully defend the award of damages that the sheriff had made in favour of the appellant.

[65] That concession was very properly made. The provisions of the 1974 Act admit the possibility of a creditor such as the second respondents supplying information relating to a debtor, such as the appellant, to a credit reference agency licensed under the Act. The credit agreement between the appellant and the second respondents in the present case explicitly provided that the appellant agreed that the second respondents could supply information relating to the credit agreement and to his conduct of the loan he received in terms of that agreement to credit reference agencies. The provisions of section 159 of the 1974 Act enabled the appellant to give notice of correction to credit reference agencies, which he did. In such circumstances, standing the appellant's conscious decision not to make any payments under the credit agreement to the second respondents and the conclusion we have reached on the issue of whether the appellant was entitled to rescind his credit agreement with the second respondents, by relying on the provisions of section 75(1), we consider that the second respondents were entitled to treat the appellant as being in default of the credit agreement. In these circumstances it follows that the Sheriff was not entitled to hold that the second respondents had made false representations relating to the appellant; that the second respondents had breached a duty of care they owed to him; and that the appellant was entitled to the award of damages he made.

[66] However, in deference to the very full submissions we received, we intend to comment briefly on the delictual issues that were raised. We do so on the basis that those submissions were, of necessity, presented on the assumption that the Sheriff had been correct in holding that before the notices relating to the appellant had been posted on registers of the credit reference agencies, the appellant had validly rescinded his credit agreement with the second respondents.

 

Submissions for second respondents

[67] On behalf of the second respondents, it was accepted that they had owed a duty of care to the appellant. That duty had been to exercise reasonable care not to make untrue statements about the appellant to credit reference agencies. However it was submitted that neither the scope nor the nature of that duty of care had been properly addressed by the appellant in his written pleadings and in evidence or by the Sheriff in his judgment. It had not been open to the appellant to argue that merely because he had suffered some kind of economic loss as a result of breach of duty on the part of the second respondents, all of the kinds of economic loss which he had sustained were recoverable. Whilst the scope of the duty might have covered damages for general loss of credit and additional interest incurred, after a lender had withdrawn or refused credit on account of their reliance on the entries in the registers of the credit reference agencies, some of the economic loss alleged to have been suffered by the appellant, in particular the loss relating to the property in Spain, had not been a foreseeable consequence of any error in the information the second respondents had provided to the credit reference agencies. The Sheriff had not heard any evidence as to any enquiries the second respondents had undertaken into the appellant's claim that he had been entitled to rescind and had rescinded his contract of sale with the first respondents. Nor had there been any evidence about the enquiries it would have been reasonable for a lender such as the second respondents to have undertaken, when faced with a situation such as had confronted the second respondents; what the outcome and consequence of such enquiries would have been; and whether such enquiries would have disclosed that the appellant had been entitled to rescind both his contract of sale with the first respondents and his credit agreement with the second respondents. Such evidence was essential before questions relating to the scope and nature of the duty of care owed by the second respondents could be addressed. It was also relevant to the question of whether any breach of duty on the part of the second respondents could be established.

[68] Particular reliance was placed on the speech of Lord Hoffman in South Australia Asset Management Corporation v York Montague Ltd (on appeal from Banque Bruxelles Lambert S.A. v Eagle Star Insurance Co Ltd) [1997] A.C. 191, at pp 211A-H, 213 C-D and 218 B-C, and to the judgment of the court delivered by Sir Anthony May P in Calvert v William Hill Credit Ltd [2009] 2 WLR 1065, at paras 45- 46. Reference was also made to McWilliams v Sir William Arrol & Co. 1962 SC (HL) 70; Davies v Taylor [1974] 1 A.C. 207; Spring v Guardian Assurance plc [1995] 2 A.C. 296; Aneco Reinsurance Underwriting Ltd v Johnson & Higgins [2002] 1 Lloyd's Rep. 157; Andrews v Barnett Waddingham [2006] PNLR 24; and Henderson v The Royal Bank of Scotland plc 2008 SCLR 823.

[69] Counsel for the second respondents also criticised the Sheriff's approach to the issues of causation and remoteness of damage that arose. It was argued that the Sheriff had erred in holding (a) that in 1999 the appellant had routinely made use of credit cards with zero per cent interest rates; (b) that breach of duty on the part of second respondents had caused the appellant to suffer loss by reason of the payment of credit card interest, which he would otherwise have avoided; (c) that, but for fault and negligence on the part of the second respondents, the appellant would have purchased a house in Spain during 2003; and (d) that any economic loss the appellant had suffered arising from his failure to purchase a house in Spain during 2003 had been established in evidence as having been caused by breach of duty on the part of the second respondents.

[70] It was argued that the appellant had not led any evidence which would have entitled the Sheriff to hold that the appellant had paid more credit card interest than he would otherwise have done had he been able to obtain zero per cent interest credit cards. Whilst there had been no dispute during the proof as to the amount of credit card interest the appellant had paid between January 1999 and January 2006, there had been no evidence before the Sheriff upon which he could have accurately determined the amounts of interest the appellant would have paid from month to month during that period, had he been able to obtain and make use of zero per cent interest credit cards. On the other hand the evidence had disclosed that the use of zero per cent interest credit cards attracts certain charges and the imposition of high rates of interest in particular circumstances and in respect of new transactions. In such circumstances, the Sheriff had erred in adopting the broad brush approach he did to the quantification of this head of loss (finding in fact 23 and paragraphs 98 - 101 of his judgment) and in holding that the second respondents had caused the appellant to sustain a loss of 6880 in respect of additional credit card interest. Reference was made to Simmons v British Steel plc 2004 SC (HL) 94

[71] It was also submitted that the Sheriff should not have held that the first re-mortgage advance of 30,000 from the Northern Rock, which the appellant arranged in 2001, had resulted from the appellant's need to pay interest that he could otherwise have avoided had zero per cent interest credit cards been available to him. The need to arrange that advance (and a subsequent re-mortgage advance of 25,000 in 2003) and the appellant's consequent inability to fund the 30% deposit required to purchase the property in Spain during 2003 had arisen on account of the appellant's level of expenditure, not on account of the alleged negligence of the second respondents. Accordingly any economic loss the appellant might have sustained on account of his not having purchased the property in Spain during 2003 had not been caused by any breach of duty on the part of the second respondents. Nor had it been foreseeable. For these reasons, and also on the ground of remoteness, it was not recoverable from the second respondents.

 


Submissions for appellant on delictual issues

[72] The submissions in response on behalf of the appellant proceeded on the basis that the second respondents accepted they had owed a duty of care to the appellant. That duty had been to take reasonable care to ensure the accuracy of any information relating to the appellant which was made available to credit reference agencies. It was agreed that assistance in determining issues relating to the scope and nature of the duty of care and the extent of liability for loss following upon any breach of the duty was to found in South Australia Asset Management Corporation v York Montague Ltd; Calvert v William Hill Credit Ltd; Aneco Reinsurance Underwriting Ltd v Johnson & Higgins; Andrews v Barnett Waddingham; and Simmons v British Steel plc.

[73] It was recognised that the duty of care only related to the recovery of loss that was reasonably foreseeable. However, it was argued that the terms of the letter of 22 July 1999, which the second defenders had sent to the appellant, demonstrated that they had foreseen that, if they made reports to credit reference agencies to the effect that the appellant was in default of his credit agreement with them, the appellant might have difficulty in the future in obtaining a mortgage or other credit. That was what had happened, after the second respondents had caused entries to be posted on the registers of the credit reference agencies. The commercial reality was that those entries had amounted to advice to prospective lenders not to lend to the appellant (cf findings in fact 24 and 25). In these circumstances the scope of the duty of care owed by the second respondents was such as to cover loss incurred by the appellant by reason of his being refused credit which he could otherwise have obtained and afforded.

[74] Turning to the issue of causation, it was submitted on behalf of the appellant that the entries posted on the registers of the credit card agencies had caused each element of the loss the appellant had suffered. But for breach of duty on the part of the second respondents, those losses would not have sustained. Not only were those losses reasonably foreseeable, they had occurred despite the appellant having posted notices of correction with the two credit card agencies and having repeatedly telephoned the second respondents asking them to remove the adverse notices (cf findings in fact 20 and 22). It was submitted that the Sheriff had not erred in the approach he had taken to assessing the quantum of the heads of loss the appellant had sustained in respect of general loss of credit and the additional payment of interest on account of zero rate interest credit cards not having been available to him. Nor had the Sheriff erred when dealing with the causation of those heads of loss. As far as the loss claimed in connection with the property in Spain was concerned, the Sheriff had been entitled to hold that, had the appellant had access to zero rate interest credit cards, he would by October 2003 have reduced his outstanding mortgage with Northern Rock over his house in Aberdeen to less than 4000. Had that been achieved, the appellant would have been able to raise sufficient funds to pay the 30% deposit that was required to purchase the property in Spain. On that approach the loss that had arisen on account of the property transaction not proceeding in 2003 had been caused by breach of duty on the part of the second respondents. Issues relating to the quantification of that particular head of loss fell to be addressed in relation to the appellant's own appeal.

 


Discussion of delictual issues

[75] There is force is the submissions advanced on behalf of the second respondents. In our opinion, defining the scope and nature of the duty of care owed by the second respondents to the appellant and addressing questions of foreseeability, causation and remoteness (and any link or overlap between them) involved a more carefully structured and detailed analysis of authority and the evidence than appears to have been presented to the Sheriff. We accept, as was submitted on behalf of both parties, that considerable assistance is to be found in the speeches of Lord Hoffmann in South Australia Asset Management v York Montague, Lord Millett in Aneco Reinsurance Underwriting Limited v Johnson & Higgins Limited and Lord Rodger of Earlsferry in Simmons v British Steel plc. It is, however, unnecessary for us to discuss those authorities in detail.

[76] Even if the Sheriff had been correct in holding that the appellant had effectively rescinded his credit agreement with the second respondents, in the absence of any averments or evidence as to the nature of the enquiries the second appellants could reasonably have been expected to carry out, and what the outcome of such enquiries would have been, it would not have been possible to have defined the scope of the duty of care owed to the appellant or to say that any acts or omissions on the part of the second respondents amounted to a breach of duty which caused the appellant to suffer loss.

[77] Turning to the question of causation, there is little more we need add. It was a matter of concession on the part of the second respondents that in the event that the second respondents were liable to pay damages to the appellant an award of general damages for loss of credit was recoverable and that a figure of 8000 was reasonable.

[78] As far as the award of compensation for loss arising from the payment of interest in connection with the appellant's use of his credit cards, we are persuaded that the second respondents' submissions are well founded. In our opinion, the evidence led on behalf of the appellant fell far short of establishing a number of facts which were essential before the Sheriff could have calculated what additional interest (if any) the appellant paid on account of his being unable to acquire zero rate interest credit cards. The only productions laid before us relevant to the detail of this head of loss were (a) a list on a month to month basis, covering the period between January 1999 and January 2006, of the appellant's outstanding credit card debt and payments of interest (production 5/7/3), and (b) copies of three letters the appellant received from credit card companies during 2003 and 2004 rejecting his applications for new zero rate interest credit cards (productions 5/2/7-9).

[79] The award the Sheriff made under this head of damage is discussed in paragraphs 98-101 of his judgement. It appears from what the Sheriff says that there were other productions available to him and that during submissions all parties may have proceeded on agreement that between mid -2001 and the end of 2005, the appellant paid interest to credit card companies amounting to 9926. However, on a consideration of the transcripts of evidence before us, we have reached the conclusion that the Sheriff did not hear evidence that entitled him to hold to what extent the appellant would have made use of zero rate interest credit cards between mid-2001 and 2005. Nor did the Sheriff appear to have had evidence before him to entitle him to hold (a) how much the appellant would have paid by way of transfer charges, incurred on transferring debit balances from existing credit cards to new zero rate interest credit cards, (b) how much the appellant would have paid by way of interest on new transactions incurred on new zero rate interest credit cards, (c) whether the appellant would have been able to avoid paying any additional charges and interest payable on such cards, in the event that the transferred debit balances were not settled before the expiry of the interest free period, and (d) if not, what such additional charges and interest payable by the appellant would have amounted to.

[80] In finding in fact 31, the Sheriff found that "(a)s a result of the non-availability to him of 0% credit cards the pursuer had funded a number of his purchases since 1999 by borrowing additional funds from Northern Rock". Having carefully considered the evidence given by the pursuer, we are not satisfied that it was open to the Sheriff to make such a finding and we have accordingly amended it. As to when the appellant would first have used a zero interest rate credit card, had one been available to him, part of the problem is that the evidence is entirely silent as to whether the appellant used such cards prior to January 1999 and as to when he first applied for one. Slightly surprisingly the appellant was not asked any questions about either of those matters.

[81] More importantly, perhaps, the amount of interest payable between mid-2001 and the end of 2005 would have been affected to a significant extent by the level of the appellant's expenditure over that period of time. Whilst the Sheriff discounted the additional interest claimed by 20% to take account of the interest on new purchases, not only was that adjustment carried out on a broad brush basis, it also fails to take any account of the fact that the level of new expenditure reduced the ability of the appellant to clear his credit card debt, which between mid-2001 and the end of 2005 had grown from a low point of 4117 to 37,744. In the absence of any detailed analysis comparing the appellant's level of expenditure during that period, with that during earlier periods, it was not open to the Sheriff to hold that additional interest calculated on the broad brush approach, which he discusses in paras 98 - 101 of his judgment, had been caused by any breach of duty on the part of the second respondents, as opposed to having been caused by the appellant's level of expenditure, which appears to have varied significantly from time to time, and by his regular practice of leaving unsettled the outstanding balances which appeared from month to month on his credit card statements.

[82] Turning to the loss claimed in respect of the house in Spain, the appellant's claim proceeds on the contention that he would have proceeded with the purchase in October 2003 had he been able to fund the deposit of 30%, which would have amounted to a figure in excess of 83,412. He argued that he had been unable to fund that deposit because of the non-availability of zero rate interest credit cards, which had led to his borrowing additional sums of 30,000 in June 2001 and 25,000 in April 2003 from the Northern Rock, secured over his house in Aberdeen. However, it is clear from the evidence before us that significant, albeit unspecified, parts of those additional borrowings had funded expenditure other than settling interest incurred in connection with credit cards. Furthermore the gross amount of the credit card interest paid between January 1999 and October 2003 was a figure less than 12,000. Here again, it appears to have been the general level of the appellant's expenditure linked to his decision not to become a Spanish tax resident, in which event a 95% mortgage would have been available to him, rather than any non-availability of zero rate interest credit cards, that led to his being unable to afford to proceed with the purchase a property in Spain during October 2003.

[83] In these circumstances we are satisfied that the Sheriff erred in holding that any fault on the part of the second respondents caused the appellant loss attributable to his having paid additional credit card interest amounting to 6880 or loss arising out of his failure to purchase a property in Spain during October 2003. In these circumstances it is unnecessary for us to address other issues relating to foreseeability that were raised in respect of these heads of loss.

 

Appeal by the appellant

[84] The submissions we received in respect of the appellant's ground of appeal were brief. On behalf of the appellant it was argued that the Sheriff had erred in assessing the damages the appellant had been awarded in respect of the property in Spain. In the course of assessing this head of loss, the Sheriff made a finding in fact as to the difference between what would have been the value of the property in Spain to the pursuer in 2006 and what would have been the total cost of buying the property in 2003/2004. He had then deducted from the resulting figure (a) the estimated costs of selling the property in 2006, in order to release the appellant's gain in the value of the property; (b) the interest charges the appellant would have paid between January 2006 and December 2006 in respect of the mortgage from a Spanish lender over the property; and (c) the interest charges the appellant would have incurred over the same period to Northern Rock and credit card companies or other unsecured creditors in order to fund the deposit payable in respect of the property (findings in fact 34 and 35)

[85] First, it was argued on behalf of the appellant that the Sheriff should have begun his assessment of this head of loss by calculating the difference between the cost of purchasing the property in October 2003 and the cost of purchasing it (as opposed to its value) in 2006. Although no authority was produced to support the proposition, the submission was that, if the costs of purchasing the property in 2003 were compared with its value in 2006, the appellant was bound to be under-compensated.

[86] Secondly, it was argued that because the appellant had wanted to purchase the property as a family home, the Sheriff had erred by deducting from the damages he had awarded the costs associated with a notional sale of the property in 2006. Finally it was argued, that the Sheriff had erred by failing to compensate the appellant for the rent he had required to pay for a house in Spain between January 2004 and February 2006, because the intended purchase of the property had not proceeded. In advancing that particular argument, it was conceded that the notional saving of interest that would have been payable by the appellant between 2003 and 2006, in respect of servicing the mortgage and the deposit over the Spanish property, had to be taken into account.

[87] We were invited to amend findings in fact 33 and 34 to reflect the first ground of appeal advanced on behalf of the appellant and finding in fact 35 to reflect the second and third lines of argument. In support of the various arguments, three schedules outlining how the appellant's damages should have been assessed were presented to the court. They had not been before the Sheriff.

[87] In response senior counsel for the second respondents argued that for the appellant to seek the difference between the costs of the Spanish property in 2003 and its value in 2006, together with the additional costs and outlays that would have been attributable to a purchase in 2006, which had never been incurred, was not an appropriate measure of loss. It was submitted that the Sheriff had not erred in deducting from the damages awarded in respect of the Spanish property the costs that would be incurred in realising the value of the property in 2006. Finally it was argued that any loss that might have been incurred by reason of the appellant paying rent for a house in Spain between 2004 and 2006 had never been the subject of averment in the written pleadings or raised in evidence or submission before the Sheriff. It was too late to raise it now.

Discussion

[88] We agree with the senior counsel for the second respondents that the appeal on behalf of the appellant should be refused. As we indicated in para [32], we have amended finding in fact 35. However, even it we had not been minded to do so, we would not have been prepared to amend findings in fact 33, 34 and 35 as proposed by the appellant. Having considered the evidence in the transcripts before us, in particular that of the appellant's evidence, and the submissions we received, we are not persuaded that the Sheriff erred in the approach he took to assessing the loss incurred by the appellant because he did not purchase a property in Spain in 2003.

 

Disposal

[89] In these circumstances we intend to refuse the appeal on behalf of the appellant; and to allow the cross-appeal on behalf of the second respondents. We will pronounce an interlocutor: -

(a) deleting findings in fact and law 42 and 43;

(b) deleting findings in law 45 and 46;

(c) amending findings in fact 16, 17, 18, 19, 21, 23, 26, 31, 35, and 36 (the foregoing alterations to the findings in fact made by the Sheriff being as specified in para [32] of this opinion and incorporated into, by way of deletions from and amendments in bold text to, the findings in fact in the appendix A to the interlocutor;

(d) sustaining the second plea in law for the second defenders and respondents;

(e) repelling the second, third and fourth pleas in law for the appellant; and

(f) assoilzing the second defenders and respondents from craves 1(ii) and 2 of the initial writ.

We will reserve to a further hearing all questions of expenses as between the appellant and the second respondents, as dealt with in the Sheriff's interlocutor of 10 April 2008 and arising out of this appeal.