Debt purchasers will have breathed a sigh of relief after the judgment in Jones v Link Financial Limited which confirmed their right as a “creditor” to take recovery action on a purchased account which was “regulated” by the Consumer Credit Act 1974 (the “CCA”). To get the ball rolling and actually start the account rehabilitation/collection processes, a Notice of Assignment of the debt has to be given to the account holder.
In some fields (eg Landlord & Tenant Law) what constitutes a “proper” notice has kept Courts and lawyers busy for decades. Debt purchasers will want to avoid being side tracked by unwelcome litigation.
Although most major lenders have for years sold a substantial portfolio of accounts, only brief details as to what constitutes a Notice of Assignment are set out in Section 136 of the Law of Property Act 1925. Reflecting the language in use at that time the section states “Any absolute assignment by writing under the hand of the assignor ...... of any debt ...... of which express notice in writing has been given to the debtor ...... is effectual in law ...... to pass and transfer from the date of such notice- a) the legal right to such debt….”. For CCA regulated accounts (which are not secured) the much more recent section 82A obliges the assignee “to arrange” for the Notice to be served (this can be done by either party and who does this is usually set out in the debt purchase agreement) but does not expand on what information is needed nor provide a specific sanction for non-compliance.
Lack of detail can usually provide fertile grounds for litigation. In 1956 the Court of Appeal decided that a Notice which incorrectly stated the date of the assignment was defective. If that decision remained good law, it would cause consternation by allowing a relatively minor error (which would not cause any prejudice to the account holder) to slow the recovery process.
Fortunately help was provided by the later Court of Appeal decision of Van Lynn Developments Limited v Pelias Construction  1QB607 which effectively ruled that a Notice of Assignment did not need to specify the date of the assignment itself. In an environment governed by mandatory prescribed forms and notices, the principle that difficulties can be avoided by omitting information will be well received. Even better, from a debt purchasers’ point of view, was the ruling that an error in the Notice (wrongly advising that an earlier Notice of Assignment had been given) was not fatal. The statement by the Court “...... and that its validity cannot be destroyed by the inaccurate statement in the second sentence of that paragraph” perhaps indicated a willingness to then adopt a “de minimis” principle which creditors no doubt wish could have been subsequently more broadly applied by the courts on issues regarding document compliance.
However, creditors/debt purchasers should not compromise on accuracy. That this remains a live issue is evidenced by the first instance decision in HFO Capital Limited v Burney where District Judge Hill ruled that a Notice of Assignment was defective. The “Van Lynn Developments Limited” case was not referred to in the judgment itself, and in view of concerns/rulings expressed by the court regarding other documents, creditors will hope (and can argue) the decision is to be confined to its own facts - and in any event it is always open for a creditor to argue that there has been an equitable assignment of the debt. Adverse first instance decisions tend to receive a lot of publicity on websites seeking to challenge liabilities arising out of CCA regulated agreements. It is important therefore that creditors ensure that the relevant appellate authorities are brought to the attention of judges as only these have any real value in terms of judicial precedent and are binding. This contrasts with first instance decisions which are generally a reflection of the available evidence which a creditor has been able to produce for a particular account.
For further information please contact Nigel Coe (Managing Director) or Jeremy Bouchier (Solicitor & Chief Legal Officer).