The importance of record keeping when suing under regulated agreements

Martin Ward
(left) and
Ollie Grant;
Eversheds Sutherland

• Mr Goodinson entered into a regulated agreement with MBNA (the 'agreement');
• Mr Goodinson did not pay the sums due under the agreement as and when they fell due;
• MBNA served Mr Goodinson with a default notice (the 'default notice');
• MBNA assigned its rights to the debt to PRA, and
• PRA, as assignee, sued Mr Goodinson for the sums due under the regulated agreement in the sum of around £18,000 plus interest.

PRA exhibited to its claim a copy of the default notice on MBNA’s headed paper.

Mr Goodinson defended PRA’s claim on various grounds, including that the default notice had never been served on him by MBNA in accordance with the CCA and the default notice appended to PRA’s claim was non-compliant with s88 of the CCA. On that basis, Mr Goodinson said the debt was unenforceable.

PRA stated that the Court should presume that the notice, having been produced with its claim, had been sent and received by Mr Goodinson.

When PRA filed its witness statement in support of its claim, it explained that the default notice which had been exhibited to its claim was a reprint of the document stored electronically on MBNA’s system.

There were therefore two issues for the Court to decide:

1. Did MBNA produce a Default Notice which complied with the CCA?
2. Was the Default Notice served on Mr Goodinson?

During the trial, despite there being minor errors in the default notice, specifically incorrect numbering of clauses and inaccurate arrears (the arrears position was later confirmed to be correct), the Court determined that the default notice was compliant. On service, the Court was satisfied that the default notice, despite being a reprint, was created and sent in accordance with the log entries on MBNA’s system on 3 December 2012.

Mr Goodinson was given permission to appeal on the following grounds: a) that the Court was wrong to infer that the Default Notice had been created and sent on 3 December 2012 and b) that it was compliant with statute. The appeal was dismissed on the basis that a) it was open to a Judge to draw an inference from MBNA’s system notes that the default notice was created and sent on 3 December 2012 and b) misidentifying the clauses within the agreement in the default notice was not fatal and did not invalidate the default notice.

Mr Goodinson made a further appeal to the Court of Appeal on the same grounds. Mr Goodinson argued that it was not enough for PRA to rely on a reprinted document and historic log entries when PRA should have provided a copy of the actual default notice allegedly sent to him, rather than a reconstituted document. The Court rejected this submission on the basis that PRA had confirmed that it did not have a copy of the original Default Notice and Mr Goodinson had previously relied on MBNA’s log entries to argue that the default notice did not exist.

The Court of Appeal said that PRA did not have to produce the original default notice to evidence compliance with s87 and s88 of the CCA. It said that secondary evidence may be admitted and relied on, but the weight given to that evidence will be dependent on the circumstances of the case.

The Court of Appeal ultimately found that the Court’s original decision was reasoned and correct, dismissing Mr Goodinson’s appeal. Mr Goodinson has now applied for permission to appeal to the Supreme Court.

This is a welcomed judgment for lenders. While in an ideal world, the original default notice would be available, the Court of Appeal has found that secondary evidence may be relied on to evidence the contents and service of a default notice.

As a matter of good practice, lenders should properly document on their systems when a document was created and sent. It should also record whether a document is an original, a copy of an original or a reconstituted copy. In the event of a dispute, this will allow firms to provide information to the Court about the document in question and its origins.

Documents should also be stored on provider’s systems in a consistent fashion, with the data documenting how and when that document was created and then sent being clear.

Firms would be well advised to ensure that their staff are provided with effective training so that they understand how documents should be stored and what the corresponding internal system data shows about a document’s creation.

Should it be necessary for this information to later be relied on in Court proceedings, it would be good practice for providers to file witness evidence clearly setting out what its internal systems show about the origins of any legally significant documents.