ON APPEAL FROM THE HIGH COURT OF JUSTICE
BIRMINGHAM DISTRICT REGISTRY
HIS HONOUR JUDGE PURLE Q.C.
Strand, London, WC2A 2LL
B e f o r e :
COURT OF APPEAL CIVIL DIVISION
LORD JUSTICE DYSON
LORD JUSTICE LLOYD
| SOUTHERN PACIFIC MORTGAGE LTD
|- and -
|JAYNE ELIZABETH HEATH
Malcolm Waters Q.C. and Jonathan Hough (instructed by Glenisters) for the Respondent
Hearing date: 13 October 2009
Crown Copyright ©
Lord Justice Lloyd:
"(1) This section applies to an agreement (a 'multiple agreement') if its terms are such as
(a) to place a part of it within one category of agreement mentioned in this Act, and another part of it within a different category of agreement so mentioned, or within a category of agreement not so mentioned, or
(b) to place it, or a part of it, within two or more categories of agreement so mentioned.
(2) Where a part of an agreement falls within subsection (1), that part shall be treated for the purposes of this Act as a separate agreement.
(3) Where an agreement falls within subsection (1)(b), it shall be treated as an agreement in each of the categories in question, and this Act shall apply to it accordingly.
(4) Where under subsection (2) a part of a multiple agreement is to be treated as a separate agreement, the multiple agreement shall (with any necessary modifications) be construed accordingly; and any sum payable under the multiple agreement, if not apportioned by the parties, shall for the purposes of proceedings in any court relating to the multiple agreement be apportioned by the court as may be requisite."
The parties' submissions
The decided cases
"The difficulty I have with this argument is that it seems to sever the provisions that create the debt (hiring the car) from the provisions that allow credit for payment of the debt. Whatever a multiple agreement may be, one cannot divide up a contract in that way. The creation of the debt and the terms on which it is payable must form parts of the same agreement."
"The main purpose of section 18 is to prevent frustration of the Act's protection to borrowers by the artificial combination of two or more agreements in one so as to take the total credit negotiated above the limit qualifying for protection."
"Whatever the uncertainties as to the meanings of 'part' and 'category' of agreement under section 18, they do not require resolution in this case. My inclination, without formally deciding the matter, is that the word 'part' in this context includes, but is not restricted to, a facility that is different as to some of its terms from another facility granted under the same agreement or one that can stand on its own as a separate contract or bargain. However, I believe that it would accord with the ordinary and natural use of the word for it to have a broader application so as to include, as here, a separate facility provided with others under an agreement where, even if the facility as a contractual entitlement does not stand on its own, the debtor's use, or non-use, of it does not affect the contractual nature of the agreement as a whole, in particular, his entitlement to use those other facilities."
The academic debate
The statutory examples
Lord Justice Dyson
Lord Justice Waller
Facts. Under an unsecured agreement, A (Credit), an associate of the A Bank, issues to B (an individual) a credit-card for use in obtaining cash on credit from A (Credit), to be paid by branches of the A Bank (acting as agent of A (Credit)), or goods or cash from suppliers or banks who have agreed to honour credit-cards issued by A (Credit). The credit limit is £30.
Analysis. This is a credit-token agreement falling within section 14(1)(a) and (b). It is a regulated consumer credit agreement for running-account credit. Since the credit limit does not exceed £30, the agreement is a small agreement. So far as the agreement relates to goods it is a debtor-creditor-supplier agreement within section 12(b), since it provides restricted-use credit under section 11(1)(b). So far as it relates to cash it is a debtor-creditor agreement within section 13(c) and the credit it provides is unrestricted-use credit. This is therefore a multiple agreement. In that the whole agreement falls within several of the categories of agreement mentioned in this Act, it is, by section 18(3), to be treated as an agreement in each of those categories. So far as it is a debtor-creditor-supplier agreement providing restricted-use credit it is, by section 18(2), to be treated as a separate agreement; and similarly so far as it is a debtor-creditor agreement providing unrestricted-used credit. (See also Example 22.)
Facts. F (an individual) has had a current account with the G Bank for many years. Although usually in credit, the account has been allowed by the Bank to become overdrawn from time to time. The maximum such overdraft has been is about £1,000. No explicit agreement has ever been made about overdraft facilities. Now, with a credit balance of £500, F draws a cheque for £1,300.
Analysis. It might well be held that the agreement with F (express or implied) under which the Bank operate his account includes an implied term giving him the right to overdraft facilities up to say £1,000. If so, the agreement is a regulated consumer credit agreement for unrestricted-use, running-account credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a direction under section 74(3). It is also a multiple agreement, part of which (i.e. the part not dealing with the overdraft), as referred to in section 18(1)(a), falls within a category of agreement not mentioned in this Act. (Compare Example 17.)