Update | Consumer: impecunious claimants post-Jackson

One aspect of consumer law which is often overlooked is how impecunious litigants are treated. Two recent cases highlight the approach that the courts are likely to take in dealing with this. Importantly, they provide an insight into how two areas of litigation which seem to take up a significant amount of legal resources should be dealt with proportionately after 1 April 2013: buy-to-let mortgage repossessions and credit hire agreements in road traffic accidents.The currently unreported status of both cases risks hiding them from practitioners' attention. How far can litigants use ?their impecuniosity to help them with ?their cases?

Buy-to-let

Economic trends being what they are, boom periods tend to attract more consumers into the buy-to-let market usually on the assumption that they stand to make a considerable amount of money from renting out properties. We know that the banks have been all too willing to lend money to finance these and many analysts attribute the current downturn to toxic mortgages.

The resulting litigation can often be complex, not so much because of the underlying mortgages, but because the mortgagors raise a wide range of issues requiring a very thorough understanding of substantive, procedural and evidential law overlapping several practice areas. Individual litigants are understandably prepared to use every avenue open to them to win their cases, and have been known to interchange acting in person with seeking representation (for example before a key hearing). Getting it wrong can and does open up solicitors to lengthy and expensive professional negligence actions.

Jumani & Tariq v Mortgage Express & Walker Singleton [2013] EWHC 157 Ch is an excellent example of the issues this type of case can raise. A brief report can be found either on Lawtel (Doc ref: AC9301303) or Westlaw. The trial adjournment issue has been to the Court of Appeal last year [2012] EWCA Civ 1455 (Westlaw ref: 2012 WL 3062450) and there was a concurrent (but not consolidated) case (Short title 'The Mortgage Express Claim' (Case No 2MA30124)) in which repossession of the various properties were sought.

The relevance is that the 2013 judgment decides issues arising only in the separate mortgage repossession proceedings. To understand why, it is necessary to also understand what had gone on before ?this hearing.

At the heart of these cases were two portfolios of around 50 buy-to-let properties. Mr Jumani had obtained mortgages from Mortgage Express (owned by Bradford & Bingley which is still in public ownership after the banking crash). When he reached the limit of the number of properties Mortgage Express would allow him to buy, he persuaded his friend Mr Tariq to take out a further batch of mortgages. These seem to have been in Mr Tariq's name but Mr Jumani stood to become their legal owner of most with Mr Tariq eventually owning four or five if things went well. Things did not, and the portfolios fell into arrears. Walker Singleton was appointed as LPA Receivers and we come to the central issue in the case.

The claimants alleged that the terms of the mortgage agreements were changed by virtue of an oral contract made during a meeting between the receivers and an account manager from Mortgage Express. They alleged that they had agreed to allow the claimants to take back those properties for which they had cleared the arrears. However, when they started to clear them, they were advised that all of the properties in the portfolios had to be in credit.

Throughout this period, the claimants had concerns that the receivers were not maintaining the properties to a standard which would allow them to be rented. Without this, the necessary rents could not be obtained and so there was little prospect of all the properties in the portfolios having their arrears cleared. The purpose of the meeting had therefore been to resolve this issue to everyone's satisfaction.

Judging from the case reports, the claimant's had initially received legal advice that they ought to sue in negligence for the financial losses being caused by the failure to maintain. The evidence for the mortgage agreements was clear but, the evidence of what went on in the key meeting was not. It amounted to differing witness accounts, handwritten notes on the part of the lay claimants and typewritten notes and generic documents on the part of the defendants.

Ultimately, Mr Jumani was found to be an honest-but-mistaken witness, Mr Tariq to be seemingly less so and the defendants won. The claimants undoubtedly faced an uphill battle in proving that the terms of the mortgages had been changed by a single meeting and it is generally true that claims of this nature require very good supporting evidence which often is not available through nobody's fault.

The procedural imbroglio

Proceedings in the main action were started in May 2011 for around £250,000. The defendants denied that any oral agreement or contract had ever been made. This was ordered to be tried as a preliminary issue on 29 November 2011 with a trial listing of 6 August 2012. The claimants application for an injunction preventing the defendants interfering with the properties was rejected on the basis that damages were an adequate remedy. Permission was granted to amend the particulars of claim regarding the case on the oral contract.

Delays occurred in serving documentary evidence and the defendants applied to vacate the trial date on 10 July 2012 as the witness statements (due on 24 February 2012) had not been finalised because disclosure had not occurred. An earlier trial date of 3 April 2012 had already been vacated by consent on 27 March 2012 and the claimants had been ordered on 13 March 2012 to provide disclosure or face being struck out. Disclosure occurred on 12 or 13 June 2013 but inspection did not. It then also transpired that Mortgage Express's key witness was unavailable for trial. The application to vacate on 26 July 2012 was opposed by the claimants and the judge rejected it.

This went before the Court of Appeal urgently on 2 August 2012 and Laws LJ (giving the leading judgement) allowed the appeal said: "Both parties are at fault here, whether by failure to observe interlocutory court orders or by taking points and making applications later than they should have done… Without exonerating the defendants from some blame in the procedural imbroglio which this case represents… it is impossible to say that a fair trial will take place next Monday."

In a nutshell, the issue of whether there was a binding oral contract could not be fairly tried if the people at the meeting had not been given sufficient time to consider ?the evidence.

On 21 December 2012, permission was granted to re-amend the Particulars of Claim (again covering the pleading of the case for there being an oral contract). The claimants were ordered to pay costs by 4 January 2013. This was not done and, on 4 March 2013, the defendants' application to make permission to re-amend conditional on payment of these costs was rejected. However, the time for payment was extended to 4 March 2013. Also on 4 March 2013, Mr Jumani was partly successful in an appeal in the Mortgage Express claim and allowed to amend his defence and counterclaim to a summary judgment application to plead that it was an implied term of the oral contract that repossession would not occur if a property was brought out of arrears. He was also alleging that the mortgages were unfair under the Consumer Credit Act 1974, ?section 104A.

The trial of the preliminary issues (i.e. was there a binding oral contract and did it include an implied term) started on 11 March 2013 and the costs had still not been paid due to the claimants' impecuniosity. On the first day, a further application was made by the defendants. This time that the trial should proceed on the basis of the amended particulars of claim only (which set out the case for the oral contract less favourably). The trial judge accepted that CPR 1998 3.8 (relief from sanctions) did not apply to a situation where a party has failed to meet a condition which needed to be satisfied before permission to re-amend was granted (as opposed to failing to comply with a court order). However, as the time for payment (4pm) had not yet expired, the trial judge left his decision to the end of the trial. Ultimately, his decision that there was no binding oral contract was based upon the evidence he heard rather than the way in which the case had been pleaded so the point was somewhat moot.

The fact that no oral contract existed completely undermined the claimants' cases in both actions. They now had no claim in the main action and no defence to the separate Mortgage Express claim. The mortgagee and receivers applied for an order that the judgement they had in the Mortgage Express claim stood.

Usually, one must consolidate actions before doing so. However, the Chancery Division took the view that the April amendments to CPR 1998 3.1 required them to intervene. It is disproportionate for the court not to grasp the nettle on relation to the other actions given that there was now a lack of defences.

There may have been an element of judicial fatigue here given what had ?gone before. However, the specific approach taken by Mr Cawson QC is to use the ?new Rule 3.1 to justify using the court's ?case management powers to cut through ?the procedural red tape. Had he not done ?so, additional applications would undoubtedly been made in the Mortgage Express claim thus extending the life of this litigation unnecessarily.

Reasonable?

In Opoku v Tintas (2013) CA (Civ Div) the court was faced with an interesting issue in respect of how much an impecunious claimant can claim in respect of hiring a replacement vehicle and the storage costs of his damaged vehicle while it is repaired. Claimants do not have to repay these charges, the service is offered to them to assist while their cars are repaired and the costs reclaimed as part of the litigation.

In this rear-end shunt case, however, the repair costs were estimated as being £3,400 plus VAT and the defendant's insurer had paid this amount early on in the case. Mr Opoku, however, kept his car in storage and continued to hire a replacement for just under two years. He claimed £149,000 to cover these costs. The trial judge found that he had failed to mitigate his loss and Mr Opoku appealed on the basis that that ?was inconsistent with his finding that he ?was impecunious.

The Court of Appeal reiterated that the courts need to exercise particular control over these agreements. There was no inconsistency and the judge was entitled to make his finding in the evidence he had heard. On this evidence, there had come a point where it stopped being reasonable for Mr Opoku to have his car repaired. He could have reasonably funded the repairs by savings and credit cards. The costs of not doing so had become disproportionate.

From a personal injury practitioner's perspective, it is interesting that Mr Opoku was still awarded £63,000. This indicates ?that the judge did not find it was unreasonable for him not to repair his car as soon as the costs exceeded the hire/storage charges. Proportionality is still a question of fact. From a consumer's point of view, it is interesting because evidence of the claimant's expenditure on matters unrelated to the litigated issues are also relevant.

Credit cards may well be being used ?to fund other expenditure and it seems ?that the courts are prepared to form a judgment on whether individual consumer's choices were reasonable if they claim to ?be impecunious.