Cooper v The Freedom Travel Group and Bank of Scotland Plc (trading as Halifax) [2022] EWCA Civ 1557: Liability under s75 Consumer Credit Act 1974 does not extend to the beneficiaries of a purchase made by a debtor
On 25 November 2022, the Court of Appeal handed down judgment in Cooper v The Freedom Travel Group and Bank of Scotland Plc (trading as Halifax). The decision is significant. This note provides an overview and explains why.
The Court's judgment can be accessed here.
Background
In 2014, the Appellant’s husband Mr Cooper used a credit card issued by the Respondent (Bank of Scotland Plc) to pay the deposit for a package holiday to Greece for himself and his wife Mrs Cooper. Whilst on holiday, the Appellant fell and suffered a fractured leg. On return to the UK, she brought a claim for personal injury against The Freedom Travel Group (“Freedom Travel”) under the Package Travel, Package Holidays and Package Tours Regulations 1992 (the “Regulations”).
The Appellant accepted an offer from Freedom Travel (a subsidiary of Thomas Cook Ltd) to compromise her claim, but before the quantum only trial, Thomas Cook and Freedom Travel entered liquidation. The Appellant then applied under CPR19.5 to add the Respondent to the proceedings to pursue a claim against it for breach of contract under s75 of the Consumer Credit Act 1974 (the “Act”).
The Appeal concerned whether the Respondent was liable to the Appellant under s75.
The Law
The Appellant had a cause of action against Freedom Travel because she was a consumer for the sake of the applicable regulation.
Regulation 15(2) provides:
The other party to the contract is liable to the consumer for any damage caused to him by the failure to perform the contract or the improper performance of the contract.
s75 of the Act concerns creditor liability for breaches by a supplier. s75(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.
[emphasis added]
Debtor is defined within s189 of the Act:
“debtor” means [(except in relation to green deal plans: see instead section 189B(3))] the individual receiving credit under a consumer credit agreement or the person to whom his rights and duties under the agreement have passed by assignment or operation of law, and in relation to a prospective consumer credit agreement includes the prospective debtor;
[emphasis added]
Findings
In the instant case at [36] Nicola Davies LJ found that:
“The respondent agreed to defer Mr Cooper’s obligations to repay the respondent for goods and services paid for using his credit card…The appellant was not a party to the Credit Agreement.”
Accordingly, Mrs Cooper did not come within the s189 definition, and she had no claim against the respondent under s75.
Moreover, Mrs Cooper’s claim under the Regulations was not a claim for breach of contract but rather a statutory claim by a non-contracting party. Accordingly, the appeal was dismissed.
Why is the decision significant?
In arriving at the decision, the Court of Appeal emphasised at [28] that the concept underlying the Act was the provision of a basic framework of regulation to cover all types of credit transactions with, in addition, specific provisions relating to particular forms of transactions. It replaced fragmented legislation with a unified, comprehensive and regulated code.
S189 includes specific definitions which are crucial to an understanding of the Act [30].
‘Debtor’ is expressly defined within s189 [31]. The definition is narrow [34], plain and unambiguous [38]. It confines the category to an individual who is a party to a consumer credit agreement [32].
Reference was made at [33] to Dimond v Lovell [2000] QB 216 which approved the ingredients of credit, namely:
“debt is deferred, and credit is extended, whenever the contract provides for the debtor to pay, or gives him the option to pay, later than the time at which payment would otherwise be earned under the express or implied terms of the contract.”
[emphasis added]
‘Credit’ is not simply having the benefit of the funds. It is having the contractual right to defer repayment of the debt. An individual cannot have the contractual right to defer payment of a debt if they are not a party to the agreement.
Finally, the ‘creditor’ should know with certainty the identity of the ‘debtor’ in the event of enforcement proceedings [37].