COST BITES 72 : COSTS BETWEEN CREDITOR AND SUPPLIER UNDER THE CONSUMER CREDIT ACT: CREDITOR’S ARGUMENT HITS A (BLACKPOOL) ROCK

March 17, 2023 · by · in Costs

Barrister Henry King has  kindly sent me a copy of the judgment in Pennington -v- Creation Financial Services Ltd, a decision of District Judge Woosnam in the County Court at Blackpool, a copy of which is available here Pennington v Creation Financial Services Ltd & Ors – Approved Judgment – 20.02.2023 V1. It deals with issues relating to costs between supplier and creditor under the Consumer Credit Act.  In particular the circumstances in which a creditor can recover its costs from a supplier under s.75(2) of the Act.

 

THE CASE

The claimant sued the defendant credit card company, alleging the supply of defective goods.  The credit card company (“the creditor”) joined the Part 20 defendant (“the supplier”) into the action.   The matter was allocated to the small claims track and was later withdrawn by the claimant, with no order for costs to be paid by the claimant.  The creditor then sought to recover its costs of defending the action from the supplier, relying on s.75(2) of the Consumer Credit Act.  That application was dismissed.

 

HENRY’S SUMMARY

  • The Claimant was the debtor to a debtor-creditor-supplier relationship for the purposes of s.12 Consumer Credit Act 1974.
  • Following allegations of a supply of defective goods, the Claimant sued the creditor under s.75(1) Consumer Credit Act 1974.
  • The Creditor successfully applied to join the Supplier. The matter was allocated to the small claims track.
  • At a dispute resolution hearing, the claim was dismissed upon withdrawal by the Claimant debtor.
  • The Creditor applied for its costs of defending the Claimant’s action to be paid by the supplier pursuant to s.75(2) Consumer Credit Act 1974: “… the creditor shall be entitled to be indemnified by the supplier for loss suffered by the creditor in satisfying his liability under subsection (1), including costs reasonably incurred by him in defending proceedings instituted by the debtor.”
  • The Creditor argued that pursuant to the case of Parker v Blackhorse (2011) unreported at paragraph 26 that satisfying a liability under s.75(2) CCA 1974 included exposure to a debtor’s claim:

“26. I think we are in danger of playing with words. I consider that “liability” (to the debtor) in this context refers to exposure to a claim, not to the claim actually being proved. Or as the Defendant puts it rather better at paragraph 14 of its skeleton, “liability” refers to the “creditor’s inclusion as a party to the action”. That must be right. Otherwise, as the Defendant points out, we would have the absurdity that only a creditor who was unsuccessful would be entitled to claim his costs back from the supplier.”

  • The Creditor further relied on HFC Bank v JMC Holidays and Graham v Sands Martin.
  • The supplier relied on the definition of liability in Mouchel v Van Ord [2011] EWHC 1516 TCC to argue that if there was no liability, no liability for costs arose.
  • The Regional Costs Judge for Blackpool, DJ Woosnam roundly rejected the Creditor’s contentions and (in essence) held that Parker v Blackhorse was wrongly decided.
  • The key paragraphs are paragraphs 8-9 (which, interestingly, go the exact opposite way to the way in which the judge went in Parker v Blackhorse)

The judge did not accept the creditor’s argument that it had an entitlement to recover its costs in these circumstances.

“In fact the other point that Mr King is complaining of is that if the Creditor were
entitled to recover his costs from the supplier in the circumstances such as this,
when there was no liability to the debtor, when the debtor’s case had not
succeeded against the Creditor, then it seems an absurd situation in that whether
or not the debtor was successful it would still mean that the Creditor would be
able to recover their own costs of defending the unsuccessful claim against him
by the Debtor, from the Supplier. In turn although the Supplier has not been
found liable to anybody in this case he would then finish up paying a party’s
(the Creditor’s) costs.
That seems absurd and unfair. Particularly so when all the parties agreed that
the debtor, in having her case dismissed, would not be liable to pay any costs so
no order for costs in the case. So, that seems there would be, in my view, an
absurd result if that is how this section were to be interpreted and therefore there
is no liability under sub-section (1) and therefore sub-section (2) is not triggered
to allow the costs to be recovered off the Supplier. Parliament cannot have
intended that, rather than intending the Creditor to be able to recover from the
Supplier, the costs of defending a claim by the debtor, if the debtor was
successful in that claim.”
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