Court of Appeal provide welcome relief for Finance Companies
During these challenging economic times finance companies are striving more than ever to maximise recoveries. Whilst the focus will quite rightly be on taking swift and decisive action on recent terminations, finance companies should not under estimate the importance of reviewing their old debt cases. These cases may have previously been written off as non recoverable because of a debtor's poor financial circumstances or the finance company's inability to locate the debtor. Renewed focus on such cases could provide a welcome cash injection.
The Court of Appeal has recently provided much needed clarification on when the limitation period commences in debt finance cases. The decision in BMW Financial Services (GB) Limited v Hart (2012) gives finance companies clear direction as to when the limitation clock starts ticking.
Mr Hart entered into a hire purchase agreement in March 1999. He defaulted on the monthly instalments so the agreement was terminated in August 1999. Mr Hart then left the UK without settling his outstanding liability under the agreement and could not be traced. In August 2005 protective proceedings were issued against Mr Hart and Default Judgment was obtained. When Mr Hart returned to the UK in 2011 he became aware of the Judgment against him and made an application to set aside.
In Chester County Court Mr Hart was successful in his application, arguing that the claim had been issued beyond limitation. The Judge, applying the case of Reeves v Butcher  2 Q.B. 509, held that the limitation period commenced from the date of breach i.e. July 1999 when Mr Hart had failed to pay the monthly instalments. The Judge concluded therefore that the claim had indeed been issued out of time. BMW Financial Services appealed this Judgment and the issue was deemed of such significance that they were granted permission to leapfrog straight to the Court of Appeal. On appeal it was held that limitation commenced when the termination notice had been served or the debtor's repudiation had been accepted. It was concluded that it was not until this point that BMW Financial Services was entitled to issue a claim for the full outstanding liability under the agreement because until then it had not actually fallen due.
This Judgment has a significant impact on the whole finance industry. It has provided a clear point in time from which the limitation period runs. The decision that limitation commences from the date of termination rather than the date of breach, essentially extends the time within which a claim can be brought against a debtor. Hence cases which previously may have been statute barred can now properly be pursued.
In light of this welcome clarification by the Court of Appeal, now is the ideal time for finance companies to review their old debt to see if a recovery can be made.
Katherine Clark is a member of the Defended and Complex Asset Recovery Team at Ford & Warren solicitors. She can be contacted by email at firstname.lastname@example.org or on 0113 243 6601.