Secondary evidence can be sufficient when assessing if a compliant default notice has been created and sent to the debtor.
Summary
A creditor can establish compliance with statutory requirements to send notices by producing internal system logs which show coded entries referring to the issue of such notices, along with a reconstituted version of what notices would have been issued at the time.
Background
Goodinson (G) entered into a Consumer Credit Act (CCA) regulated credit agreement for a credit card with MBNA International Bank Ltd (MBNA). They failed to pay the monthly instalments and in due course MBNA terminated the agreement. MBNA’s rights under the agreement were assigned to PRA Group (UK) Ltd (PRA) who issued a claim against G for £18,415.66.
G defended the claim on the basis that they had not received a default notice pursuant to s. 87(1) of the Consumer Credit Act 1974 and, therefore, MBNA could not terminate the agreement or demand payment.
PRA provided a reconstituted copy of a default notice, as evidence of what would have been issued to G. G argued that this was not sufficient to prove that the notice was sent. They also claimed that the reconstituted notice was not compliant. They therefore continued to maintain that PRA could not enforce the agreement.
The High Court decided in favour of PRA on both points. Firstly, any issues with the content of the notice were ‘de minimis’ (too small to be meaningful) and therefore the default notice was valid. Secondly, the court looked at additional evidence taken from MBNA’s internal systems to assess whether a default notice had been sent to G. This evidence was a copy of an 'archived comment log' which included coded entries referring to the account balance, the amount of arrears and notices sent to G.
The court inferred that an entry which included the code 'NOD' referred to a ‘Notice of Default’ and that the code 'SD 0312' referred to a ‘Sent Date’ of 3 December 2012. It decided that, on the balance of probabilities, the reconstituted default notice presented to the court by PRA had been created on 3 December 2012 and sent to G.
G was given permission to appeal against the second finding. G argued that the copy of the system log was simply “an unexplained record, which states… letters and numbers” and that “as a matter of principle” the court was not permitted to infer compliance with the legislation from such a document.
The court's decision
The question for the Court of Appeal was whether it was possible for a creditor to establish compliance with statutory requirements to send notices by producing internal system logs showing coded entries, such as those provided in this case.
In the judgment, Judge Warby commented: “It cannot, in my opinion, be laid down as a rule of law or practice that the creditor under a regulated agreement which bears the burden of proving, on the balance of probabilities, the service and expiry of a notice which complies with ss 87 and 88 of the CCA can only achieve this by production of the original notice.”
In the court’s opinion, if G’s defence succeeded, it would mean that a debtor could defend any case where a creditor could not produce the original notice, even where there was compelling evidence that a valid notice had been created and sent to the debtor: “The debtor would escape in every case where the original was not produced, however good the explanation for failure to produce it, and however compelling the secondary evidence.”
Judge Warby provided several examples of how this could be unjust to the creditor, asking:
“What if it is proved beyond doubt that the server holding the original digital document was destroyed by fire, but it happens that secondary evidence can be produced in the form of photographs of a hard copy document put together in impeccable form, taken before and during its delivery to the debtor?”
Although PRA could only provide a reconstituted copy of the default notice, the court held that entries on their internal system logs were enough evidence to confirm that a compliant notice had been sent, the date it was sent and when it expired. Therefore, the court decided that, on the balance of probabilities, a compliant default notice had been served.
Comments
The court’s findings are important when considering whether a creditor is permitted to enforce an agreement and for determining the date that the cause of action accrued in limitation cases.
In enforceability cases, where a creditor cannot produce a copy of a notice, they will be able to rely on records in their internal systems, as long as this provides sufficient evidence - on the balance of probabilities – that the notice was sent to the client. The argument that creditors could go back and falsify their records to make up for earlier omissions was dismissed as ‘improbable’.
However, this judgment could also work in favour of clients who are looking to prove when the limitation period started to run. In the case of Doyle v PRA Group (UK) Ltd (2019) EWCA Civ 12, the Court of Appeal decided that, in relation to claims for debts due under a credit card agreement, the limitation period starts to run after the expiry of a default notice served on the borrower pursuant to s.87 of the CCA 1974.
Usually, in order to establish the date that a debt became statute barred, ideally a copy of the default notice is necessary, or failing that perhaps a letter referring to the date of issue of a default notice. However, this Goodinson case suggests that a client would be able to rely on other evidence that a notice was issued, such as information from creditor’s internal systems, even where they cannot provide a copy themselves.