Consumer Credit Act: An important decision for suppliers of goods on credit
Mark Hambling, Director at Rogers & Norton, recently represented Pentagon Ltd, a subsidiary of the Marshall Motor Group Ltd in an important case considering costs liabilities on suppliers under Section 75 claims under the Consumer Credit Act 1974. As a result Mark and Counsel Mr Henry King of 12 King’s Bench Walk‘s specialist cost team have secured much needed clarification for many suppliers of goods on credit.
Pennington v Creation Financial Services v Pentagon Limited
Mrs Pennington (the claimant) purchased a vehicle from Pentagon Ltd which she was unhappy with and rather than pursuing the supplier she decided to pursue her rights under s.75 (1) of the Consumer Credit Act and pursued the Defendant credit card company, Creation Financial Services Ltd, for her remedy, alleging the car was defective.
The matter was allocated to the small claims court and Mrs Pennington’s claim was later withdrawn by her, by consent, with no order for costs in any parties favour. Notwithstanding the claim concluding, Creation pursued from Pentagon an indemnity for all their costs of defending the claim, relying on Section s.75 (2) of the Consumer Credit Act, even though the claim was unsuccessful, Creation had no liability to Mrs Pennington and the claim was allocated to the small claims track, where costs are usually restricted to fixed costs. Creation relied on an old case authority of Parker v Blackhorse 2011.
In Parker, the Claimant purchased a faulty motorcycle and her claim failed against the finance company but the District Judge held that notwithstanding that the finance company had no liability whatsoever to the customer, the supplier was still liable for the costs of the creditor of defending a claim, in which neither the finance company or the supplier of the motorcycle had any liability.
Mark, Counsel and his client felt that decision had to be wrong and needed to be challenged to avoid more claims by creditors for their significant costs against innocent suppliers, where the claim has failed. We argued that section 75 (2) of the Consumer Credit Act 1974 was not intended to create a situation where a supplier indemnifying a creditor can be required to indemnify anything more than the claim, and any costs of the claim, and certainly not the costs for defending an unsuccessful claim. It’s relevant to point out that in Pennington, a case on the small claims track, Creation were seeking over £14,000 in costs from our client, a sum vastly ahead of the fixed costs on the small claims track.
The decision
The court hearing took place on 20th February 2023 in Blackpool County Court before District Judge Woosnam, the Regional Costs Judge. Having heard submissions from Creation and Pentagon, District Judge Woosnam, held that our submissions were preferred, in effect that the Parker case was wrongly decided and referred to the more recent case of Mouchel Ltd v Van Oord (UK) Ltd (2) [2011] EWHC 1516 (TCC), a case which considered the issues under Civil Liability Contribution Act 1978 and supported Pentagons position. It was therefore held that in the absence of a liability under S75(1) of the Consumer Credit Act, a supplier could not be pursued for a creditor’s costs of defending a claim. As such the indemnity for costs failed.
Our comment
Mark Hambling, solicitor for Pentagon Ltd observes when discussing the outcome that it was always our view that Parker was wrongly decided and that it was completely obscure that a creditor who has no liability for a claim in damages and costs, could pursue an unlimited indemnity against what was the innocent supplier.
During this litigation, it became apparent that since the Parker v Blackhorse (2011) decision, that many credit card companies may have been using the decision to pursue costs against suppliers where the claim being brought was unsuccessful and the supplier should not have a liability. We, with the instructions from our client Marshall Motor Group Ltd, and with the assistance of counsel, Henry King of 12 Kings Bench Walk, have been able to protect the position of our client and hopefully provided clarity to suppliers in any future claims.
At Rogers & Norton we can advise and act on issues relating to the supply and installation of defective goods and services, as well as the mis-selling of goods. We also have a specialist team advising the motor industry sector on many areas of operation including, motor insurance liability, outlay recovery, credit hire defence and all commercial and consumer issues. For more information, visit our Consumer Disputes service webpage or to arrange an appointment please contact us on 01603 666001 or by emailing mark.hambling@rogers-norton.co.uk