Sheriffs erred in refusing decree in absence for breach of conditional car sale agreement
A lender which sued two customers for payment of outstanding sums due on car sale agreements has successfully appealed against decisions to refuse to grant decree in their favour after the actions were undefended.
The Sheriff Appeal Court ruled that the sheriffs erred in considering that the vehicles would first require to be sold, and the fact that sale of the cars would have affected the amount due.
‘Conditional sale agreement’
Sheriff Principal Marysia Lewis, sitting with Appeal Sheriff Nikola Stewart and Appeal Sheriff Peter Braid, heard that the appellants Santander Consumer (UK) PLC were seeking to challenge decisions by two sheriffs to refuse to grant decree in absence in actions brought against vehicle owners who had breach their conditional sale agreements.
The court was told that in September 2015 the appellants entered into an agreement with Alan Creighton, regulated by the Consumer Credit Act 1974, in terms of which the defender agreed to purchase a motor vehicle for a total price of £16,107.60 payable in instalments, with title passing to the defender only after all sums due had been paid.
The defender, having fallen into arrears, thereby breaching the agreement, the appellants served a default notice and then terminated the agreement in January 2019, at which point a total sum of £7,286.88 remained due to the appellants.
The appellants’ writ sought payment of the sum of £7,286.88 with interest; declarator that they were entitled to recover the motor vehicle in terms of section 90(1) of the 1974 Act; an order for the defender to deliver the vehicle to the appellants within five days; and warrant to sheriff officers to search the defender’s premises and take possession of the vehicle to deliver it to the appellants; as well as the expenses incurred in instructing officers of the court and recovery agents and for the expenses of the action.
The action was undefended and the appellants sought decree in absence, but the sheriff refused to grant decree for payment, although did grant decree in absence in terms of the second, third and fourth craves, and continued the craves for expenses.
In refusing to grant decree for payment the sheriff considered that the termination clause in the agreement did not entitle the appellants to recover any sums from the defender until the vehicle had been recovered and sold, and the sale proceeds applied to the account balance.
‘Decree for payment’
In the second case, the appellants averred that in July 2013 they entered into a similar conditional sale agreement with William Simpson whereby the defender agreed to purchase the vehicle for a total price of £12,650.
The defender took possession of the vehicle but subsequently fell into arrears and the appellants served a default notice before terminating the agreement in January 2018, at which point the defender was said to have owed the appellants £3,021.62.
The appellants sought payment of the sum of £3,021.62 with interest; delivery of the vehicle within five days; declarator that they were entitled to recover possession of the vehicle for the purposes of sections 90 and 92 of the 1974 Act with assistance from vehicle recovery agents; warrant for sheriff officers to search the defender’s premises and take possession of the vehicle; and expenses incurred in instructing sheriff officers and recovery agents; and the expenses of the action.
Like the sheriff in the Creighton case, the sheriff declined to grant decree for payment, but he also refused to grant decree in terms of the third and fourth craves and refused to grant a warrant in terms of the fourth crave.
In relation to the crave for payment the sheriff’s reasoning was that only a relatively small part of the original loan was outstanding and it was likely that the proceeds of sale may exceed that amount or, at least, a lesser sum would ultimately be due.
He considered that the existence of a decree for payment could cause “double jeopardy” where the appellants could simultaneously enforce a decree for payment and sell the car which, at least in theory, could leave the pursuers holding a credit balance.
The lender appealed, arguing that decree in respect of all the remaining craves in both actions should be granted.
It was submitted that while a sheriff had the power to refuse to grant decree in an undefended action, that power may be exercised only in “exceptional cases”, namely, either where there was a very apparent want of jurisdiction or where there was a very apparent incompetency in the remedy sought.
It was argued that both sheriffs had “erred” in refusing decree on the grounds on which they did, which involved neither jurisdiction nor competency.
Allowing the appeals, the court held that both sheriffs erred in enquiring into whether the sum ultimately due might be less than the sum sued for.
Delivering the opinion of the court, Appeal Sheriff Braid said: “In short, the appellant’s submission, that the sheriff may refuse to grant decree only if there is a lack of jurisdiction, or the remedy sought is incompetent, is well founded.
“So, the approach of both sheriffs involved delving into the merits in a manner inconsistent with the authorities. To take an extreme example, even had the clause been penal (for example, by not providing for the sale of proceeds to be taken into account at all) it would not have been open to the sheriff to refuse to grant decree.
“As it was, there was no basis for either sheriff assuming that the appellants in each case would not comply with their obligation to refund any surplus to the defender in each case (and, even if they did, the defenders would require to enforce that obligation in separate proceedings, having failed to defend the present actions). In essence the defenders here are in no different position from any defender who fails to defend an action but who might have had a complete, or partial, defence had he chosen to do so.
“The sheriffs having erred, the matter is therefore at large for us to deal with. For the reasons given above, we do not consider that it is appropriate for us to explore whether or not the appellants are strictly entitled to the sums sued for, and in particular we express no view on whether the sheriff in the Creighton case was correct in his construction of the agreement.
“We have also already explained why we consider that the sheriff in the Simpson case was wrong not to grant decree for delivery and for a warrant to open shut and lockfast places. We will also grant the declarator sought, but refused, in the Simpson case.
“In the event we shall, in each case, grant decree as craved, with interest from the respective dates specified above, under deletion of all references to vehicle recovery agents.”
© Scottish Legal News Ltd 2021