The High Court allowed an appeal by Michelle Gabriel and Noreen Gabriel, holding that their written notice of 21 August 2009 terminated a hire purchase agreement for a Renault Clio. The court ruled that payment obligations under section 63 of the Consumer Credit Act 1995 did not have to be met before termination took effect.
The judgment, delivered by Mr Justice Hanna on 27 July 2011, arose from a determination by the Financial Services Ombudsman dated 18 October 2010. The Ombudsman had concluded that the agreement was not terminated because the hirers had not paid enough to bring their payments up to half the hire purchase price.
The agreement was made with GE Capital Woodchester Finance Limited, trading as GE Money, which was named as the notice party and was the vehicle’s legal owner. The judgment says the hirers paid an initial deposit of €871, a documentation fee of €72, 17 instalments of €349.98 and a further payment of €198.78. By August 2009, they had paid €7,019.44 in total. The hire purchase price was stated as €18,151.51.
After facing financial difficulties, the first named appellant sought advice from the Money Advice and Budgeting Service. The appellants then wrote to the finance company saying they wished to terminate under section 63 and asking it to collect the car. The company did not acknowledge that letter. It later sent a “final notice” concerning arrears and charges, taking the position that the agreement had not been lawfully terminated. The company argued that €2,058.32 remained payable to reach half the hire purchase price.
Mr Justice Hanna interpreted section 63(1) as giving a hirer a standalone right to terminate by written notice before the final payment fell due. He said the payment options in section 63(2) applied once the agreement had been determined. The finance company remained entitled to recover amounts due under the Act and to sue for payment or return of the vehicle; the former hirers could not impose a schedule of instalments without the company’s agreement.
The court said it was not deciding the implications, if any, of the company’s failure to recover the car after it was offered, including any possible deterioration in its condition. It found that the Ombudsman had made a significant error by treating payment of the shortfall as a precondition to termination. The court allowed the appeal and held that the 21 August letter terminated the agreement.