Sheriff Decision Throws Light On Effects of Time Orders

 

 

Time Orders are a subject I have touched on and returned to on several occasions in this blog over the last year.

In relation to Hire-Purchase agreements for cars and Conditional Sale and Personal Contract Purchase Plans (PCP), Time Orders allow Courts to give consumers time to pay their agreements where they have went into arrears or defaulted on them, whilst also allowing them to retain possession and use of the vehicles.

The question I have been seeking an answer to is what are the effects of Time Orders once granted?

They have not been easy answers to find.

However, in an unreported decision delivered on the 7th February 2019, Sheriff McIntyre in Greenock Sheriff Court has finally provided an answer to one question I have been asking: what happens when a Time Order is granted?

In a case that involved an action for the repossession of a car, that was subject to a Personal Contract Purchase Plan (which for all legal purposes is a Hire-Purchase Agreement regulated by the Consumer Credit Act 1974), Sheriff McIntyre held that a Time Order varies the terms of a regulated agreement and allows the payments to be repaid in a regulated manner.

He also held that it was possible to argue for the action for payment of money and repossession of the car to be dismissed on the awarding of the Time Order, or for it to be continued or sisted (suspended) to monitor the repayments of the agreement.

The case involved was eventually sisted, as it was felt this was fairer to both parties, as it allowed the creditor to bring the case back into court quickly should the consumer default on the agreed repayments again,

Sheriff McIntyre also held that unlike Time to Payment Directions, which are awarded under the Debtors (Scotland) Act 1987 and result in a decree being granted, a Time Order allows the consumer to retain possession and use of the car.

What are the other effects of Time Orders?

Although the case does not definitively answer other questions I have raised in recent months, it may be possible from Sheriff McIntyre’s reasoning to extrapolate some additional understanding of what the effects of a Time Order may be.

If it varies the agreement, is it unreasonable to assume, depending on how the Time Order is framed, that it may do so to allow the consumer time to remedy their default of the agreement; or, to amend certain provisions of the agreement for the remaining duration of the agreement?

So, for example, where the consumer has arrears of £1,000, a Time Order may allow for those arrears to be repaid at £100 per month, in addition to the contractual payments; or for example, it may reschedule how the full amount owing under an agreement is repaid, changing the contractual payment amounts, the interest rates and ultimately the terms of the agreement? It is clear the court has wide discretion in how it grants a Time Order.

In such cases, where the Time Order is just for the arrears, once these are cleared, providing the issue of legal expenses are addressed, could it be argued that the action should be dismissed? Has the consumer not remedied their default and brought the agreement back into good order? Or likewise, where it varies the terms in which the full amount should be repaid, in effect varying the existing agreement, then after a period of court supervision, should the court not consider dismissing the action and allow the new varied agreement to continue as if there had been no default?

This is important as it may answer another question in relation to Time Orders which I have asked (Time Orders: Has Their Time Come?), and that is if they can remedy a default on an agreement, should any termination of the agreement by the lender, not be reversed? This may then allow the consumer to enjoy again the full contractual and statutory rights that accompanied their existing agreement, including the right to terminate the agreement themselves. The logic being as the lenders right to terminate the agreement arises from the debtor being in default, where the default is reversed, so should, where possible, all the consequences of that default?

This is important for the purposes of s99 and S100 of the 1974 Act, which respectively allows a consumer to terminate an agreement after half the amount owing has been paid and limits the borrower’s liability to that amount (subject to certain caveats).

This is important in a consumer finance market where car finance is now believed to be responsible for 90% of all new car purchases and where car debt is on the rise. It is even more important when you consider one of the reasons for this rise, is falling monthly instalments, driven by optional balloon payments at the end of the agreement, which are no longer optional once an agreement is in default or a decree has been granted.

These are still questions that need to be answered.

Either, way, it would appear, from Sheriff McIntyre’s reasoning, the action that is raised in court should not result in decree once a Time Order is granted and its terms are being complied with.

More information about Time Orders can be found here.

Note: the decision of Sheriff McIntyre is not binding on other sheriffs

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