Article by Christine Rutkowski

The consumer industry is becoming increasingly familiar with motor finance claims involving secret commission payments.

In such claims, a customer pleads a right to rescind vehicle finance agreements owing to the payment of an undisclosed commission from the lender to the credit intermediary, often being the car dealership itself.

The true fighting ground between the lenders and the customers focusses on the applicability of the case law to such claims, but before the parties even get to trial the Court is often required to determine the appropriate track allocation for the claim.

Lawyers for the consumer frequently assert that claims should be allocated to the fast track, or even the multi-track on grounds of complexity, the claim value, and the expected length of trial.  Lenders usually take a contrary view and routinely file directions questionnaires that advance allocation to the small claims track.  The result is that the Court will list the matter for a contested hearing.

The rationale behind the Lender’s position is that the true value of the claims fall well under the £10,000.00 small claims track limit.  Consumers usually plead a case that they are entitled ‘as of right’ to rescission subject to counter restitution. The raw figures to be used when calculating the value of rescission are the total amount payable under the agreement minus the cash price of the vehicle.

If the basic calculation results in a figure of less than £10,000.00, CPR r. 26.9(4) applies as the starting point:

‘the small claims track is the normal track for any claim which has a value of not more than £10,000’.

Consumers will usually present calculations to the Court that suggest the value of the claim exceeds £10,000.00 on the basis that interest will be awarded on a rescission calculation.  The contrary argument to this point is found in CPR r. 26.13(1)(a).  The true financial value of a claim is a matter for the Court to assess, and in doing so it will disregard any claim for interest (CPR 26.13(1)(b)).

Leaving aside the claim value, the parties are routinely at odds as to how complex these claims are.  The applicable case law is relatively new, and many Courts may be unfamiliar with the issues.  Likewise, some Courts will struggle to complete the cases in 3 hours and reserved Judgments are frequently given.

In terms of proportionality, the claims should undoubtedly be heard under the small claims track procedure.  In the early days of PPI Plevin disputes the Court would often list the trials for a full day.  If the same approach was to be adopted in motor finance claims, the litigation would be conducted at proportionate cost whilst the Court would have enough time to grapple with the novel arguments that are being advanced in this case.  With the volume of cases being litigated ever increasing however, it seems unlikely that the Courts would be able to accommodate so many full day trials.

Until the Courts become more familiar with the arguments, it is likely that claims will continue to be allocated to track on a case-by-case basis, with a more uniform approach to be adopted in the future.