Debt Buyer Court Defence Explained

How did we get to Court?

A debt buyer buys debts for pennies in the £. The figure of 12% of the face value of an alleged "debt" is not unusual. The debt buyer then writes to a "debtor" saying that they have purchased or been "Assigned" the debt. They will send a "Notice of Assignment" and claim this is all they have to do to establish themselves as the new owner of the "debt" as per Section 136 (1) of the Law of Property Act 1925..

Law of Property Act 1925136 Legal assignments of things in action.(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—(a)the legal right to such debt or thing in action;(b)all legal and other remedies for the same; and(c)the power to give a good discharge for the same without the concurrence of the assignor:Provided that, if the debtor, trustee or other person liable in respect of such debt or thing in action has notice—(a)that the assignment is disputed by the assignor or any person claiming under him; or(b)of any other opposing or conflicting claims to such debt or thing in action;he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other thing in action into court under the provisions of the M1Trustee Act, 1925.

Clearly the tricky debt buyer would like you to believe they only have to comply with that one little Section of the Law of Property Act 1925 to make the purchase LEGAL, but this is simply not the case. Any Corporation has to comply with ALL statute regulation.

What COMMON LAW says!

The OVERIDING PRINCIPLE in Common Law, which is superior to Statute Law, is that a debt buyer cannot sue for a contract that they were not a party to!

When the Rules Changed to give Debt Buyers and EXEMPTION to Doctrine of Privity

In 1999 the Contract (Rights of Third Parties) Act was passed giving debt buyers an EXEMPTION to Doctrine of Privity IF they are expressly identified in the Original Contract by name (or by being a member of a Class or answering a particular description). Often contracts do not even have a clause about the BENEFIT of the Contract being sold.

Prior to court action the debt can be disputed using the 3 Letter Process which asks for PROOF that the debt buyer owns the debt. This proof ultimately is the DEED OF ASSIGNMENT, also known as the SALE AGREEMENT between the Original Creditor and the Debt Buyer.

The Debt Buyer rarely wants to provide the DEED OF ASSIGNMENT, claiming it is a "commercially sensitive" document containing personal information relating to other people. That is because it is simply a list of names and numbers purchased in BULK by the debt purchase company. If it was just to protect sensitive information, the Supreme Court has ruled that the Debtor has a right to see the Deed of Assignment with the sensitive information blocked out:

See (Van Lynn Developments v Pelias Construction Co Ltd 1968.[3] All ER 824) Where Lord Denning M.R. said "the debtor is entitled to view the sale agreement to ensure that the assignee can give him good discharge under the contract";
And; [Webster v Ridgeway (2009) ] - A case that demonstrates that a debtor is entitled to see a redacted version where sensitive information is contained in the document(s);
Also; [Jones v Link Financial Ltd (2013) ] 1 WLR 693 Where at Section 9, the judge found that three conditions for the validity of such an assignment must be satisfied, 'namely': that the assignment was absolute and not by way of charge; that it was in writing under the hand of the assignor, and that express notice in writing had been given to the debtor.

The Zombie Debt buyer has to show THREE ELEMENTS of a LEGAL ASSIGNMENT to satisfy the Court (if you point this out) that the Assignment is a LEGAL Assignment and not just "EQUITABLE":

a. that the assignment is absolute and not by way of a charge; (they cannot assign future "debts", but this is common practice!);
b. that it is in writing under the hand of the assignor (the 'Deed of Assignment'); (it must be correctly formatted with TWO signatures, not just one;
c. and that express notice in writing has been given to the debtor; The easiest element, but is must be sent by registered post, not just standard mail.

Often the actual sale agreement will be a separate document, creating an interesting problem for the Debt Buyer. If they show you what they have, you will look at the documents and conclude it is not a valid Deed of Assignment as required by the Law of Property Act 1925. The debt buyer has an EQUITABLE ASSIGNMENT NOT A LEGAL ASSIGNMENT.

The Debt Buyer needs to include the Original Creditor as a party to any Court action!

So we have a stalemate that often ends up with the Debt Buyer issuing a County Court Claim and us having to argue the case in court.

The judge can either:

Order the Claimant to provide the Deed of Assignment to the Defendant (the correct course of action) which the Claimant will not do. This usually results in the Claimant giving up and discontinuing their claim.
View the Deed of Assignment himself and say he is perfectly happy with it and it is not an issue! This often happens and puts the judge is an strange position. He is saying he viewed a document that does not meet the criteria for a Deed, so we can question him on the elements of the Deed. If he incorrectly confirms elements that cannot possibly exist, we create a good case for any appeal of an incorrect judgment. Often judges will claim that you cannot appeal their decision. This is simply incorrect.

A Judge will never like being put on the spot and challenged on his word, so it is important to get the Key Points that we are challenging into our written defence. The judge will not want to put himself in the firing line of key defence points:

The Key Points

The points to challenge challenge the Debt Buyer on in the Defence bundle are:

Section 1(3) Law of Property (Miscellaneous Provisions) Act 1989, - A Deed must be witnessed if signed by one person.
Section 44 of the Companies Act 2006, - A Deed requires the signature of Two Directors or One Director and a Secretary or a Director and a Witness.
The Regulatory Reform (Execution of Deeds and Documents) Order 2005 (S.I. 2005/1906), arts. 1(1),3 , (Deed/two signatures)
Section 136 of the Law of Property Act 1925. There needs to be a sale agreement in writing under the hand of the assignor.
Section 196 of the Law of Property Act 1925. S.196 (1) Any notice required or authorised to be served or given by this Act shall be in writing.

A Deed Must be Witnessed if signed by one person

Section 1(3) Law of Property (Miscellaneous Provisions) Act 1989

(3)An instrument is validly executed as a deed by an individual if, and only if—
- (a)it is signed—
  - (i)by him in the presence of a witness who attests the signature; or
  - (ii)at his direction and in his presence and the presence of two witnesses who each attest the signature; and
- (b)it is delivered as a deed F2...

A Company needs two signatories (Director & Secretary or Witness)

Section 44 of the Companies Act 2006

44Execution of documents

(1)Under the law of England and Wales or Northern Ireland a document is executed by a company—
- (a)by the affixing of its common seal, or
- (b)by signature in accordance with the following provisions.
(2)A document is validly executed by a company if it is signed on behalf of the company—
- (a)by two authorised signatories, or
- (b)by a director of the company in the presence of a witness who attests the signature.
(3)The following are “authorised signatories” for the purposes of subsection (2)—
- (a)every director of the company, and
- (b)in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company.
(4)A document signed in accordance with subsection (2) and expressed, in whatever words, to be executed by the company has the same effect as if executed under the common seal of the company.
(5)In favour of a purchaser a document is deemed to have been duly executed by a company if it purports to be signed in accordance with subsection (2).
A “purchaser” means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.
(6)Where a document is to be signed by a person on behalf of more than one company, it is not duly signed by that person for the purposes of this section unless he signs it separately in each capacity.
(7)References in this section to a document being (or purporting to be) signed by a director or secretary are to be read, in a case where that office is held by a firm, as references to its being (or purporting to be) signed by an individual authorised by the firm to sign on its behalf.
(8)This section applies to a document that is (or purports to be) executed by a company in the name of or on behalf of another person whether or not that person is also a company.

A company needs two signatures and a seal (if not relying on s44 above)

The Regulatory Reform (Execution of Deeds and Documents) Order 2005 (S.I. 2005/1906), arts. 1(1),3

Execution by corporations

3. For section 74(1) of the 1925 Act substitute—

“(1) In favour of a purchaser an instrument shall be deemed to have been duly executed by a corporation aggregate if a seal purporting to be the corporation’s seal purports to be affixed to the instrument in the presence of and attested by—

(a)two members of the board of directors, council or other governing body of the corporation, or
(b)one such member and the clerk, secretary or other permanent officer of the corporation or his deputy.”

There must be a written sale agreement (Deed of Assignment)

Law of Property Act 1925

136 Legal assignments of things in action.

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—

(a)the legal right to such debt or thing in action;
(b)all legal and other remedies for the same; and
(c)the power to give a good discharge for the same without the concurrence of the assignor:

Provided that, if the debtor, trustee or other person liable in respect of such debt or thing in action has notice—

(a)that the assignment is disputed by the assignor or any person claiming under him; or
(b)of any other opposing or conflicting claims to such debt or thing in action;he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other thing in action into court under the provisions of the M1Trustee Act, 1925.

Notice should be served in writing

Section 196 of the Law of Property Act 1925.

196Regulations respecting notices.

(1)Any notice required or authorised to be served or given by this Act shall be in writing.
(2)Any notice required or authorised by this Act to be served on a lessee or mortgagor shall be sufficient, although only addressed to the lessee or mortgagor by that designation, without his name, or generally to the persons interested, without any name, and notwithstanding that any person to be affected by the notice is absent, under disability, unborn, or unascertained.
(3)Any notice required or authorised by this Act to be served shall be sufficiently served if it is left at the last-known place of abode or business in the United Kingdom of the lessee, lessor, mortgagee, mortgagor, or other person to be served, or, in case of a notice required or authorised to be served on a lessee or mortgagor, is affixed or left for him on the land or any house or building comprised in the lease or mortgage, or, in case of a mining lease, is left for the lessee at the office or counting-house of the mine.
(4)Any notice required or authorised by this Act to be served shall also be sufficiently served, if it is sent by post in a registered letter addressed to the lessee, lessor, mortgagee, mortgagor, or other person to be served, by name, at the aforesaid place of abode or business, office, or counting-house, and if that letter is not returned [F1by the postal operator (within the meaning of [F2Part 3 of the Postal Services Act 2011]) concerned] undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered.
(5)The provisions of this section shall extend to notices required to be served by any instrument affecting property executed or coming into operation after the commencement of this Act unless a contrary intention appears.
(6)This section does not apply to notices served in proceedings in the court.

Sample Defence/response to Particulars of Claim:

EXAMPLE LOWELL PORTFOLIO I LTD DEFENCE

1. It is disputed that the Claimant has any right or legal standing ('Locus Standi') to claim the sum of £4243.88 that the Claimant asserts is due under an agreement regulated by the Consumer Credit Act 1974 ('CCA') for a NewDay Ltd account referenced as 1234567890 (the 'Void Agreement'). The Defendant avers that the Void Agreement was void from the outset due to the Alleged Assignor's failure to comply with Section 138D of the Financial Services and Markets Act 2000 ('FSMA 2000') and CONC 5.2A of the Consumer Credit Sourcebook, concerning irresponsible lending. This argument is supported by the decision in Dimond v Lovell 2002 1 AC384, where Lord Hoffman held that agreements failing to comply with the requirements of the Consumer Credit Act 1974 are unenforceable.

The Claimant is required to provide a copy of the Contract upon which they rely, as per Section 77 of the CCA, and demonstrate that a Default Notice was served pursuant to Sections 87 & 88(1) of the CCA.

2. It is disputed that the Defendant failed to maintain contractual payments required by the Void Agreement. Additionally, it is disputed that a Default Notice was served under s.87(1) of the CCA, and it is disputed that it has not been complied with. The Claimant is required to provide a copy of all statements, invoices, demands, termination, and default notices relating to the Void Agreement.

3. The Defendant asserts that the Claimant, Lowell Portfolio I Ltd, may not have the appropriate authorization by the Financial Conduct Authority (FCA) to bring the present claim, potentially breaching the Financial Services and Markets Act 2000. The Defendant highlights that Lowell Portfolio I Ltd applied to be removed from the FCA register on 21st March 2024. Although the removal has not yet been processed and Lowell Portfolio I Ltd remains technically authorized until the removal is finalized, this application indicates an intention to cease regulated activities, raising questions about their compliance and authorization status at the time of the claim. The Defendant relies on paragraph 55 of the Schedule to the Financial Services and Markets Act 2000 (Exemption) Order 2001, which establishes that a debt purchaser cannot rely on the FCA authorization of an affiliated third party for the purpose of bringing a claim.

To support this assertion, the Defendant has conducted a search of the FCA register, confirming that the Claimant is in the process of cancelling its authorization. This situation is similar to the decision in Intrum UK Finance Limited v B (8th June 2022), where the Court of Appeal, before His Honour Judge Robinson sitting in the County Court at Sheffield, upheld the lower court's finding that the Claimant lacked FCA authorization and was not entitled to bring the claim. The claim was struck out pursuant to CPR 3.4(2)(a) and (b).

While Lowell Portfolio I Ltd remains technically authorized until the removal is finalized, the application for cancellation introduces significant restrictions and obligations, including ceasing new business activities, informing customers of the impending cancellation, and maintaining compliance with all relevant FCA regulations. This application casts doubt on their status to issue the claim, as it raises concerns about their ongoing compliance with regulatory requirements and their intention to maintain the necessary authorization to pursue legal actions.

Therefore, the Defendant contends that the Claimant’s pending removal application and the associated legal complexities undermine their legitimacy and legal standing to bring this action. Consequently, the claim should be dismissed accordingly.

4. It is disputed that the benefit of the Void Agreement was legally assigned to the Claimant (the 'Alleged Assignment') on 16-06-22, due to the constraints of Section 136 of the Law of Property Act 1925 and Section 44 of the Companies Act 2006. The Defendant argues that the Claimant has a duty to provide the instrument of assignment ('Deed of Assignment'), which forms part of the agreement that the Claimant relies on, under Practice Direction 16, paragraph 7.3. Without this document, there is no evidence of any agreement between the Defendant and the Claimant. To establish whether the Claimant has any Locus Standi to bring a claim, it is crucial for the Claimant to provide a copy of the Deed of Assignment under CPR Part 31.6, CPR 18, and CPR 31.14.

The Defendant urges the Court to conclude that if the Claimant fails to provide any Deed of Assignment upon which they rely to prove any exception from the Common Law Doctrine of Privity of Contract ('Privity'), then the Claimant has no Locus Standi to issue this claim.

See; (Van Lynn Developments v Pelias Construction Co Ltd 1968. All ER 824) Where Lord Denning MR said 'the debtor is entitled to view the sale agreement to ensure that the assignee can give him good discharge under the contract'.

And; (Hancock v Promontoria (Chestnut) Ltd [2020] EWCA Civ 907) - In this case, the court held that the redacted deed of assignment did not provide the necessary information to establish the terms of the assignment, the identity of the parties involved, or the legal rights and obligations of the parties. The court therefore concluded that the claimant had not provided sufficient evidence of the assignment to establish their legal right to enforce the debt.

Also; Jones v Link Financial Ltd [2013] 1 WLR 693 Where it was found that three conditions for the validity of such an assignment must be satisfied, namely: that the assignment was absolute and not by way of charge; that it was in writing under the hand of the assignor, and that express notice in writing had been given to the debtor. Therefore, the Claimant must demonstrate that all three elements of a legal assignment have been satisfied for the Alleged Assignment to be valid.

5. The Defendant denies being given any Notice of Assignment (the 'Alleged Notice of Assignment') for the Alleged Assignment of the Void Agreement, on an unspecified date. The Defendant requests that the Claimant provide a copy of the Alleged Notice of Assignment and evidence of its service, such as a record of delivery or a witness statement from the person who served the notice. The Defendant maintains that the Claimant's Locus Standi to issue the claim would be called into question if they were to rely solely on an alleged Notice of Assignment. The Defendant cites the case of:

Mitchell McFarlane & Partners Ltd v Foremans Ltd 2002 - 'Even If I had held that notice of assignment had not been given, I do not think that this would have made any difference. As an equitable assignee Foremans could not have brought an action at law without joining the assignor, old Foremans.'

The Claimant is required to provide the Deed of Assignment, upon which they rely, for inspection by the Court at any substantive hearing as per Civil Procedure Rule Part 39 PD 39a (3.3) and Practice Direction 16, paragraph 7.3.

6. The Defendant contends that the reliability of the Claimant's case hinges on data derived from a computer system maintained by Fujitsu, the same entity implicated in the provision of the flawed Horizon system spotlighted in the well-documented Post Office Scandal:

See: Bates v Post Office Ltd (No 3) [2019] EWHC 606 (QB). In this legal precedent, the esteemed Mr. Justice Fraser underscored the existence of actual reported errors in data recorded within the Horizon system, arising from various stages of :

(a) data entry;

(b) data transfer, and;

This acknowledgment emphasizes not only the potential for errors but substantiates their occurrence, resulting in financial discrepancies within branch accounts. To ensure a comprehensive and accurate evaluation of the presented data, the Defendant demands that the Claimant furnish all error logs related to its computer system. Additionally, the Defendant insists on conclusive evidence affirming the accuracy of the data provided, asserting that human supervision was diligently exercised throughout the entire process, including but not limited to:

Data Entry; Data Transfer; and All instances of data processing.

This requirement is imperative to establish the veracity of the data and safeguard against potential discrepancies, considering the historical precedent of errors within a system maintained by the same technology provider.

7. The Claimant's entitlement to claim statutory interest under Section 69 of the County Courts Act 1984 at a rate of 8% per annum, from the date of the alleged assignment to the date of these proceedings, amounting to £227.58, is disputed.

The Defendant relies on the ruling in Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34, the House of Lords held that damages for breach of contract should be assessed on the basis of the actual loss suffered by the claimant, subject to the principles of causation and mitigation. The court noted that damages were not intended to be a punishment or a windfall, but rather a compensation for loss. The Defendant avers that the Claimant has suffered no loss due to any actions of the Defendant and is not entitled to claim interest. The Defendant avers that the Claimant is attempting betterment by claiming losses plus interest that the Claimant has not suffered.

The amount claimed of £4471.46 is disputed both whole and in part, Costs are disputed, and the court is respectfully invited to award costs against the Claimant.

8. It is contended that the Claimant is in breach of CPR 16.4 (i)(a) and (c) by not providing concise details of the claim and not stating if claiming aggravated damages. In particular, the Particulars of Claim do not identify:

a. Any clear summary of the facts on which the claim is based;

b. Any explanation of how the amount of financial loss has been calculated;

c. Any list of those documents upon which the Claimant intends to rely;

d. Any date that the Defendant is claimed to have entered into the Void Agreement;

e. Any date of alleged failure to maintain payments;

f. Any date of any alleged default;

g. Any date of any cause of action; or;

h. Date of any Alleged Notice of Assignment.

The Defendant invites the court to dismiss this claim as it is in breach of pre-court protocols in relation to the particulars of claim under Practice Direction 16, set out by the Ministry of Justice and also under Civil Procedure Rules 16.4 and to allow such Defendant's costs as are permissible under Civil Procedure Rule 27.14.

The Defendant emphatically emphasizes to the Claimant that, pursuant to Civil Procedure Rule Part 39 PD 39a(3.3) and Practice Direction 16, paragraph 7.3, all documents the Claimant intends to rely upon must be presented in their original form for comprehensive examination during any subsequent hearing. Additionally, the Defendant firmly asserts that witnesses must attend the hearing, as the Defendant has the inherent right to cross-examine them.

STATEMENT OF TRUTH

I believe the facts stated in this Defence are true. I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a Statement of Truth without an honest belief in its truth.

Signed: [DEFENDANT'S NAME WRITTEN OR TYPED]

Printed: [NAME ALL CAPS]

Address: [YOUR ADDRESS]

Email: [YOUR EMAIL ADDRESS]

Telephone number: [YOUR TELEPHONE NUMBER]

Executing Deeds

Individual

For an individual to execute a Deed validly, they must sign the Deed in the presence of a witness, who must 'attest' the signature. The individual's name must be clearly stated.. The witness' details must be clearly recorded and this must include their signature, name and address. The witness must be independent – another party to the Deed cannot be the witness, and good practice is for the witness to be over 18 and not to be related to the individual signatory.

Company

In accordance with the Companies Act 2006, companies can execute deeds:-

· Under their common seal (if they have one), by affixing the seal to the document in the presence of the company secretary and a director, or two directors, who will need to sign the Deed. The signatures do not need to be witnessed; or
· By two company directors or one director and the company secretary, who need to sign the Deed. The signatures do not need to be witnessed; or
· By one director in the presence of a witness – in which case the director signs in their capacity as director, but otherwise as described for individual signatories above.

In each case, where a Deed is being executed by a company, the execution clause will read "Executed as a Deed by [Company name] acting by…"

The ONLY other way for a Corporation to execute a Deed is by using it's SEAL:

There are only TWO Methods of Execution for Corporations

There are two statutory presumptions of due execution in favour of third parties dealing with a corporation:

Section 74(1), Law of Property Act 1925 (1925 Act). This provides, in favour of a purchaser, that a deed is deemed to be executed by a "corporation aggregate" (for example, a registered company, local authority or building society) if the common seal is affixed to the deed in the presence of, and attested by, the corporation's clerk, secretary or other permanent officer or their deputy and a member of the board of directors, council or other governing body of the corporation.
- The purpose of section 74 of the 1925 Act was to make it unnecessary for a purchaser to require proof of a corporation's formal compliance with the provisions of its memorandum and articles or its charter.
Section 36A(6), Companies Act 1985 (1985 Act). This provides, in favour of a purchaser, that a document is deemed to have been duly executed by a company or a limited liability partnership (LLP) if it purports to be signed by a director and the secretary of the company or by two directors of the company or two members of the LLP.
- The apparent intention of section 36A(6) of the 1985 Act was to extend the protection under section 74(1) of the 1925 Act to the situation where a company (or LLP) signs under section 36A(4) of the 1985 Act. However, significant inconsistencies remained:

You have solved the problem for the debt buyer then!

They can simply follow the law.

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