The Sheriff Appeal Court has made an important ruling which will be of interest to all motor finance lenders with customers in Scotland.

In the case Santander Consumer (UK) Plc v Alan Creighton, the appeal court ruled on the question of whether a lender has to recover and sell the car before obtaining a payment decree (money judgment), or whether it can get both orders at the same time.

The case originated earlier this year when a court action was raised for the sale of a car, following a terminated conditional sale agreement. The defender, Mr Creighton, had breached the agreement by falling into arrears. There was nothing unusual about this type of action, which will be familiar to many lenders.

The lender took the view that on termination they could recover both the vehicle and also the full balance due for payment from Mr Creighton. They therefore asked Aberdeen Sheriff Court to grant decree for both payment of the balance due and recovery of the vehicle.

The case ended up at the Appeal Court on 6th November after the Sheriff Court decided not to grant decree for payment of the balance due until the lender had attempted to recover and sell the vehicle. The judge considered that the amount due could only be known once the goods had been recovered and sold, and therefore asked the lender to come back to court with an established net sale figure or an assurance that the vehicle would not be recovered.

The lender appealed the decision and the appeal court decided to overturn the original judgment, a decision which will be of comfort to motor finance lenders.

The appeal court stated that because the customer had breached the agreement, he was no longer entitled to keep the vehicle on any terms. Once a default notice has been served and the agreement has been terminated, a debtor has no greater right to retain or use the vehicle than he would under common law. The common law position is that there would be nothing to stop the lender taking back their vehicle if it were parked in the street, providing they didn’t infringe on the Mr Creighton’s other rights in any way.  The common law position is altered by statute, which requires a court order to recover regulated goods, but once a creditor has a court order, as the lender did, there is nothing to stop them repossessing the vehicle in the same way as they would be entitled to do under an unregulated agreement.

The appeal court agreed with the lender’s argument that a sheriff may only refuse to grant decree if there is a lack of jurisdiction, or the remedy sought is incompetent, neither of which applied to this case. The court therefore granted decree for payment of the balance, with interest from the date upon which the agreement would have terminated.

For further information or to discuss any aspect of this case, please contact me on 07795 504476.

Mark Higgins, Chairman