OFT v Bank Court Case updates

Nathan_Spleen

The author kindly requests that If you would like to re-post this account of the test case elsewhere, please ask me first.



Reproduced with the kind permission of Legalbeagles.info

Day 4

Before continuing to set out Barclays case from yesterday QC Milligan raised several procedural issues regarding the schedule of the rest of the hearing and the unsolved matter of addressing the OFT’s stance on Plain Intelligible Language.

He suggested that the IDRC should be booked for beyond the week of the 28th. ‘’That’s fine but you’ll need a judge’’ said Justice Smith who went on to explain that he had ‘’commitments beyond that week’’. But then conceded he’ll have to reschedule them.

Between them they thrashed out a likely timescale. After Barclays finish hopefully by the end of the day the remaining 6 banks would need half a day each taking them to Monday. The OFT would then need a week to set out it’s case, then the PIL issued clarified and then both parties summing up. OFT’s Brian Doctor then announced he would not be available on the 7th and 8th so the judge suggested ‘’maybe the week of the 11th as well.

Brian Doctor was then asked to respond to the 12 questions the banks had submitted yesterday about the OFTs stance on Plain Intelligible language. He said the questions were in the main not relevant to the case and any answers ‘’wouldn’t be much help to the County Courts’’.

Milligan suggested the judge read some County Court Claims to help form his view. The judge finally decided to address the issue ‘’once we’ve got a few more submissions out the way’’.

Milligan returned to his setting out. During this he listed Barclays 4 or 5 ‘services’ for a payment or non-payment:

1. Provide a system of payment request i.e. cheque or direct debit.

2 Determine the validity of the payment request i.e. is the cheque signed? Is their a direct debit mandate?

3. All the payment requests are checked against funds available.

4. If insufficient funds are available the granting of an unauthorised overdraft is considered. This consideration is a contractual obligation.

5. If granted, a letter of notice of an unauthorised overdraft stating the terms is provided.

Justice Smith cleverly put the question ‘’In the event a cheque is presented with more than enough cleared funds available, would not the cheque be an instruction to pay and not a request? Is a direct debit in the same circumstances a mandate and not a request?

Milligan replied ‘’well that’s partly right’’.

When seeking clarification or questioning Milligan the judge often stopped in mid sentence to consider his words. It seemed to me that on occasion when Milligan was uncomfortable with the judges probing he would ‘interperate’ Justice Smiths’ pauses as the end of his questioning and would quickly jump on to his next point. But not for long. The next time it happened the judge said quire firmly ’’Can I finish my question without you talking over me? The startled Milligan gave a grovelling apology. Marvellous.

At one point the judge went through Barclays T&Cs with Milligan from 2002 onwards. ‘’The ‘buffer’ is what?’’, and Milligan replied ‘’the threshold - £5 - you need to cross before a charge is triggered’’. ’’But ‘buffer' is not clear. Am I right that to understand the charges, you have to cotton on to what ‘buffer’ is?’’

The judge asked for his view on whether the layout, font and colours of T&C’s are relevant to Plain Intelligible language. ‘’No’’ said Milligan.

The judge then asked ‘’If Barclays produced a 500 page booklet of T&Cs and the charges are somewhere on page 497, would this be in PIL?’’. ‘’Yes’’.

Another odd argument from the Barclays QC was that in T&Cs, if a term was ‘implied’ as opposed to being an ‘express term‘, it could not fall into the OFT’s unfairness category as the OFT have not questioned any ‘implied’ terms, only express terms.

He then spoke about the OFT’s 7 main gripes with the T&Cs and the way charges are administered. Milligan said ‘’they have been labelled ‘the seven deadly sins’ within our camp’’ (all the banks). And these included the order in which payments are processed.

After lunch the OFT QC gave out a document clarifying the PIL points they considered relevant to the case and put the PIL ball back in the banks’ court.

The judge took Milligan back to Barclays T&Cs. ‘’Where are the charges?’’. Milligan helpfully pointed out ‘’by the dagger on the bottom of the last page’’. The judge, admittedly looking at a court bundle photocopy, said ‘’that’s a dagger? It’s completely illegible’’.

The judge found other key terms in the T&Cs under the heading ‘important information’. ‘’Is the ‘important information' in the leaflet clear that they are terms?’’ Milligan confidently replied ‘’everything in the leaflet is contractual’’. The judge took another look. ‘’Is ‘Barclays is a responsible lender’ a contractual term?’’. ‘’Err no. Well yes’’.

There’s no question that the judge is finding holes in the banks defence. But it has to be said that in the short time the OFTs QC has spoken the judge has been, in my view, sometimes a bit critical of the consistency of the OFT’s case.

Milligan told the judge his submission is almost complete and will need just 15 minutes in the morning to finish. Tomorrow kicks off at 10.30.

Joined up ‘justice seen to be done’.

Today I thought I’d watch the proceedings from the victorian splendor of the feed room at the Royal Courts of Justice. On entering the magnificent building, although I was only half way through Led Zeppelin’s ‘Misty Mountain Hop’, I somehow felt obliged to turn off my I-Pod before making enquiries about a pass.

‘’I’d like a feed room pass for the OFT v Banks hearing at the IDRC please’’.

‘’What, the Diana inquest?’’

‘’Err no. The OFT v Banks case. In courtroom 65 I think’’.

‘’I don’t know anything about it. You can’t come in’’.

So off down the road to the IDRC where I’m assured that although a technical problem meant that no feed was available at RCoJ yesterday, it was all sorted for today. But I decided to stay at IDRC anyway.

Then chatting to the feed tech guy who installed and runs both feeds he tells me that although they abandoned trying to fix yesterdays RCoJ feed at 9am, no-one informed the usher who remained on duty until lunchtime.

Wondering if anyone would actually be able to access the RCoJ feed room at all if the doorman knew nothing about it, my question was answered when the tech guy showed me a monitor linked to a camera trained on the feed room itself showing all 50 seats unoccupied and one lonely usher.

Nathan_Spleen

The author kindly requests that If you would like to re-post this account of the test case elsewhere, please ask me first.



Reproduced with the kind permission of Legalbeagles.info

Day 5

Before continuing Barclays submission, QC Milligan wanted to give a correction to the judge on the ‘’muddled response’’ he gave yesterday as to how he believes ‘’the common law kills penalties’’.

Although his correction was difficult to understand through the legal jargon he seemed to be saying that the consumer was the only side to benefit from any protection against penalties in common law and the benefit was not reciprocal, regulation was a better test.

He gave his reasons that ‘’the law was inconsistent with penalties’’. The circumstances of penalties and unfairness were different. A high penalty charge was not necessarily more than a pre-estimate of cost. A penalty depends on a pre-estimate of cost - not actual loss and he quoted from Johnson & Johnson in the Court of Appeal.

The subject then turned again to current and historical T&Cs. Milligan restated the banks requirement for a declaration on both that they are ‘’struck down under common law’’. He said they needed both ‘’for the purposes of County Court litigation’’.

The judge voiced some displeasure at continually being asked to address an issue not in the agreement on the case and the extra time needed for it. ‘’This hearing has stretched from 2 to 5 weeks.’’ and criticised the banks for not accounting for this in their original 2 week estimation. He said that although he is yet to make a decision, ‘’it’s not likely I’ll make a declaration on historical T&Cs at this hearing.

Milligan ended his submission by referring to a comment made by the judge yesterday on the ‘seven deadly sins’ that the judge joked ‘’and no doubt the first one is greed’’. Milligan thought this ‘’unhelpful’’ and could imply that ‘’our charges are too high’’. The judge didn't seem that bothered.

Next up was young QC Snowden for HSBC. He started with the analogy of a new car one orders and chooses extras such as air conditioning. But as you can’t have the air conditioning without the car, the air conditioning is therefore a core part of the contract.

Snowden took the judge through the HSBC terms and conditions and the judge asked about under 18s not being charged for unauthorised overdrafts. ‘’Do you consider and not charge him for not granting it? What about a joint account if only one of them is under 18?’’ Snowdon was stumped and asked the judge if he could consult his clients and respond tomorrow.

Like Milligan Snowden stated that everything in the T&C’s are contractual. The judge quoted from HSBC’s terms and conditions, ‘’what is this ‘fair fees policy? Is it fluff and spin or is it contractual?’’ ‘’It’s a policy statement’’ the QC replied.

The judge pointed out the use of ‘overdraft’ and ‘item charge’ which appeared to refer to the same thing. ‘’Your terms and conditions refer to overdraft but your price list refers to item charge. If your current balance is £25 and you make a payment for £30 you could say that your overdraft requirement is £5 bringing you under your £10 threshold but as an item charge the overdraft is more than you need. Is this unambiguous?’’ Snowdon simply said ‘’no, the price list makes this clear.

Other than that the submission was a repetition of both Barclays and RBS.

At the end of day 5 Justice Smith is now very concerned by the overruns to the schedule. He is now insisting that Snowdon has 15 minutes to finish his submission in the morning and that Nationwide complete theirs by lunchtime followed by Abbey in the afternoon.

It’s almost certain the hearing won’t sit for this and next Friday. Kick off tomorrow is at 10.30.

Feed rooms

Although access to the 50 seat feed room at the Royal Courts of Justice is now a reality - I checked - It hasn’t made too much difference to the attendance figures which reached the dizzy heights of one today albeit for 20 minutes. As the IDRC room only attracted 6 they are considering closing the IDRC room and keeping the RCoJ.

Unlike IDRC no pass is required, the trade off being you have to use the main entrance and wade through the media scrum for the Diana inquest and go through airport like security.

Transcripts

Transcripts of the hearing will be made available through Merril Legal Solutions 15 days after the last day of the hearing. I have ordered up a set in PDF and will post them up.

Bleeding Lawyers

In the middle of QC Snowdon’s submission this afternoon the HSBC lawyer began bleeding from his neck and asked the judge for a 5 minute adjournment while he left the room to apply a band aid, explaining that due to a recent operation he was on blood thinning medication causing him to bleed spontaneously.

No sooner was he back and a junior Clydesdale QC passed out and hit the deck. This caused a further half hour delay even though the sparko lawyer took no part in the rest of the proceedings.

Nathan_Spleen

The author kindly requests that If you would like to re-post this account of the test case elsewhere, please ask me first.



Reproduced with the kind permission of Legalbeagles.info


Day 6

For the second time I arrived at the hearing to find it well underway before the time the judge said it would start yesterday. HSBCs lead QC was just finishing his submission and I missed his answers to the under 18s questions he couldn’t answer yesterday.

Next it was the turn of Nationwide represented by Jeffery Vos. He started by saying that although most of his submission would mirror that of the other banks he would be putting forward an ‘’alternative contract analysis’’.

‘’We are not obliged to consider an unauthorised overdraft but only contractually obliged to effect a payment instruction’’. And that ‘’the bank has no obligation to honour a cheque’’. He went on ‘’the term ‘unauthorised overdraft is a misnomer. It is actually ‘unarranged’ ‘’. He referred to Barclays & Sims (1979 page 699 of judgement). He said that the OFT ‘’make great play of ‘unauthorised’’ This didn’t however, prevent him using the term ‘unauthorised overdraft’ numerous times during the rest of his submission.

‘’There are differing contractual terms for credit and debit customers. Terms alter when going in to debit and this is why regulation 62b is satisfied. A credit customer makes a loan to the bank and the difference in the interest paid and the interest the bank achieves can be regarded as the price’’.

He went through Nationwide’s 3 relevant charges:

1. Unarranged overdraft fee a month.
2. Guaranteed paid item fee £21.50.
3 Returned item fee £30.

The contract comprises of T&Cs and tariff leaflet from time to time and 2 other non-contractual leaflets. He also referred to an ‘’internal document’’ about the ‘’flexibility’’ of current accounts but felt it was only relevant to the outstanding issue of Plain Intelligible Language. The Judge wasn’t convinced it was relevant at all as PIL can only refer to customers documents.

Vos said that the OFTs view that no customer has a right to an unauthorised overdraft and as so is not a central part of the contract was wrong. ‘’But we say that it is to a debit customer’’.

‘’The UK banks pay £600m a day in unauthorised overdraft payments so it is a common method of raising finance and not, as the OFT would say, unorthodox.

On penalties he said that as no breech of contract occurs, no penalty is imposed. The judge reminded him that the T&Cs state that using a cheque guarantee card when in debit ‘’is not permitted’’. But Vos responded ‘’not contractually’’. Then out the blue the OFTs Brian doctor waved a copy of Nationwide’s ‘’Making the most of your overdraft’’ which he pointed out made a clear reference to ‘breech of contract’. Justice Smith turned to Vos, ‘’well?’’ and all Vos could say was ‘’we say it’s wrong’’. The judge didn’t pursue it but be he did make a written note.

The next bank into the breech (so to speak) was Lloyds with QC Thanki and walked the judge through their terms and conditions. He made reference to the similarity of the current November 2007 T&Cs with those of Barclays and said matter of factly (but I thought very interestingly) that he ‘’wouldn’t be surprised if they were written by the same draftsman’’.

Thanki said that charges were for a ‘request for consideration’ for an unauthorised overdraft and not the overdraft itself. He referred the judge to Cuthbert & Robarts where this ‘notion’ exists. The judge pulled him up on ‘’we will take your personal circumstances into account when considering your unauthorised overdraft’’. The judge said that would be achievable if the consideration was made by a personal banker familiar with the customer but what if that consideration was made by someone who wasn’t? Would that be a breech of contact?’’ Thanki conceded it might.

The judge then questioned the start date of the single monthly charge that the terms and conditions said was either the 2nd or some other date not specified. He said that the customer need to know as a 3 day period of overdraft could span 2 monthly periods and the customer could get ‘’clobbered, sorry, charged twice’’.

The QC said that the OFT says that an overdraft excess fee is for consideration alone ‘’but we say it is for consideration and agreeing’’. He said the OFT identifies as a penalty your responsibility not to have a cheque returned. ‘’But there is no obligation on the customer to refrain.’’

After the afternoon break Rabinowitz , on behalf of all the banks again asked the judge to schedule in the PIL and historical T&Cs issues at some point in the hearing. He said the FSA need the historical T&Cs dealt with as much as possible. Rabinowitz said there was a danger of ‘’letting loose a tirade of litigation in the County Courts.'' The judge consulted the FSAs representative at the hearing who said she would consider the banks request for the FSA to state it’s position on County Court litigation. Presumably this would be dependent on the Judges advice to the County Courts, as Rabinowitz suggested the possibility of an appeal to the judge’s recommendation.

The HBOS QC got half an hour into his submission before the judge called it a day. The hearing continues on Monday.

Nathan_Spleen

The author kindly requests that If you would like to re-post this account of the test case elsewhere, please ask me first.



Reproduced with the kind permission of Legalbeagles.info

Day 7

HBOS QC Robin Dicker continued his submission from Thursday. He said on fees and charges that the contract requires customers ‘’to promise to pay fees for a service’’ and that ‘’there is no language in the T&Cs that refer to a breech of contract‘’.

Dicker made use of the term ‘’remuneration’’ to which the judge questioned the accuracy of the word but Dicker insisted that ‘remuneration’ and ‘price’ were the same. ‘’We only promise to pay an item if the customer is in credit’’. The judge asked ‘’is this the result of a request or an instruction?’’ to which the QC replied they were effectively the same.

Dicker said that the OFT’s contention that the revenue from these charges was ‘’unorthodox’’ was wrong. ‘’There is no economic (banking) model for just interest only remuneration’’. He said the OFT says no bank tells the customer the price of integrated services and that the price is triggered by specific services and therefore can only be for specific services. ‘’We think that is wrong’’. He countered the OFT’s argument that defining the fees as a service charge were ‘’artificial’ and gave two examples:

You ask the assistant in a shoe shop to look in the stockroom for a particular size and you incur a £10 service charge. ‘’This would be artificial’’. You ask an assistant in a rare book shop to try and track down a book at other branches and the internet. If the assistant makes it clear there will be a £10 service charge whether the book is found or not ‘’this would not be artificial’’.

The judge questioned him about the HBOS T&Cs which state that the charges are for an unarranged overdraft ‘’but you are saying it’s a payment for consideration. This is part of your difficulty’’. Dicker went on to refer to a case involving Independent Insurance and used aspects of it to highlight his argument. ‘’Is this admissible evidence?’’ asked the judge. ‘’ Err no’’ replied Dicker and before he had a chance to explain Justice Smith said ‘’You cannot put inadmissible evidence before this court’’.

The penultimate bank to set out it’s case was Abbey. Ali Malek described the OFT’s approach to ‘’the seven deadly sins’’ as ‘’living in a utopian world’’ and that they needed to see things ‘’in the real world’’. Even if the seven deadly sins approach was right, Abbey would not have committed one of them. Malek made great play of the range and ‘’complexities’’ of the various payment clearing systems that for the average customer to fully understand ‘’we would need to send them on courses’’. But the judge said that the complexity of the subject matter of terms and conditions should be no bar to plain intelligible language ‘’if it’s ‘too complicated’ you can’t get out of the regulation’’.

Justice Smith pointed out that the T&Cs stated that if a payment was declined you wouldn’t incur a monthly overdraft charge but the reality was that the unpaid item fee would put you in overdraft and therefore the monthly charge would apply. For the second time in the hearing the judge used the C word. ‘’so you get clobbered again!’’. But this time he made no apology for using it.

Malek finished by rubbishing the OFT’s stance that the banks never ‘market’ the unauthorised overdraft service and that this was ‘revealing’’ and indicative that it is not a core part of the service. Malek said this was ‘’irrelevant’’.

Last, and probably least, the Clydesdale bank took to the stand in the shape of Richard Salter QC. His was the shortest submission as he admitted his was the smallest bank but none the less he described their ranking as ‘special’.

He didn’t endorse the other banks christening of the OFT‘s ‘ seven deadly sins’ but preferred to call the ‘’the seven ambiguities’’. On PIL only the language itself is relevant ‘’even if it is in tiny text’’. He guided the judge through the French and German versions of the European directives on PIL which he translated as having exactly the same meaning as the English version that he claimed was solely about the language used and not the presentation.

He said that the OFT’s real reason for the attack on the banks was the level of the charges and that the PIL issue was merely adopted. He referred the judge to an OFT survey in March 2006 that asked account holders for the reasons they went into debit by ticking various boxes. ‘’There was no box for not understanding the contract’’.

Finally he wanted to assure all his Clydesdale and Yorkshire bank customers that his bank ‘’didn’t relish any litigation with our customers’’ and that they are taking part in the test case ‘’with our customers interests at heart’’. So there you go.

Stuff

The game of PIL ping pong continues apace between the OFT’s Brian Doctor and lead QC Laurence Rabinowitz - who incidentally has represented HM Customs & Revenue in the past. Not a day passes without documents being thrown back at the other party for clarification on the contentious and unresolved issue of the OFT’s stance on plain intelligible language. The judge has intimated that if the ground rules are not resolved before the hearing finishes it may be that an adjournment will be necessary ‘’for a few days’’ before the issue is finally thrashed out.

For the first time during the hearing the Banking Code was discussed. Clydesdale’s Richard Salter was keen to fill in the judge - who had little knowledge of it - in on just how ‘’independent’’ the Banking Code Standards Board are and that most of the board come from outside the banking industry. The judge, curious of their ‘independence’ asked Salter who appoints the board members. Salter’s reply? ‘’The banking industry my lord’’.

The usher told me that before the afternoon session began the judge, not for the first time, warned the banks legat teams to keep their mobiles swicthed off as several had rung during the morning session. He reminded them they can be in contempt of court.

Nathan_Spleen

The author kindly requests that If you would like to re-post this account of the test case elsewhere, please ask me first.



Reproduced with the kind permission of Legalbeagles.info




Day 8

QC for the OFT Brian Doctor, a big man with a strong voice began setting out his case. He started out by saying the OFT’s uncompleted investigation into overdraft charges and the whole retail banking market was it’s duty in response to the ‘’numerous complaints it had received’’ and that the test case would provide them with the power to exercise an injunction.

‘’What the OFT is not doing’’ he said ‘’is gratuitously interfering with the banks’’. He gave an example of a typical OFT investigation they would undertake such as the one in to care homes where contracts were signed and later amended by customers who by their very nature would be vulnerable to unfair terms and that agreement with the industry was ‘’reached by negotiation’’. ‘’But this case is different’’ because of the current litigation, banks ‘’brought the case to deliver a knockout blow by an exemption to regulation 62 and stop county court litigation‘’ which was ‘’a tall order. ‘’Banks blame the flurry of activity in the county courts on the OFT’s credit card statement that implied a read-over to current accounts but the claims started before that’’.

Half the banks, he said, have introduced new contracts since the investigation began for regulatory reasons and Ali Malek for Abbey has conceded that. But the judge remarked that ‘’history doesn’t bare on my decision’’.

Doctor then said that the ‘’flood of claims’’ was a result of the banks refunding charges ‘’in enormous amounts’’. He cited the BBC’s table of total refunds made by each bank and the vast majority were not a result of a judgement. ‘’If you are looking for a reason….’ the judge stopped him. ‘’This is not relevant to the case. What can I do?’’ The QC spoke of the ‘’colourful array of analogies’’ the banks used to support their case. ‘’They are not analogies. No one has come up with an example that resembles this one’’. And that their ‘’charging structure is highly unusual’’.

He set out the principal areas his case will cover:

Banking law background.
The facts.
Applying the law to the facts.
Good faith.
Penalties.
(PIL is, at present ‘’parked’’)

On banking law he referred to the ‘’Banking Law Encyclopaedia’’ which defined the customer and the bank as ‘’principal and agent’’ and that the agency relationship was important to recognise and must not be overlooked. ‘’All services except debit services are agency functions but have been dressed up as services by the banks’’.
On the bank’s ‘consideration’ to identify if enough funds are available to meet a payment, the judge asked him ‘’are you saying banks are obliged to consider if enough funds are available?’’. Doctors reply was that ‘’it is in the banks interest to consider this and that they must do as they are obliged to return unpaid cheques’’.
He went on to say that essentially the case was about the interpretation of European Law and how the regulations constructed from it are principally for consumer protection.

At one point Doctor was dealing with the difference between a standard non negotiable contract and a negotiable one. He used the odd example of shopping at Marks & Spencer as a negotiable contract which the judge dealt with rather amusingly.

.I remember on the announcement of the test case in July, Bob Egerton saying ‘’I hope the OFT are serious about this and don’t put up their trainee solicitor’’. These words have always haunted me and judging by what was to follow in the afternoon you could be forgiven for thinking he was right. Things started to go seriously pear shaped.

Continuing his submission with the case histories of First National Bank and Barstow Eves Doctor began to lose what was already an unsteady rhythm. Their were lots of ums an ahhs punctuated with silent pauses. On referring the judge to particular sections of the bundle he repeatedly misquoted the reference numbers, which clearly distracted the judge.

On at least 2 occasions he’d be half way through reading a case judgement before informing the judge he was looking at the wrong extract.. His sequencing fell apart making it difficult for the judge to understand his points.

Things weren’t helped by the QCs legal team who unlike the banks teams who made sure the right file was in front of their QC at the right time,. but in Doctors case his team seemed to wait until he went to a particular subject before they would begin looking for the right file causing cringing gaps in his delivery while they rummaged around in piles of files and handing him hurriedly written post it notes. The judge told him to ‘’focus’’.

To his credit, after the 10 minute afternoon break he made a marked improvement and regained his composure. He ended well by again making reference to the ‘’array of irrelevant analogies’’ by the banks including the shoe shop and rare book shop. He gave his analogy that he said was far more applicable: An budget airline charges £25 for a ticket to Paris and has a luggage limit of 15 kilos. You then place your baggage on the scales but are charged for the ‘consideration’ of the weight and either charged again for excess baggage or not. ‘’This is a service that the supplier is not obliged to supply and therefore cannot be included in the main part of the contract.

I sincerely hope that Doctor’s early afternoon lapse was just a blip and that he gets a better night’s kip than I will.

Nathan_Spleen

The author kindly requests that If you would like to re-post this account of the test case elsewhere, please ask me first.



Reproduced with the kind permission of Legalbeagles.info

Day 9

The OFTs Brian Doctor picked up where he left off yesterday on the interpretation and the interpretations of interpretations of the all important meaning of ‘the main subject matter ‘ referred to in section 62b of UTCCR. ‘’We must adopt the typical consumers’ view of what the main subject matter is as it is ultimately a matter of interpretation’’ and that it ‘’cannot include services the supplier is not obliged to supply’’.

On 62a he said that the First National Bank appeal judgement in the House of Lords made no real distinction between 62a and b and that the banks were not putting forward 62a independently.

Doctor then spent quite some time on defining the word ‘price’ in the regulations which state that the price for the main subject matter in the contract is exempt from regulation.
‘’The price’’ he said ‘’is the agreed sum for the exchange of services and goods but many payments in contracts are not the price’’. And he made an analogy of vacating a rented property and being charged for repairs but what the regulation stipulates is ‘price’.

He said that ‘’nothing has changed’’ between historical and current terms and conditions. ‘’Some banks have written 2 new versions since these proceedings have begun’’ and that ‘’the receipt of all this bumph by the consumer hasn’t changed a thing. The new contracts have been introduced to provide a theoretical construction to meet the regulations and the clauses were designed to fit the exemption’’. Quoting some T&Cs that warned customers of unwanted charges the judge joked ‘’as opposed to wanted charges?’’. He said that as the banks conceded that only a minority of people incurred the charges they cannot claim it is a core part of the bargain. ‘’If the charges were for the main subject matter, why do they have a discretionary policy to waive them?.

Pushing his luck a bit, Doctor said that ‘’in some countries in Europe drawing a cheque without the funds is an offence’’ but the judge smiled and said ‘’we’re not in Europe’’. Although Doctor conceded that the level of the charges is not relevant to this hearing,he said that they were ‘’prohibitively expensive’’. He argued that if a customer wanted to make use of the service ‘’it would be extremely difficult to work out the cost. You’d need a wet towel to work out what it is‘’.

On the banks submission that the charges were for ‘consideration‘ , ‘’we reject that out of hand. There is virtually no consideration charge elsewhere (outside the banking industry)‘’ and ‘’the service charge has been created and is a metaphor for what actually happens.

Overall his performance today was marginally better than yesterday. Although he didn‘t get in quite the same muddle it seems to me that his haphazard delivery is part and parcel of his style. But it was clear the judge found his submission difficult to follow. On several occasions when Doctor was pressing home a point the judge had to ask him whicharea of his case it was referring it to.

On occasion he would labour over a point that it was clear the judge had already understood and accepted. He also repeated points from yesterday that the judge had to remind him ‘’we’ve covered that’’. But his strategy of concentrating his case on the interpretation and applicability of the regulations must be right as this is what this hearing is all about. He did come up with some very convincing arguments that the judge appeared to accept.

In my very humble opinion, if the OFT is to win it’ll be on the weakness of the banks case rather than the strength of the OFTs’ as effectively this hearing is about the bankschallenging the authorities view that the charges are exempt from regulation and to a large degree it’s for the banks to prove otherwise. We live in hope.

At the end of today the judge asked the parties to take stock and map out the schedule for the rest of the hearing. The OFT are expecting to finish by tomorrow ( which should be the most interesting day of their submission when they go through the banks T&Cs) and Friday is adjourned. On Monday Brian Doctor will set out his stance on PIL and the banks will each give their reply and the hearing could be completed by Thursday.

Nathan_Spleen

The author kindly requests that If you would like to re-post this account of the test case elsewhere, please ask me first.

Reproduced with the kind permission of Legalbeagles.info

Day 10

Before going through each of the banks terms and conditions Brian Doctor started by clarifying some points from yesterday. He asked the judge to read a section of the court transcript from day 6 where Vos - unlike the rest of the banks - submitted that Nationwide’s contract changed when the customer went in to debit. Doctor began reading extracts from it. After some time the judge impatiently said ‘’we can’t go through pages and pages, what’s your point?

Doctor explained that as the contract ‘’changed fundamentally’’ it would ‘’make the regulations unworkable’’. And that a decision would have to be made by the judge as to which contract - credit or debit - would be considered in the Judge’s findings. After some discussion it was decided to use the credit contract and the judge made lots of notes.

The OFT QC then referred to Rabinowitz’s submission that described the ‘benefit’ to the consumer of having a payment refused as the ‘prospect’ of it being paid. Doctor argued that ‘’everyone has the ‘prospect’ of an overdraft by simply by walking in to a branch and asking’’. The judge reminded Doctor that he’d made that very point yesterday.

A discussion started, initiated by the judge. He asked Doctor that if, in the event of one or some types of charges were ruled not exempt from the regulations, how it would work with the regulations.as ’’We have to look forward’’. Doctor replied ‘’it depends on the nature of the findings’’. Doctor said that before he went through the T&Cs, he wanted the judge to keep in mind that the regulations required that ‘’payments should be in exchange for something’’.

He started in alphabetical order with Abbey. ‘’These are an attempt to run the ‘services’ argument’’. He made references to the numerous times the word ‘service’ appeared throughout the terms and conditions. ‘’This is a self serving attempt to head off the penalties argument’’. He read from the T&Cs ‘’you may obtain an overdraft’’ and from another page ‘’you may deposit ‘’. He told the judge that Abbey have used the same word ‘may’ in two entirely different ways, May meaning ‘might’ and may meaning ‘can’.

He then quoted from a box in the contract that was marked ‘non-contractual’’. The judge asked him ‘’do you think it is contractual?’’ and Doctor said ‘’well if it says it isn’t I suppose it isn’t’’. The judge joked that he was making ‘’a major concession’’ but said he wanted to know his view. But Doctor said he just didn’t know and nor would the consumer.

He read out a section that said all payments are separate requests. He said standing orders require only the initial request and in the case of direct debit’s the request comes from the supplier. Another section referred to a charge if you ‘use’ an unarranged overdraft but Abbey’s submission is that the charge is for the ‘consideration’ of the overdraft.. He said that the T&Cs stated that if a payment is declined there would an unpaid item charge ‘’but what it doesn’t say is in that situation you would also incur another charge’’.

Doctor produced a ready reckoner of how the charges were incurred in various situations that a declined payment ‘’could trigger charges indefinitely .’’ Also the monthly overdraft fee is not linked to any service’’.

On Barclays he read ‘’we expect you to keep your account in credit…..to avoid unnecessary charges’’ and said this was not consistent with the main part of the contract argument. Under the heading ‘Charges on unauthorised overdrafts’’ was the returned item fee. ‘’Why?’’

A gain he went through the same points as he made with Abbey’s T&Cs but the judge said he didn’t need to make the same points several times on all 8 banks contracts.
Clydesdale’s, he said, tried to come closer to linking the charges to a service but still ‘’failed miserably’’. On a line that Clydesdales T&Cs referred to about returning a payment, Doctor said that this can only apply to a cheque. ‘’you can’t return a direct debit or standing order. It doesn’t go anywhere’’. On the daily unplanned borrowing fee he said it wasn’t a payment for anything but ‘’a state of affairs’’.

Unfortunately, today I could only make the morning session and missed out the rest of the banks terms and conditions.

Brian Doctor

Having just read what I’ve written on the mornings proceedings you’d be forgiven for thinking that the OFT QC had a relatively good day judging by the points he raised but it doesn’t tell the real story.

From the moment he started he clearly annoyed the judge by making him read vast extracts of the transcripts needlessly because Doctor had misquoted the page number.
There was no pre-defined order to his submission and the judge repeatedly asked him which of the five areas he was on that Doctor originally listed. He went from Abbeys terms and conditions to Barclays when the judge said ‘’Do you not want to cover Abbey’s price list?’’ Doctor replied ‘’Oh yes!’’.

He seems to have made no attempt to rehearse his submission and his support team would prompt him by plonking hastily written post-it notes in front of him on dozens of occasions. The contrast in the preparedness and delivery of the banks flawless legal teams was unbelievable.

A legal professional in the feed room who was watching the hearing for the first time today, turned round to me after five minutes and whispered ‘’is he like this all the time?’’

I lost count of the times my eyes met with a Which? lawyer who would stare at me unsure as to what expression she should wear. Although I found it quite distressing at times you couldn’t help but join in the frequent chuckles of the others watching. gaff after gaff. At one point I could clearly hear laughing from the banks legal teams.

What effect this could have on the outcome of the case is impossible to say. It may not have any as the judge has clearly got a firm grasp of the issues and is certainly bright enough to base his decision on the facts alone.

Nathan_Spleen

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Day 11

Brian Doctor spent most of today finishing off his submission on the subjects of good faith, PIL and penalties. The good news is that he had by far his best day in terms of performance and delivery. He was in a different class than anytime last week. I’m not too sure where he went at the weekend but I want to go there. He was relaxed, concise and looked well prepared. Go Doc!

Finishing off on good faith from Thursday he said that the wording of Justice Smith’s declaration on good faith would have ’’far reaching effects on County Court litigation’’. He said that regulation 61 - assessment of good faith of terms - should take in to account subsequent amendments to T&Cs if they effect the assessment of fairness and also that the regulations could apply to pre 1994 contracts if contracts are subsequently amended.

He referred to a quote from Rabinowitz that ‘’foreign commentary (on the case) is unreal and in cloud cuckoo land’’. Doctor said that this comes from places ‘’where good faith is an everyday concept’’. Then quoting from Lord Bingham in the First National Bank case Doctor said that it is not just the literal terms used in contracts that should be assessed but ‘’their likely effect’’. The judge went even further, ‘’it’s more than that’’.

Next on the agenda was plain intelligible language. Apparently the ‘clarification’ document that has been bouncing between the OFT and the banks since the start of the case has been finalised and doctor handed copies out to the banks and the judge.

He said that the OFT’s skeleton on PIL may have been overstated. ‘’Just because something is not in PIL doesn’t mean it’s unfair’’ and that ‘’PIL and fairness need to be considered separately’’.

He gave an example of how PIL doesn’t work: If you order from a supplier and the T&Cs state that the price will be decided on delivery of the goods, then it’s not in plain intelligible language even though the meaning of the contract is understandable.

Doctor said that there was uncertainty in the order in which the banks processed payments. The judge reminded him that the T&Cs stated that the order of payments was discretionary but Doctor said that in banking law practice, several payments processed on the same day should begin with the smallest payment first.
Referring to the OFT’s ready reckoner of charges he said that Abbey could repeat charges indefinitely even though the bank had pleaded this would not happen in practice, so he questioned that the terms did not make this clear. There was also uncertainty in the enforcement of charges and he made reference to the many times that T&Cs stated ‘there MAY be a charge.

He said that many of the banks accepted that they may lead to uncertainties. But the bank’s claims that contracts are too complicated to be in PIL and would require ‘’a complicated payments manual’’ are self inflicted. He pointed out the bank's enviable position of being able to deduct charges from accounts rather than having to invoice them like the rest of industry made the charges more difficult to query and that the banks ‘’don’t benefit from the discipline of enquiries’’.

Their was a discussion with the judge about Doctor’s views on some terms that Doctor considered didn’t amount to a term. The judge said that the OFT’s POCs defined them as terms and as such they can’t be exempted ‘’if the OFT don’t consider them as terms.’’

On penalties he started by saying the context in which are ruled ‘’is important to the County Courts as penalties arise in all claims’’.

On the bank’s argument that the regulations ousted common law, he said ‘’the argument cannot succeed as the directive is the minimum. There is nothing in the regulations that says it supersedes common law. There is no reason why they can’t run hand in hand’’. The judge seemed to agree and said ‘’I’ll be asking Milligan how this displacement occurs’’.

Another discussion began about the exclusion of historical terms and conditions in the penalties argument. Doctor asked the judge to reconsider historical T&Cs and the judge indicated that he may do this ‘’as a supplementary judgement’’.
Doctor said that phrases like Barclays' ‘’you must not…’’ and that a guaranteed cheques ‘’must not exceed the funds available’’ clearly suggested a breech of contract. He jokingly said ‘I don’t want to pick on Barclays but they’re all much the same’’ and the judge laughed.

Justice Smith asked Doctor an interesting and possibly revealing question: From the consumers point of view, if the OFT’s argument on penalties is upheld, would it be better for the OFT to consider penalties under common law or UTCCR? Doctor, who looked as though Christmas might have come early, said that he’d get back to the judge once he’d consulted the OFT.

He finished off on disguised penalties making an analogy of a video rental which is a pound a day for the first 7 days and then £50 for the eighth day.

RBS QC Laurence Robinowitz began his reply shortly before the hearing ended. Interestingly, he ended by informing the court that the FSA had issued their document on PIL which the judge had asked the FSA to do. As a financial services regulator, what on earth are the FSA doing by going through the defendants to announce it?

It was good to see Bob Egerton and Budgie at the hearing. Both Bob and Budgie enjoy nothing more than taking banks to court.. Budgie told me more than a few times ‘’I love it’’.<!-- / message --><!-- sig -->

Nathan_Spleen

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Reproduced with the kind permission of Legalbeagles.info

Day 12

Rabinowitz kicked off by replying to the OFT’s ‘’narrow interpretation’ of the concept of ‘service’ in which the regulation 62b talks about goods and services supplied in exchange for a price. He said that ‘service’ should be understood in a wider context as in the European meaning. He relied on a European Court of Justice case which although dealt with what tax category a restaurant would fall in - service or goods - the judgement suggested that all preparatory acts like laying the table would be included in the overall price of the meal and just like bank charges the various services make up the charge.

‘’Banks go through a great deal when presented with a payment’’ and he went through the various stages. All payment instructions were processed and then considered. When a payment is made while in debit, the payment is ‘granted’. All this, he said, ‘’involves substantial and expensive technology, infrastructure and human involvement’’. But the judge said that ‘’the expense is irrelevant’’.

Rabinowitz continued that when a payment instruction is received when in debit the instruction becomes ‘’a purported instruction or request’’. The judge asked him ‘’is that formulation what you explain to your customers?’’, Rabinowitz said that ‘’it is what the contract implies’’. The judged asked, if in the event of a non paid item, notification letters were issued and if so were they part of the service.

Rabinowitz said that not all banks sent them but for those who did it formed part of the service. The judge asked Rabinowitz if RBS sent the letters and somewhat surprisingly, the lead RBS QC, who is understood to be charging in excess of £10000 a day, didn’t know.

He accepted that services must be in exchange for a price. The judge questioned if this was a departure from his ‘price for an overall package’ argument but Rabinowitz said it was ‘’an alternative argument’’ and that the OFT did not offer an explanation as to what the charges were for. ‘’People don’t pay charges for nothing’’. The judge asked him if he agreed with the OFT’s view that the regulations require charges to be clearly identified.‘’No’’ Rabinowitz said.

Before finishing Rabinowitz agreed what OFT’s Chief Executive John Fingleton said about the possibility of the change to the way banking is structured. ’’I don’t know if you saw him on the Money Programme?’’ The judge replied ‘’ I did but so what?’’. Rabinowitz warned of the end of the free banking while in credit model.

Just before he sat down Rabinowitz through a spanner in the works. He referred to Brian Doctor’s submission yesterday that the issues of good will and PIL should apply to T&Cs going back to 1994 and even before. He said the banks were under the impression these issues would be based on current T&Cs alone and that if the OFT had it’s way, the banks would need more time to respond. He said the backdrop to this is the ‘’enormous implications it could have to people up and down the country in County Court litigation.’’ The judge asked Rabinowitz to ‘’caucus’’ the banks on there views but that ultimately it was a decision for the judge.

The banks reply to the OFT on PIL was the responsibility of HBOS QC, the unfortunately named Robin Dicker. He said that under English law, banks are not obliged to provide information as to how a contract works in practice. He said that current account T&Cs ‘’are simple arms length contracts’’. But Justice Smith said ‘’I’ve got to realistically consider that if you go to open a bank account it’s counter intuitive to think you sit and read the T&Cs while the bank manager taps his fingers’’. Dicker reminded the judge that the Banking Code allowed for a cooling off period.

All though he’s not yet finished, the rest of his PIL reply was quite tedious going with interpretations of case law judgements and the preparatory documents of European directives and UK regulations.

Before they adjourned for the day, Milligan hit the judge with a bombshell. He wanted the judge to ‘give an indication’ as to his recommendation to County Courts by the end of the hearing. He was effectively asking Justice Smith to make his recommendation before he had even considered his judgement on the hearing. Milligan explained that the duration of many of the current stays end immediately after the hearing finishes. The judge conceded he hadn’t realised this but cast some doubt as to if this could be achieved but has yet to make a decision.

The judge is very keen to conclude the hearing this week and the following schedule has been agreed by both parties: Dicker will have an hour or so to finish on PIL in the morning and then Milligan will give the banks reply on penalties. The rest of the banks will give their replies to the OFT’s reply before Brian Doctor finishes by giving his reply to the banks replies. Got it?

The hearing won’t sit on Thursday due to Doctor being in court on another case and as Justice Smith has another court appearance at 11.00 on Friday the hearing must finish by 10.45 and will start at 8am. Although he hasn’t given any indication when a judgement will be reached the judge suggested that when the judgement is handed down they should schedule in a case management conference. Milligan asked the judge for at least 7 days between the written summary of the judgement being provided and the handing down and CMC but the judge said that due to the possibility of a leak, 7 days would be ‘’pushing it’’

So it looks like the hearing could be finished before lunchtime on Friday but I can’t help thinking that with so much yet to cover and at least 2 major issues still outstanding, it’s going to be a bit tight to say the least.

Nathan_Spleen

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Day 13

Robin Dicker continued with the bank’s reply on Plain Intelligible Language and again Justice Smith raised the subject of small or feint text. ‘’Is this part of the language?’’ and Dicker said that ‘’if you can’t physically read it, doesn’t mean it’s not in plain intelligible language’’. The judge asked the same of ‘’hands and boxes ‘’ but all Dicker would say is that they are ‘’incidental’’.

Throughout the morning the HBOS QC who is the most unlikable of all the banks lawyers clearly tried the judge’s patience which made for some very entertaining exchanges and Justice Smith would sometimes exhale through his teeth and slam files closed in dissatisfaction.

Dicker asked the judge to consider the Competition Commission’s views on PIL which were not in the court bundle. ‘’Are you presenting this as law or fact?’’ snapped the judge. ‘’I’m assisting my Lord in understanding authorities interpretations of PIL’’. ‘’But is this law or fact? We’ve got to have some discipline. We’ve got to talk like lawyers’’.

Pushing his luck too far Dicker explained that the Competition Commission thought that if contracts were considered acceptable by a Plain English organisation or they passed market research criteria, it would follow that they’d be in PIL. ‘’That’s what HBOS do’’. The judge said despairingly ‘’This court is the independent authority on PIL. The Competition Commission were not interpreting PIL, they were just saying ‘that looks nice to us’ ‘’.

And again Dicker came unstuck when he selectively quoted from OFT bulletins on PIL but the judge insisted on reading them in their entirety. ‘’ I can’t help thinking that there’s a certain amount of cherry picking going on here’’.

The subject of the order in which payments are processed was raised and Dicker said it was the customer’s choice to present multiple payment instructions on the same day and that ‘’the customer implicitly expects the bank to use it’s discretion’’ because ‘’the customer hasn’t given any instructions as to the order they want them processed’’. But this service was news to the judge, ‘’I’ve never heard of this. Could these instructions be reasonably expected to be accepted? Is it the case that HBOS accept these instructions?’’ After a pause Dicker replied ‘’that is my understanding’’. The judge put the question to Barclay’s QC, Milligan, who said ‘’I don’t know my Lord’’.

Having spent all morning on the ropes the ‘Dickster’ was visibly relieved when he finally finished his reply.

Before Milligan started on penalties the judge addressed the question of his advice to the County Courts that Milligan had raised yesterday. ‘’It’s for the County Courts to decide on cases before them. All I can say is that many cases have been put on hold for this one and I haven’t discerned anything in this hearing that undermines that expectation. I can’t intervene in the county courts’’. In essence the judge was saying that any recommendation to the County Courts would have to wait until his judgement was handed down. Needless to say Milligan was delighted. ‘’That’s very helpful my Lord’’. I bet it is.

I have little doubt that the banks knew the judge wouldn’t be able to commit himself to any County Court recommendation until his judgement is made but wanted this confirmed to protect any challenge to the FSA’s complaints handling waiver.

The Barclays QC continued on penalties. At one point the judge asked if consideration itself was a ‘’service supplied’’. To isolate his point the judge asked ‘’if the bank manager dies after his consideration but before effecting his decision, has the consideration service been supplied?’’ . Milligan said it was ‘’a constituent part of supplying a service’’.

Milligan poured scorn on the OFT for their view that the case is not about the level of charges and that the OFT were adopting the regulations to attack them. He said that if the charges were not £35 but 1p the OFT wouldn’t claim the charges were unfair and he described this as a ‘’vanishingly small point’’.

Picking up Brian Doctor’s penalty analogy of the video rental being £1 a day but £50 for the eighth day Milligan said it could not be a penalty ‘’if the video store had the right to it on the eighth day.''

The rest of the day was taken up with brief replies from Thanki, Malek, Salter and Taladano who was standing in for HSBC QC Snowden, all of which said nothing new. Only Vos and Doctor are left to speak and it looks like the hearing will conclude on Friday morning.