Lloyds win in court on 'No Breach' Argument

[Celestine]

This is the thread where we will discuss the impact of the recent win in court by Lloyds Bank in a standard claim.

We need to put alot of energy into developing a response to this result, however from what we already know, this should not be too difficult to solve.

Comments and Opinions please


LINK TO JUDGEMENT:

[willowb]

From what I've read, he tripped up on the use of the word 'illegal' rather than 'unlawful' although I think it's crazy that the Judge awarded the victory to a defendent who didn't bother to show! Didn't the Judge or someone say that the Claimant was well prepared? Though he obviously didn't use any of the widely available POCs etc.....Did he actually belong to a forum or was he a loose cannon....it all makes a difference doesn't it?

Wxxx

[Simian]

Er.....um.......Apparently he had a thread in CAG, I'm told. So it seems that - either he didn't listen, or he wasn't told.

I've not seen the thread, as I don't have a CAG search facility anymore. Does anybody - anymore ?

I think he was just ill-prepared, and that is just not going to happen here, is it ?

[iancognito]

I do Bill, he does have a thread over there and is now getting advice and a whip round for the appeal.

[Simian]

I do Bill, he does have a thread over there and is now getting advice and a whip round for the appeal.

Thanks, Ian. I'm glad he's getting help with his appeal.

[Amethyst]

Okay the Lloyds case that lost was actually two cases. I think the first case can be completely disregarded for the purposes of discussing further moves - the guy messed up, insufficient particulars, ignored directions etc etc No effort put in, too confident the whole process would just happen for him and he'd be paid. So really I'm ignoring that case entirely.


The second case, the berwick case, was an entirely different matter...IMO.

He followed procedures, I havent seen his POC but it seems comprehensive from what the judge said in the judgement. He complied with AQs and directions in good time and with good information. He showed up to court and put his case forward to the judge in the defendants absence. (many judges would have said sod em and awarded judgement to the attending party - I think this judge really wanted to take the opportunity to gte his teeth into it at last)

The judge didnt pass immediate judgement - he went away and investigated, and thought about it and did some reading, before making his decision.

Basically the parts the claim fell down on in my opinion are the contractual term which states exceeding OD limits is a breach of contract - the claimant didnt have the T&C of the bank with him, and couldnt point out where the specific terms were. the judge went on the internet to read the banks T&C's and shock horror, they said service charge..... so we need to have that backed up for future claims.

The unfair service charge argument then comes in once the judge has decided they are a service charge rather than a penalty - so I think we need to do a lot more work on countering that argument.

Once the judgement can be posted up on here we can have a better look, I know some good work will be going on re future strategies.

I don't think its a major loss in any way shape or form.....

Just my basic thoughts anyways...

Ame
x

[willowb]

Yeah, they've changed the contract terminology on most if not all contracts haven't they? If the decision turns out to be based on present T&Cs then it shouldn't have been upheld, surely if the Judge was attempting to be thorough in his decision he should have asked the Claimant (given him more time) to produce the T&Cs from the time he entered into the contract?

As for the whole service charge issue, how can they claim that? Aren't you supposed to ask for a service in the first place? Ok then, if I go overdrawn I choose not have the bank's service of bouncing my cheque and charging me £38, I choose that they cover the cheque and charge me what it has cost them in doing so. If I am a bad customer and I keep doing this then they can tell me to b**ger off.

Wxxx

[Moog]

I have ploughed through the whole bloomin thing and one thing that stood out like a sore thumb was that he failed to mention the OFTs repeated warning about attempting to disguise penalties as service charges.

Lloyds defence says:

"It is asserted that the charges are fair and reasonable and not unlawful, and in particular in relation to the UTCCR, it is asserted that as they constitute the price payable by the consumer for services provided, they are excluded from any consideration of fairness by regulation 6 of those regulations"

Here, they are trying to say that they form part of the "core terms" of the contract which is in direct conflict with the OFT's view from their April 2006 statement

Default Charges are not "core terms"

3.4 "Core terms" relate to the definition of the main subject matter of the contract or to the adequacy of the price or renumeration as against the services supplied in exchange. They are subject to the UTCCRs , but are outside the test of fairness by virtue of Regulation 6(2). We do not consider that terms providing for default charges are core terms.(In this context the breaches of contract which may lead to a default charge typically arise where a customer exceeds a credit limit, fails to pay or fails to honour a payment.) Consumers do not generally enter into such contracts expecting to incur these charges. We consider that the charges are not the substance of the bargain but are simply an incidental charge that is applied if some of the main obligations are not complied with"

1.13 on page 4 of the OFT Doc

We will in general be careful to ensure that the concerns we have raised are effectively addressed. We cannot be tolerant of strategies which seek to avoid the substance of these concerns, for example by merely changing the nomenclature or re-characterising the charges. We deal with this again below.

This is where the Claimant should have brought in the OFT statement about cloaking from the April 06 report which is basically the same as the extended paragraph from the new consultation doc. which is due to be finalised in August

Disguised penalties
4.21 The analysis in this statement is in terms of explicit, transparent default fees. Attempts to restructure accounts in order to present events of default spuriously as additional services for which a charge may be made should be viewed as disguised penalties and equally open to challenge where grounds of unfairness exist.12 (For example, a charge for 'agreeing to' or 'allowing' a customer to exceed his credit limit is no different from a charge for the customer's 'default' in exceeding his credit limit.) The UTCCRs are concerned with the intention and effects of terms, not just their mechanism.

He didn't bring this up however and the judge went with the Defence argument

15. Having held that the charges complained of are not charges for breach of contract but part of the price of the services provided by the bank, it follows in my judgment that regulation 6(2) prevents the court from making any determination that they are unfair. In this respect, the result is the same whether those charges for a package of services, or as an individual charge for an individual servie such as making a payment which causes an overdraft limit to be exceeded. The result is equally the same whether the criticism is that the price is too high (on the basis that because the cost involved was lower only a lower charge would be justified) or whether it is said that it is unfair that a charge should be made at all and the bank's charges should be structured in some completely different way"

[willowb]

I tried to click you for that Moog but as per usual I need to spread it about a bit more before I can tip your scales again:rolleyes:

I just can't get my head around the fact that the Judge was supposedly trying to be thorough in his Judgement by taking time out to read through the T&Cs yet didn't know about OFTs warning about disguising penalty charges.......I just don't get that . I know that it is up to the Claimant to present his/her case thoroughly but you'd think that the Judge (after all the publicity on this) would be abreast of all this information.....am I missing something here?

Anyway, I figure (as Ame has said) that the banks know they were lucky and I doubt they will win the appeal.......how will that work Ame/Moog? Obviously Lloyds can't dodge an appeal can they? Do you think they'll send in the 'big guns' for it?

At least, in the light of this, anyone who is now claiming will be a little more less complacent about any forthcoming hearings they may have and really put in the work to make their cases solid....in which case, this isn't so good for the banks is it?

Wxxx

[willowb]

btw LOVE the avatar Moog...he's gotta be my fave!!!! well, him or evil edna I wanna change my user name!!!!tee hee

Wxxx

[Amethyst]

my personal opinion is that lloyds will just settle up before the appeal gets to cout... they'll know they were on thin ground to win that one and I doubt they'll want it to go any further.... but I could be wrong ~ its not unusual by any stretch.

[lioness]

Bank charges: the jury is still out | Personal Finance | Money | Telegraph

[willowb]

That link doesn't work for me

my personal opinion is that lloyds will just settle up before the appeal gets to cout... they'll know they were on thin ground to win that one and I doubt they'll want it to go any further.... but I could be wrong ~ its not unusual by any stretch.

Yes I thought you'd say that, ATEOTD either way it isn't good for the banks at all. If they settle before appeal they know that's only gonna give more confidence to Claimants and if they Defend in Court, they're screwed! lol


Wxxx

[lioness]

oh, it works for me. anyway, I'll post it here

Bank charges: the jury is still out
Last Updated: 12:01am BST 22/05/2007



Lloyds TSB seems startled to have won an argument in court about overdraft charges. But, says Emma Simon, bankers shouldn't start celebrating yet

Bank managers were no doubt rubbing their hands in glee last week at the news that Lloyds TSB had won a landmark court case against one of its customers who was claiming a refund of their overdraft charges.

The ruling, by Judge Cooke at Birmingham County Court, came as a surprise to many - including, it appears, the bank itself. Lloyds TSB did not send lawyers to argue its case in court, relying instead on its standard written defence. This has fuelled speculation that the bank never intended the case to end up in court, and that this unexpected victory was accidental.

The tide had been flowing in favour of consumers in the dispute over bank charges. Over the past 12 months thousands of people have forced their bank to refund overdraft charges dating back six years. Given that banks charge as much as £39 every time a customer exceeds his overdraft limit or has a cheque bounced, it is clear that many of these payouts have been substantial.

But while bank managers may be popping the champagne corks, customers should not get too disheartened by this judgement. The defendant, Kevin Berwick, may have failed to get £2,545 in overdraft fees refunded. But all the evidence suggests that most bank customers, provided they are persistent, will be able to reclaim their overdraft charges.

Because this was a county court judgement, it does not set a legal precedent, so other courts are not bound to follow its line.

In fact other legal minds seem to have taken the reverse view. Earlier in the week a high court judge warned banks that they were effectively wasting court time and creating undue anxiety for consumers by saying they would defend these court actions when they had no intention of doing so.

Judge David Mackie QC pointed out that over 300 cases have now been referred to just one London court on this issue, with 140 in April alone. But none has gone any further because the banks have always settled in full just before any hearing. He warned that this "unreasonable behaviour" could pave the way for consumers to receive additional compensation.

It is not just the courts that are getting frustrated with the banks' behaviour. The Financial Ombudsman Service has received a deluge of complaints about bank charges; it is handling a thousand cases a week on the matter. But it has yet to fully investigate or adjudicate on a single case, because once cases get to the Ombudsman the banks settle in full, again without any admission of liability.

This suggests that the banking industry is terrified of losing a case in court or being subject to a test case through the Ombudsman. Potentially, losing such a case could lead to them being forced to reduce charges across the board and refund all customers, rather than just those savvy enough to complain.

All of which leads back to the puzzling question of how Kevin Berwick's case ended up in court. Lloyds TSB had already offered a partial settlement; did it merely forget to offer the full amount before the hearing?

Lloyds denies that there was any such oversight. It says that each case is looked at on its merits and that it believes it offered the customer a fair settlement.

But it is clear the bank did not treat this as an important test case, an opportunity to defend bank charges vigorously and stem the flood of consumer claims. If it had, a barrage of well-paid lawyers would no doubt have been in attendance to expand on its written defence that the fees were "service charges", not penalties, which by law are supposed to reflect the actual costs incurred by the bank and not be a revenue-generating stream of income.

Lloyds is obviously cock-a-hoop at this unexpected turn of events. "We are pleased with the ruling. The court has agreed with us that these are charges for a service and not default fees," says a spokeswoman. But the bank refused to say whether more claims would end up in court as a result.

For customers looking to reclaim bank charges, the Ombudsman remains the cheapest and easiest way of getting redress - although, because of the volume of cases, it may be slower than going through the small claims court.

As we have written before, customers should be extremely wary of using the various "claims management companies" that offer to help customers get refunds. On Thursday it was announced that the newly formed Ministry of Justice would investigate the actions of many of these firms, which operate on a "no-win, no-fee" basis but pocket up to 25 per cent (plus VAT) of any payout.

There could still be a final twist in the tale. Berwick may appeal his case. If he does, it may go to a division of the High Court, which has the power to set legal precedents. Given the range of legal opinion, a second victory for the bank is by no means certain. Perhaps banking chiefs should leave the champagne on ice for the moment.

[Moog]

I doubt that Lloyds really are that pleased with the judgement. IMHO, they only won this time because the Claimant was asked several times by the judge whether he believed he had breached the T&Cs and he said no!! Things may have gone the other way had he said yes.

They would quite likely have gone the other way had he brought the judge's attention to the OFT reports (incidently, the new guidance on the UTCCR further clarifies the OFTs position on the "cloaking" of penalty charges and will be finalised in August so, we need to be reading up on that also)

So, they are left with something of a "poisoned chalice" - they have won for now but, if he appeals, it will go to a higher court where precedents will be set and this time he will be fully aware of the right arguments to use at the right time and possibly even a barrister of his own.

A somewhat hollow victory for LLoyds

Oh, and the banks really don't like "wasted costs" requests - they get quite huffy about them because it means the case stays open even if the issue of charges has been settled. I had a bank's solicitor put the phone down on me last week.

I'm trying really hard to feel sorry for them.......no, can't do it