9 December hearing

[EXC]

COURT 76
Before MR JUSTICE ANDREW SMITH
Tuesday 09 December 2008
At 9:30
2007-1186 Office of Fair Trading v Abbey National PLC Court Li

[ROBSTER]

Re: 9 December hearing

Is this the continuation of1186 on the PIL aspect or can we expect appeal news?
At least it's moving onwards!

[EXC]

Re: 9 December hearing

I think it's mainly to deal with certain historical T&Cs that are yet to be declared on the penalty aspect, pending Smith J getting more info from Abbey, Lloyds & RBS.

See paragraph 3 on page 3 in the Sealed Order http://www.oft.gov.uk/shared_oft/per...rder241008.pdf

There may well be more to it than that though

[Budgie]

Re: 9 December hearing

I think it's mainly to deal with certain historical T&Cs that are yet to be declared on the penalty aspect, pending Smith J getting more info from Abbey, Lloyds & RBS.

See paragraph 3 on page 3 in the Sealed Order http://www.oft.gov.uk/shared_oft/per...rder241008.pdf

There may well be more to it than that though

I will be attending the hearing tomorrow as Exc cannot make it, so will report back as it unfolds.

Budgie

[EXC]

Re: 9 December hearing

Good lad.

[TANZARELLI]

Re: 9 December hearing

Nice one Budgie
------------------------------- merged -------------------------------

5 December 2008

There will be a hearing at the High Court at 09:30 on 9 December to deal with further submissions from Abbey, Lloyds and RBSG relating to whether some of their historical charging terms are capable of amounting to penalties at common law.

http://www.oft.gov.uk/advice_and_res...nal-test-case/

[Amethyst]

Re: 9 December hearing

Hiya

Budgie will write some bits up later. says the hearing was quite interesting and the Abbey and Lloyds seem to have got agreement on penalty charges arguments not applying to their historical terms, RBS have another submission to make and its not decided as yet - Judge expects to pass judgement on those parts before Christmas...so Bud will post up the whys wherefores etc later on after 5ish when he gets home.

Ta muchly

Ame
xxx

[Budgie]

Re: 9 December hearing

Today's Court report - Part 1

In relation to Lloyds TSB

Reminder of October judgment :

iv) I invite further submissions from Lloyds TSB and the OFT as to whether I should make any declaration in favour of Lloyds TSB and if so what its terms should be.

I missed the very beginning ( 5 mins or so ) of Thanki's submission today but it appears that much discussion has been undertaken by Lloyds and the OFT since the original hearing in July and the October judgment. Please also bear in mind that there were many court documents ( witness statements and skeleton arguments covering today's hearing that are not yet available for public viewing )

The Judge commented to Thanki today that "there seems to be a sufficiently robust platform for a declaration provided that you can draft a declaration in suitable terms, in agreement with the OFT"

Later, Thanki advised that he had discussed with Crow of the OFT, during the interval, and they had come up with a suitable wording for a declaration for the Judge to consider using in his forthcoming judgment. This was roughly as follows :-
"To the extent that a contract between Lloyds TSB and a personal current account customer included the terms contained in the documents listed, or any of them ( as applicable from time to time ). Lloyds TSB was contractually entitled to levy the charges identified, in so far as the terms triggering them are not considered prohibitive." There was some discussion over the exact wording to be used so as not to preclude the test of fairness aspects and the Judge asked Thanki and Crow to discuss.

So in summary it appears that Lloyds TSB are highly likely to be given the declaration they have sought regarding the non penal nature of the terms and conditions considered in the test case.

Part 2 - Todays submissions by Abbey
&
Part 3 - Todays submissions by Nat West and the OFT response

will follow later

Please note that this report or it's content may not be reproduced elsewhere without written permission of the Author.

[Budgie]

Re: 9 December hearing

Today's Court Report Part 2

In relation to Abbey

A reminder of the October judgment :
"ii) I shall consider the position with regard to Abbey’s May 2005 conditions in light of further submissions, but otherwise Abbey is entitled to a declaration."

This basically concerned the Abbey "Instant Plus" Account, a basic account without a cheque book but that does have direct debit facilities.

There seems to have been some confusion about this particlular account which led to the partial judgment in October. The Judge stated today that he was concerned about making a declaration which would only cover bizarre circumstances on this account. As no cheque books were issued with this account a Customer could not incur a returned item charge so the Judge felt that there was no need for a declaration as to any relevent terms being penal or not.

Malek later submitted that whilst there was no cheque book facility there was the possibility of setting up direct debits from this account and that a declaration was sought similar to that provided in respect of other Abbey accounts. Malek aslo suggested that to clear up the confusion surrounding this account the Judge should consider striking out an earlier submission by the OFT which stated that some of the terms of this account were penal.

All in all this was a short but confusing exchange.

However in summary it appears that the Abbey are likley to get the declaration that they have sought in relation to this "Instant Plus" account as well as their other accounts. IE that terms are not considered capable of being penal.

Part 3 - Todays submissions by Nat West and the OFT response

will follow later

Please note that this report or it's content may not be reproduced elsewhere without written permission of the Author.

[righty]

Re: 9 December hearing

So far this appears to turn long settled law on it's head. Also to be enforceable contractually surely a term should be negotiable & not arbitrary

[EXC]

Re: 9 December hearing

Good stuff Budgie. What time did it finish and anything of a CMC nature?

[jax007]

Re: 9 December hearing

Today's Court report - Part 1

............. the terms triggering them are not considered prohibitive."

Please correct me if I'm wrong here but as I understand it, today's hearing was to ascertain whether the charges in the historic T&Cs could be deemed as penalties?? And it has been decided that they are not penalties.

However the above statement, assuming the word 'prohibitive' was used, throws this decision into confusion because the word 'prohibitive' means ... (of prices) too high to be affordable

If this is the case, does this not cross over into the 'fairness' aspect of the case and render the charges to be 'fair'.

I may be analysing this too much but the use of the word 'prohibitive' worries me in this context.

jax

[Budgie]

Re: 9 December hearing

Today's Court Report Part 3

In relation to RSBG / NatWest

A reminder of the October judgment :
v) As things stand, I am not satisfied that I should make any declaration in favour of RBSG, but shall seek further assistance from counsel about its application.

There was a very long and tedious submission by Walters of NatWest.

This submission basically concerned the “NatWest July 2003 leaflet” and Nat West’s submissions as to it’s part contractual / part advisory status.

Walters main arguments were that :-

In relation to the "You must not................" type terms

There was no material difference between the wording of the terms in the Nat West leaflet to the wording used by other Banks in their terms or leaflets( eg HSBC ) which the Judge decided in his October judgment were not capable of being penal.

That these were not intended as contractual prohibitions. He sited the many uses of "must not" in the leaflet, some of which he stated were clearly not contractual but advisory or explanatory.

That the "must not" terms in question were aimed at actual borrowing requirements as in the case of the similar HSBC terms and therefore were not contractual prohibitions.

Judge Smith was concerned that no one seemed to actually be able to provide him with a copy of the leaflet being discussed.
“What does the leaflet actually look like, is it an A4 folded sheet like this”
Walter replied “We do not have the original, we believe it was attached to an application form”
There was some frantic searching by the RBS legal team and various version of leaflet and A4 printed sheets were passed backwards and forwards between the various team members.

In relation to the term in the leaflet :

“You must always have an agreed overdraft or Credit Zone Overdraft before you spend or withdraw any amounts that may cause your account to go overdrawn. If you exceed your arranged overdraft facility, or if you go overdrawn without prior arrangement you will be charged.”

Again Walters appeared to be attempting to argue that this as purely advisory / explanatory and not a contractual prohibition. He referred to the language of this term and also said that “If if gets past stage 1, ie that it is in fact a contractual prohibition, then all it does is limit the authority of the Consumer in giving instructions to the bank. If it is a conractual prohibition then the breach of this term is not the trigger of the charge.”

All in all this was a very confusing 45 minute submission by Walters which was not made easier to follow owing to the fact that I did not have the benefit of seeing the skeleton arguments that supported it.

Judge Smith made the following comments at various points through the submission.

“I am not sure we have had this particular wrinkle before, seeking a declaration that the charges triggered by an event are not penal rather than the terms. We shall have to see how this works through in the declarations.”

“It doesn’t wed together very well. In the terms and conditions the charges are subject to annual review and in the leaflet they are described as subject to variation. It is important that I see where I am going on this. Is it saying that if Nat West increased charges other than under an annual review then it was not entitled to do so.”

Smith asked Walters. “Is there anything in this leaflet which doesn’t fall under the incorporation banner, ( three incorporation points are amount of charges, debit interest and credit interest ). It can only be contractual if it is incorporated and it can only be incorporated into the contract if the gateway exists between the terms and conditions and the leaflet. I need to see an exhaustive list of gateways”.

In contrast to Walters somewhat disappointing submission the response by Crow of the OFT was extremely slick.

He set the scene and reminded the Judge of the October judgment and said that he felt the Judge merely needed to decide between paragraphs 89 and 123/124 of his draft judgment.

Crow submitted that “It was clear from earlier submissions by Natwest and stated in their skeleton arguments that the entire leaflet was intended to be of contractual effect.”

He felt that the Judge should consider the relevant terms in three ways :-

Is the term of contractual effect?
If so does it impose a prohibition?
And if so is a relevant charge imposed as the result of a breach of this prohibition?

Crow argued that it was clear in the terms and conditions that the leaflet is part of the contract. and also that “what is prohibited is quite clearly stated in the terms and conditions ”

“If there is a contractual prohibition then there is quite clearly a relevant charge imposed as the result of a breach.”

“Analogies are interesting and informative but not necessarily determinative”

“What the Customer must do or not do is not determining what the bank may choose to do.
The leaflet also defines the consequences for the Customer and the fact that there is a charge upon a breach then automatically falls into place”.

In summary, I feel that whilst all possibility of Abbey or Lloyds historic terms being capable of being considered penal has probably disappeared, the situation for RBSG ( Nat West ) is wide open. It’s now up to the Judge to decide.

Judge Smith hopes to be able ( workload permitting ) to hand down the judgments resulting from today’s submissions before Xmas.

On a separate note he thanked the OFT for keeping him advised ( via letter ) of progress being made in other test case related areas and hoped that they would continue to do so. He also commented that he had noted that the OFT was expecting to make it’s decision soon as to whether to investigate ( I presume by this he meant, investigate from the fairness point of view ) and more importantly which Banks.

Todays hearing finished at around 12.30

Please note that this report or it's content may not be reproduced elsewhere without written permission of the Author.

[EXC]

Re: 9 December hearing

Very nice summary and sounded like an interesting morning - was Rabinowitz not there?

[Budgie]

Re: 9 December hearing

Thanks Exc,

Yes it was interesting and it was good to see Crow in action, very polished performer.

Rab was absent.
It was a Mr Walters or Watters doing the business for RBSG.

No one in the crowd seemed to know his proper surname and the Judge only mentioned it once and very unclearly.