OFT Test Case on Bank Charges ......from House of Lords to Supreme Court

[agnes]

Re: TODAY at the House of Lords - OFT v Banks latest news

[quote=strangewayofsavin;128330]Lets talk about garbage, Gordon Brown talks about prudance, then we find out about Mp's expences, Gordon Brown preeches about democracy, to the Zimbawe government, then refuses a referendem on the EU to his own people, and refuses to debate issues with the BNP, a democratically elected party within the government/Euro, If you agree with the BNP or not, they are an elected party, refusing to work with them is a miscsrarrage of justice, I did not vote BNP,nor do I support their polocies, within the European union, but as an entity with the majority of votes in 2 constituincies, they do have a right to confer.
I would encourage people to vote UKIP, but what do I know?[/quot

How much longer can these unscupulous polititions and their exploits go on running our country into the ground, UKIP does seem to be attracting more attention.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Posted on MSE.


Radical Bank Charges Thoughts: Bigger and longer compensation?

September 14th, 2009 by Martin Lewis
I recently received an e-mail from Marc Gander, one of the founders of our fellow bank charge reclaiming campaigning website the Consumer Action Group.
While MSE and I tend to focus on the mainstream and mass elements of reclaiming, CAG tends to be more radical (our different approaches have been a good fit, hence why we jointly founded the bank charges fighting fund.
As he raised some interesting, though challenging, points, I thought they were well worth sharing – so with his kind permission I’ve reproduced some of the note below.

• Reclaiming for a much longer period.
  The general wisdom is you can claim back six years of charges, though since the FSA hold this is now six years from the date the hold was imposed (ie eight years now)… However, CAG believe there’s an argument for going further…
  “New limitation period – 1995
  There is an important new element which affects the refund period very seriously. Bank charges are probably recoverable back to 1995.
  The basis of the 1995 limitation period is as follows: –
  The banks say that they are entitled to charge what they like, because their charges are not subject to the Unfair Terms in Consumer Contracts Regulations. They also say that their charges are fair.
  We all say CAG, MSE, the whole world, — and the OFT says — that the banks are mistaken. So far the courts are agreeing with us. If it is finally established that the charges are susceptible to UTCCR (ML – the laws that say fairness count) and that they are unfair, then the banks’ mistake will have been confirmed.
  The contractual term which requires payment of the charges will have been invalidated. It will then be clear that all the bank charges which have been paid over by customers will have been paid over on the basis of their mistaken belief that they were obliged to pay it and on the basis of the banks’ mistaken belief that they were entitled to levy the charges at this excessive rate.
  In law money paid over in this way is described as “money paid under a mistake”. The limitation period for a legal action to recover money paid under a mistake is six years (the same as a normal contract limitation). However in the case of mistake, the limitation period begins from the time that the mistake could reasonably have been discovered. In the case of bank charges, the limitation period has not even yet begun to run.
  It will only begin to run from the time that the OFT litigation is concluded, the charges are declared to be unfair, and the banks have accepted the situation. That date will be the date upon which the mistake has been discovered.
  Why back to 1995? Although The Unfair Terms in Consumer Contracts Regulations were introduced in 1999, they actually gave retrospective effect to a European directive which came into force on 1 January 1995. This means that if a contractual term is invalid under UTCCR, it is invalid all the way back to 1 January 1995. UTCCR affect any contracts which were entered into after 1 January 1995.
  This may seem quite extraordinary but it is not at all fanciful. It is completely settled and very basic law. I don’t know if you noticed that the during the House of Lords hearing in June, Jonathan Sumption QC acting for the banks actually told their Lordships that if the banks lost the case that there was a possibility that their customers might start claiming back into the 1990s.
  He didn’t say anything more about this, (I think that he didn’t want to alert the public too much) but the limitation period and the 1995 liability period is what he was referring to. I think that it is our job to alert the public.
  You might think that your viewers and listeners should know about this when you talk about bank charges.”
  
  This is a fascinating argument, due careful consideration – though it is of course unproven. In the MSE guides we suggest people ask for charges back at least as far back as six years before the hold on charges starting – I decided not to add these arguments in for the time being.
  For our ‘everyman’ guides this adds a level of complexity that is as yet unnecessary – while it would allow people to claim more – it is a tougher argument and most MSE users are looking for a straightforward route (evidenced as we sadly know by issues such as people sending unaltered template letters).
  My own view is while this is an important legal principle, the core aim is to get a formalised system of reclaim recompensive (I hope for automatic payback– see the Nick Clegg letter – but suspect it will need application). I doubt that will go back as far as Marc’s hoped 1995, meaning people may have to take further court action to test that. Therefore for the moment I think a wait-and-see situation is best for MSE (though if you want to go for it – the template letters are available on CAG).
  
  
• Restitutionary Damages
  The second concept is further along the revolutionary spectrum…
  “The extent of the banks liability in respect of the amount which they should refund to their customers is far greater than is generally thought.
  At the moment, when customers begin court actions for the refund of their charges, they expect to recover their charges plus a statutory 8% interest.
  As I have already suggested, UTCCR operates to invalidate an unfair term. This means that there is no longer an action for breach of contract. Instead bank customers must sue for the recovery of money paid under a mistake.
  Where money has been paid over mistakenly, the courts take the view that the beneficiary of a mistake has been unjustly enriched. The idea of unjust enrichment applies whether or not the beneficiary deliberately took advantage of the claimant or whether it was entirely innocent mistake.
  The action which is brought to recover money paid under a mistake is the action for restitution. People tend to think that this only means getting your money back. It means far more than that. Where a litigant is successful in a claim for restitution, they are entitled to restitutionary damages.
  This means that they are entitled to receive compensation. However the compensation award is not calculated on the basis of the claimant’s loss but instead it is calculated according to the defendant’s gain. It is sometimes known as “gain stripping”. The idea is that the defendant is to be divested of their unfair gains. Any profits which they have made out of the mistake are to be disgorged and handed over to the claimant.
  The way this works is that the court will order the unsuccessful defendant to disclose all the profits which they have made on the back of their customer’s unlawful charges. The court then orders that those profits are paid over to the customer. The customer is not required to make any representations as to how much profits the bank may or may not have made. This obligation falls upon the bank.
  I don’t know what your view is of this but I find it is breathtaking and frankly rather frightening because the full-scale of the banks’ liability is stupefyingly large. Going back to 1995 I can imagine a bill for restitutionary damages well over £150 billion — but who knows.
  However, if the banks manage to get away with merely handing out refunds and 8% interest, then they will have done very well from their customers’ money because I’m quite sure that they have been able to lend out their bank charges money at the very high commercial rates of interest. I think it would be very unfair if they were permitted to keep this money — especially in view of all the hardship, misery, broken homes, broken families, broken businesses, broken homes and broken dreams that they have caused by their greed. I think that their customers are entitled to a proper recompense.
  If you are struck by the enormity of what I am saying — then you may feel incredulous about it, as I do as well. However I have been juggling this legal logic in my mind for a considerable time and I come to no other conclusion.
  What finally confirmed it to me was that in his arguments to the House of Lords, Jonathan Sumption QC also warned their Lordships that if they found against the banks that there was a danger that they might be faced with claims for restitution. He actually said this! Once again, he didn’t go on to detail what he meant. However I’m sure that their Lordships understood his dire warning very clearly and I recognised it immediately as an indication that the banks themselves are fully aware of the true scale of their liability and that they are very frightened about it.
  On the Consumer Action Group we have already published template Particulars of Claim which include restitutionary damages as part of the claim. We have played it safe though and the templates also asked for 8% statutory interest in the alternative.”
  

Again a fascinating option but not one to encourage in the mainstream as yet. The Tom Brennan case (see my old blog on it) was one of the more difficult moments in bank charges history. By asking for punitive damages risked both losing the sympathy of the general public and as it eventually lost – sadly it meant some lost faith in reclaiming.
Given the current state of play, my view is it’s best to focus on the bigger issue of getting people to get their claims in quickly and en masse, rather than pushing. However I wanted to bring it to the site for discussion and so people can see the options.
Comment and Discuss

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

not being narky, I genuinely can't see where Sumption mentioned people claiming back to the 90's. Anyone else find it?

Crow at one point stated

''6 So all the terrible consequences that might flow
7 from contracts being unenforceable and people reclaiming
8 the charges that they have had to pay over the years,
9 those are, in principle, capable of flowing pursuant to
10 the directive if terms are not in plain and intelligible
11 language.''

Bit about limitations here between Crow and Lord Mance

15 So when it is suggested that the Court of Appeal's
16 analysis is going to produce a deluge of litigation, one
17 wonders how much of a deluge of litigation is going to
18 be generated by arrangements that have those kinds of
19 features in them. In our submission, not at all.
20 LORD MANCE: Just in this particular case, the consequences
21 are -- if you were to succeed in establishing that the
22 terms were unfair, that, at the very least, the terms
23 would be invalid, so that all the unpaid charges would
24 be refundable within the limitation --
25 MR CROW: That is assuming a lot. No, my Lord, that is
95
1 assuming a great deal. That was one of the points
2 I made at the very, very outset, that all the directive
3 says is that the term shall not be binding. European
4 law leaves to national law -- it may be convenient just
5 to draw you to the point where we make this point in our
6 case. It is picked up in --
7 LORD MANCE: It is a quantum meruit point, is it?
8 MR CROW: Essentially, yes. It is page 13 of our case, and
9 it is footnote 19 which is tied to paragraph 21. We
10 say:
11 "In this context, the banks are slightly coy about
12 the potential consequences of any finding that the
13 relevant charges are unfair. They rightly say in
14 paragraph 4 of their case that the stated effect of
15 regulation 8 is that the relevant terms would not be
16 binding. However, that leaves unanswered the question
17 whether the banks would be required to reimburse the
18 full amount of the relevant charges to their customers."
19 The reason why it leaves it unanswered is explained
20 in the footnote:
21 "Because where a provision of community law renders
22 a contract unenforceable, the consequence is a matter
23 for the domestic courts."
24 So the domestic courts are going to have to sort out
25 the answer to the question as to what the consequences
96
1 of the effect of regulation 8 are.
2 That question is not before the House on this
3 appeal. As a result, your Lordships should not proceed
4 on the assumption that the banks will necessarily have
5 to reimburse everything that they have charged and, read
6 carefully, the banks' case does not say that that is
7 what would happen.
8 LORD NEUBERGER: The banks were never going to be coy about
9 this, because they want -- for these purposes, they want
10 it to be as draconian as possible. If they lose the
11 appeal they want --
12 MR CROW: Just be aware of that. Exactly.
13 LORD MANCE: Another possibility is, I suppose, in theory,
14 at any rate -- I don't know whether anyone would argue
15 with this -- the whole contract might cease to be
16 binding on the basis that it wasn't capable of
17 continuing in existence. That is a possibility under
18 the directive.

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

possibly this part?

Now, the unfair contract terms legislation is quite
10 different, because that renders unfair terms in existing
11 or past contracts unenforceable. Money paid by virtue
12 of them would, therefore, in principle -- in
13 principle -- be repayable in an action for restitution
14 subject to any defences arising from the particular
15 contractual relationship, such as change of position or
16 settled accounts, and that would be the position, in
17 principle, going back up to six years.
18 Now, we submit that in trying to attack insufficient
19 fund charges under the directive and the regulations,
20 instead of relying on their competition powers, the OFT
21 have taken a fundamentally false turn which has
22 enormously raised the financial stakes,

[natweststaffmember]

Re: TODAY at the House of Lords - OFT v Banks latest news

The issue of restitutionary interest is utter BS. Under UTCCR the issue of restitutionary interest or how far back the term is unenforceable is up to the National Courts. My personal feeling is that it is reasonable to assume that it will be back as far as the FSA waiver allows, ie Limitations Act or 6/5 years.
------------------------------- merged -------------------------------
p.95-97, day 3:
20 LORD MANCE: Just in this particular case, the consequences
21 are -- if you were to succeed in establishing that the
22 terms were unfair, that, at the very least, the terms
23 would be invalid, so that all the unpaid charges would
24 be refundable within the limitation --
25 MR CROW: That is assuming a lot. No, my Lord, that is
assuming a great deal. That was one of the points
2 I made at the very, very outset, that all the directive
3 says is that the term shall not be binding. European
4 law leaves to national law -- it may be convenient just
5 to draw you to the point where we make this point in our
6 case. It is picked up in --
7 LORD MANCE: It is a quantum meruit point, is it?
8 MR CROW: Essentially, yes. It is page 13 of our case, and
9 it is footnote 19 which is tied to paragraph 21. We
10 say:
11 "In this context, the banks are slightly coy about
12 the potential consequences of any finding that the
13 relevant charges are unfair. They rightly say in
14 paragraph 4 of their case that the stated effect of
15 regulation 8 is that the relevant terms would not be
16 binding. However, that leaves unanswered the question
17 whether the banks would be required to reimburse the
18 full amount of the relevant charges to their customers."
19 The reason why it leaves it unanswered is explained
20 in the footnote:
21 "Because where a provision of community law renders
22 a contract unenforceable, the consequence is a matter
23 for the domestic courts."
24 So the domestic courts are going to have to sort out
25 the answer to the question as to what the consequences
of the effect of regulation 8 are.
2 That question is not before the House on this
3 appeal. As a result, your Lordships should not proceed
4 on the assumption that the banks will necessarily have
5 to reimburse everything that they have charged and, read
6 carefully, the banks' case does not say that that is
7 what would happen

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

lol thanks for repeating that bit nats

[natweststaffmember]

Re: TODAY at the House of Lords - OFT v Banks latest news

Apologies but this restitutionary nonsense keeps coming up and it personally hacks me off and makes me go into blind rage where previous posts remain unread. I have challenged Marc on his own forum to explain RD and to date I still have no idea what he is talking about(in fact, it was others here who explained it to me with case law) and from the HOL transcripts he has not clearly seen the parts we have both picked up on.
I have an idea let's say to everyone to reclaim back to 1995 when the courts at a later date may say you can't go that far back and people who are claiming 1995-2000 and have to pay the fee for filing lose their money as well as their time and energy getting the data. Waste of ******** time.
KISS--Keep It Simple Stupid which is Limitations Act since the National Courts decide on how far back a case can go.
GRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR R!

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

This is Tom's take on limitations:

There is indeed a very strong argument that the charges can be claimed back to 1 Jan 1995. Although the UTCCR 1994 (the original regulations) came into effect on 1 July 1995, the Directive applied to all contracts that were concluded after 31 December 1994. There is a gray area over contracts that were concluded before 31 December 1994 and the coming into force of the Regulations in 1 July 1995, but the point remains the same that claims can be back-dated to 1995.

There is an additional argument over the Limitations Act 1980: Section 32(1)(b) of the Limitation Act 1980 postpones the commencement of the limitation period where “any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant.”

This particular provision was considered by the House of Lords in Cave v Robinson Jarvis & Rolf [2002] UKHL 18. As was pointed out by Lord Millet at paragraph 8:

"In such a case the period for limitation does not begin to run until the plaintiff discovers the concealment or could with reasonable diligence discover it. The reason for the rationale is plain: if the defendant is not sued earlier, he has only himself to blame."

Section 32(2) of the 1980 Act provides that for the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

The banks have always known that the charges imposed for breaches of the overdraft facility have been disproportionate to the true cost to the bank of such breaches. The banks have consistently maintained that such charges are fair and reasonable and reflect the true cost to the banks. If those charges are found to be disproportionate, then it follows that the banks have deliberately concealed that fact from the public and from any potential claimant. It follows from this that the 6 year period of limitations does not begin to run until those facts have been, or could have been discovered by any claimant, i.e. the investigation or conclusions of the OFT in respect of bank charges.

There is also support for this position from the ECJ. InCofidis SA v Jean-Louis Fredoutthe ECJ was considering the issue of time limits in respect of Unfair Terms. Under the French national law, the first paragraph of Article L. 311-37 of the Code de la consommation provides:

`The Tribunal d'instance shall have jurisdiction to hear disputes arising from the application of this chapter. Actions brought before it must be raised within two years of the event which gave rise to them and are otherwise time-barred ...'.

The question put to the ECJ was 'Does that requirement of an interpretation in conformity with the system of consumer protection under the directive require a national court, when hearing an action for payment brought by a seller or supplier against a consumer with whom he has contracted, to set aside a procedural rule on pleas in defence, such as that in Article L. 311-37 of the Code de la consommation, in so far as it prohibits the national court, either on the application of the consumer or of its own motion, from annulling any unfair term which vitiates the contract where the latter was made more than two years before the commencement of proceedings, and in so far as it thereby permits the seller or supplier to rely on those terms before a court and base its action on them?'

Essentially, the question was whether or not the court must apply a limitation period laid down by national legislature.

The court concluded:
“It is therefore apparent that, in proceedings aimed at the enforcement of unfair terms brought by sellers or suppliers against consumers, the fixing of a time-limit on the court's power to set aside such terms, of its own motion or following a plea raised by the consumer, is liable to affect the effectiveness of the protection intended by Articles 6 and 7 of the Directive. To deprive consumers of the benefit of that protection, sellers or suppliers would merely have to wait until the expiry of the time-limit fixed by the national legislature before seeking enforcement of the unfair terms they would continue to use in contracts.

A procedural rule which prohibits the national court, on expiry of a limitation period, from finding of its own motion or following a plea raised by a consumer that a term sought to be enforced by a seller or supplier is unfair is therefore liable, in proceedings in which consumers are defendants, to render application of the protection intended to be conferred on them by the Directive excessively difficult.”

This indicates that national time limits on claims involving unfair terms should not, in principle, be used to prevent consumers from having effective protection. The problem is that this was a case of a seller or supplier seeking to enforce the unfair contract term against the consumer, rather than a consumer seeking redress for the past use of an unfair term. The policy considerations remain the same, however, that national limitation periods in respect of unfair terms should not be applied to consumer cases. After all, a right without a remedy is no right at all.

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Hmmm provisional lists just up for Supreme Court and its not listed yet

(listings up to 17th dec)

Mind you would judgment be listed as sitting?

( http://www.supremecourt.gov.uk/docs/FutureSittings.pdf )

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

As they've previously explained. judgments are only listed one week in advance. Typically the HoLs reserved Thursdays for judgments and the current listings indicate no sittings (case hearings) for 15 October. So my money's on that.

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Sorted Thank you velly muchly xx Will keep an eye on weekly menu too.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Also the listings shown only start from the week beginning 5 October. The court actually resumes on Thursday 1 October and although that day has been put aside for the Law Lords to swear themselves in - they have to swear themselves in as their is nobody legally senior to do it for them - It is perfectly possible that the judgment could be handed down on the Friday (2 October).

[natweststaffmember]

Re: TODAY at the House of Lords - OFT v Banks latest news

I think you can prove cost up to a certain period after the directive.....(sorry, but I think you can and I'm not sure I can explain on the open forum).

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Regarding this restitution and limitations. I agree with reclaiming back to 1995, however much as Martin said its a diffifcult route and many people are happy claiming back to 2001. I also think that it will be covered in the courts on everyones behalf eventually when the OFT have to take the firms back to force injuntion/compliance and the GLO (in whatever form as it progresses) will argue all the matters. I do not believe the stays will be lifted until these issues are agreed (limitations and restitution will be same for everyone - individual matters will be such as consequential loss as that would only apply to very extreme cases). I do not agree with pushing hardship claimants to claims restitution and lead them to believe they are entitled now to full refunds back to 95 (or even to 2001). Restitution I agree with to a point but not at the levels being suggested. So I agree with how Martin has dealt with the information - put it out there for consideration but not pushed people who do just want their money back to help them through a sodding hard time at the moment into trying to argue it.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

I would certainly hope that the issue of pre 2001 limitations would be dealt with by the OFT in the later stages of the test case but I'm not so sure that restitution or anything like it is an area that the OFT could and would get involved in.

The reference that Sumption made to 'restitution' was in the context of individual claimants and not the OFT or anything to do with the test case itself. I think I'm right in saying that 'restitution' actions can only be brought by individuals.

In my view a more likely scenario would be a Reperesentitive Action, not unlike the one that Which? brought against JJB Sports http://business.timesonline.co.uk/to...cle1353424.ece on behalf of consumers for 'damages' after the OFT fined JJB £8m for price fixing.