OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

[shooter]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Have just had a look at the POC I used in my claim against Lloyds and although I mentioned the Consumer Contracts Regulations 1999
I didn't actually state which term (copy below) So am wondering that as and when the courts do decide what the way forward in all this is whether I would have to concider any changes or not.

Claimant contends: (a) The charges exceed the
Defendant's losses caused by the breaches;
(b) The Term permitting the Defendant to
levy such charges is unenforceable under
the Unfair Terms in Consumer Contracts

Regulations 1999 and at Common Law.

What do any of you think about this?

[witch1]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

:grouphug: Having watched and read with interest throughout the day,and gone through almost all of Maslow's hierarchy of needs (lol) the team at L.B deserve a BIG thankyou for all their help and advice.
It is human nature to give a knee/jerk reation to news such as this, and I wondered if anyone thought a petition on the no 10 website would do any harm.
Whilst it may not do any good, it would give us all something to do!! and let them know upstairs how the public feel.
Once again thankyou all, let's not lose hope.

[charitynjw]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Isn't Capt Mannering a bank manager?

PUSH HIM IN FRONT OF THE BUS!!! (hehehe!)

cnjw

[Budgie]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Copy of the official order resulting from today's judgment

http://www.supremecourt.gov.uk/docs/..._0070_coV2.pdf

[Budgie]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

For Reference

Extract from Justice Smith's original High Court Judgment related to regulation 5(1)

This covers the declaratory relief that the banks were seeking in relation to regulation 5(1) which Justice Smith decided, in his judgment, it would be inappropriate to provide.

These issues have, to my knowldege, not been discussed since the original High Court Hearing as the Appeal Court hearing and House of Lords Appeal hearings were narrowly focussed on regulation 6(2.

I have highlighted what I believe to be the key quotes from Smith's Judgment.

The requirement of good faith

437. By the Litigation Agreement, it was agreed that the Banks should bring a counterclaim for a declaration that “if the Relevant Terms and/or Relevant Charges fall to be assessed for fairness under the 1999 Regulations, … it is a necessary (but not sufficient) precondition to such terms and/or charges being shown to be unfair within the meaning of regulation 5(1) of the 1999 Regulations that they be shown to be contrary to the requirement of good faith and a declaration as to the true meaning of “good faith” for the purposes of the 1999 Regulations”. The relief sought by the Banks about the effect of the words “contrary to the requirement of good faith” underwent some changes in the course of the hearing. In the end they sought declarations that:
i) “It is a necessary, but not a sufficient, precondition to any finding of unfairness under Regulation 5(1) to the 1999 Regulations that the contractual terms under consideration are contrary to the requirement of good faith.”
ii) “The Relevant [Bank] Terms and Relevant [Bank] Charges could not be found to be unfair within the meaning of Regulation 5(1) of the 1999 Regulations by virtue only of giving rise to a significant imbalance in the rights and obligations of the parties, without reference to the issue of good faith.”
iii) “If the OFT seeks any relief from the Court based upon a contention that the Relevant Terms and Relevant Charges are unfair within the meaning of Regulation 5(1) of the 1999 Regulations, one of the matters which it will have to establish is that the bank has not dealt fairly and openly with its customers as regards the process by which the Relevant [Bank] Charges were agreed by [or otherwise became part of the contract between] the bank and its customers.”
(As I understand it, the Banks include the words in square brackets simply to indicate that these words might or might not be included in any declaration made. Although in the third declaration the word “customers” (plural) is used, it is not disputed that the 1999 Regulations are concerned with the fairness of terms between the seller or supplier and an individual customer: see paragraph 16.)

438. As far as the first declaration is concerned, the OFT does not dispute that it is a necessary, but not a sufficient, precondition to any finding of unfairness under Regulation 5(1) that the terms under consideration are contrary to the requirement of good faith. There is also no issue that the Relevant Terms and Relevant Charges could not be found to be unfair within the meaning of Regulation 5(1) by virtue only of giving rise to a significant imbalance in the rights and obligations of the parties, without reference to the issue of good faith.

439. In the First National Bank case the House of Lords explained, in the context of the facts of the case, about the requirement of good faith and its part in an assessment of fairness. Lord Steyn (cit sup at para 36) referred to the “twin requirements of good faith and significant imbalance”, and went on (at para 37) to say that, “there is a large area of overlap between the concepts of good faith and significant imbalance”. As for the requirement of good faith itself, he said this (at para 36): “The examples given in the Schedule 3 [to the 1994 Regulations, that is to say the “greylist”] convincingly demonstrate that the argument of the bank that good faith is predominantly concerned with procedural defects in negotiating procedures cannot be sustained. Any purely procedural or even predominantly procedural interpretation of the requirement of good faith must be rejected”. Lord Millett (at para 54) warned against looking for a single test for what constitutes unfairness as defined by the 1999 Regulations. Lord Bingham (at para 17) said this:
“A term falling within the scope of the Regulations is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith. The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the Regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties’ rights and obligations under the contract. This involves looking at the contract as a whole. But the imbalance must be to the detriment of the consumer; a significant imbalance to the detriment of the supplier, assumed to be the stronger party, is not a mischief which the Regulations seek to address. The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulation. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the Regulations are designed to promote”

440. These observations were made by the highest authority by reference to the facts of the specific case before them. It is not appropriate for me, asked to consider in the abstract and without reference to specific facts whether the Relevant Terms satisfy the requirement of fairness, to seek to explain or amplify what they said. As I see it, I am effectively being invited by the first and second proposed declarations to add a gloss to the 1999 Regulations while resolving nothing in dispute between the parties, and this would be at best valueless and at worst confusing. I decline to grant these declarations.

441. It is apparent that the Banks’ third proposed declaration is drafted on the basis of Lord Bingham’s speech (with which, as I have said, all of the other Law Lords expressed their agreement) but nothing would be gained from me making a declaration if it is designed simply to endorse what he said. I would be the more reluctant to make the proposed declaration because on any view it is difficult fully to define the requirement of good faith, a concept which is to be given an autonomous interpretation in light of the recitals to the Directive (and in particular the 16th recital) but at the same time has different connotations in the law of different member states: see Lando & Beale’s Principles of European Contract Law, Notes to Article 1:201 (combined and revised 2000). As Mr Rabinowitz observed, there is room for debate as to quite what would be covered by Lord Steyn’s expression “procedural defects in the negotiating process”, and it seems to me that equally the expression in the proposed declaration “as regards the process by which the Relevant … Charges were agreed by … the bank and its customers” would give rise to uncertainty. For example, the 16th recital to the Directive states that in making an assessment of good faith, particular regard shall be had (among other things) to “the strength of the bargaining position of the parties”, but the strength of the parties’ bargaining position in itself (and in contradistinction from its exploitation by the stronger party) is not obviously part of the “procedure” or the “process” whereby the contract was made.

442. The Banks’ argument that I should grant the third declaration faces a further difficulty. As I have mentioned, in the First National Bank case (cit sup at para 13, and see too para 20) Lord Bingham made it clear that “fairness must be judged as at the date the contract is made, although account may properly be taken of the likely effect of any term that is then agreed and said to be unfair”. The question therefore arises when in the circumstances of the present case and the current account contracts between a Bank and an individual customer the contract is to be taken as being made. One obvious answer might be that it is made when, possibly many years ago (maybe before 31 December 1994, the date referred to in article 10 of the Directive), the Bank agreed with the customer to operate a current account. But there is an equally obvious objection to this: the Relevant Terms that are the subject of the issues between the parties were in many cases not included in the contract when it was first made, but were introduced into it at some later date (whether by way of consensual variation or by way of what is called in Chitty on Contracts, 29th Ed (2004) at para 22-039 a “unilateral power of variation” exercised by the Bank). Assuming that the fairness of the Relevant Terms is not to be assessed as at a time before they were introduced into the contract between Bank and customer, it does not necessarily follow that the fairness is to be assessed when they were so introduced rather than at some later date, for example when the parties make what I have termed a specific contract, such as that explained in Paget’s Law of Banking 13th Ed (2007) at para 7.1 to which I referred at paragraph 417 above.

443. This question was not identified in advance as one that I was to consider at this hearing of preliminary issues, and not one with which the parties dealt in their written submissions. Indeed, I think that it is fair to say that its potential importance and the difficulties that it entails were not identified by the parties before I raised it during the hearing. Although some of the Banks made some oral submissions about it, in the end the Banks told me that its implications were of such potential importance that they did not wish me to answer it until they had had the opportunity to consider it further. The OFT, for its part, made no submissions as to the date as at which any assessment of fairness is to be made in the circumstances of this case, and did not dissent from the Banks’ request that I should not decide the question in this judgment, reserving its position as to whether it should be decided by me after further argument.

444. Although in some ways it is unfortunate that this question should not be resolved, I accept the Banks’ contention that I should not determine it without the parties having the opportunity to decide what position that they wish to adopt about it and to make full submissions.

445. It is against this background that I consider whether I should make the third proposed declaration. The proposed declaration itself refers to the “process by which the Relevant … Charges were agreed by [or otherwise became part of the contract between] the bank and its customers”. The wording reflects uncertainty about how the Relevant Terms were introduced into the Banks’ contracts with individual customers, and the evidence about this is unsatisfactory. As I explained in paragraph 96 above, all of the Banks now have the right under their standard terms to give customers thirty days’ notice of a change of terms, and it seems probable that many of them used a comparable power in their previous terms to introduce the Relevant Terms into their existing contracts with individual customers, but there is no clear evidence about this; and indeed in the case of Lloyds’ TSB there is no evidence that it had any such power before its current terms of November 2007, and there is no evidence about how the Relevant Terms were introduced into its existing contracts.

446. The focus of the third proposed declaration is that the Banks’ wish to establish that, provided a Bank acted properly (as it was put in Mr Rabinowitz’s opening submissions) with regard to the manner in which it obtained its customer’s agreement to the terms under scrutiny, the requirement of good faith is satisfied and any enquiry as to how the Bank acted thereafter and any enquiry as to whether any contractual term causes a significant imbalance in the parties’ rights and obligations arising under the contract would be superfluous. They argue that this follows from a proper understanding and application of the speeches in the First National Bank case and the decision of the Court of Appeal in Bryan & Langley v Boston, [2005] EWCA Civ 973.

447. I have serious doubts whether in any case it would be appropriate to make a declaration of this kind in abstract terms and without regard to the facts of any particular case, but in any event I am not willing to make one without forming some view as to when, for the purposes of the declaration that the Banks seek, the process of making the contract containing the Relevant Terms is to be taken to be complete. Otherwise, I am not in a position to consider the implications of deciding that subsequent conduct cannot bear upon whether the requirement of good faith is satisfied, and otherwise the meaning of any declaration that I might make would be inappropriately obscure.

448. For these reasons I shall make none of the declarations about the requirement of good faith that the Banks seek.

[natweststaffmember]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Tools, could you elaborate on the BCOBS regulations?

GUIDANCE ONLY

Dealings with customers in financial difficulty

BCOBS 5.1.4 01/11/2009 Principle 6 requires a firm to pay due regard to the interests of its customers and to treat them fairly. In particular, a firm should deal fairly with a banking customer whom it has reason to believe is in financial difficulty.

Principle 6 - Customers' interests A firm must pay due regard to the interests of its customers and treat them fairly.

Thread on BCOBS is HERE: BCOBS - comes into force 1/11/09 - Legal Beagles

Ruby I hope this is useful and Amethyst kinda pointed me to where the relevant bit was....so thank you Amethyst.

[witch1]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

:beagle:Could anyone tell me if (and when) it would be possible to unite with other consumer sites and using the power of the public voice take this to the courts as a group? I wondered whether the voices of many and the media coverage of a large class court action MAY get the banks to pay back what people are owed.
Sorry if i'm barking up the wrong tree, it's just one of many thoughts on this matter.

[natweststaffmember]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

:beagle:Could anyone tell me if (and when) it would be possible to unite with other consumer sites and using the power of the public voice take this to the courts as a group? I wondered whether the voices of many and the media coverage of a large class court action MAY get the banks to pay back what people are owed.
Sorry if i'm barking up the wrong tree, it's just one of many thoughts on this matter.

I think at the moment it is still less than 24 hours after the Supreme Court decision and I think we are all taking it in. Even the OFT have not given a full opinion on the matter apart from disappointment.
I am sure in the coming days things will become a little bit clearer.

[EXC]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Great post Bud (no 290).

The Litigation Agreement refers to the 5(1) - good faith - at 1.4(b) http://www.oft.gov.uk/shared_oft/per...-Banks-FSA.pdf

[Amethyst]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Discussions are in progress with a number of parties.



We havent recommmended people take bank charges to court since the waiver was introduced so we are mainly talking about people with claims in at court from before the test case that got held up.

Their POCs, although they need checking, should have something like this in

4: It is the claimants contention that these charges are unfair under The Unfair Terms in Consumer Contracts Regulation 1999 SCHEDULE 2 Indicative and Non-Exhaustive List of terms which may be regarded as unfair (e) Requiring any consumer who fails to fulfill his obligation to pay a dis-proportionately high sum in compensation .

5: Insofar as they purport to be services provided by the Defendant, the High Court on the 24th April 2008 rejected the notion that the blocking of cheques, direct debits and so forth were services in the sense commonly understood. Furthermore the High Court held that the Defendant's charges were subject to tests of unfairness under the Unfair Terms in Consumer Contracts Regulation 1999. The Court of Appeal upheld this view on 26th February 2009.

6: The terms imposing the charges are unfair within the meaning of Regulation 5 (1) and thus not binding on the Claimant under Regulation 8.

This is also what most of the letters are based on. So there is an argument to process the claims under those regs. Which will end up resulting in more stays and hold ups.

Assessment of unfair terms
6. - (1) Without prejudice to regulation 12, the unfairness of a contractual term shall be
assessed, taking into account the nature of the goods or services for which the contract was
concluded and by referring, at the time of conclusion of the contract, to all the circumstances
attending the conclusion of the contract and to all the other terms of the contract or of another
contract on which it is dependent.

so....I think........we are not arguing for assessment of fairness of terms with 5(1) we are arguing that the amount is disproportionate to the breach. so this part (((((((((((6: The terms imposing the charges are unfair within the meaning of Regulation 5 (1) and thus not binding on the Claimant under Regulation 8))))))))))))))))))) need rewording but I am not jumping into anything until we have the views of various parties and the OFT (who we are still behind).

[EXC]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

SO

we are not arguing for assessment of FAIRNESS of terms with 5(1) we are arguing that the amount is disproportionate to the breach. so this part

Don't you mean default?

[Amethyst]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

no, I don't think so. You arent defaulting on the contract, you are breaching it which is fixable and requires a sum in compensation, but we argue its disproportionate to the damage the breach caused. The courts have to look at it even if they cant assess the actual term for fairness under reg 6. very similar to penalty arguments, I think too similar, but using Toms £1000 a time example it makes sense, but I am wary of making an argument FIT and sending people down the wrong path knee jerk.... I still dont think anyone should go to the courts asking for stay lifts or anything. If you do, you DO risk costs. These arguments are not recommendations, we're just looking at all the various options (paras 60-61 of phillips judgment does say there are a lot) lol.

Also - the supreme court seem to say that although 6(2) cant be used for the individual charges it could be used to assess overall price for the entire service, (through para 62/63) and I think that needs looking at as much as 5(1) and thats the angle the OFT could take next.

60. This agreement between the parties reflects acceptance by the Banks in the Court
of Appeal of a finding by Andrew Smith J that was contrary to one of their submissions.
The Banks had submitted that a term of a contract that provided the “price or
remuneration” for “goods or services supplied” was absolutely exempt from assessment
for fairness by reason of Regulation 6(2). This was described as the “excluded term”
construction of the Regulation. Andrew Smith J held that this was not correct. Regulation
6(2) precluded assessing a price term for fairness by reference to its adequacy as payment
Page 25
for the goods or services provided in exchange. It did not, however, preclude assessing a
price term for fairness according to other criteria. This has been described as the
“excluded assessment” construction of the Regulation.
61. Mr Sumption submitted that the difference between the “excluded term” and the
“excluded assessment” constructions was “a distraction from the real issues”. It is
certainly a distraction from the narrow issue that the parties are now agreed is before the
court. But it is only because the “excluded assessment” construction has prevailed that the
issue has been narrowed from that in the Agreed Statement of Facts and Issue. Had the
“excluded term” construction prevailed, a finding in favour of the Banks that the Relevant
Terms were included within the meaning of the word “price” in Regulation 6(2) would
have precluded any challenge to those terms on the ground of fairness. As it is, if the
Banks succeed on the narrow issue, this will not close the door on the OFT’s
investigations and may well not resolve the myriad cases that are currently stayed in
which customers have challenged Relevant Charges.
62. There is a further general point to be made. It seems likely that many of the
customers who have challenged Relevant Charges have done so on the basis that they are
excessive for the individual services to which they relate. They have treated the Relevant
Charges as being levied in exchange for those services. Equally, one of the provisional
grounds of attack advanced by the OFT has been that the Relevant Charges are out of all
proportion to the cost of providing the services to which they relate. The Banks’ primary
case is that these attacks are founded on a misconception that the Relevant Charges are
payment for the services that trigger them. According to the Banks the reality is that the
Relevant Charges are simply part of the payment in exchange for a global package of
services. If that is correct, it would seem to follow that the attack based on the disparity
between the cost of providing the services that trigger the Relevant Charges and the
amount of the Relevant Charges is based on a false premise and does not in fact involve
an assessment of fairness that relates “to the adequacy of the price or remuneration, as
against the goods or services supplied in exchange”.
63. This was a point that was appreciated by Andrew Smith J. At paragraph 400 of his
judgment he says:
“Moreover, the basis of the whole package argument is that
the Relevant Charges are not the price or remuneration for
services but part of the price or remuneration for services.
An assessment of the fairness of the Relevant Charges does
not involve an assessment of the level or adequacy or
appropriateness of the overall price or remuneration for the
package of services supplied by the Bank, and an
assessment of the fairness of the Relevant Charges as
against those services, apart from being entirely beside the
Page 26
point, would not intrude upon the essential bargain between
the parties that the Directive and the 1999 Regulations
intend should be protected from assessment. The whole
package argument does not engage the policy of the
Directive and the 1999 Regulations for exempting the
fairness of the Relevant Terms from assessment. Indeed, I
am far from convinced that an assessment of part of the
price or remuneration (or at least for less than what is
manifestly the predominant part of the price or
remuneration) for goods or services would ever be covered
by Regulation 6(2)(b), but since this is not an argument
advanced by the OFT, I say no more about that.”
64. Mr Crow did not submit before us that if the Relevant Charges formed part of the
price paid in exchange for the package of services, they could not be included within the
meaning of the word “price” in Regulation 6(2). I consider that Regulation 6(2) could
apply to a complaint that the Banks’ charges overall, of which the Relevant Charges are
an important element, are unfair because those who pay them pay an excessive amount in
exchange for the package of services in respect of which they constitute part of the
payment. Thus the issue of whether or not the Relevant Charges form part of the “price or
remuneration, as against the goods or services supplied in exchange” within Regulation
6(2) is not necessarily academic. No attack has yet been made, however, on the level of
the Banks’ charges overall

So read this post What Should You Do Now The Judgments Been Handed Down - Legal Beagles if you are trying to work out what to do next.

[orc]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

I must admit when this all kicked off I thought they where investigating the use of s5, but now it has become clear that is was all about a few sub-paras of s6.
ALL of my POC's have already been written with ref to s5 anyway, so the game is STILL on.
Also now that the FSA have lifted the waiver, the rules change significantly.

I think the banks have, or soon will, realise that they aren't out of the woods and they will end up with the stuffing they so royally deserve.
Things would of been slightly different had they not almost brought the entire world economy crashing down around us.
It about time they realised that they must be accountable to their customers, ie US !!!

Spot on!

Great to see you are still an incredible bloke and the grey matter is suitably engaged!
------------------------------- merged -------------------------------

I'm concerned that courts will see a bank charges claim and go, ''ok thats out then as the supreme court said so'' and strike/dismiss the claims, without even looking at the ACTUAL claims. So thats what we need to counter, rather than the judgment as such.

(I hope that makes sense guys)

You are bang on. (that was hard but I'm over it, life moves on and this issue is too important).

We all know what's happened in the past, eg credit card claims caught up in bank charges court process.

[Dougal16T]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Good morning everyone,

First: My sincere thanks and good wishes to all members of the site team for their fantastic efforts and hard work.

Second: I agree entirely with the thoughts that Reg 5 is the way forwards.

Third: It is perfect sense to wait for a statement from the OFT

Fourth: It is also essential to wait for any announcement from the MOJ BEFORE doing anything!

Again kind regards to all, and if it is not too early, a merry christmas :hungry: to all my readers!!

As ever
Dougal

[jibbsy1912]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Is there any news on the anouncement from the MOJ soon? Def agree with all the posts we have to let the dust settle. I think those smug gits think they have got away with it and hope that we give up! What they dont realise is that we all want justice and we are not prepared just to walk away! Great work every one, im sure if we all put our heads together we can finally nail those money grabing tos***s! Although im new to this site just looking at everyone's posts we can get there in the end! I also think they don't have any idea what this is doing to the average person. Having twice had my claim for financial hardship dismissed by both HSBC and Natwest because I earn enougth to pay my rent and be able to get to work!Does anyone know where I stand on this, because i put my self in new debt because I borrowed from stupid companies i.e payday loans in order to live, but theyy wont look at that debt! I will not give up, lets stand up and be heard and we will finally get justice!!!!!!!!!!