DIARY of the OFT Test Case - as it happens - EXC

**EXC** · 17th January 2008, 21:41:PM

Re: Day 1 - OFT Test Case - as it happens

It’s showtime

Queens Counsel for the Royal Bank of Scotland Laurence began by setting out the background to the case. He talked of ‘’the torrent of claims’’ thatthe banks had faced and ‘’the deluge’’ on the Financial Ombudsman Service.

He said that the issues of the relevance of UTTCR and Common Law need to be settled and it was appropriate for the Office of Fair Trading was involved. However he was less certain about the OFT’s views on their findings in the April 2006 investigation into credit card default charges that there was cross-over to current accounts. These he described as ‘’ill judged comments’’. The judge interrupted, ‘’this doesn’t affect the case’’. The QC paused briefly and continued. ‘’a hornet’s nest has been stirred’’.

Rabinowtz turned to his submission telling the judge that none of the witneses who had given statements to the banks case would be cross examined. There was then an interruption from a distant bank’s QC, Milligan, who complained of ‘’the amplification not working’’ and not being able to hear the judge’s microphone. ‘’I believe Mr Milligan is having trouble with me’’ the judge said. ‘’perhaps the beginning of a stream?’’. Although said tongue in cheek it must have sent a little bit of a shudder down the QC’s back.

During the next part of his submission the QC recommended to the judge that the volume of historical trems & conditions was such that for the judge to consider all of them in detail would be......

More in a bit if I'm still conscious....

**EXC** · 17th January 2008, 22:19:PM

Re: Day 1 - OFT Test Case - as it happens

Tom, Stephen & Phil outside the IDRC and out to lunch, & The Bunker

**EXC** · 18th January 2008, 10:06:AM

Re: Day 1 - OFT Test Case - as it happens

Day One Continued.

........to focus on the key aspects of them. he said that the OFT would concentrate on current T&C’s and it was for the FSA to look at the historical ones.
Rabinowitz out-lined the ‘’constructive issues’’ of the UTCCR, relating to 62b which the OFT believe do not form part of the contract.

The issue of the T&C’s being in ‘’plain inteligible language’’ was raised and became the most interesting exchange so far. After harping on about the balance that was needed to be struck between plain intelegable language and concise wording the judge intervened with the OFT’s view that far from being in plain inteligable language, they were ‘’in no language at all’’.Justice Smith went on to give an example: If aspects of T&C’s are subsequently defined in a leaflet then the T&C’s are in no language at all. Therefore ‘’the question needs to be asked, does a term need to be made clear that it is in fact a term?’’. It was clear he thought it does.This was significant in that the judge was clearly on the OFT’s side on this point and it prompted wry smiles and nods of approval from Stephen and Tom.

The QC went through 2 cases that supported the bank’s case - one involving First National Bank and the other Easy Car Hire. The rest of the session was taken up with quite tedious stuff about EU directives and there application.

The quality of the legal arguments of his case aside, there’s no doubt that the RBS QC gave a very polished performance. Throughout the 5 hours he was putting his case he rarely looked at his notes and never faltered in his delivery. Like him or loathe him, it was seriously slick stuff.

Tit bits

The attendant to our feed room wore a school teacher like black robe and came across as a headmaster. On occasion there was an iterference to the sound of the feed and he would stroll around suspiciously in the hunt for someone’s switched on mobile. Matters weren’t helped when half way through the morning Tom Brennan’s phone rang and instantly realising the gravity of his fax pas he made a calculated judgement call not to risk fumbling around for his phone and he made an undignified sprint for the door Honestly, these bloody legal types eh?

In the gents which were located next to the hearing room I spotted 2 emptyminiture bottles of vodka stashed in a apaper towel holder. Interesting.

The judge was neither robed or wigged and wore a suit and tie.

The transcriber in the hearing halted the proceedings when her machine broke and the judge called for patience until it was dealt with, ‘’we must have a transcript’’.

During day one it emerged that the judge and the OFT did not have copies of a section of RBS’s court bundle. Naughty.

**EXC** · 18th January 2008, 21:47:PM

DIARY of the OFT Test Case - as it happens

Day 2

At close of play yesterday the judge had ordered an 11 o’clock start for today, half an hour later than yesterday. And this was confirmed again when I picked up a pass at 8.00 this morning. But on returning to the venue at 10.40 I was surprised to find the hearing was already well underway.

After a while it became apparent that the bank's had made an overnight representation to the judge about several issues they weren’t happy with and the entire morning session was devoted to discussing them. From what I could understand after missing the start, there were basically 2 issues. the first being the status and significance of historical T&C’s in the case which I’ll return to in a bit.

The second was a criticism of the way the judge was ‘’speaking his mind’’ when dealing with the bank's submission and this seems to relate to the format of the hearing in which the banks set their case out first. Like others I’d always assumed that as the defendants in the case the banks would go last but as Tom explained yesterday, as the OFT have long stated that UTTCR applies to the T&C’s, the onus is on the banks to effectively challenge the view of their regulator. And this appears to give the OFT 2 advantages: the first that they get to hear the banks case first and can respond accordingly but secondly the OFT can see in what areas the judge feels the banks case is week through his questioning and the OFT can then focus their attack on those issues. Hence Rabinowitz is keen for the judge not to reveal his views on the bank’s case.

The judge told him ‘I want you to object if you think the issues I’m raising are adversarial’’. but the RBS QC declined the invitation. Rabinowitz suggested that a solution would be for the OFT’s QC Brian doctor to give a summary of his submission before the other 7 banks set out their case. But Justice Smith is yet to make up his mind on this.

The judge then asked each bank’s lead QC to summarise their views on these issues and it was during this time that one QC raised the issue of the current County Court stays of which the judge said ‘’I need to decide at the end of this case what recommendation to make on the issue of stays to the County Court.'' The QC replied ‘’but after any appeal’’, to which the judge simply said ‘’no’’. The Nationwide QC responded ‘’ We would need clarification of your recommendation of stays’’

This is a clear indication that if the hearing goes the OFT’s way, the judge will recommend the County Court lift stays. Bingo!

This would follow Tom’s view that even if a subsequent appeal was lodged, a favourable judgement would be enough to get the stays lifted as ‘’a judgement is a judgement’’ until it is successfully appealed. Returning to the subject of historical T&C’s, this took up the rest of the morning.. I must confess I really don’t understand this issue and it’s significance for the banks and for this case so I’ll leave it to someone else to explain but this is what was what was discussed:

The judge said he wants to ‘’establish the principals of current T&C’s and apply those principals to historical terms and conditions‘’. The OFT’s QC who spoke for the first time in the hearing said that ''for the purposes of this hearing, the OFT’s main interest is current T&C’s''. And the bank’s seem to be keen to introduce as many historical T&C’s into the equation as the judge would allow. The judge eventually decided that the banks should choose one historical set per bank. after it seemed that neither party or the judge was keen to make the selection

If anyone can shed any light on all this, answers on a postcard please….

After a quick sandwich lunch with TUTTSI in the plush and well lit Legal Beagles bunker, Rabinowitz resumed his setting out from yesterday and the contentious issue of plain intelligible language in T&Cs. After a while the judge again raised the subject of leaflets and their status in contractual terms. ’’Are leaflets enough to enjoy exemption? (from UTCCR)’’. The judge had earlier asked Brian Doctor for the OFT his stance on leaflets that appear to alter the contractual terms. ‘’Leaflets change nothing'' he said, ''They do not enable you to know why the charges are made’’.

The rest of the afternoon was really heavy going with the judge and Rabinowitz debating very complicated and fine points of what constitutes the core terms in contracts and therefore whether they apply to UTCCR.

Rabinowitz is still to complete his Bank’s submission. At the end of the hearing the judge commented that the case is now ‘’obviously behind schedule’’. And to make matters worse he said, (for reasons I don’t know,) that as things stand, the court won’t be sitting for the next two Friday’s and that the sentencing for his previous case will require him to miss another day ‘’probably during the week of the 28th’’. Needless to say it was the 28th that was scheduled to be the final day and there’s precious little chance of that.

The judge has scheduled an earlier start on Monday of 9.30.

.

**EXC** · 22nd January 2008, 18:33:PM

DIARY of the OFT Test Case - as it happens - EXC

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 ‘interoperate’ 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?’’

To be continued in a couple of hours.

**EXC** · 22nd January 2008, 18:40:PM

Re: Day 4

The IDRC feed room at lunchtime. The left hand screen is on the judge's seat and the right hand screen on the banks' QCs which when they are not in session is focused om the wall.

BBCs Ian Pollock is seen calling through the morning's report.

**EXC** · 22nd January 2008, 19:40:PM

Re: Day 4 - OFT Test Case report

Day 4 cont

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.

**EXC** · 22nd January 2008, 20:19:PM

Re: Day 4 - OFT Test Case report

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.

**EXC** · 23rd January 2008, 19:58:PM

DIARY of the OFT Test Case - as it happens - EXC

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.

**EXC** · 24th January 2008, 20:47:PM

DIARY of the OFT Test Case - as it happens - EXC

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.

**EXC** · 24th January 2008, 20:47:PM

DIARY of the OFT Test Case - as it happens - EXC

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.

**EXC** · 28th January 2008, 21:25:PM

DIARY of the OFT Test Case - as it happens - EXC

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.

**EXC** · 29th January 2008, 21:01:PM

DIARY of the OFT Test Case - as it happens - EXC

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.

During the lunch break over a pie with Tom and Vortex we all shared a little unease with Brian Doctor’s delivery which was notably less polished and more untidy than the smooth flowing performances of the bank’s Qcs . Tom’s view was that performance would only come into play if the legal arguments were close fought but in the main it was the strength of your legal case. I asked him if Doctor was, in ranking, on par with the banks legal ‘dream team’. Somewhat unnervingly he said that ‘’In legal terms, he’s a budget QC’’.

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’’.

At one point an ashen faced Tom whispered ‘’I don’t think I can sit through any more of this’’. And within 15 minutes he’d left. I'm not going to lie to you. It was truly awful. At one point I looked at the woman sitting next to me and her head was in her hands.

I never got the chance to get Tom’s post mortem on this unexpected episode of Mr Bean but Vortex put it down to lunch. I’m inclined to think it was simply bad preparation and nerves.

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.

**EXC** · 29th January 2008, 21:01:PM

DIARY of the OFT Test Case - as it happens - EXC

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.

During the lunch break over a pie with Tom and Vortex we all shared a little unease with Brian Doctor’s delivery which was notably less polished and more untidy than the smooth flowing performances of the bank’s Qcs . Tom’s view was that performance would only come into play if the legal arguments were close fought but in the main it was the strength of your legal case. I asked him if Doctor was, in ranking, on par with the banks legal ‘dream team’. Somewhat unnervingly he said that ‘’In legal terms, he’s a budget QC’’.

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’’.

At one point an ashen faced Tom whispered ‘’I don’t think I can sit through any more of this’’. And within 15 minutes he’d left. I'm not going to lie to you. It was truly awful. At one point I looked at the woman sitting next to me and her head was in her hands.

I never got the chance to get Tom’s post mortem on this unexpected episode of Mr Bean but Vortex put it down to lunch. I’m inclined to think it was simply bad preparation and nerves.

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.

DIARY of the OFT Test Case - as it happens - EXC

DIARY of the OFT Test Case - as it happens - EXC

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Announcement

Court Claim ?