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

[Vortex]

Re: DAY 8

Only additional bit I would mention is EC(at the time) Directive which brought about UTCCR 1994 and 1999. Doctor did state that the 1999 regulations on the contentious section 6 resembled the original wording of the EC Directive that had previously been made within the 1994 regualtions(it is worth reading all three documents)

There was a clarification on section 6.2(a) and 6.2(b) with each bank either claiming to have submitted a response to one of them but orally submitting another one and vice versa. I have to say that my notes about Doctor was that he had a stuttering bumbling way of presentation. This afternoons tortuous first part of the session would have seen most people carried out comatose. It was amazing to see the test case in action. The Judge is without doubt very meticulous and someone who you would be happy to be stuck in a lift with. The lady who exc refers to is none other than a lady from the Northern Ireland Consumer Council who have a vested interest in the case.

I should add that Doctor's final point did leave you hanging awaiting for the next instalment tomorrow morning. His minor indiscretion this afternoon was redeemed by that last example quoted above. Unfortunately, I am unable to make the next instalment but I would urge anyone with the time to go and see the OFT test case in action. And the added bonus is of meeting EXC.

[EXC]

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

Day 9

The OFTs Brian Doctor picked up where he left off yesterday on the interpretation and the interpretations of interpretations of the all important meaning of ‘the main subject matter ‘ referred to in section 62b of UTCCR. ‘’We must adopt the typical consumers’ view of what the main subject matter is as it is ultimately a matter of interpretation’’ and that it ‘’cannot include services the supplier is not obliged to supply’’.

On 62a he said that the First National Bank appeal judgement in the House of Lords made no real distinction between 62a and b and that the banks were not putting forward 62a independently.

Doctor then spent quite some time on defining the word ‘price’ in the regulations which state that the price for the main subject matter in the contract is exempt from regulation. ‘’The price’’ he said ‘’is the agreed sum for the exchange of services and goods but many payments in contracts are not the price’’. And he made an analogy of vacating a rented property and being charged for repairs but what the regulation stipulates is ‘price’.

He said that ‘’nothing has changed’’ between historical and current terms and conditions. ‘’Some banks have written 2 new versions since these proceedings have begun’’ and that ‘’the receipt of all this bumph by the consumer hasn’t changed a thing. The new contracts have been introduced to provide a theoretical construction to meet the regulations and the clauses were designed to fit the exemption’’.

Quoting some T&Cs that warned customers of unwanted charges the judge joked ‘’as opposed to wanted charges?’’. He said that as the banks conceded that only a minority of people incurred the charges they cannot claim it is a core part of the bargain. ‘’If the charges were for the main subject matter, why do they have a discretionary policy to waive them?.

Pushing his luck a bit, Doctor said that ‘’in some countries in Europe drawing a cheque without the funds is an offence’’ but the judge smiled and said ‘’we’re not in Europe’’. Although Doctor conceded that the level of the charges is not relevant to this hearing, he said that they were ‘’prohibitively expensive’’. He argued that if a customer wanted to make use of the service ‘’it would be extremely difficult to work out the cost. You’d need a wet towel to work out what it is‘’.

On the banks submission that the charges were for ‘consideration‘ , ‘’we reject that out of hand. There is virtually no consideration charge elsewhere (outside the banking industry)‘’ and ‘’the service charge has been created and is a metaphor for what actually happens.

Overall his performance today was marginally better than yesterday. Although he didn‘t get in quite the same muddle it seems to me that his haphazard delivery is part and parcel of his style. But it was clear the judge found his submission difficult to follow. On several occasions when Doctor was pressing home a point the judge had to ask him which area of his case it was referring it to.

On occasion he would labour over a point that it was clear the judge had already understood and accepted. He also repeated points from yesterday that the judge had to remind him ‘’we’ve covered that’’.

But his strategy of concentrating his case on the interpretation and applicability of the regulations must be right as this is what this hearing is all about. He did come up with some very convincing arguments that the judge appeared to accept.
In my very humble opinion, if the OFT is to win it’ll be on the weakness of the banks case rather than the strength of the OFTs’ as effectively this hearing is about the banks challenging the authorities view that the charges are exempt from regulation and to a large degree it’s for the banks to prove otherwise. We live in hope.

At the end of today the judge asked the parties to take stock and map out the schedule for the rest of the hearing. The OFT are expecting to finish by tomorrow ( which should be the most interesting day of their submission when they go through the banks T&Cs) and Friday is adjourned. On Monday Brian Doctor will set out his stance on PIL and the banks will each give their reply and the hearing could be completed by Thursday.

[EXC]

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

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EXC


Day 10

Before going through each of the banks terms and conditions Brian Doctor started by clarifying some points from yesterday. He asked the judge to read a section of the court transcript from day 6 where Vos - unlike the rest of the banks - submitted that Nationwide’s contract changed when the customer went in to debit. Doctor began reading extracts from it. After some time the judge impatiently said ‘’we can’t go through pages and pages, what’s your point?

Doctor explained that as the contract ‘’changed fundamentally’’ it would ‘’make the regulations unworkable’’. And that a decision would have to be made by the judge as to which contract - credit or debit - would be considered in the Judge’s findings. After some discussion it was decided to use the credit contract and the judge made lots of notes.

The OFT QC then referred to Rabinowitz’s submission that described the ‘benefit’ to the consumer of having a payment refused as the ‘prospect’ of it being paid. Doctor argued that ‘’everyone has the ‘prospect’ of an overdraft by simply by walking in to a branch and asking’’. The judge reminded Doctor that he’d made that very point yesterday.

A discussion started, initiated by the judge. He asked Doctor that if, in the event of one or some types of charges were ruled not exempt from the regulations, how it would work with the regulations.as ’’We have to look forward’’. Doctor replied ‘’it depends on the nature of the findings’’.

Doctor said that before he went through the T&Cs, he wanted the judge to keep in mind that the regulations required that ‘’payments should be in exchange for something’’.

He started in alphabetical order with Abbey. ‘’These are an attempt to run the ‘services’ argument’’. He made references to the numerous times the word ‘service’ appeared throughout the terms and conditions. ‘’This is a self serving attempt to head off the penalties argument’’. He read from the T&Cs ‘’you may obtain an overdraft’’ and from another page ‘’you may deposit ‘’. He told the judge that Abbey have used the same word ‘may’ in two entirely different ways, May meaning ‘might’ and may meaning ‘can’.

He then quoted from a box in the contract that was marked ‘non-contractual’’. The judge asked him ‘’do you think it is contractual?’’ and Doctor said ‘’well if it says it isn’t I suppose it isn’t’’. The judge joked that he was making ‘’a major concession’’ but said he wanted to know his view. But Doctor said he just didn’t know and nor would the consumer.

He read out a section that said all payments are separate requests. He said standing orders require only the initial request and in the case of direct debit’s the request comes from the supplier. Another section referred to a charge if you ‘use’ an unarranged overdraft but Abbey’s submission is that the charge is for the ‘consideration’ of the overdraft..

He said that the T&Cs stated that if a payment is declined there would an unpaid item charge ‘’but what it doesn’t say is in that situation you would also incur another charge’’. Doctor produced a ready reckoner of how the charges were incurred in various situations that a declined payment ‘’could trigger charges indefinitely .’’ Also the monthly overdraft fee is not linked to any service’’.

On Barclays he read ‘’we expect you to keep your account in credit…..to avoid unnecessary charges’’ and said this was not consistent with the main part of the contract argument. Under the heading ‘Charges on unauthorised overdrafts’’ was the returned item fee. ‘’Why?’’

Again he went through the same points as he made with Abbey’s T&Cs but the judge said he didn’t need to make the same points several times on all 8 banks contracts.

Clydesdale’s, he said, tried to come closer to linking the charges to a service but still ‘’failed miserably’’. On a line that Clydesdales T&Cs referred to about returning a payment, Doctor said that this can only apply to a cheque. ‘’you can’t return a direct debit or standing order. It doesn’t go anywhere’’. On the daily unplanned borrowing fee he said it wasn’t a payment for anything but ‘’a state of affairs’’.

Unfortunately, today I could only make the morning session and missed out the rest of the banks terms and conditions.

Brian Doctor

Having just read what I’ve written on the mornings proceedings you’d be forgiven for thinking that the OFT QC had a relatively good day judging by the points he raised but it doesn’t tell the real story.

From the moment he started he clearly annoyed the judge by making him read vast extracts of the transcripts needlessly because Doctor had misquoted the page number.

There was no pre-defined order to his submission and the judge repeatedly asked him which of the five areas he was on that Doctor originally listed. He went from Abbeys terms and conditions to Barclays when the judge said ‘’Do you not want to cover Abbey’s price list?’’ Doctor replied ‘’Oh yes!’’.

He seems to have made no attempt to rehearse his submission and his support team would prompt him by plonking hastily written post-it notes in front of him on dozens of occasions. The contrast in the preparedness and delivery of the banks flawless legal teams was unbelievable.

A legal professional in the feed room who was watching the hearing for the first time today, turned round to me after five minutes and whispered ‘’is he like this all the time?’’

I lost count of the times my eyes met with a Which? lawyer who would stare at me unsure as to what expression she should wear. Although I found it quite distressing at times you couldn’t help but join in the frequent chuckles of the others watching. gaff after gaff. At one point I could clearly hear laughing from the banks legal teams.

What effect this could have on the outcome of the case is impossible to say. It may well not have any, as the judge has clearly got a firm grasp of the issues and is certainly bright enough to base his decision on the facts alone. But whatever happens the case will end up in the House of Lords on appeal and if the OFT don’t replace him, they should certainly be encouraged to.

[EXC]

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

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EXC


Day 11

Brian Doctor spent most of today finishing off his submission on the subjects of good faith, PIL and penalties. The good news is that he had by far his best day in terms of performance and delivery. He was in a different class than anytime last week. I’m not too sure where he went at the weekend but I want to go there. He was relaxed, concise and looked well prepared. Go Doc!

Finishing off on good faith from Thursday he said that the wording of Justice Smith’s declaration on good faith would have ’’far reaching effects on County Court litigation’’. He said that regulation 61 - assessment of good faith of terms - should take in to account subsequent amendments to T&Cs if they effect the assessment of fairness and also that the regulations could apply to pre 1994 contracts if contracts are subsequently amended.

He referred to a quote from Rabinowitz that ‘’foreign commentary (on the case) is unreal and in cloud cuckoo land’’. Doctor said that this comes from places ‘’where good faith is an everyday concept’’. Then quoting from Lord Bingham in the First National Bank case Doctor said that it is not just the literal terms used in contracts that should be assessed but ‘’their likely effect’’. The judge went even further, ‘’it’s more than that’’.

Next on the agenda was plain intelligible language. Apparently the ‘clarification’ document that has been bouncing between the OFT and the banks since the start of the case has been finalised and doctor handed copies out to the banks and the judge.

He said that the OFT’s skeleton on PIL may have been overstated. ‘’Just because something is not in PIL doesn’t mean it’s unfair’’ and that ‘’PIL and fairness need to be considered separately’’.

He gave an example of how PIL doesn’t work: If you order from a supplier and the T&Cs state that the price will be decided on delivery of the goods, then it’s not in plain intelligible language even though the meaning of the contract is understandable.

Doctor said that there was uncertainty in the order in which the banks processed payments. The judge reminded him that the T&Cs stated that the order of payments was discretionary but Doctor said that in banking law practice, several payments processed on the same day should begin with the smallest payment first.
Referring to the OFT’s ready reckoner of charges he said that Abbey could repeat charges indefinitely even though the bank had pleaded this would not happen in practice, so he questioned that the terms did not make this clear. There was also uncertainty in the enforcement of charges and he made reference to the many times that T&Cs stated ‘there MAY be a charge.

He said that many of the banks accepted that they may lead to uncertainties. But the bank’s claims that contracts are too complicated to be in PIL and would require ‘’a complicated payments manual’’ are self inflicted.
He pointed out the bank's enviable position of being able to deduct charges from accounts rather than having to invoice them like the rest of industry made the charges more difficult to query and that the banks ‘’don’t benefit from the discipline of enquiries’’.

Their was a discussion with the judge about Doctor’s views on some terms that Doctor considered didn’t amount to a term. The judge said that the OFT’s POCs defined them as terms and as such they can’t be exempted ‘’if the OFT don’t consider them as terms.’’

On penalties he started by saying the context in which are ruled ‘’is important to the County Courts as penalties arise in all claims’’.

On the bank’s argument that the regulations ousted common law, he said ‘’the argument cannot succeed as the directive is the minimum. There is nothing in the regulations that says it supersedes common law. There is no reason why they can’t run hand in hand’’. The judge seemed to agree and said ‘’I’ll be asking Milligan how this displacement occurs’’.

Another discussion began about the exclusion of historical terms and conditions in the penalties argument. Doctor asked the judge to reconsider historical T&Cs and the judge indicated that he may do this ‘’as a supplementary judgement’’.
Doctor said that phrases like Barclays' ‘’you must not…’’ and that a guaranteed cheques ‘’must not exceed the funds available’’ clearly suggested a breech of contract. He jokingly said ‘I don’t want to pick on Barclays but they’re all much the same’’ and the judge laughed.

Justice Smith asked Doctor an interesting and possibly revealing question: From the consumers point of view, if the OFT’s argument on penalties is upheld, would it be better for the OFT to consider penalties under common law or UTCCR? Doctor, who looked as though Christmas might have come early, said that he’d get back to the judge once he’d consulted the OFT.

He finished off on disguised penalties making an analogy of a video rental which is a pound a day for the first 7 days and then £50 for the eighth day.

RBS QC Laurence Robinowitz began his reply shortly before the hearing ended. Interestingly, he ended by informing the court that the FSA had issued their document on PIL which the judge had asked the FSA to do. As a financial services regulator, what on earth are the FSA doing by going through the defendants to announce it?

It was good to see Bob Egerton and Budgie at the hearing. Both Bob and Budgie enjoy nothing more than taking banks to court.. Budgie told me more than a few times ‘’I love it’’.

[Budgie]

Re: DAY 11

I thought I would take the opportunity to add some comments to Exc's excellent report but firstly I would like to personally thank him for the time spent with me today, for lunch and for his continuing diligence in reporting this momentous event. I would really encourage any of you who could make a visit to the hearing to get along before it finishes. You are missing probably about the best free entertainment on offer anywhere.

I arrived at the IDRC at 8AM and obtained my pass for the day from the lovely young lady on reception. She told me that the hearing was due to commence at 10AM but that it may be delayed. I wandered up and down Fleet Street for half an hour ( had a peek at the Royal Courts of Justice - very impressive ) and replenished caffeine and nicotine levels before arriving back at IDRC at 10AM.

Viewing room is on second floor, small room with about 20 chairs and two TV screens, one is permanently set on Judge and the other on whichever QC is speaking. Proceedings were just about to start, sound quality is very good. I introduced myself to Exc and to a guy from "WHICH" whom I believe has been present at every day of the hearing so far. Only other people in the room were a couple of Court Ushers. Although various others people did pop in throughout the day, including Bob Bankbuster Egerton, a BBC news reporter, a couple of young Barristers and one or two others who may have been claimers but did not introduce themselves.

Anyway moving onto the events of the day :-

I totally agree with Exc's impression of Mr Doctor. I feel I owe the man an apology because I made some disrespectful comments in relation to Mr Doctor on the Day 10 report thread. It was suggested that his oratory may have been slicker today because he was dealing with slightly less difficult areas than last week but to be honest once he warmed up he was superb !

I have nothing really to add to Exc's summary on the Good Faith portion of his report. This section did seem to drag on for a while but Exc’s summary is spot on.

PIL also dragged on for quite a while as Doctor interspersed his presentation with many examples relating to this subject. One thing that Exc didn’t mention is that the OFT are now only pursuing objection 1 ( and not objections 2 and 3 ) in light of an alternative argument they have prepared relating to “obligation”
In summary, Doctor stated that the Banks argue that in relation to PIL, you should not look beyond the actual contract terms, whilst the OFT argue that you should not just look at the terms of a contract but also at the implied obligations. The OFT are concerned by the practical operation and effects of the contract as well as the actual terms contained within the contract. The OFT say that if the terms do not deal with the “obligations” then, as a result, the terms themselves cannot be considered to be in PIL as the Consumer is thereby not capable of making an informed choice. The alternative “obligations” argument from the OFT was submitted to the Court. Bear in mind that Doctor is effectively presenting first on PIL so the Banks will respond and Doctor will have a right of reply.
There was a lot of additional dialogue from Doctor on this “obligation” argument and a quote from Doctor “ these are more than just forensic points” but am sure Exc will pick up on this as and when the banks respond.

Also, Doctor did state that if the banks actually admit that certain of their conditions are unclear, even if owing to the nature of their business, then as far as the OFT are concerned that is enough in itself to suggest that the terms are not in PIL.

One other very interesting comment from Justice Smith in relation to PIL was that 6.2 is considered to be an “achievement” prize and not a “hard work best effort” prize.

The penalty / common law presentation by Doctor was for me the most interesting event of the day. I quote from the relevant section of Exc’s report below and have added some additional commentary of my own.

On penalties he started by saying the context in which are ruled ‘’is important to the County Courts as penalties arise in all claims’’.

Here, Doctor was referring to the fact that Justice Smith will be giving guidance to the County Court regarding the penalty aspect of the stayed claims

On the bank’s argument that the regulations ousted common law, he said ‘’the argument cannot succeed as the directive is the minimum. There is nothing in the regulations that says it supersedes common law. There is no reason why they can’t run hand in hand’’. The judge seemed to agree and said ‘’I’ll be asking Milligan how this displacement occurs’’.

Additionally, Doctor stated that the UTCCR regulations are a mandate of EU law there has been no involvement by UK Parliament and there is no need or directive to replace or supercede established UK Law. Justice Smith also said that he would be asking Milligan exactly what displacement he was looking for.

Another discussion began about the exclusion of historical terms and conditions in the penalties argument. Doctor asked the judge to reconsider historical T&Cs and the judge indicated that he may do this ‘’as a supplementary judgement’’.

On a humerous note. Doctor request also included the rider "should you be able to find the time and the ability to to do it my Lord" ........Justice Smith responded that finding the time would be feasible but the second issue might be a bit of a problem.

Justice Smith asked Doctor an interesting and possibly revealing question: From the consumers point of view, if the OFT’s argument on penalties is upheld, would it be better for the OFT to consider penalties under common law or UTCCR? Doctor, who looked as though Christmas might have come early, said that he’d get back to the judge once he’d consulted the OFT.

To my point of view this was highlight of the day !

Additionally Doctor stated that "the Banks theory that terms are Charges for a service and therefore cannot be penalties was an artificial and unreal analysis"

And Doctor also ridiculed the Banks reliance on Jarvis Vs Harris and how this was a demonstartion as to how the Banks terms are charges for a service. ( this case refers to a Lanlord and Tenant relationship, where the Tenant fails to carry out repairs, the Landlord could carry out the repairs himself and charge the cost to the tenant ).
Doctor cleverly stated that this was a seperate act, a definite act, the lanlord could only claim back the actual cost of the repairs. This bore no resemblance at all to the issue at hand. The Landlord was only entitled to recover his costs.


I thoroughly enjoyed my day at the Test Case and am hoping to get back up on Thursday.

Hope to see some of you there

Budgie

[EXC]

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

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EXC

Day 12

Rabinowitz kicked off by replying to the OFT’s ‘’narrow interpretation’ of the concept of ‘service’ in which the regulation 62b talks about goods and services supplied in exchange for a price. He said that ‘service’ should be understood in a wider context as in the European meaning. He relied on a European Court of Justice case which although dealt with what tax category a restaurant would fall in - service or goods - the judgement suggested that all preparatory acts like laying the table would be included in the overall price of the meal and just like bank charges the various services make up the charge.

‘’Banks go through a great deal when presented with a payment’’ and he went through the various stages. All payment instructions were processed and then considered. When a payment is made while in debit, the payment is ‘granted’. All this, he said, ‘’involves substantial and expensive technology, infrastructure and human involvement’’. But the judge said that ‘’the expense is irrelevant’’.

Rabinowitz continued that when a payment instruction is received when in debit the instruction becomes ‘’a purported instruction or request’’. The judge asked him ‘’is that formulation what you explain to your customers?’’, Rabinowitz said that ‘’it is what the contract implies’’. The judged asked, if in the event of a non paid item, notification letters were issued and if so were they part of the service.

Rabinowitz said that not all banks sent them but for those who did it formed part of the service. The judge asked Rabinowitz if RBS sent the letters and somewhat surprisingly, the lead RBS QC, who is understood to be charging in excess of £10000 a day, didn’t know.

He accepted that services must be in exchange for a price. The judge questioned if this was a departure from his ‘price for an overall package’ argument but Rabinowitz said it was ‘’an alternative argument’’ and that the OFT did not offer an explanation as to what the charges were for. ‘’People don’t pay charges for nothing’’. The judge asked him if he agreed with the OFT’s view that the regulations require charges to be clearly identified.
‘’No’’ Rabinowitz said.

Before finishing Rabinowitz agreed what OFT’s Chief Executive John Fingleton said about the possibility of the change to the way banking is structured. ’’I don’t know if you saw him on the Money Programme?’’ The judge replied ‘’ I did but so what?’’. Rabinowitz warned of the end of the free banking while in credit model.

Just before he sat down Rabinowitz through a spanner in the works. He referred to Brian Doctor’s submission yesterday that the issues of good will and PIL should apply to T&Cs going back to 1994 and even before. He said the banks were under the impression these issues would be based on current T&Cs alone and that if the OFT had it’s way, the banks would need more time to respond. He said the backdrop to this is the ‘’enormous implications it could have to people up and down the country in County Court litigation.’’ The judge asked Rabinowitz to ‘’caucus’’ the banks on there views but that ultimately it was a decision for the judge.

The banks reply to the OFT on PIL was the responsibility of HBOS QC, the unfortunately named Robin Dicker. He said that under English law, banks are not obliged to provide information as to how a contract works in practice. He said that current account T&Cs ‘’are simple arms length contracts’’. But Justice Smith said ‘’I’ve got to realistically consider that if you go to open a bank account it’s counter intuitive to think you sit and read the T&Cs while the bank manager taps his fingers’’. Dicker reminded the judge that the Banking Code allowed for a cooling off period.

All though he’s not yet finished, the rest of his PIL reply was quite tedious going with interpretations of case law judgements and the preparatory documents of European directives and UK regulations.

Before they adjourned for the day, Milligan hit the judge with a bombshell. He wanted the judge to ‘give an indication’ as to his recommendation to County Courts by the end of the hearing. He was effectively asking Justice Smith to make his recommendation before he had even considered his judgement on the hearing. Milligan explained that the duration of many of the current stays end immediately after the hearing finishes. The judge conceded he hadn’t realised this but cast some doubt as to if this could be achieved but has yet to make a decision.

The judge is very keen to conclude the hearing this week and the following schedule has been agreed by both parties: Dicker will have an hour or so to finish on PIL in the morning and then Milligan will give the banks reply on penalties. The rest of the banks will give their replies to the OFT’s reply before Brian Doctor finishes by giving his reply to the banks replies. Got it?

The hearing won’t sit on Thursday due to Doctor being in court on another case and as Justice Smith has another court appearance at 11.00 on Friday the hearing must finish by 10.45 and will start at 8am. Although he hasn’t given any indication when a judgement will be reached the judge suggested that when the judgement is handed down they should schedule in a case management conference. Milligan asked the judge for at least 7 days between the written summary of the judgement being provided and the handing down and CMC but the judge said that due to the possibility of a leak, 7 days would be ‘’pushing it’’

So it looks like the hearing could be finished before lunchtime on Friday but I can’t help thinking that with so much yet to cover and at least 2 major issues still outstanding, it’s going to be a bit tight to say the least.

[EXC]

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

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Day 13

Robin Dicker continued with the bank’s reply on Plain Intelligible Language and again Justice Smith raised the subject of small or feint text. ‘’Is this part of the language?’’ and Dicker said that ‘’if you can’t physically read it, it doesn’t mean it’s not in plain intelligible language’’. The judge asked the same of ‘’hands and boxes ‘’ but all Dicker would say is that they are ‘’incidental’’.

Throughout the morning the HBOS QC who is the most unlikable of all the banks lawyers clearly tried the judge’s patience which made for some very entertaining exchanges and Justice Smith would sometimes exhale through his teeth and slam files closed in dissatisfaction.

Dicker asked the judge to consider the Competition Commission’s views on PIL which were not in the court bundle. ‘’Are you presenting this as law or fact?’’ snapped the judge. ‘’I’m assisting my Lord in understanding authorities interpretations of PIL’’. ‘’But is this law or fact? We’ve got to have some discipline. We’ve got to talk like lawyers’’.

Pushing his luck too far Dicker explained that the Competition Commission thought that if contracts were considered acceptable by a Plain English organisation or they passed market research criteria, it would follow that they’d be in PIL. ‘’That’s what HBOS do’’. The judge said despairingly ‘’This court is the independent authority on PIL. The Competition Commission were not interpreting PIL, they were just saying ‘that looks nice to us’ ‘’.

And again Dicker came unstuck when he selectively quoted from OFT bulletins on PIL but the judge insisted on reading them in their entirety. ‘’ I can’t help thinking that there’s a certain amount of cherry picking going on here’’.

The subject of the order in which payments are processed was raised and Dicker said it was the customer’s choice to present multiple payment instructions on the same day and that ‘’the customer implicitly expects the bank to use it’s discretion’’ because ‘’the customer hasn’t given any instructions as to the order they want them processed’’. But this service was news to the judge, ‘’I’ve never heard of this. Could these instructions be reasonably expected to be accepted? Is it the case that HBOS accept these instructions?’’ After a pause Dicker replied ‘’that is my understanding’’. The judge put the question to Barclay’s QC, Milligan, who said ‘’I don’t know my Lord’’.

Having spent all morning on the ropes the ‘Dickster’ was visibly relieved when he finally finished his reply.

Before Milligan started on penalties the judge addressed the question of his advice to the County Courts that Milligan had raised yesterday. ‘’It’s for the County Courts to decide on cases before them. All I can say is that many cases have been put on hold for this one and I haven’t discerned anything in this hearing that undermines that expectation. I can’t intervene in the county courts’’. In essence the judge was saying that any recommendation to the County Courts would have to wait until his judgement was handed down. Needless to say Milligan was delighted. ‘’That’s very helpful my Lord’’. I bet it is.

I have little doubt that the banks knew the judge wouldn’t be able to commit himself to any County Court recommendation until his judgement is made but wanted this confirmed to protect any challenge to the FSA’s complaints handling waiver.

The Barclays QC continued on penalties. At one point the judge asked if consideration itself was a ‘’service supplied’’. To isolate his point the judge asked ‘’if the bank manager dies after his consideration but before effecting his decision, has the consideration service been supplied?’’ . Milligan said it was ‘’a constituent part of supplying a service’’.

Milligan poured scorn on the OFT for their view that the case is not about the level of charges and that the OFT were adopting the regulations to attack them. He said that if the charges were not £35 but 1p the OFT wouldn’t claim the charges were unfair and he described this as a ‘’vanishingly small point’’.

Picking up Brian Doctor’s penalty analogy of the video rental being £1 a day but £50 for the eighth day Milligan said it could not be a penalty ‘’if the video store had the right to it on the eighth day.''

The rest of the day was taken up with brief replies from Thanki, Malek, Salter and Taladano who was standing in for HSBC QC Snowden, all of which said nothing new. Only Vos and Doctor are left to speak and it looks like the hearing will conclude on Friday morning.

[EXC]

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

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Day 14 final day

Justice Andrew Smith began by addressing the documents left on his desk by the various parties and in particular one by the FSA.

Although he didn’t reveal the contents of it, the document appeared to relate to the decision by the judge not to take historical terms and conditions into account during the hearing. The judge took great exception to the FSA’s view this was because the court didn’t have enough time to include anything other than current T&Cs.

The judge reminded the FSA that he had indeed offered to make time available but the issue was simply ‘’unmanageable’’ to consider and that historical T&Cs were not part of the preliminary issues. He said, referring to the FSA, ‘’it is unfortunate that this has been distorted’’ and ‘’frankly I don’t think it should be put in any public document’’. The FSA’s legal representative stood up and meekly offered an apology for her ‘’misunderstanding’’.

Mr Vos for Nationwide began his reply saying that the charges and interest were in exchange for both a package of services and ‘’obviously and naturally the price for an overdraft’’. He said that Nationwide’s view that their contracts change when a customer goes from credit to debit ‘’had not been responded to by the OFT’’. He countered the OFT’s contention that contracts should be judged in the view of a typical consumer by saying that there were 2 types of typical consumer, ‘’a credit consumer and a debit consumer’’. The judge suggested that for a customer who regularly goes in to debit before pay day, changing his contract monthly ‘’may be pushing it too far’’ when they ‘’just crossed the debit line’’.

On the subject of the order in which same day payments are processed Vos said that many incoming payments were ‘’outside the banks control’’. He said that the bank have complete discretion as to the order payments processed and the judge asked him what he thought of Brian Doctor’s argument that banking law procedure indicated that the smallest payment should be processed first. Vos conceded ‘’there is some authority on that.’’

Vos claimed that the OFT had accepted that payment instructions were not deemed requests but the judge said that ‘’when one charge triggers another, we move closer in to the world of deeming’’. All Vos could say was ‘’I don’t make any comment on that’’.

The judge asked him if the order of payments were ‘’too complicated to state in the contract?’’ Vos said he’d prefer to use ‘’too confusing’’ but Nationwide’s contracts did give some clear guidance. ‘’Yes but not within a day’’ said the judge.

Brian Doctor covered much of the same ground as before. He spoke on the ‘seven uncertaities’ and the judge seemed to disagree with several of his points.

Doctor said that some of the banks T&Cs were contradictory in saying that the balance of the account would be taken judged at the time when payment instructions were considered but that expected incoming payments ‘may’ be taken into account and making it difficult for the customer to know what balance was being considered. He quoted Nationwide’s contract that stated internal transfers made before 5pm would be credited to the account but made no mention of external credits but the judge said that if no obligation was in the contract, what actually happens is irrelevant.

At 10.30 sharp the judge thanked everyone and got up to leave for the last time. But before he could straighten his back the bank’s QCs piled in with questions about his judgement. Robin Dicker popped the big question of when the judge expected to reach his judgement., ‘’I have no idea at all’’ the judge said.

Malek then said that as the case had attracted such interest, how would the judge manage the risk of a breech of confidentiality between giving his written summary and handing down his judgement and said that even body language could give the game away. Justice Smith said he understood the potential seriousness of a leak and would be considering restricting his summary to 2 counsel per party but Brian Doctor protested at the imbalance of 16 members of the defence versus 2 of the OFT and the judge said he would consider it. Earlier Thanki had asked the judge for more time between his written summary and the judgement so the banks could prepare for the inevitable deluge of calls on the status of claims.

The judge suggested that in consideration of his judgement, it may be that additional information and clarification could be required from both parties and rather than doing this in writing it may be sensible to hold a ‘’discrete hearing’’.

The banks also wanted to know about how his decision on the current terms and conditions would effect historical T&Cs which were largely the subject of current litigation. Justice Smith said that at this stage there was ‘’every indication that my findings on current T&Cs would translate to many historical contracts in very short order, possibly within a month’’. This meant that the principles he reaches on current T&Cs could be applied to most historical T&Cs by the county courts and presumably this would necessitate the amending particulars of claim and defences that are currently stayed.

The Seven Deadly Sins of The Eight Deadly Sinners

These are the 7 issues on plain intelligible language that the OFT has with the banks.

1. The qualifying of ’available funds’.
2. The qualifying time of ‘available funds’.
3. The order in which payments are processed.
4. The constitution of a ’deemed request’.
5. Uncertainties of the outcome of a ‘deemed request’.
6. The uncertainty of the scope of the relevant charges.
7. The uncertainty of the enforcement of the relevant charges.

It was notable that the banks somehow managed to grasp the concept of plain intelligible language during the course of the hearing on the very issues of PI L itself - even though this didn’t seem to apply to their terms and conditions. For the first few days it was ‘the seven deadly sins’, midway through the case it changed to ‘the seven ambiguities’ and at the end of the hearing it was referred to as ‘the seven uncertainties’ which is what the OFT called it in the first place.

It was also interesting to note the different terms each bank used for ‘unauthorised overdraft’. Depending on the bank it was ‘unplanned overdraft’, ‘instant overdraft’, ‘unarranged overdraft’ or simply good old fashioned ‘unauthorised overdraft’ which became the standard term used by all the banks, the OFT and the judge during the hearing. Though I can’t help thinking that the term ‘unauthorised’ doesn’t sit too comfortably with the banks pleadings that their charges are for the consideration and inevitable authorisation for an overdraft that is then classified as ‘unauthorised’.