Bank of Scotland v Mitchell case in the Leeds County Court.
Derek R Halbert
Designated Civil Judge, Cheshire.
12th March 2009.
Mitchell Vs Bank of Scotland (June 2009)
Below is the transcript of the recent Bank of Scotland v Mitchell case in the Leeds County Court.

Bank of Scotland V Robert Mitchell(1)

Leeds Judgement

The Combined Court Centre
Oxford Row
1st June 2009
For the Claimant: MISS GARDNER
For the Defendant: MR BERKLEY QC
Transcribed from tape by
J L Harpham Limited
Official Court Reporters and Tape Transcribers
55 Queen Street
Sheffield S1 2DX
1st June 2009
1. I have to deal with an issue as to costs which has arisen on the informal discontinuance of an action.
2. The action was commenced on 21st May 2008. The claimant bank had, in December 2003, issued a credit card to
the defendant, and the claim was for £15,417.23, being the amount said to be due on the defendant’s account.
Judgment in default, for a total sum of £15,727.23, was obtained on 4th July 2008. The defendant subsequently
applied to have the judgment set aside. That application came before District Judge Jordan on 29th January this year
and was successful. The recitals to the District Judge’s order say this: ‘And upon the defendant’s proceedings on the
basis of a breach of Section 61(1)(a) of the Consumer Credit Act, namely that the claimant failed to comply with the
requirements to give copies of all the documents relevant to the agreement at the time of signing, and upon the
defendant contending that notwithstanding Section 65 of the Consumer Credit Act 1974, Section 127(3) of the Act
preventing the enforcement’.
After those recitals it is ordered the court sets judgment aside, and it is ordered that there be, ‘A determination of
the issue set out above’. Various procedural directions then follow.
3. What has been listed for trial today is, ‘The determination of issue’, referred to in the order which I have just
4. The agreement made in relation to the defendant’s credit card was a regulated agreement within the Consumer
Credit Act 1974. Section 61(1)(a) of that Act provides:
‘A regulated agreement is not properly executed unless a document in the prescribed form, itself containing all the
prescribed terms and conforming to regulations under Section 60(1), is signed in the prescribed manner, both by the
debtor or hirer, and by or on behalf of the creditor or owner’.
Having regard to the date of the agreement made in this case, which was prior to amendments made to the Act
which took effect from 5th April 2007, the result of non compliance with Section 61(1)(a) would be that the credit
card agreement would be unenforceable against the defendant, see Consumer Credit Act 1974 Section 127(3).
5. This morning I was informed by Miss Gardner, counsel for the bank, that the bank was withdrawing its claim
against the defendant. This announcement has been accepted by Mr Berkley QC, who appears for the defendant, as
equivalent to the service of a notice of discontinuance under the Civil Procedure Rules Part 38.3. By the Civil
Procedure Rules Part 38.6.1:
‘Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against
whom the claimant discontinues incurred, on or before the date on which notice of discontinuance was served on
the defendant’.
Miss Gardner contends that the court should, ‘Order otherwise’, and make no order for costs as between the parties.
Mr Berkley contends that the presumption in CPR 38.1.6 should operate, and further that the order for costs to be
made in favour of his client should be an order for assessment on the indemnity basis.
6. The thrust of Miss Gardner’s submission is that the issue directed by the District Judge, and on which the evidence
has been focused, is whether the bank supplied the defendant at the time of signing the application form for credit
with documents which contained all the terms of the agreement between them. I shall elaborate a little further on
this. It has been the defendant’s case that he was supplied with nothing more than the application form which he
signed. It has been the bank’s case that in accordance with the usual practice of the bank the defendant would have
been, and must have been, supplied with other documents, including a pack which will have contained all the terms
and conditions of the agreement made between the parties. Miss Gardner goes on to say that the defendant has at
the last moment taken a new and radically different point, namely that the document signed by the defendant did
not contain all the prescribed terms of the agreement. I must again elaborate on this. It is common ground that the
only document signed by the defendant was the application form. It is also common ground that the application
form did not, on its face, set out the prescribed terms of the agreement between the parties. The point which is
treated by Miss Gardner as a new point is dealt with in paragraphs 22 and 23 of Mr Berkley’s written argument, and
it will, I think, be more economical if I simply quote those two paragraphs in full rather than attempt, in my own
words, to expand on them:
‘The key words in Section 61(1)(a) are the reference to a document itself containing all the prescribed terms, and
conforming to the regulations under Section 61. This language is clear and specific, and ensures that mere reference
to terms contained in another document will not suffice. The document must contain the prescribed terms, just as
the signed document referred to in Section 127(3), which might save the day, must however contain the prescribed
terms. The construction contended for by the defendant is entirely consistent with the language of Section 61(1),
and is also supported by Professor Good in his encyclopaedic work – see Good & Consumer Credit Law and Practice
volume 2, 2B 5.121, and see also the comments at 2B 5.247. There the learned author draws a distinction between
the language of paragraph (a) contain and paragraph (b) embody. It is respectfully submitted that the court should
adopt the same reasoning in determining this issue in favour of the defendant, irrespective of whether or not it finds
that the defendant was supplied with documents other than the credit agreement itself’.
7. In my judgment, the point with which I have just been dealing is not properly to be characterised as a new point
on which the bank can present itself as being taken by surprise. I refer to four documents. First, on 3rd November
2008, when the defendant was acting as a litigant in person, in the request to have the default judgment set aside he
said this:
‘As the court is aware, in the absence of all the prescribed terms being embodied, it will render a document
unenforceable in court. These terms must be contained within the agreement, and not in a separate document
headed ‘Terms and Conditions’, or words to that effect’. Secondly, on 18th February 2009, solicitors, who were by
then acting for the defendant, sent to the solicitors acting for the bank a copy of what they called an expert report
setting out the reasons why the agreement was in breach of Section 61(1)(a), and they went on:
‘As you are aware it is our client’s position that at the time he entered into the agreement he was not provided with
a copy of the terms and conditions governing the agreement’.
If one goes to the so called expert’s report, one finds that it is in effect an opinion prepared by another firm of
solicitors, and the opinion contains the following:
‘Based on the information provided, it appears that the prescribed terms and conditions were not included in the
document signed by the borrower. The agreement would appear to be in breach of the regulations in that it does
not contain within the signed agreement itself all of the prescribed terms’.
Thirdly, that point having been taken on behalf of the defendant, it was robustly rejected by the solicitors acting for
the bank in their reply of 19th March 2009:
‘Our client has sought counsel’s opinion on this matter and her view is that the agreement is compliant. We note
that your client is arguing that at the time of signing the agreement, the application for a credit card, he was not
provided with the actual terms and conditions which were contained in a separate document to the application.
Whilst our client accepts that the application itself does not comply with the requirements of the Consumer Credit
Act 1974, and only becomes compliant by reference to terms and conditions, there are references in the agreement
to the conditions in which it states that they are provided in the Halifax credit card application pack’.
Fourthly, going back in time a little, on 4th March 2009, in the defendant’s witness statement made for the purpose
of the trial of the issue, at the very beginning of the statement, in paragraph 3, he said this:
‘It is my position that the agreement is not enforceable by the claimant as it has failed to comply with its obligations
under Section 61 of the Consumer Credit Act 1974 by failing to include within the document that I signed all the
prescribed terms’.
8. The absence of further reference to the point in the evidence is hardly surprising, since the point is one of law, on
which there was no controversy as to the facts.
9. Miss Gardner has given no reason for the withdrawal of the action. She is in no way to be criticised for the
omission. She is bound to act in accordance with her instructions, and those instructions were presumably to say no
more than she has in fact said. But this does not prevent me from drawing what is in my judgment the only inference
which can possibly be drawn from what has happened, which is that the bank realises that if the issue were to be
contested it would either lose on the issue or be at serious risk of losing. There may be hundreds of similar cases and
the bank would plainly not wish other defaulting customers to get wind of an adverse decision on the fundamental
point which is embodied in the quotation from Mr Berkley’s written argument, which I have already set out.
10. Accordingly, I conclude, without hesitation, that there is no reason for displacing the presumption as to incidence
of costs which is ordinarily applicable in a case of discontinuance. The bank will pay the defendant’s costs of the
claim, subject only to any existing order for costs in favour of the bank not being disturbed.
11. Finally, I have to consider whether the costs of the defendant should be assessed on the standard or on the
indemnity basis. In my judgment the assessment should be on the indemnity basis. The only realistic view of what
has happened is that the bank has surrendered on a straightforward point of law, to which it has on several
occasions been alerted by the defendant or his solicitors. A large commercial enterprise which proceeds with
litigation in the face of warning signs of the kind which were erected here, adopts a high risk strategy. The point in
question was a simple one. There was no relevant controversy as to the evidence. To choose to abandon the claim
on the very day of the hearing is doing a serious disservice to the efficient administration of justice, and comes very
close to constituting an abuse of process. At the very least, the bank’s conduct of the litigation falls comfortably
within the range of cases in which, on the modern authorities, an assessment of costs on the indemnity basis is