Apologies in advance but hold on to your hats cos it's a long 'un!
Court Bundle needs to be submitted 20 June, wife already 4 days overdue with baby, so thought I should get my finger out and start pulling everything together ready for printing before it all gets rather hectic! I'm quite happy with what I need to submit (thanks Latty!), but I'd like a fresh set of eyes to mull over my statement of evidence, so I'm posting it below (minus all personal info of course).
I'm particularly interested in thoughts on paras 10 & 11 as I've added these in as my own interpretation of how the terms & conditions of the account were breached by my wife (para 10) and how the descriptions of the charges applied by HSBC contradict their "service charge" defence (para 11). Is there anything else within the T&C's that need to be highlighted in support of the claim? Do I need to PM a Moderator and have them take a look? Thanks in advance for any comments.
In the xxxxxxx County Court
HSBC Bank Plc
STATEMENT OF EVIDENCE
1. The Claimant has a Bank Account (“the Account”), account number xxxxxxxxxxx, with the Defendant which was opened circa 1993 with the then Midland Bank (now HSBC Bank plc).
2. During the period from xxxxxxxxx to xxxxxxxx the Defendant debited thirty-nine separate charges to the Account in respect of purported breaches of contract on the part of the Claimant and also charged interest on the charges once applied.
3. A list of the charges applied (further evidenced on the enclosed prints of the relevant monthly bank statements taken from the online banking services that are available on the Defendants website; Home: personal, business, online, internet, banking: HSBC Bank UK) is attached to these particulars of claim.
4. The Claimant submits that the charges levied to the Account, as set out in the enclosed schedule, are, notwithstanding the defence of the defendant, penalty charges arising from and relating directly to breaches of contract, both explicit and implied, on the part of the claimant. As a contractual penalty, the charges are unenforceable by virtue of the Unfair Terms in Consumer Contracts Regulations 1999, the Unfair Contracts (Terms) Act 1977, and the common law.
5. It is admitted that the Defendants charges were levied in accordance with the terms and conditions of the Account. However, it is submitted that the Defendants charges are not related to or intended to represent any actual loss arising from a breach of contract, but instead unduly enrich the Defendant which, by virtue of the legislation cited in paragraph 10 below, exercises the contractual term in respect of such charges with a view to profit.
6. The Defendant avers that the charges levied are legitimate fixed price contractual services, unrelated to breaches of contract, which are therefore not required to be a pre-estimate of loss incurred on the part of the defendant. The Claimant further submits that this contention is merely an attempt to ‘cloak’, or disguise, their penalties in order to circumvent the common law and statutory prohibition of default penalty charges with view to a profit.
7. The Claimant believes the definition of a 'service' to be a provision of knowledge, skill or other transferable facility that benefits the consumer, and one that the consumer agrees is at a reasonable market rate commensurable with the service provided. The Claimant believes it to be inconceivable that the charges levied to her account by the defendant could be any form of ‘service’, rather than a penalty.
8. I understand the definition of 'breach of contract' to be the failure of a party, without legal excuse, to perform a contractually agreed obligation pursuant to any or all of the terms agreed within that contract. I have an overdraft with the defendant. This overdraft has a contractually agreed limit, which is an express term of the bank account contract between myself and the Defendant. When I exceeded this agreed overdraft limit, therefore breaching an express term of the contract between myself and the Defendant, I was consequentially penalised for each such breach by way of charges ranging from £10 to £100 (as stated on the enclosed schedule of charges).
9. In the case of Dunlop Pneumatic Tyre Co v New Garage & Motor Co  AC 79, Lord Dunedin stated that a clause is a penalty if it provides for;
"The essence of a penalty is a payment of money stipulated as in-terrorem of the offending part;”
I.e. if it is designed to scare or coerce or is used as a threat. It is submitted that the charges applied are not representative of any 'service' provided by the Defendant, but instead are punitive, and held "in-terrorem".
10. The Claimant believes that she was in breach of the terms and conditions that applied to the Account and would like to draw specific attention to clause 7.3 of the Midland Bank Terms and Conditions 1996, superseded by clause 7.4 of the HSBC Personal Banking Terms and Conditions 2004 (and earlier versions), which respectively state:-
7.3 You must not go over any overdraft limit that is agreed with us unless you get our agreement first.
7.4 You should always stay within an agreed overdraft limit unless you get our agreement to increase this first.
The Claimant believes that, by exceeding her agreed overdraft limit without prior agreement with the Defendant, she has effectively breached the terms of her contract and, therefore, the charges applied by the Defendant are penalties associated to these breaches.
The Claimant can confirm that these clauses were replaced (or reworded) effective from 1 December 2006; after the period to which this claim relates.
11. Further, The Claimant would like to draw attention to clause 7.9 of the Midland Bank Terms and Conditions 1996, superseded by clause 7.13 of the HSBC Personal Banking Terms and Conditions 2004 (and earlier versions), which respectively state:-
7.9 As well as charging interest for unauthorised overdrafts, we may also charge a fee to cover the cost of the administration involved (see the relevant price list).
7.13 As well as charging interest under clause 7.10, we may also charge our applicable fee for reviewing overdrafts not agreed in advance on each occasion that your Bank Account goes overdrawn, or further overdrawn, without an agreed overdraft. We may also charge this fee when your Bank Account goes over, or further over, any agreed overdraft limit. This fee is to cover our management and administration costs (see the relevant price list for details of the fee).
The Claimant can confirm that these clauses were replaced (or reworded)effective from 1 December 2006; after the period to which this claim relates; specifically that the description of the fee was changed to exclude any reference to a fee to cover management and administration costs.
The Claimant contends, therefore, that the “cost of administration”, and thereafter “management and administration costs” which the Defendant has applied to the account must be proportionate to the actual costs incurred as a result of the claimant’s breaches. The Claimant disputes that charges ranging from £10 to £100 are excessive in the extreme and cannot, in any way, represent the actual costs incurred for what is, effectively, an automated operation. The Claimant has made several attempts to clarify the actual costs incurred by the Defendant as a result of the breaches but has received no response. Paragraph 23 below contains an impartial view on this issue which states that the maximum conceivable costs that could be incurred by a direct debit refusal or overdraft excess is £2.50
12. The Claimant refers to the statement from the Office of Fair Trading (April 2006), who conducted a thorough investigation into default charges levied by the British financial industry. While the report primarily focused on Credit card issuers, the OFT stated that the principle of their findings would also apply to Bank account charges. They ruled that default charges at the current level were unfair within their interpretation of the Unfair Terms in Consumer Contracts Regulations 1999. With regard to the ‘cloaking’ or disguising of penalties, the OFT said this;
“4.21 The analysis in this statement is in terms of explicit, transparent default fees. Attempts to restructure accounts in order to present events of default spuriously as additional services for which a charge may be made should be viewed as disguised penalties and equally open to challenge where grounds of unfairness exist. (For example, a charge for ‘agreeing’ or ‘allowing’ a customer to exceed a credit limit is no different from a customers default in exceeding a credit limit.) The UTCCR’s are concerned with the intentions and effects of terms, not just their mechanism”.
13. As submitted above, the Claimant believes the charges levied to the Account to be disproportionate contractual penalties, arising from clear and demonstrable breaches of express terms of the account contract between itself and the Defendant. The Claimant vehemently refutes the Defences contention that they are legitimate contractual service charges.
14. However, and without prejudice to the above, in the event the charges were accepted by this honourable court as being a fee for a contractual service, the claimant submits that they are unreasonable under section 15 of the Supply of Goods and Services Act 1982.
15. Further, under the UTCCR:
"5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.
(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a pre-formulated standard contract.
(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was."
Schedule 2 also includes such clauses (to define examples of unfair clauses) as:
"(i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract;
(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;
(m) giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract, or giving him the exclusive right to interpret any term of the contract."
The defendant is a multi-national corporation. The term regarding charges was inserted unilaterally in contract. The contract was pre and mass produced and I had no opportunity to negotiate the clause, or indeed any of the contract.
16. Following on from the above, the claimant does not accept The Defendants contention that the charges are enforceable as a service charge. It is not disputed that the Defendant is entitled to recover its damages following my breaches of contract, and it is entitled to include a liquidated damages clause. I accept without reservation the banks right to recover its actual losses or a genuine pre-estimate thereof. A penalty however, is unenforceable.
17. The Claimant cites the case of Robinson v Harman  1 Exch 850 which states that a contractual party cannot profit from a breach and that the charge for a loss suffered from a breach of contract should be the amount necessary to put both parties in the same position before the breach occurred.
18. Lord Dunedin in the case of Dunlop Pneumatic Tyre Co v New Garage & Motor Co  AC 79 set down a number of principles in definition of a penalty clause and how such clause may be ascertained from a liquidated damages clause. One of these principles being -
"The sum is a penalty if it is greater than the greatest loss which could have been suffered from the breach"
19. The Claimant will further rely on numerous recorded authorities dating throughout the 20th century up to the most recent case of Murray v Leisureplay  EWCA Civ 963, all of which have upheld and reinforced the principles set down by Lord Dunedin defining contractual penalty clauses and the unenforceability thereof.
20. Further, under the Unfair Terms in Consumer Contracts Regulations 1999, schedule 2 (1) includes to define an example of an unfair clause as -
"(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation;"
20. On numerous occasions, the Claimant has requested that the Defendant justify its charges by providing details of the costs incurred as a result of my contractual breaches. Each time those requests were rebutted or ignored.
21. In a recent study undertaken in Australia, (Nicole Rich, “Unfair fees: a report into penalty fees charged by Australian Banks”) it was estimated that the cost to an Australian Bank of a customers direct debit refusal was estimated to be in the region of 54 cents. By reviewing the charges against the above figure, the study estimated that banks could be charging between 64 to 92 times what it costs them to process a direct debit refusal. The study’s key findings stated that in its opinion the Australian Bank’s cheque and direct debit refusal fees were likely to be penalties at law.
22. The Defendant, or indeed any of the UK banks, has never published any information to support how their charges are calculated, or what their actual costs associated with such breaches are, or what revenue they derive from such charges.
23. For their recent BBC2 documentary “The Money Programme”, the BBC appointed a commission of former senior banking industry figures and business academics to attempt to ascertain the actual costs to the UK banks of processing a customer’s breach of contract. They concluded that the absolute maximum conceivable cost that could be incurred by a direct debit refusal or overdraft excess is £2.50, and of a returned cheque £4.50. They did state however, that the actual cost is likely to be much less than this. The commission also estimated that the UK banks collectively derive as much as £4.5billion in profit a year from their charging regimes.
24. It is submitted that the Defendants charges are applied by an automated and computer driven process, resulting in a computer generated letter. It is therefore impossible to envisage how the Defendant can incur costs of up to £100 by carrying out this completely automated process.
25.22nd May 2006, the House of Commons passed an early day motion which welcomed the OFT's statement that default charges should be proportionate to the actual loss incurred. The house described such default charges as "exorbitant" and "excessive".
26. The Claimant also cites a radio interview in 2004 with Lloyds TSB’s former head of personal banking, Peter McNamara, in which he states bank charges are used to fund free banking for all personal customers as a whole.
27. As set out previously, it is submitted that The Defendant’s charges can not be considered to be a service charge. In arguing that they are, they also effectively admit that their charges make profits. The Defendant seemingly contends that their charges are not subject to any assessment of fairness whatsoever. This implies they can set these fees at whatever level they like without limit or regulation. Similarly, as set out above, the charges cannot be considered to be liquidated damages. They, by The Defendant's own admission, are not a pre-estimate of loss incurred as a result of the breach of contract. The charges are punitive, held “in-terrorem", and unduly and extravagantly enrich the Defendant. As such, they are a contractual penalties and unenforceable at law.
I, the Claimant, believe all facts stated to be true.
Documents attached in support of this statement
Schedule of Charges (prints of the relevant monthly bank statements taken from the online banking services that are available on the Defendants website; www.hsbc.co.uk).
Copies of all correspondence with the Defendant (and their representatives) in relation to this claim.
Bank Account Terms and Conditions for 1996, 2004 and 2006.
Relevant case law summaries.
Office of Fair Trading report, April 2006.
House of commons early day motion, May 2006.
BBC commission conclusion - BBC NEWS | Business | The Money Programme bank commission
Australian Default charges report, Nicole Rich - Domain Names, Web Hosting, Web Design, Search Engine Optimisation, and Search Engine Marketing at Melbourne IT