recieved their court bundle here it is any feed back would be appreaiated
1. The Claimant's claim appears to have been prompted by and be based upon the recently released Office of Fair Trading report "Calculating fair default charges in credit card contracts”, which was issued after an investigation involving submissions from either of the leading credit card issuers, which the Court should note, the OFT "assumed to be largely representative of the industryas a whole". Para 1.4
2. The OFT analysed the legal principles involved in contracts between the issuers and their customers and, on the basis of the evidence submitted by the credit card issuers as to their costs and its own preferred analysis of the correct methodology to be employed for calculating those costs, the OFT found the the amounts being charged in default fees were "set at a significantly higher level than was fair “ Para 1.6
3. The OFT did acknowledge that its finding was merely "a statement of [its} position and reflect[ed] the exercise of [its] discretion as an enforcement agency” It went onto say that" Only a court can decide finally whether a term is unfair or at what level default charges should be set to meet the requirements of the UTCCRs.” Para 1.14
4. Notwithstanding the above, the OFTdid establish a threshold for default charges, setting it at no more than £12. This amount was derived from the evidence given by the eight issuers and upon the basis of reasoning set out in the paragraphs identified in the witness statement of John Alan Jones, namely paras 3.14-3.15,3.26-3.27 and 4.3. The OFT went on to state that its "presumption will be that credit card default charges set above this level are unfair unless there are exceptional factors that legally justify the higher charge." Para 5.3 - 5.4
5. AS a result of the investigation, the OFT instructed all issuers to take on board the principles in its statement and recalculate their default charges or face enforcement action. CitiFinancial Europe plc, despite not being one of the eightissuers initially approached for comment and despite disagreeing with the basis of the OFT's analysis and its method of calculating the consequences to its business of breathes, elected to change its charging methodology in line with its regulator's recommendations and reduced all default charges to £12 from June 28th 2006.
The Claimant’s Claim
6. The Claimant claims that the Defendant is in breach of contract by dint of the application of penalty charges to the account. She does not state why she believes these to be penalties in her Claim Form but merely parrots a line of argument downloaded from one of several consumer action websites which have been orchestrating these default fee claims as agent provocateurs. She seeks to recover all such sums and interest thereon, as if it was a debt
7. As the Claimant, it is up to her to discharge the burden of proof and assert a positive case for the Defendant to answer. She asserts that the charges are penalties or unreasonable but fails to address her own or the Court's mind as to why or give any basis of that belief. In the absence of any positive evidence to support her claims about the specific contract she is litigating on, the Claimant simply asserts the charges are penalties and thereby assumes what she is tasked with proving. I respectfully submit that the does not discharge the burden of proof, which is the Claimant's and the Claimant's alone:
8. The Claimant does not acknowledge or appear to accept that both the common law and the OFT report allow that some level of charge is an acceptable consequence of a breach of contract. This is also a matter of public policy. Furthermore, the Claimant does not acknowledge that her case is entirely derived from the that on her own figures she herself breached the contract on 28 occasions, that she did this entirely voluntarily and that, had she not done so, she would have incurred no charges whatsoever.
9. The Claimant is, in effect, cherry picking the OFT report, seeking to adopt the OFT's reasoning where it suits her case i.e. that default charges are unfair, but ignoring the obviously unwelcome finding by the OFT, based uponits exhaustive investigation conducted with the full cooperation of the leading credit card issuers, that (a) such charges are not unfair per se and (b) that charges up to the level of £12 are likely to be fair. She implicitly asserts that the OFT is right to find the charges unfair but then refuses to allow the logic of the Defendant's response to the OFT report which was to lower its charges to £12.
10. The Defendant notes that the whether the charges are penal or not does nothing to determine the contract nor to prevent the Defendant claiming for its losses arising as a result of the Claimant’s breaches and does not establish whether the charges were penalty charges. The Defendant submits that neither £25 nor £12 are such sums, the first being a genuine attempt at defining the Defendant’s actual loss in a liquidated damages clause and the second being the cap placed on its damages by the OFT the real damages being higher inboth cases.
11. The Claimant has relied upon the Unfair Contract Terms in Consumer Contracts Regulations (1999) and the Unfair Contract Terms Act 1977.
12. Paragraph 8 UTCCR 1999 Effect of fair term
8 – (1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term.
Schedule 2 identifies terms that may be unfair including at (1) (e) a term requiring any consumer who fails to fulfil obligation to pay a disproportionately high sum in compensation.
Section 4 of UCTA applies to unreasonable indemnity clauses inconsumer contracts.
13. The Defendant notes that the above section of the UTCCR does nothing to determine the contract nor to prevent the Defendant claiming for its losses arising as a result of the Claimant's breaches and does not establish what a "disproportionately high sum in compensation “ actually is. In fact, section 4 of UCTA applies only to indemnity clauses and is therefore inapplicable to the clauses which are the subject matter of the claim. The Defendant submits that neither £25 nor £12 are such sums, the first being an attempt at defining Defendant’s actual loss in a liquidated damages clause and the second being the cap placed on its damages by the OFT, the real damages being higher
14. The Rule in Dunlop Pneumatic Tyre Co. Ltd v New Garage Motor Co Ltd  A.C 79 has been implicitly relied upon by the Claimant. The classicdistinction drawn by Dunedin LJ in Dunlop was between a payment on breach stipulated as in terrorem of the offending party and a genuine covenanted pre- estimate damage. Dunedin LJ added that the question was one of construction of each contract, to be decided as at the time of its making, not the time of breach. He offered as tests which might prove "helpful, or even conclusive", the following:
"a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach
b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid .....This though one of the most ancient instances is truly a corollary to the last test.
© There is a presumption (but no more) that it is penalty when "a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious andothers buttrifling damage”.
On the other hand [my emphasis]
(d) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties..".
Another, perhaps more pertinent point is contained in the concurring judgment or Lord Atkinson in Dunlop who made the telling point that the case was actually about indirect losses and stated "..although it is true ..that a presumption is raised in favour of a penalty where a single lump sum is to be paid by way of compensation in respect of many different events, some occasioning serious, some trifling, damage, it seems to me the presumption is rebutted by the very fact that the damage caused by each and every one of those events, however varying in importance, may be of such an uncertain in nature that it cannot be accurately ascertained. The damage has been proved to be of that nature in the present case, and the very fact that.it is so renders it all the more probable that the sum of 5lwas not stipulated for merely in terrorem but was really and genuinely a pre-estimate of the appellants probable or possible interest in the due performance of the contract
15. In Philips Hong Kong Ltd v. The A G of Hong Kong (1993) 61 BLR49,the Privy Council, in advice delivered by Woolf LJ, underlined test (a) suggested by Dunedin LJ and, citing with approval the view of Dickson that: “It is, now evident that the power to strike down a penalty clause is a blatant interference with freedom of contract and is designed for the sole purpose of providing relief against oppression for the party having to pay the stipulated sum. Ithas no place where there is no oppression." Woolf LJ endorsed the view that the "court should not be astute to descry a 'penalty clause'" and emphasised that it would "normally be insufficient .... to identify situations where the application of the provision could result in a larger sum being recovered by the injured party than his actual loss” (pp.58-59). However Woolf LJ went on:
“A difficulty can arise where the range of possible loss is broad. Where it should be obvious that, in relation to part of the range, the liquidated damages are totally out of proportion to certain of the losses which may be incurred, the failure to make special provision for those losses may result in the "liquidated damages" not being recoverable. However, the court has to be careful not to set too stringent standard and bear in mind that what the parties have agreed should normally be upheld. Any other approach will lead to undesirable uncertainty especially in commercial contracts
16. The Defendant believes that it has satisfied the Dunlop test by its default fees Policy. The Defendant retains inPlace an infrastructure involving staff, computer systems etc as allowed by the OTF report in order to operate a collections and credit risk management based on its assumptions about the number of defaulting customers in any given period
17. Simply put, if the intention of the Defendant in setting its charges was to oppress or deter a customer from ever breaching the contract rather than to compensate the Defendant for the loss sustained by covering the extra costs incurred by the breach then the Defendant would have no need for such staff and systems and defaults fees would be far higher. The fact is that the industry through long experience is aware of the likelihood of multiple breaches of contracts and has established infrastructures to deal with the inevitable costs associated therewith,
18. The fact that these infrastructures have costs which are seemingly disproportionate to the lowest possible breach scenario is the source of much misunderstanding. As set out in Dunlop, the actual test is whether they are unconscionable in comparison with the greatest loss not the lowest. Consumer groups assume the cost incurred is the cosf of a stamp or a pre-printed letter. They refuse to see the infrastructure in staff, materials and running costs which the OFT acknowledge underpin the credit institutions operations and their collections strategies. Para 4.3, These simply do not, as the OFT again accepted, lend themselves to an individually tailored and finely calibrated calculation of the loss sustained by one individual breaching one contract on one occasion. Para 5.8. To cite Dunedin LJ: “It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimate of almost animpossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties ...... ". This was recognised by theOFT report. The only point of difference between the Defendant and the OFT is the manner by which that attempt at a genuine pre-estimate was to be calculated.
19. The case of Murray v Lelsureplay PLC  EWCA is authority for the important point enunciated by Lady Justice Arden at para 69 of the judgement that:
“The burden of showing that a clause for the repayment of damages on breach is a penalty clause is on the party who seeks to escape liability under it, not on the party who seeks to enforce it."
To require otherwise would result in the burden of proof being reversed contrary to the common law principle that "He who alleges must prove”
20. Finally the Court of Appeal case of Jobson v Johnson  1 WLR isauthority for the proposition that even if the original clause (or amount charged thereunder) was found by the court to be a penalty then as per Kerr LJ “combined effect of law and equity on penalty clauses is simply that they will not be enforced in favour of a plaintiff without giving the Defendant a proper opportunity to obtain relief against their penal consequences". In the circumstances of the present case the default fees ought not therefore to be struck out or "blue-pencilled" as the Claimant imagines but merely unenforceable, to the extent they are penal. Given the fact that the OFT has already stated that the extent to which it would consider them to be penal is anything over £12 and the Defendant has already submitted a witness statement to the effect that its actual costs are in excess of £12 but has complied inany event, the Defendant submits that it is entitled to rely on these in support of its policy of refunding the difference and retaining the balance.
The Defendant’s Position in Principle
21. 21 The Defendant believes that the unilateral decision to adhere to the £12 default fee limit suggested by the Defendant' s regulator renders unnecessary any need for the Court to look at the original clause in the Agreement allowing for default charges or for it to decide whether such a clause was a penalty. However if the Court were so minded then, for the record, the Defendant will assert that the original higher default fee figure was not intended as a penalty but was a genuine pre-estimate of its losses, Such an estimate does not have to be right to be reasonable per Mr Justice Jackson in Alfred McAlpine Capital Projects Limited v Tilebox Limited EWH~  Notwithstanding the OFT's report, which the Defendant reminds the Court was based on an assumption by the OFT that the costs of eight major credit card issuers were the same as the Defendant’s, the Defendant's default fees always bore a direct relation to its costs incurred on default.
22. The Claimant is alleging that the Defendant imposed excessive charges in it contract with the Claimant. The Defendant denies that. The Defendant will rely upon the statement of John Alan Jones in support of its contention that the original fee levels charged were in line with its own realistic pre-estimate of its costs on default. The Defendant disagrees with the OFT’s ownproposedmethod of calculating default costs. The Defendant submits that without earlier specific guidance on this from that regulatory body, it was entirely reasonable of the Defendant to adopt a method of calculating this cost to the business in a manner different from the OFT, that this is not of itself unfair and that the Defendant should not be retrospectively penalised for adopting a different methodology to the one subsequently imposed by its regulator, as the Claimant is attempting to do.
23. Furthermore, contractual and common law principles allow the Defendant to charge for breaches. Accordingly, the Defendant does not understand how the Claimant can hope to recover all her default fees as she has claimed, as that would logically imply she could breach the contract she had with the Defendant with impunity. That is not a tenable position for businesses such as that of the Defendant to adopt and would effectively bring to an end the free banking in the UK which is enjoyed by credit card customers provided they maintain the terms of the contract.
24. Finally ,notwithstanding the Defendant believing that its charges were a genuine pre-estimate of its costs, it cannot realistically be maintained that the amount in question whether in the past or present was or is now "in terrorem” or "extravagant and unconscionable" given the fact that they were under the actual levels of costs occasioned to the Defendant in maintaining its default department costs and the fact that the Claimant repeatedly breached the contract over the period of the Agreement. The Claimant had the option at any time to cancel this agreement and seek another issuer if she believed the charges to have had that effect. The caselaw states that it is the effect on the Claimant at the time of the contract which should be borne in mind by the Court. If she thought the fees extravagant or unconscionable then she would, presumably, not have entered the contract. If she did not think about them at all then how can they be considered to have acted in terrorem? She chose not to discontinue the contract on the imposition of the first such default fee and continued to contract with the Defendant on its terms on an entirely voluntary basis. Given that continued pattern of defaulting, the Defendant believes it cannot be realistically argued that the Claimant believed the amount of the individual default fee was in terrorem or unconscionable.
25. The Defendant also submits that the Claimant has mispleaded her claim as a debt action. She has pleaded a breach of contract by the imposition and enforcement of an illegal clause and relied upon caselaw and statute in support. However, she has failed to claim damages based upon the Defendant's alleged breach and is instead seeking to recover the entire sum levied in charges together with interest thereon. The claim cannot be a debt action and should be dismissed on that ground alone. Further, the Claimant's interest calculation has been further mispleaded since it is based upon an assumption that any interest that the "penalty" fee ought to attract should run from the date the charge was applied to the account. However, as the account is a credit account and not a deposit account, interest on the default fee amount could only run from the date of payment by the Claimant. As the account was a running account, until finally paid the sum due to the creditor has not crystallised. It is therefore illogical to claim interest on charges as if they had crystallised at the date levied,
26. In conclusion, the Defendant believes the Claimant has presented an opportunistic and mispleaded case based upon a selective interpretation of the OFT report and without applying either the common law or contractual principles which she seeks to rely upon. The Claimant explicitly accepts that she breached the contract as this is the basis of her claim. She does not accept that those breaches should attract any charge whatsoever. She contracted with the Defendant voluntarily and continued to remain a customer using the credit facilities offered by the Defendant despite the occasional imposition of a charge. The Defendant's contractual position with the Claimant has been altered by the OFT report, the conclusions of which the Defendant disagreed with. It was not retrospective in nature but has opened the floodgates to small claims of a similar nature to the Claimant's. The Defendant has dealt with the consequences of the OFT report in the fairest manner it could. It considers its original costs were a genuine pre-estimate of its cost and said so to the OFT. The OFT and the Defendant have legitimate differences in the manner in which such costs are calculated. Even on the OFT's current methodology, the Defendant's costs are higher than the £12 maximum the OFT imposed. The Defendant respectfully requests that the Claimant's case be dismissed.