H.O.L Test case appeal. Judgement Declared. ***See Announcements***

[Aequitas]

I think the judge left the penalty charge aspect open to appeal on purpose.

 

He is so obviously out of step with centuries of convention that I can see only other reason.

 

It is, regrettably, many consumer champions who are out of step.

 

I think it is like this:

 

If there were ever any possibility that all or any bank charges were contractual penalties lawyers would have picked the point up years ago. Someone with an imperfect knowledge of the law of contract came up with the idea that bank charges were contractual penalties. I expect his argument went something like this: bank charges are excessive and cannot be justified and so are penal; customers have contracts with banks; bank charges are governed by those contracts; bank charges are contractual penalties. What he failed to realise is that a contractual penalty is something quite specific; just because something may be regarded as "penal" in the everyday sense of the word does not mean it has to be a contractual penalty.

 

The idea was naturally attractive to those seeking to recover bank charges. It spread like a contagion until it became an article of faith, rather like the idea that lemmings commit mass suicide. The belief became so widespread that the OFT was almost forced into arguing it.

 

The notion that bank charges can be challenged on the grounds that they are contractual penalties has proved (at least at this stage of the legal proceedings) to be the chimera I argued it was in the very first post I made on this forum. Consumer champions have made a huge mistake in trying to challenge bank charges on legal grounds instead of applying tactics more likely to succeed.

 

Note that he didnt describe the path of reasoning he used to come to his conclusion that penalty charges for a breach of contract, were not actually penalty charges for a breach of contract.

 

Au contraire! His arguments were closely reasoned and crystal clear. I respectfully suggest you fail to see it because you have convinced yourself that bank charges are contractual penalties. The very words you use reflect the category error (if that is the right phrase) on which the whole argument was constructed. Please read the relevant parts of the judgement again with an open mind.

 

In case there is any misunderstanding here, I repeat that I think that the level of bank charges is excessive. An approach other than a legal one is needed to make the banks change their ways.

[Aequitas]

Good points, but you dont make any comment as to WHY they arent penalties.

 

A contractual penalty can only arise in a case where there is a breach of contract. The correct analysis of any banking contract, whatever words may be used, shows that the circumstances in which bank charges are payable never amount to a breach of contract.

[Aequitas]

If a charge is a penalty you do not need the UTCCR as you have the protection of the common law. If a charge is not a penalty applying the UTCCR is tricky as they expressly exclude (except to the extent that the charging provision is not phrased in plain English) any consideration of whether the price paid is reasonable.

 

As to the breach of contract point, I think the judge took the only position that is tenable in law. However the terms and conditions may be phrased, any instruction by a customer which, if acted upon would result in the account going into an unauthorised overdraft, has to be treated as a request by the customer for an overdraft facility and not as a breach of contract.

 

I am not sure if people realise quite how the breach of contract argument looks. It is as if you are saying:

 

Hey! I'm not paying that - I'm in breach of contract!

 

Which has the implied corollary:

 

OK, I'm not in breach of contract - I'll pay up.

 

To put it another way, is there not something slightly odd about someone vehemently insisting that he is in breach of contract taking the moral high ground? (I do not say there necessarily is, I simply pose the question.)

[Aequitas]

So surely there must be a way to have stays lifted now.

 

I still maintain that more pressure on MP's now should have an effect.

 

This would involve the legislature seeking to influence the judiciary - a violation of the doctrine of the separation of powers, one of the cornerstones of the constitution.

[Aequitas]

Incidental we don't have a Constitution cos Tone never got round to it

 

We have the Magna Carter, Common Law & we had the Bill of Rights until this government emasculated it......but no Constitution

 

If there is no constitution I wonder why so many books on it are around.

 

I have started a thead on the Bill of Rights here:

 

http://www.consumeractiongroup.co.uk/forum/general-knowledge/143166-bill-rights.html#post1503693

[Aequitas]

Aeq do you really think there is never any 'discussion' about a particular matter, even when before the courts, around the tearooms of the HoC & HoL which involve the government & the judiciary. If you do then you live in a world I know little of

 

I think you underestimate the independence of the judiciary.

 

Lots of contributions in this forum suggested that the outcome of the case was a foregone conclusion and that the banks would win. It did not happen.

[Aequitas]

So if someone has evidence that it cost them 2 pound then the oft amount will be invalidated.

 

I think you may be missing the point here. The idea that a charge for a service must not exceed the cost is a hangover from the notion that bank charges are penalties. It is not unreasonable that banks should make a reasonable profit out of providing banking services. If you think otherwise, then it is logical to go on and suggest that no one should make a profit out of providing a service.

 

Part of the problem here is that (in response to consumer demand it has to be remembered) routine services are provided free to those who remain in credit. This means that the profits come from those who have overdrafts, whether authorised or not. If everyone paid the same fee for services whether in credit or not, no one would be talking about penalties.

[Aequitas]

When it is said that Britain has an unwritten constitution it really means that it does not have its constitution set out in a single document called "The Constitution". As has been suggested, a lot of it is written down somewhere, but a sizable portion is not.

 

To suggest that Britain has no constitution is absurd. That would mean there are no rules by which government, including the making of laws and the administration of justice, works. If there are no laws, then I wonder the purpose of this site is.

[Aequitas]

It is not the case that any Act of Parliament is set in stone. It may be the case (open to argument) that a non-constitutional Act cannot override a constitutional Act.

 

If it is the case that the Bill of Rights is set in stone, what about this provision?

 

That the subjects which are Protestants may have arms for their defence suitable to their conditions and as allowed by law

 

Do you think it is or ought to be the case that, to the extent that the law allows citizens to arm themselves, it is only Protestants who should be allowed to have arms? I think your answer would be "no". It would be "no" because you would argue that the provision is historical. If we are to apply the historical argument to one provision we must be allowed to apply it to them all.

 

The provision that everyone homes in on says:

 

That all grants and promises of fines and forfeitures of particular persons before conviction are illegal and void

 

We need to ask what this meant in 1689 (when there no cars). The Bill of Rights settled matters that were not fully resolved by the Civil War. In a nutshell, the Stuart kings believed in the divine right of kings. Their argument was that the king could not do anything unlawful because he was the law. Accordingly (amongst other things) he could levy fines and forfeitures as he thought fit. The king was judge, jury and tax collector without the citizen having the chance to be heard. The key thing here is "without the citizen having the chance to be heard". Do you have the right to be heard in parking and speeding cases? Yes you do. If you wish you can opt to waive your right and just pay up. The essential principle of the Bill of Rights, so far as it applies, is not broken.

 

This principle, intended to prevent kings from acting tyrannically, does not apply to the civil law and so has no application to bank charges. If it did apply to the civil law then we would have to ask if the law which permits landlords to forfeit leases contravenes the Bill of Rights; I have never seen an argument that it does. In any event, in the case of the forfeiture of leases and the application of bank charges the citizen is not prevented from having recourse to the law so that, if the provision does apply in civil cases, the principle is not flouted.

 

Of course the Bill of Rights is still law. It is the foundation of parliamentary democracy, but there was a long road to travel before there was universal suffrage - that was not achieved until 1928. Even though it is the law, the document needs to be read in its historical context. In particular, its virulent anti-Catholic tone is today an embarrassment, even to those who adhere to the doctrines of the Church of England.

[Aequitas]

That all grants and promises of fines and forfeitures of particular persons before conviction are illegal and void

 

A premium paid for the grant of a lease is a "fine". Anyone fancy starting a court case to get back the money they paid for their flat? Should a landlord ensure you are convicted before selling?

 

Landlords regularly forfeit leases. Should they have to get the tenant convicted first?

[Aequitas]

In passing the 1972 European Communities Act, Parliament surrendered its sovereignty to the European Union.

No it did not.

The 1998 Human Rights Act is similar in nature to the 1972 EC Act. It states that the courts can overthrow any act that contravenes it in the future.

 

No it does not.

[Aequitas]

Two extracts from the judgment worth quoting:

The defence argue that in relation to our constitution the older the doctrine the better. The concept of the older the better may well apply to certain vintages of claret but old law, like old wine eventually goes off. What happened in 17th, 18th and 19th century does not necessarily tie Parliament and the courts today if they have evinced the intention of not being so tied because there would be an apparent and obvious conflict with recent legislation and case law.

***

Constitutional law is not like a stagnant pond - never changing. It is like a fresh running stream, constantly changing as it does to accommodate the surrounding land and the varying weather patterns, so it is with our Constitution in order to meet the needs of the time and age in which we live. Constitutional law has and always will evolve as of necessity to fit into the demands of the time.

[Aequitas]

It dose not matter how much they charge us if we were not given the chance to negotiate the price it is an unlwful amount.

 

What is your authority for that proposition?

[Aequitas]

Sorry if the way I posed my question caused offence. You are of course free to make whatever assertions you like about the law.

 

I do not think there is any authority to back up your proposition and it is not to be found in the UTCCR. Indeed, it is my view that the UTCCR do the exact opposite. Regulation 6 (2) says:

 

In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate...to the adequacy of the price or remuneration, as against the goods or services supplied in exchange

 

So, the Regulations specifically exclude the possibility that any enquiry can be made as to the level of any charge. What the Regulations do permit (at least according to the current state of play) is that any of the banks' term imposing charges can be subject to assessment as to fairness - something quite different.

[Aequitas]

You are in fact quoting from the 1994 Regulations which have been revoked.

[Aequitas]

Just to get this clear. Are you saying that if a consumer does not individually negotiate the price for goods or services that the contract cannot be enforced in a court of law?

[Aequitas]

:Dwhat kind?

 

All contracts to which the Regulations apply.

[Aequitas]

Let's start again.

 

 

You said:

 

 

It does not matter how much they charge us if we were not given the chance to negotiate the price it is an unlawful amount.

 

 

The current Regulations say:

 

 

In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate...to the adequacy of the price or remuneration, as against the goods or services supplied in exchange

 

 

You have yet to persuade me that what you said is not incompatible with the Regulations.

 

 

But we also need to consider fully the implication of what you say. Let's suppose we are concerned with a hotel booking (what applies to a banking contract must apply to a hotel booking). The price advertised is for a certain amount. You book a room. The price was not individually negotiated. According to you it is an unlawful amount and, moreover, “the contract cannot be enforced in a court of law”. Are you telling me that if you stay in the room when you come to leave there is no obligation to pay?

[Aequitas]

...it was a minor one about Water.

 

It's here: Results within legislation - Statute Law Database

 

I found it yesterday when Josh aroused my curiosity

[Aequitas]

I still believe that the financial institutions are in cahoots with the OFT/FSA.

 

What makes you believe that?

[Aequitas]

OFT Thinks charges are unfair.

 

We all know that. The question is whether they are (a) unlawful and/or (b) unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999.

[Aequitas]

A solicitor has pointed out to me that even if the judgement on the historic terms is that they do not equate to penalties at common law it should not be assumed that business claims now have no legal basis. The solicitor pointed out that the judge hearing the test case has not considered a single business contract or any business terms and conditions during the test case, and so reliance on the judgement would be unjust for business claimants. Any judge would need to consider the contract between the business customer and bank and the business terms and conditions before a fair ruling can be delivered.

 

Any thoughts?

 

Whilst it is the case that the judge only considered personal banking terms, I think it has to be said that the idea that contractual penalties have any application to any bank charges is pretty much dead in the water. I cannot see the language used in terms and conditions for business customers being significantly different from that used in personal banking terms and conditions.

 

I hope I can be forgiven a wry smile when reading those posts that say that the argument never was about penalties.

[Aequitas]

The caselaw on penalties is clear that what is, or is not, a penalty is a matter of fact based on the circumstances. The terms, including the detail of the wording, has to be considered alongside that, also.

 

What is happening here is that we are getting Judgment based on standard terms and conditions and not the individual circumstances of each case.

 

Obviously there may be cases of individually negotiated contracts which provide for contractual penalties, but if the standard terms of business contracts are similar to those of personal contracts then it will be futile to pursue the penalty point.

 

I've always thought the question was about fairness - if they are unfair, they would be seen as penalties, in layman's terms, but not technically penalties in Law.

 

Of course the law on contractual penalties is there to prevent unfairness, but not all unfairness can be put down to contractual penalties. The whole problem here has been people considering bank charges to be "penalties" in some everyday sense of the word and therefore assuming they must be penalties in the sense used in contract law. The essence of a contractual penalty is that it is a provision that purportedly allows you to claim more than the amount of your loss - it is not about making excess profit.

[Aequitas]

The Legal definition is a lot more narrow than you'd think

 

Can we have that in lights, please?

[Aequitas]

He said that bank overdraft fees were required to be clear but were not necessarily required to be fair.

The High Court and the Court of Appeal have both previously upheld the right of the OFT to scrutinise the fairness of bank charges under the 1999 Consumer Contract Regulations.

Mr Sumption said both of the lower courts had been wrong, and had both over-refined and overcomplicated the interpretation of the regulations.

He pointed out that the regulations were not designed as a mechanism of price control and were not aimed at regulating what services were offered or the price charged.

They did not, he argued, apply to the main subject matter of a contract or the price being charged for it - only to ancillary or contingent charges.

"The overdraft charges are too fundamental to the bargain to be declared unfair," he said.

 

Whilst I do so reluctantly, since if it is right it produces a result opposite to what I would like, I cannot help feeling that the above argument is right. Indeed it is what I have always believed.

 

Can anyone persuade me (using legal and not emotional arguments) that it is wrong?