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

[photoman]

Ok, you lot seem to be pretty clued up on all this with the judgement and stuff at the moment, so here's a little poser for you to think about.

 

I have a basic bank account, which doesn't have the facility for any form of authorised overdraft. But when a direct debit got refused due to lack of funds the letter I got stated the charge was for an "Instant Overdraft Request Fee".

 

Now, since there can be no consideration for an instant overdraft on this type of account does that mean that the charge is illegal as it has been made contrary to the terms of the account?

 

Okay, I've been having a think about this, and had a read of the judgement.

 

 

The case quite specifically discounted any consideration of the terms and conditions of "basic" accounts. Thus it has made no specific declaration as to whether such charges upon such accounts could be deemed as having arisen due to a breach of contract.

However, given that basic accounts do not allow for any overdraft facility, and quite specifically stipulate in their terms that the accounts must always be operated in credit, then making it overdrawn must be a contractual breach.

 

 

From the judgement:

 

The OFT, however, identifies some provisions in the Banks’ current and historical terms which, it is submitted, might give rise to customers being in breach of contract in these circumstances. For reasons that I have explained, in this judgment I consider provisions in current terms other than those governing basic accounts, specifically provisions in the terms of Abbey, Barclays, Lloyds TSB and Nationwide, and I also consider some historical terms used until recently by Clydesdale and by RBSG. It is necessary to examine separately each of the provisions identified by the OFT as arguably penal in order to determine (i) whether it is truly of contractual effect (and not, for example, merely exhortatory or advisory); (ii) if it is of contractual effect, whether it imposes an obligation or prohibition upon the customer (rather than, for example, simply states a condition precedent before an obligation on the Bank arises); and (iii) if it does impose a contractual obligation or prohibition upon the customer, whether the Relevant Charge is payable upon breach of it. Leaving aside basic accounts, I consider that the OFT has identified all the arguably penal provisions in the terms now used by the Banks for their personal current accounts and in the historical terms of Clydesdale and RSBG to which I have referred. It has rightly not suggested that there is any penal provision in the terms now used by Clydesdale, HBOS, HSBC, and RBSG.

 

299. The Banks emphasise that a Relevant Charge cannot be penal unless it is payable upon a breach by the customer, and illustrate this principle by referring to the decision of the Court of Appeal in Jervis v Harris, [1996] Ch 195, which concerned a provision in a lease (clause 2(10)) obliging a tenant to carry out repairs and providing that if he did not do so, the landlord might do the repairs and recover from the tenant the costs and expenses of doing so. This provision was held not to be penal, and Millett LJ said this (at p.206E-G):

“... it is well settled that the event on which the sum alleged to

be a penalty becomes payable must be a breach of some other

contractual obligation owed by the obligor to the obligee. That

is not the case here. There is only one relevant obligation on

the part of the tenant and that is to repay the landlord his costs

in carrying out repairs himself.... the event which triggers the

tenant’s liability under a clause such as clause 2(10) is the

expenditure by the landlord of money in effecting repairs, not

the anterior failure of the tenant to repair.”

 

Undoubtedly the law about penalties does not apply if the obligation is to pay for a service or upon an event other than a breach, even if the service is supplied or the event takes place against the background of or accompanied by a contractual breach, and even if the service would not have been provided or the event would not have occurred but for the breach. A customer could not necessarily invoke the law about penalties to challenge charges payable for his bank lending him money simply because his account would not be overdrawn but for his own breach. If an obligation to pay is penal, it must require payment upon the breach itself.

 

 

I find the last two paragraphs a little bit at odds with each other here ?

 

(anybody else wish to comment) ?

 

 

IMHO, the only way I can think to resolve this, is (taking the first paragraph) that if a an item is presented that would take you over any agreed limit, and the bank decide to actually honour it, thus taking you over your limit (ie: in effect lending you additional money), then even though the charge has arisen due to what could possibly be a contractual breach, it could not be considered penal in nature, as it also relates to a loan.

However (taking the second paragraph), if the payment is simply refused and returned (ie: the bank is not loaning you any additional money), then the payment is in fact penal, as it relates purely to a payment for a breach (ie; it does not relate to any additional lending).

 

 

Anyway, back to the question of whether or such charges upon a basic account are unlawful penalties.

To my mind the answer has to be yes.

The terms and conditions of a basic account stipulate that there is no overdraft facility, and that the account must operate in credit.

Thus any attempt to create an overdraft is a breach.

The item cannot be cleared and must be returned, so no lending is occurring, and so it is simply payable upon the breach itself. Thus it is a penalty.

 

 

PM

[JonCris]

The Bill of Rights has been decimated by the introduction of recent laws which allow this government to introduce laws without reference to Parliament.....It's by this means that they are now giving the powers to councils to fine people.

 

It was part of their same bill which has seen the introduction of the right of bailiffs to enter by force the homes of those debtors who's only crime is to be in debt.

 

As for the Judiciary yes they are independent but it's naive to think the Government doesn't have 'views' which are made known to them

[BigBudgie]

Okay, I've been having a think about this, and had a read of the judgement.

 

 

The case quite specifically discounted any consideration of the terms and conditions of "basic" accounts. Thus it has made no specific declaration as to whether such charges upon such accounts could be deemed as having arisen due to a breach of contract.

However, given that basic accounts do not allow for any overdraft facility, and quite specifically stipulate in their terms that the accounts must always be operated in credit, then making it overdrawn must be a contractual breach.

 

 

From the judgement:

 

The OFT, however, identifies some provisions in the Banks’ current and historical terms which, it is submitted, might give rise to customers being in breach of contract in these circumstances. For reasons that I have explained, in this judgment I consider provisions in current terms other than those governing basic accounts, specifically provisions in the terms of Abbey, Barclays, Lloyds TSB and Nationwide, and I also consider some historical terms used until recently by Clydesdale and by RBSG. It is necessary to examine separately each of the provisions identified by the OFT as arguably penal in order to determine (i) whether it is truly of contractual effect (and not, for example, merely exhortatory or advisory); (ii) if it is of contractual effect, whether it imposes an obligation or prohibition upon the customer (rather than, for example, simply states a condition precedent before an obligation on the Bank arises); and (iii) if it does impose a contractual obligation or prohibition upon the customer, whether the Relevant Charge is payable upon breach of it. Leaving aside basic accounts, I consider that the OFT has identified all the arguably penal provisions in the terms now used by the Banks for their personal current accounts and in the historical terms of Clydesdale and RSBG to which I have referred. It has rightly not suggested that there is any penal provision in the terms now used by Clydesdale, HBOS, HSBC, and RBSG.

 

299. The Banks emphasise that a Relevant Charge cannot be penal unless it is payable upon a breach by the customer, and illustrate this principle by referring to the decision of the Court of Appeal in Jervis v Harris, [1996] Ch 195, which concerned a provision in a lease (clause 2(10)) obliging a tenant to carry out repairs and providing that if he did not do so, the landlord might do the repairs and recover from the tenant the costs and expenses of doing so. This provision was held not to be penal, and Millett LJ said this (at p.206E-G):

“... it is well settled that the event on which the sum alleged to

be a penalty becomes payable must be a breach of some other

contractual obligation owed by the obligor to the obligee. That

is not the case here. There is only one relevant obligation on

the part of the tenant and that is to repay the landlord his costs

in carrying out repairs himself.... the event which triggers the

tenant’s liability under a clause such as clause 2(10) is the

expenditure by the landlord of money in effecting repairs, not

the anterior failure of the tenant to repair.”

 

Undoubtedly the law about penalties does not apply if the obligation is to pay for a service or upon an event other than a breach, even if the service is supplied or the event takes place against the background of or accompanied by a contractual breach, and even if the service would not have been provided or the event would not have occurred but for the breach. A customer could not necessarily invoke the law about penalties to challenge charges payable for his bank lending him money simply because his account would not be overdrawn but for his own breach. If an obligation to pay is penal, it must require payment upon the breach itself.

 

 

 

I find the last two paragraphs a little bit at odds with each other here ?

 

(anybody else wish to comment) ?

 

 

IMHO, the only way I can think to resolve this, is (taking the first paragraph) that if a an item is presented that would take you over any agreed limit, and the bank decide to actually honour it, thus taking you over your limit (ie: in effect lending you additional money), then even though the charge has arisen due to what could possibly be a contractual breach, it could not be considered penal in nature, as it also relates to a loan.

However (taking the second paragraph), if the payment is simply refused and returned (ie: the bank is not loaning you any additional money), then the payment is in fact penal, as it relates purely to a payment for a breach (ie; it does not relate to any additional lending).

 

 

Anyway, back to the question of whether or such charges upon a basic account are unlawful penalties.

To my mind the answer has to be yes.

The terms and conditions of a basic account stipulate that there is no overdraft facility, and that the account must operate in credit.

Thus any attempt to create an overdraft is a breach.

The item cannot be cleared and must be returned, so no lending is occurring, and so it is simply payable upon the breach itself. Thus it is a penalty.

 

 

PM

 

 

Well explained and I believe is perfectly accurate analysis. Let's hope Judge see it this way as well when he hands down his decision regarding these types of accounts.

 

Budgie

[qbal]

Thanks Photoman and BigBudgie. That has been what I have been thinking, and I hope that the judge does see it that way.

 

So any comments on how a bank can charge an "Instant Overdraft Request Fee" on an account that CANNOT have an instant overdraft?

 

Doesn't that make the charge a breach of the contract in itself? Basic account T&C's have a clause that allows them to charge an "Unpaid Item Fee" and take the customer into an unauthorised overdraft if there is not enough money to cover it, but if the charge is Specifically stated in the statements as an "Instant Overdraft Request Fee" then they have charged me for a service that is not in my contract, therefore it is a breach?

[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.

[photoman]

Aequitas.

 

1/ The recent ruling that gives rise to assumption that such charges cannot be penalties was reached whilst only considering (recently conveniently changed) current T&C's. It did not consider or rule that the same applied to historical T&C's.

 

2/ Hopefully when the judge releases his findings upon historical charges (he stated an intention to do so within a month), then he will see through the banks recent blatant attempts to "cloak" such charges. I do believe the issue of penalties arising due to a breach of contract is not completely resolved yet, and will still require a complicated analysis of each and every T&C for each Bank over quite some period.

 

3/ The judge did also actually rule that the charges cannot be considered as being fees for a service, so there is actually no right to mark them up as such.

 

4/ Highly hiked up unauthorised borrowing rates are adequate recompense to the banks for the such lending.

 

5/ There is no such thing as "free" banking, as even those with accounts in credit "pay" by only receiving miniscule (or no) credit interest, despite effectively lending the bank their money.

[mailmannz]

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

 

Oh for the love of [a religious entity that may or may not exist!], time and time again the judiciary has PROVEN beyond doubt that it is not in cahoots with the government :?

 

I think the one that lives in laalaa land is yourself.

 

Mailman

[JonCris]

No one is claiming they are in cahoots with the government but if anyone thinks 'views' aren't expressed then the are living in cloud cuckoo land

[credit allergy]

As regards photomans earlier question about the conflicting paragraphs i would like to offer my opnion. If the charge is penal or not should depend on what it is for. This is what was mentioned in the judgement in respect of what service is provided. So if a breach has occured even though a charge is levied it can only be a penalty if it is a straight charge and is a charge for breaching the contract like a fine and bears no resemblence to any cost as in the landlord example. So whatever the banks call their charge if it can relate to a service provided, it will not be regarded as penal. So I suppose even if a machine prints something this would not be penal. Then you revert to utccr where you would have to prove unfairness from the list in the regs, but no breach is neccessary. This is all IMO.

[patrickq1]

It is not unreasonable that banks should make a reasonable profit

just to say a reasonable profit is fair and balanced,what is missing is the transparencey in how the banks arive at a 25/35 or 12 pounds figure (be that the figure that the FSA seems to think a fair min)in their eyes only, but really the FSA have had since April 2007 to come up with the true figures as promised through transparancey yet to date all this has been kept secret and we still are none the wiser ,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...i have yet to see free services ? by hook or by crook they will draw every last penny out of you given the scope to do so....i had a isa account with loydds and it came to an end mid last year now they tell me that because of losses they lost money on the isa account (bad investments) yet the same company boasted billions in profit ,luckily i got my money back and the loydds directors had a big fat bonus for doing so well,,i am still argueing with them over this but i know i wont get anywhere with it because their is no transparencey this is where things are wrong and if you think it cost more than £1.50 to auto procces a check and a letter then approx 40 % of that is profit enough would nt you not agree with that 35 and more is an ubuse and pure wanton greed and arrogance in my book and i have the most conservative veiws well i thought so until i see greed like when you watch gonden bolloks on tv i am so glad the really greedy ones dont get a penny lol

patrickq1

[mailmannz]

No one is claiming they are in cahoots with the government but if anyone thinks 'views' aren't expressed then the are living in cloud cuckoo land

 

And? Whats your point?

 

So what if the government has views? Do you not have views? Is the Government not allowed to have views on anything?

 

They could make their views as widely known as possible for all I care HOWEVER, what is beyond doubt is the fact the judiciary is totally and uterlly independent of Government control.

 

Mailman

[patrickq1]

what is beyond doubt is the fact the judiciary is totally and uterlly independent of Government control.

this is doubtful very very doubtful when you have jack straw at the helm ,just look at dispatches /mobiles and margret hodge involvment this is something that the judiciary should pick up on and prosecute the ministers involved for manipulating price controls on a higher scale than should be allowed the EU had to warn the british goverment over this but nothing happened

patrickq1

[mailmannz]

Patrick,

 

If you could be so good as to point out which laws they have broken that would be good.

 

Mailman

[MilkTrayMan]

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.

Is there any chance of U providing a link to the UK's (...England's preferably) Constitution for us Aequitas??...

...

[pugsley]

Constitution of the United Kingdom - Wikipedia, the free encyclopedia

 

 

 

maybe he has studied law and considers that we have an unwritten constitution (hey that's what I was taught at law school), it is subject to debate though obviously

 

 

 

The Constitution of the United Kingdom is the uncodified body of law and convention under which the United Kingdom is governed.

Because the UK has no single codified documentary constitution along the lines of the Constitution of the United States, it is often said that the country has an "unwritten constitution".[1] However, the majority of the British constitution does exist in the written form of statutes, court judgments and European treaties. The constitution does have some unwritten sources, including parliamentary constitutional conventions (more than most countries except New Zealand and Israel) and the royal prerogatives.

The bedrock of the British constitution is the doctrine of Parliamentary sovereignty, according to which the statutes passed by Parliament are the UK's supreme and final source of law. It follows that Parliament can change the constitution simply by passing new Acts of Parliament. However UK membership of the European Union the European Communities Act 1972 means the UK applies all EU law (and disapplies any provisions of its own which conflict) that it passes in common with other member states.[2] Changing attitudes may also be seen among the judiciary: for example, the judgments of the Court of Appeal and the House of Lords in the Jackson litigation arising out of the Hunting Act 2004 indicate that senior judges may no longer necessarily be prepared to view Acts of Parliament as sacrosanct.[3] These developments are not without their opponents.

[TideTurner]

Surely the Bill of Rights Act should play a part here

[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.

[TideTurner]

Taken from an earlier post - http://www.consumeractiongroup.co.uk/forum/general/113387-oft-test-case-pocs.html?highlight=bill+of+rights+act

 

 

Are we forgetting about the Bill of Rights Act 1689, a constitutional statute, whereby a penalty cannot be applied to a person or body prior to any conviction by a Court of Law?

 

Acts of Parliament may be amended and adapted, but those that are cast in stone cannot be altered.

 

The banks' argument that penalties applied to peoples' account were actually services is fickle. They have invested heavily in technology, which brought in the bucks, but meant there was no manual intervention when making a charge / penalty, and therefore no justification for the £39 charged for none payment of a DD etc.

 

Where a service cannot be proven (the banks have yet to provide a breakdown of the charges they make) therefore no service could have been provided. The OFT is now focussing on the justification of any such "service".

 

Tide

[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.

[SELV]

Hi Everybody Selv here,

I wished I had payed more attention at school and turned up for all my History lessons instead of my mates and I locking ourselves in the toilets and having a smoke cus then I would have known a bit more about some of the last posts espescially Aequitas's last parragraph (whats all that about) me being a not so well educated type of person if it was written in a way I could understand then there would be more interest and a lot more posts ,cus people like me think we are out of our depth so are frightened to reply....SELV....

[paulwlton]

Hi Everybody Selv here,

I wished I had payed more attention at school and turned up for all my History lessons instead of my mates and I locking ourselves in the toilets and having a smoke cus then I would have known a bit more about some of the last posts espescially Aequitas's last parragraph (whats all that about) me being a not so well educated type of person if it was written in a way I could understand then there would be more interest and a lot more posts ,cus people like me think we are out of our depth so are frightened to reply....SELV....

 

I agree. Why do lawyers, and the juidiciary still use a language that doesn't exist "latin" .... to keep the laymen out!

[ANDENA]

Yes i agree i am so confused just let the boys get on with it sooner or later someone will explain to us in simple terms,its good we have some boys in this field of work.

[pugsley]

I thought the last paragraph was clear, so maybe some of my studying has sunk in afterall

 

Universal suffrage (also universal adult suffrage, general suffrage or common suffrage) consists of the extension of the right to vote to all adults, without distinction as to race, sex, belief, intelligence, or economic or social status.

In the first modern democracies only a limited number of people had a say in the running of the government - for example in the United Kingdom only Protestant, male landowners with relatively large holdings had the right to vote. Suffrage depended on local custom before 1832, so there were exceptions. In all modern democracies the number of people who could vote increased gradually with time. The 19th century featured movements advocating universal male suffrage - the extension to all males regardless of social standing or race. The democratic movement of the late 19th century, unifying Liberals and Social Democrats, particularly in northern Europe, used the slogan Equal and Common Suffrage. The Movement for Universal Suffrage consisted of a social, economic and political movement aimed at extending suffrage to people of all races.

[SELV]

Nice one pugsley, now you have explained it in detail I am now totally confused ...SELV...

[ANDENA]

Nice one pugsley, now you have explained it in detail I am now totally confused ...SELV...

SELV i should give up i have.