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Not over yet! RGS1 vs HSBC


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Thanks for posting that letter RGS :)... looks like that'll be the next one my son will get .... :rolleyes:

 

I haven't digested it all yet... but we'll have to watch the 3 month deadline ... which looks as if it may be 3 months from the 25 November .... i.e 25th February .... as someone (can't remember who at the moment) got a letter from the court saying they should make a decision on the status of the 'Stay' on their claim by 26 Feb 10 at the latest ... makes me think the courts have already agreed to the Banks' "Suggested Directions"...?

Nemo me impune lacessit

 

 

Advice & opinions given by johnnymitch are personal, are not endorsed by Consumer Action Group or Bank Action Group, and are offered informally, without prejudice & without liability. Your decisions and actions are your own, and should you be in any doubt, you are advised to seek the opinion of a qualified professional.

 

 

If you think I've helped you please feel free to tickle my star :-D

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  • 2 weeks later...

Well I figure we can at least have a go at a change in POC's to see if it does change the judges mind at all.

Im not feeling too confident now though, I can imagine the claim will probably still be dismissed.

Do we have any news on the new POC's, I have found a few sections to add in about section 5 but dont know if thats strong enough now?

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  • 3 weeks later...

Have had another letter from DG (ill post it up tommorrow) they have given me their counter arguement to the Section 5 arguement and also warned me if i continue and lose in court they will apply for me to pay their costs.

Not really sure what to do now. Ill scan the letter in so people can have a look. Sounds like they have crushed the section 5 arguement though.

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I sent a letter requesting to change my POC's and DG responded to this letter, as far as i know i havent actually changed them yet though so do people think it is ok to amend them further before it is formally submitted??

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I think it would be a good idea to see DG's response to your letter first :) Was the letter you sent http://www.consumeractiongroup.co.uk/forum/hsbc-bank/234710-not-over-yet-rgs1.html#post2613552 one ?

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FSA Waiver on Bank Charges:http://www.fsa.gov.uk/pages/Doing/Regulated/Notify/Waiver/pdf/dir_quart_0709.pdf

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Yes I originally sent that one then expanded section 5 in my POC's and sent that off.

Their responce arguement to this was to do with the price of the charges so I want to amend it to remove the price arguement.

I dont have the letter with me at work today but ill post it when I can.

Just a bit worried about them saying they would apply for me to pay their costs.

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thats quite standard and to be expected. Expect them to throw everything at the first few cases in court. We have already seen a London QC attend an application hearing in Scotland. You have to decide yourself on whether you are willing to take the risks involved. If the claim is considered without merit, then even in small claims, the judge does have the discretion to award limited costs.

 

they are correct in that 6(2) has wiped out arguments on level of the charges under 5(1) (the disprop argument) however it hasnt wiped out the imbalance of the contract overall. Martin on MSE has done a nice PIL description of the new approach to the 5(1) arguments, so have a peek at his bank charges updated guide - he will be updating that further next week.

 

hope that helps a little bit, look forward to seeing hsbc's letter, it should help with other claims too if we can counter their arguments up front.

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FSA Waiver on Bank Charges:http://www.fsa.gov.uk/pages/Doing/Regulated/Notify/Waiver/pdf/dir_quart_0709.pdf

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thanks RGS. Can you post up what you sent DG / entered as your proposed amended particulars ? From hsbcs letter you seem to have only argued on the level of the charge under utccr and penalties, both of which were ruled out in the supreme court judgment. I see there is a mention of the imbalance in rights and obligations.

 

Ahh have you used CAGs template from the letters page ? http://www.consumerforums.com/resources/templates-library/48-bank-templates/113-4-particulars-of-claim-n1-updated-version-now-available

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FSA Waiver on Bank Charges:http://www.fsa.gov.uk/pages/Doing/Regulated/Notify/Waiver/pdf/dir_quart_0709.pdf

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Its pretty much that one yeah, I think its all about expanding on the imbalance arguement on the POC's, unfortunately I rush ahead a little and didnt really expand on that.

Heres what I had about section 5:

"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."

15. It is submitted that the charges are unfair under regulation 5 because contrary to the requirement of good faith they cause a significant imbalance in the parties’ rights and obligations under the banking contract. The charges are most likely to penalise those customers with little or no credit and the charges could be imposed repeatedly with interest levied on top at the higher rate. The cumulative effect is therefore to substantially increase the debt burden on the customer who incurs the charges making it increasingly likely that further and repeated charges and interest would be charged.

 

 

16. The defendant is a powerful 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 part of the contract.

 

17. The cost of the Defendant's charges have increased substantially and indiscriminately during the period in which my account has been in operation, neither time was I given the opportunity to negotiate, or even notified of this increase. This means the bank, a powerful financial institution, has unilaterally altered the terms of my account contract to my significant detriment, and to their advantage.

 

 

18. It is submitted that the account contract is within the ambit of the Regulation 5 as it was not individually negotiated. The requirement of good faith was described by Lord Bingham in Director General of Fair Trading v First National Bank[2001] UKHL 52 [exhibit SPM07] as:

 

"Good faith in this context is not an artificial or technical concept... It looks to good standards of commercial morality and practice. It lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the regulations are designed to promote. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position"

 

19. The Claimant submits that the charging regime operated by the Defendant by charging those who can least afford it to subsidise free banking of other customers takes advantage of the Claimant’s necessity indigence and weak bargaining power. The objectives which the Regulations are designed to promote include the protection of Consumers from commercial entities.

 

20. The Defendant may assert that the charges are within the requirement of good faith as they were in the published terms and conditions and the Claimant was aware of them. However, this is a purely procedural argument and according to Lord Steyn in Director General of Fair Trading v First National Bank:

 

"Any purely procedural or even predominantly procedural interpretation of the requirement of good faith must be rejected."

 

 

 

My POC's havent actually been changed though, this was in response to a letter requesting the change, im guessing I can still change them.

I just dont know how successful that arguement will be though, obviously its a big risk if they will go for costs.

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Thanks RGS.

 

A lot rests on the individual negotiation there doesn't it. That really is a minor point - its agreed the terms arent individually negotiated - it isnt that which creates the imbalance.

 

Yes you can still amend your claim, just don't amend it to that. You need, if you want to continue, to do a lot of reading on the arguments.

 

You have until the 26th Feb to apply to amend particulars of claim so a little patience and research is needed. If you are stuck then I believe Caro is asking people to email her with their case so CAG can help you.

 

Costs wise, I have no idea, it would hopefully be limited in small claims, but we have seen costs of £'000's for claims without merit going through hearing.

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FSA Waiver on Bank Charges:http://www.fsa.gov.uk/pages/Doing/Regulated/Notify/Waiver/pdf/dir_quart_0709.pdf

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So are the new arguements based around the points set out by Martin Lewis on his website?

 

The public service point is very interesting.

To what extent can you amend your POC's surely removing the fair value arguement pretty much changes the whole POC's.

 

Need to know what to leave and what to take out really.

 

My full original POC's are this:

1. The Claimant has an account number 000000000 with the Defendant which was opened in the year 2000.

 

2. During the period in which the Account has been operating the Defendant debited numerous 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 is attached to these particulars of claim.

 

4. The Claimant submits that the charges levied to his bank account, as set out in the attached schedule, are, notwithstanding the contention of the defendant, penalty charges arising from and relating directly to breaches of contract 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 Defendant’s charges were levied in accordance with the terms and conditions of the account in question. 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 4 above, 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 his 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 a charge ranging from £18 to £27.50.

9. In the case of Dunlop Pneumatic Tyre Co v New Garage & Motor Co [1915] 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 further submits that the Defendant’s contention that the charges are now a legitimate service charge represents a contradiction to materials published by the bank previously. HSBC Bank’s 1200 Terms and Conditions section 7.11 state: “As well as charging interest under 7.10, we may also charge our applicable fee for overdrafts not agreed in advance”

 

 

11. 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”.

 

12. As submitted above, the Claimant believes the charges levied to his 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 Defenses contention that they are legitimate contractual service charges.

 

13. However, and without prejudice to the above, in the event the charges were accepted by this honorable 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.

 

14. 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."[/font]

 

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.

 

15. 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.

 

16. The Claimant cites the case of Robinson v Harman [1848] 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.

 

17. Lord Dunedin in the case of Dunlop Pneumatic Tyre Co v New Garage & Motor Co [1915] 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"[/font]

 

18. The Claimant will further rely on numerous recorded authorities dating throughout the 20th century up to the most recent case of Murray v Leisureplay [2005] 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.

 

19. 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 fulfill his obligation to pay a disproportionately high sum in compensation;"

 

20. 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.

 

21. 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.

 

22. It is submitted that the Defendant’s charges are applied by an automated and computer driven process. This process consists of a computer system ‘bouncing’ the direct debit, and sending out a computer generated letter. It is therefore impossible to envisage how the Defendant can incur costs of between £25 per transaction by carrying out this completely automated process. Note that the letter received notifying of a charge is identical in every instance, and if multiple breaches occurred on the same day, a separate letter will be sent in each instance.

 

23. On 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

 

24. 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.

 

25. Accordingly the Claimant claims:

 

[a) the return of the amounts debited in respect of charges in the sum of £000.00 any interest charged thereon;

 

b) Court costs;

 

c) The claimant claims interest under section 69 of the County Courts Act 1984 at the rate of 8% a year, from the date that each charge was applied to 28 February 2007 of £000.00.[/font]

 

I, the Claimant, believe all facts stated to be true.

Edited by RGS1
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thanks RGS, yes a heck of a lot of that is based on breach and penalty, even the UTCCR parts. you can amend the POC to remove all those arguments, and yes the main ''new'' arguments are as Martin Lewis has discussed.

 

1. UTCCR Reg. 5(1) – An imbalance of rights and obligations, contrary to good faith, and to the detriment of the consumer.

2. The Misrepresentation Act 1967 or common law Mistake

3. The Competition Act 1998, Chapter II

4. Undue influence (common law)

5. CCA 1974 (as amended), s140A & 140B – unfair relationship (in overdraft situation cases)

6. Common law penalty 9in certain cases)

 

http://www.consumeractiongroup.co.uk/forum/oft-test-case-updates/139905-h-o-l-test-222.html#post2673306 and the rest of that thread has some good stuff in to help you create your POC, just keep asking for help and if you are stuck then speak to the site team.

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FSA Waiver on Bank Charges:http://www.fsa.gov.uk/pages/Doing/Regulated/Notify/Waiver/pdf/dir_quart_0709.pdf

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Thanks Yourbank, I started my case way back when the pentalty arguement was the main issue so it is pretty much all based on that.

Has anyone had any success yet using the new approach does anyone know?

There threat of going for costs has really put me in a dilemma.

 

Can I go to the extent of Deleting all about the penalties in my POC or is that effectivly changing my case entirley.

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Actual undue influence

 

An innocent party may also seek to have a contract set aside for actual undue influence, where there is no presumption of undue influence, but there is evidence that the power was unbalanced at the time of the signing of the contract.

 

Can anyone tell me where the Misrepresentation come in?

 

“ 1. Removal of certain bars to rescission for innocent misrepresentation.

Where a person has entered into a contract after a misrepresentation has been made to him, and—

 

(a) the misrepresentation has become a term of the contract; or

(b) the contract has been performed;

or both, then, if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled, subject to the provisions of this Act, notwithstanding the matters mentioned in paragraphs (a) and (b) of this section.

 

Not sure how this fits.

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More on Undue Influence

 

In certain set relationships there is, in the nature of things, an imbalance of power and knowledge, such as that of bank and customer. These relationships can be seen in law as being such that if the "weaker" or dependent party makes a substantial gift to the dominant party, or a personal contract with him, it will be presumed to be invalid. This is called a “presumption of undue influence”. The only way the more dominant party can persuade the court that the gift or contract is okay is by showing that the other side took independent legal advice before going ahead.

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