Contractual Interest? - Judge doesent seem to think so

[millymollymoo]

Hi

 

I don't know to what extent you will be using unjust enrichment in your claim but I have several saved documents/articles/court cases on the subjects of unjust enrichment/restitution/mistaken payments that I would be happy to send to anyone via email if it would be of any help.

 

Regards, Pam

 

Hi Pam,

 

I hope you do not mind as I ave P'md you:)

 

Milly X

[CrispDust]

Can we get zoot in on this important thread?

[thecornflake]

I'm having a search around for this as well. I found something called mutuality of obligation which seems to mainly relate to employment contracts, I'm not sure if it applies in this case or in fact exactly what it is.

 

I'll have a better look later when I get some more time.

[thecornflake]

Some possibly interesting stuff I have found so far.

Hoult & Anor v. Turpie [2003] ScotCS 124 (29 April 2003)

Mutuality of contractual obligations

In developing his argument on the principle of mutuality of contractual obligations, counsel for the pursuers submitted that the principle only operated in respect of obligations that corresponded to each other, and hence could be described as the counterparts of each other. Consequently, if a contract imposed distinct obligations on each party which could not be described as the counterparts of each other, the principle did not operate. In that event one party could demand performance without tendering performance himself. Reference was made to Johnston v Robertson, 1861, 23 D 646, at 652 per Lord Benholme, Gloag on Contract at 594-595, Turnbull v McLean & Co, 1874, 1 R 730, at 738 per LJC Moncreiff, Redpath Dorman Long Ltd v Cummins Engine Company Ltd, 1981 SC 370, at 374-375 per LJC Wheatley; and Bank of East Asia Ltd v Scottish Enterprise, 1997 SLT 1213, at 1216-1217 per Lord Jauncey. In the present case, the contract involved two distinct sets of contractual obligations. One involved the employment of the defender by IME and payment by IME for his services; the other involved the defender's offering his shares for sale, and the pursuers' paying the price of the shares.

 

Allied Dunbar Assurance Plc v. Superglass Sections Ltd [2003] ScotCS 276 (05 November 2003)

In Penman v Mackay 1922 SC 385 Lord McKenzie referred, 394, to a

".....well established doctrine of our law, which is an equitable doctrine, that, if a party to a contract seeks to plead a clause in his favour, he cannot do so when he himself is in breach of a material stipulation in the contract".

 

These may or may not be of use, not much of my legal head is on today.

[progenic7]

Hi cornflake,

 

i have also looked into the mutuality of obligation and i think you are right it generally deals with contracts in employment and not general consumer issues. Maybe the argument could be used on some osrt of basis, im not sure to be honest, zoots would probably know !

[Mad Nick]

Sorry to butt in with a FWIW, but I'm pursuing a claim against Abbey including contractual interest, but I'm claiming the authorised overdraft rate on the basis that I'm just reclaiming the interest they took directly associated with the charges (I was virtually always in overdraft). My next stage is AQ, so I'll be interested to see what happens. But I just wanted to make the point that "contractual interest" is not just about the "mutuality & reciprocity" issue (about which I have to say I have personal reservations) - just in case this thread put newbies off "contractual interest" per se. Regards, Mad Nick

[progenic7]

Sorry to butt in with a FWIW, but I'm pursuing a claim against Abbey including contractual interest, but I'm claiming the authorised overdraft rate on the basis that I'm just reclaiming the interest they took directly associated with the charges (I was virtually always in overdraft). My next stage is AQ, so I'll be interested to see what happens. But I just wanted to make the point that "contractual interest" is not just about the "mutuality & reciprocity" issue (about which I have to say I have personal reservations) - just in case this thread put newbies off "contractual interest" per se. Regards, Mad Nick

 

Hi mad nick, well what else is it about then exactly in your opinion. Exact legal arguments would be prefered rather than interpretation.

 

progenic

[Mad Nick]

progenic, not sure of your tone, but I'll play a straight bat. "Contractual intersest" means interest iaw with the contract. There are two approaches :

• you claim interest on the charges at the (contractual) unauthorised overdraft rate because the charges were unauthorised
  
• you claim back the interest at whatever contractual interest rate they took it at.

I've posted previously on this thread myself questioning the legal basis of "mutuality & reciprocity" - I posited that "fairness & balance" was the nearest legal basis, so you're out of luck asking me about that. As far as the 2nd approach is concerned, that's just the basic legal principle of being restored to the status quo ante. Regards, Mad Nick

[progenic7]

Hi Mad nick,

 

just read back that thread and can see that maybe i had a "tone" didnt mean anything by it. Just got a bit excited when somebody seemed to have a precise new argument on this matter, i just wanted to get to the bones of it thats all.

Ah well back to the drawing board, i have been trawling through swaithes of legal act's this evening to try and find something i could use. I think i have though im not going to post it here just yet until im sure.

Keep up the good work people !

 

Johnny

[Mad Nick]

progenic, to add to your reading in case you hadn't already turned it up, here's the post about fairness and balance I was talking about http://www.consumeractiongroup.co.uk/forum/general/18313-why-no-one-claiming-30.html?highlight=fairness+balance#post444092

post 586 on page 30 if the link doesn't go to the right page. Regards Mad Nick

[Glenn UK]

Heres another FWIW

 

When i talk about contractual interest i usually mean what i am charging the bank for borrowing my money.

 

My claims consist of charges, interest i paid as a result of those charges plus interest for them borrowing that money.

 

If i have understood Nick he is talking about the interest he paid as a result of the charges.

 

I think that both the interest you pay and the interest you charge are both contractual interest, its just not what i usually mean when i use the phrase.

 

Just thought it a point worth clarifying to make sure were all on the same page.

[progenic7]

thanks mad nick i have looked through that post from time to time but im going to go and have another look now to refresh my mind.

 

Glenn point noted on the contractual issue

[Glenn UK]

seems we might be beating up the wrong track anyone heard of disgorgement before?

 

Disgorgement is the giving up to a claimant of a gain made by a defendant, as a consequence of a wrongdoing committed against the claimant, but received from a third party. This dichotomy presents a difficult problem: what happens if a defendant, who is liable only in unjust enrichment and not in wrongdoing, makes a gain causally related to the unjust enrichment but by receipt from a third party? An answer to this question has important consequences for the coherence of an independent claim in unjust enrichment.

 

Glenn

[progenic7]

Hi Glenn,

 

i must admit i have not ome across this term before, and to be honest its a bit late at night to get my head round it.

I have just scanned through and it might as well be written in dutch lol

 

i'll look again tomorrow after a good nights sleep, working in the daytime though (worse luck) but shall continue the plight when home

 

keep up the good work

[CrispDust]

Glenn second element of that paragraph is irrelevant, since charge are unlawful, the defedent is liable for wrongdoing.

But the disgorgement concept seems a sound and viable one.

[tim2718281]

The point here is that because of the size of your claim, then if you lose the outstanding issue you may be liable for the banks' legal costs incurred since they made a part payment.

 

These costs could be £10,000. (Don't forget, many forum participants are claiming less than the Small Claims limit, so are not exposed to the same risk you are.)

 

So: how are you going to persuade the judge that the bank is obliged to pay you contractual interest?

 

I am not a lawyer; my understanding is that a claim for contractual interest must be based on a term in the contract.

 

When Bankfodder proposed claiming contractual interest, my understanding of his argument was that it was an implied term of the contract, based on the principles of reciprocity and muuality. (Apologies if I have misrespresented the argument.)

 

What you have to remember is that going to court is a gamble, and you must contemplate the possibility of losing.

 

At this point, I call for three cheers for Bankfodder, and his proposal for claiming contractual interest. I suspect what it has done is changed the playing field Before, the banks were simply arguing about whether they had to repay money they took. Now, with contractual interest in the frame, they are having to contemplate paying double what they took. Bearing in mind that they are taking £4 billion a year, claims for contractual interest could cost them additional billions.

 

To my mind, the prime purpose of claiming contractual interest was never a way to enrich claimants; it was always a way to put pressure on the banks to settle. And the money claimed in contractual interest was never money the claimaint had, nor money the bank took.

 

If the bank has paid up the amount excluding contractual interest, then the claim for contractual interest has done its job. You've got a good result. The bank has repaid you money you previously thought you would never see again, without your having to persuade a judge that you are right and the bank is wrong.

 

Whether you pursue your claim for contractual interest is up to you. But bear in mind that pursuing it could cost you in the region of £10,000 in legal costs if you fail. I think that's what the judge was trying to warn you about ... you're playing with the big boys who can rack up a couple of thousand pounds a day in legal costs.

 

Tim

[GaryH]

Regarding the unjust enrichment arguement, it would seem that there is actually a precident against awarding compound interest on those grounds. Page 56 - http://fds.oup.com/www.oup.co.uk/pdf/0-19-928753-8.pdf

[Glenn UK]

Gary

 

I have read a little bgit from page 56 on wards and there are arguments against based on the premise that the law currently explicitly allows simple interest.

 

However, reading further it is asserted and judges quoted, where they recognise the award of compound interest as the most logical.

 

So in other words it precents both arguments. There may be more i have only read a bit so far.

 

Glenn

[newbody]

What i have read and deemed relevant the black is copied (almost)

blue is case notes or bits i thought important

red what i believe our point in case is

If i have made any mistakes in my reading of this please feel free to say so i can try to understand it

The law of restitution is concerned with the award of a generic group of remixes which arise by operations of LAW

And which have one common function to deprive the defendant of a gain rather than to compensate the claimant for loss suffered

These are called the the restitutionary remedies.

The 2 main categories of restitutionary remedy are

(i) Personal restitutionary remedies

These are remedies which restore to the claimant the value of a benefit which the defendant has received

These remedies are said to operate IN PERSONAM

This means the defendant is liable to pay the value of the benefit to the claimant rather than transfer the benefit itself

(ii) Property restitutionary Remedies

The function of these remedies is to enable the claimant to assert their property rights in or on an asset which the defendant holds.

Of these 2 I believe in our claims for interest from the banks that part (i) applies

The characteristics of Restitutionary gain

(i) Restoring what the claimant has lost

Since restitutionary remedies are assessed by reference to the defendants gain they operate in a different way from compensatory remedies where the measure of relief is assessed by reference to the claimant’s loss.

Despite this in many cases the measure of relief is assessed by reference to the claimant’s loss

The award of such restitutionary remedies to the claimant can be justified on the ground that where the defendant has obtained a benefit at the claimant’s expense, justice demands that this should be restored to the claimant

Our expense is the removal of money in charges

(ii) Disgorgement

In some cases the remedy which is awarded though it is still assessed by the defendants gain results in the claimant receiving property which they never had before. Property in this case I would view being monetary gain

For example the defendant may have obtained some money from a third party due to their breech to the claimant by taking our money they have had it to relend to others thus giving us the right to make a claim in respect of the money so though it is not fully right to call this restitution as it is giving the claimant something they didn’t have it is more appropriately called asking the defendant to disgorge benefits to the claimant

A fundamental principle of the Law of restitution is that no defendant should profit from his or her wrong doing.

Also corrective justice also demands that a defendant should disgorge these benefits to the claimant because the claimant is the victim of the wrong doing.

The law of restitution is the law relating to all claims which are founded upon the principle of unjust enrichment relending of our money to make a profit

This equation of the law of restitution in reversing the defendants unjust enrichment has been recognised by the judiciary as well Case MOSES Vs Macferlan (1776 2 burr 1005,1012;97 er 976,981) Lord Mansfield recognised that the defendant is obliged by the ties of equity to refund the money

Lord Wright aa leading proponent of an independent law of restitution (Fibrosa Spolka Akcyjna Vs Fairbairn Lawson Coombe Barbour Ltd 1943 ac32,61)

Such remedies in English law are generically different from remedies in contract or tort and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution

For careful analysis of the case law suggest that the law of restitution is not founded on 1 principle but that of three

(1) The reversal of unjust enrichment

(2) The prevention of a wrongdoer from profiting from his or her wrong

(3) The vindication of property rights with which the defendant has interfered

Restitution is available in respect of each of these points but it is important that the claimant keeps them separate as each needs a different description from the outset

The substantive sense of unjust enrichment

Unjust enrichment should be used as a way to determine in what circumstances restitutionary remedies should be available to establish this four main points need to be considered

(a) The defendant must have received an enrichment they had my money to invest or lend to others

(b) The enrichment must have been at the claimant’s expense if they didn’t have my money they would have had to get it from else where

© The enrichment must have been received in circumstances of an injustice (meaning that it must fall within one of the recognised grounds of restitution) (A Link to these if anyone knows one would be appreciated

(D) The defendant is not able to rely on a defence which defeats or reduces the claim (they haven’t and never have disclosed the true cost of what our charges cost them)

If the first 3 are satisfied and the defendant doesn’t have a defence that extinguishes the claim i.e. validates their charges are lawful and a true administrative cost a restitutionary remedy can be awarded to enable the claimant to recover the value of any enrichment which had been received by the defendant

The depravation of benefits from a wrongdoer

In certain cases the victim of a wrong maybe able to bring a restitutionary claim to recover the value of the benefit obtained by the defendant as a result of the wrong doing

E.g.

Sometimes where the defendant commits a tort against the claimant.

A similar response may also arise in respect of benefits accruing to the defendant as a result of a breach of contract the commission of equitable wrongs such as a breach of fiduciary duty by over charging us they are wronging us

It is sufficient that defendant has committed a wrong against the claimant and that it is the wrong that has triggered the restitutionary response

The award of interest

Since it is a function of restitutionary remedies that the defendant should be deprived of its gains of being unjustly enriched having committed a wrong it should automatically follow that the claimant be awarded interest as well.

This is because immediately the defendant has received a benefit which they are liable to restore to the claimant as the defendant is not entitled to the benefit thus should pay it to the claimant .The law of restitution accepts this argument thus meaning the defendant is liable to the claimant for the use of the benefit by means of interest.

Traditionally Compound interest has been awarded where the wrong has been carried out by a fiduciary (president of India Vs La Pintada Compania Navigacion SA (1985) ac 106, 116 Lord Brandon))

Compound interest is paid on the amount of money owed to the Claimant and on the interest of that money owed as well

the supreme courts act 1981 does not specifically exclude the award of compound interest at common law claims Rather it recognises that the court can award simple interest and the courts have the right to award compound interest to appropriate claims It would be down to the defendant to prove if they had borrowed the same sum of money from another financial institution they would have only paid simple interest then it is only fair that the defendant pays simple interest not compound. However the interest awarded in commercial transactions would normally be compounded Sempra Metals Ltd Vs Irc2005 ewca civ 389, 2005 3 wlr 521 539 para 44 (Chadwick L.J)

[millymollymoo]

Gary

 

I have read a little bgit from page 56 on wards and there are arguments against based on the premise that the law currently explicitly allows simple interest.

 

However, reading further it is asserted and judges quoted, where they recognise the award of compound interest as the most logical.

 

So in other words it precents both arguments. There may be more i have only read a bit so far.

 

Glenn

 

 

Hi Glenn, this has moved off the other thread concerning restitution and your disgorgement find.

 

However have alook here about compound interst on page 27. Also from pg1 index there are arguments for and against:)

Appears on page 35 of pdf

http://www.lawcom.gov.uk/docs/cp167.pdf

[tim2718281]

Gary

 

I have read a little bgit from page 56 on wards and there are arguments against based on the premise that the law currently explicitly allows simple interest.

 

However, reading further it is asserted and judges quoted, where they recognise the award of compound interest as the most logical.

 

So in other words it precents both arguments. There may be more i have only read a bit so far.

 

Glenn

 

Gary was referring specifically to the "unjust enrichment" situation.

 

Personally, if I were suing a bank for return of penalties and interst on them, I would not be arguing that the bank had unjustly enriched itself; I would be arguing it had unjustly made me suffer!

 

Suppose a year ago my bank balance stood at zero, and the bank took £100 in penalties, and I immediately paid in £100, thus avoiding further charges.

 

I seek compensation, and the bank offers to pay £100. That puts me financially back in pretty much the same position as if the bank had never taken a penalty.

 

But I have been deprived of the use of my £100 - the £100 I used to pay the penalties - for a year. Perhaps that meant I was unable to take my wife out for a meal on her birthday; or perhaps I was unable to lend my son £100 when he was short. Or perhaps I missed out on a bargain on ebay.

 

The point is, I have suffered what I believe the law terms a "loss of amenity" - in this case, the loss of the use of the £100.

 

Now, it is very difficult to point to specific things you did not do because you were short of money; and even if you could, it would be difficult to place a monetary value on just compensation.

 

But suppose I borrowed the money to make up the shortfall, thus avoiding missing out on a meal with my wife etc. I would have paid interest on the loan. If I could show that I had taken out the loan as a result of the unlawful penalties, I would have an argument that the bank should repay me the interest on the loan. That argument may or may not persuade a judge, but it is at least plausible.

 

However, the interest I am arguing for would not be what I could get from my investing £100, nor the amount the bank could get from investing it; it is the amount *I* would have to pay to borrow the money.

 

Now, I argue that the cost of a loan to cover the amount of penalties is a good guide to the right compensation for the loss of amenity - even if I do not actually take out a loan. (If I take out a loan, I do not lose out on the use of the money for a year, but I do pay the interest. If I do not take out a loan, I do not pay the interest, but I do lose out on the use of the money.)

 

Where no loan to cover the penalties is taken out, we have to settle on an interest rate for the notional loan. As the bank is in the money-lending business, it seems reasonable to use the bank's own rate - that is, charge them however much they would have charged me to borrow the money to cover their penalties. After all, they can hardly object that their own interest rates are unreasonable.

 

Tim

[Mad Nick]

I think this might be two problems disguised as one. I think Golfscape's Judge might have had a basic problem with a claim for compound interest per se and then another problem with the contractual rate being claimed.

 

This link provides very good support for claims for compound interest :

House of Lords - Westdeutsche Landesbank Girozentrale v. Islington London Borough Council particularly where the interest claimed explicitly restores the Claimant to the status quo ante (ie interest rates relevant to the account balance)

 

I've always been uneasy about claiming the unauthorised overdraft rate, and I think that this is where the ice gets thinner. Regards, Mad Nick.

[Glenn UK]

May i suggest we discuss this issue all in one thread?

 

Perhaps we can ask a mod to merge the two threads and encourage people posting related quesiotns to post them elsewhere before the thread develops into something very long but with little focus.

 

Just a thought.

 

Glenn

[GaryH]

Which thread would you like it merged with Glenn? Providing its Ok with the OP, I'll get a mod to move it for you.

[Mad Nick]

This link about claims for compound interest gets quite interesting from 2.42 to 2.54. Although it's just a Law Commission Discussion Paper, it starts off with a summary of the law surrounding interest on claims. Regards, Mad Nick

http://www.lawcom.gov.uk/docs/cp167.pdf