Contractual Interest - Precedent - LOST

[GaryH]

as it overturns one of the judgements that the Judge used to dismiss my appeal.

Which one, just out of interest?

[steven4064]

I suspect Westdeutschland - the judgement goes in favour of the minority view "that equitable jurisdiction remained sufficiently flexible to allow it to award compound interest where justice so required, even in the absence of a trust or other fiduciary relationship."

[GaryH]

Yep, it bloomin well does! This could be highly significant.

[steven4064]

Yep, it bloomin well does! This could be highly significant.

Absolutely. All those hours spent reading up on equity and fiduciary relationships - straight down the toilet!!!

[GaryH]

All those hours spent reading up on equity and fiduciary relationships - straight down the toilet!!!

I know! Damn!! And it was more like weeks than hours!

 

Only joking, this is excellent news. Before we get carried away though, this still needs digesting properly and it certainly does not mean that the M&R route is back open. The court still cannot imply a term so M&R or fairness is still dead.

 

What this looks like is that a restitutionary claim for compound interest under unjust enrichment is now very much an option and stands a reasonable chance of success. There are going to be caveats though - for instance the large size of the claim was a factor in this judgement by the looks of it, as perhaps was the fact that it involved a huge commercial entity. it seems like the law commission recommendations held weight - that claims over £15000 should have a rebuttable presumption of a right to compound interest and the opposite for claims under £15000.

[monkey_uk]

Gary (et al), going back to my Halifax BANK ACCOUNT (rather than VISA) claim ()http://www.consumeractiongroup.co.uk/forum/halifax-bank-bank-scotland/70034-monkey_uk-halifax-bank-accounts.html then, you may recall halifax have paid charges + s69 int + Court fee into my account (they've not even offered anything for the interest I paid on charges, but as I was claiming CI @ 28.8% APR, that wasn't in my PoC).

 

Their deadline for entering a defence is 21st July 2007.

 

What do you advise I do?

 

My PoC stated I was claiming CI "on the basis of M&R AND unjust enrichment".

 

What would you advise I do NOW, in light of the above?

[GaryH]

I would say that there are now valid grounds for proceeding with a compound interest claim under unjust enrichment - but you've got to bere in mind that Halifax are still likely to defend it and that this one case by no means gaurentees you success. It could still fall down on a number of points and you need to be able and prepared to make your case in court.

 

IMHO you should forget about the higher rate - personally I think the chances of success at that rate are virtually nil. I don't think you could pursuade the court that the bank have enriched themselvse to that extent given that most of their capital is invested in mortgage lending, etc at much lower rates. In fact YOU'D be unjustly enriched at the banks expense if you were to get the higher 30% rate.

[monkey_uk]

Would it be worthwhile ringing them to negotiate a lower rate or interest?

 

Would it make a difference if I enter a default against them on Saturday (or am I correct in thinking I won't be able to do this until Monday morning, or may it even be after 4pm on monday??) (they've not entered a defence)? They'd therefore be in default for the amount that is the difference between what they'ce paid me and what I claimed, so surely the rate wouldn't really matter??

[monkey_uk]

I should also add that when *I* refer to "CI" I mean Contractual Interest (i.e interest at a rate higher than s69's 8%, and also interest which is compoun).

[dad]

Gary H

Quote:

as it overturns one of the judgements that the Judge used to dismiss my appeal.

Which one, just out of interest?

 

From my note of the judgement the key bit was:

 

There may be an argument that to bring perfect justice compound interest should be paid. This was reviewed by the House of Lords in ‘President of India v La Pintada Compania Navigacion SA’ [1985] 1 AC 104 and mentioned in the Law Commission’s consultation paper ‘Compound Interest’ referred to me. In this case the court held that in the general law there is no title to compound interest on debts. But if there is room for criticism of the general law it cannot be remedied by the implication of terms. Such an implication cannot stop at the banker customer relationship, but would extend to any debt where the claimant is inadequately recompensed. The courts have declined to exceed the statutory provisions in such cases.

[steven4064]

To my mind, this is the important bit from our POV

239. The other obstacle faced by Sempra's claim relates to the circumstances in which equity will award compound interest. The Harsant case cited above in fact falls within the category of claims against fiduciaries in relation to which Lord Brandon in La Pintada pointed out that the equitable jurisdiction to award interest, with compounding, was well established. The principles were set out by Lord Denning MR in Wallersteiner v. Moir (No 2) [1975] QB 373, 388B-G and by Lord Goff in the Westdeutsche case at pp 692D-H. In claims against fiduciaries, the court may in its discretion award interest on a simple or compound basis, as it concludes that the circumstances require. In other cases, as where granting specific performance or rescission of a bargain or taking an account, equity commonly awards simple interest only. But Lord Goff and Lord Woolf in the Westdeutsche [1996] AC 669case considered that the equitable jurisdiction to award compound interest extended to personal claims where there was no question of failure to account as a fiduciary: see e.g. per Lord Goff at pp. 693H-695E and Lord Woolf at pp 726H-730H. In my view, the House can and should now adopt this approach. The courts of equity developed the equitable jurisdiction to award interest. There is no sustainable reason in modern conditions for continuing to limit it artificially in a way which may prevent the court doing equity.

 

240. I would in these circumstances respond to Sempra's invitation to revisit the Westdeutsche case, by adopting the minority approach in preference to that of the majority and also by determining that in appropriate circumstances equity can go further and provide relief in respect of any actual interest benefit received from any principal sum paid by mistake, even though such principal may be recouped before action brought.

[GaryH]

Absolutely!

[GaryH]

For anyone who doesn't know, the minority opinion in Westdeutsche was pretty much summed up by this;

 

Lord Goff;

“I wish however to record that Hobhouse J. was in no doubt that, if he had jurisdiction to do so, he should award compound interest in this case. He said [1994] 4 All E.R. 890, 955:

"Simple interest does not reflect the actual value of money. Anyone who lends or borrows money on a commercial basis receives or pays interest periodically and if that interest is not paid it is compounded. . . . I see no reason why I should deny the plaintiff a complete remedy or allow the defendant arbitrarily to retain part of the enrichment which it has unjustly enjoyed."

With that reasoning I find myself to be in entire agreement. The council has had the use of the bank's money over a period of years. It is plain on the evidence that, if it had not had the use of the bank's money, it would (if free to do so) have borrowed the money elsewhere at compound interest. It has to that extent profited from the use of the bank's money. Moreover, if the bank had not advanced the money to the council, it would itself have employed the money on similar terms in its business. Full restitution requires that, on the facts of the present case, compound interest should be awarded, having regard to the commercial realities of the case. As the judge said, there is no reason why the bank should be denied a complete remedy.”

[Capitulator]

I should also add that when *I* refer to "CI" I mean Contractual Interest (i.e interest at a rate higher than s69's 8%, and also interest which is compoun).

 

Hi Monkey, I have been following this thread with some interest as it is my intention to claim for CI on Cap1's interest on their charges. However, rather than using any "unauthorised" rate, I am merely using the current typical rate for fairness. I believe if it goes to judgment, the courts may be more amenable both on the basis of recent events and on my being very reasonable and only charging them at the rate they charged me !

 

Good Luck in your continued claim regardless !

[Capitulator]

Steven4064,

 

But Lord Goff and Lord Woolf in the Westdeutsche [1996] AC 669case considered that the equitable jurisdiction to award compound interest extended to personal claims where there was no question of failure to account as a fiduciary:

 

The bit in bold seems to state that we need to prove that the defendant is acting as a fiduciary ? I assume it could be proven for a bank but can it be done for card companies ?

 

Just a thought !

[GaryH]

The bit in bold seems to state that we need to prove that the defendant is acting as a fiduciary ?

That was the case - a la Westdeutsche - until the recent Sempra judgement. This opens the door for courts to award compound interest in restitutionary claims in the absence of a trust or fiduciary duty. If the circumstances of the case warrent compound interest, of course.

[steven4064]

That was the case - a la Westdeutsche - until the recent Sempra judgement.

That is, until yesterday!!!

 

(Capitulator - do try and keep up )

[Montablanc]

Guys - this thread is fascinating. I'm almost overwhelmed by the legal complexities. What would you suggest someone do if:

 

They'd argued M+R in their POCs

Claimed unauthorised, authorised (both compounded) and s69 in the alternatives

Submitted their bundle

Due in court in a couple of weeks

 

Thanks

Monty

[steven4064]

IMHO you should sit tight for now as this will only matter if you actully get to court and the vast majority of cases are settled out of court. I don't know if Gary agrees, but it seems to me that Sempra effectively puts M&R back on the table - at least that it shouldn't be dismissed out of hand and that would give the opportunity to introduce sempra I think, altough I'm not sure what mechanism you might use to do it - this is a bit out of my knowledge of court procedure.

[Capitulator]

Steven4064,

 

Hmmmm........................................................................................

.....................................................

 

1 - 0 to you but.......

 

I'm not trying to take the banks' side but

 

equitable jurisdiction to award compound interest extended to personal claims where there was no question of failure to account as a fiduciary: see e.g. per Lord Goff at pp. 693H-695E and Lord Woolf at pp 726H-730H. In my view, the House can and should now adopt this approach.

 

The bit in bold seems to refer to the statement above ? (Yesss! 1 - 1 )

 

But...I recall in one of your other posts you wrote

 

that equitable jurisdiction remained sufficiently flexible to allow it to award compound interest where justice so required, even in the absence of a trust or other fiduciary relationship.

 

You win 2 -1 at full-time ! (At least I hope you do ! ) I'm just trying to find that para in the judgment

[GaryH]

IMHO you should sit tight for now as this will only matter if you actully get to court and the vast majority of cases are settled out of court. I don't know if Gary agrees, but it seems to me that Sempra effectively puts M&R back on the table - at least that it shouldn't be dismissed out of hand and that would give the opportunity to introduce sempra I think, altough I'm not sure what mechanism you might use to do it - this is a bit out of my knowledge of court procedure.

I agree to a point - although I don't think you could say that the M&R route is back open becouse that relies on an implied term and there is settled law which dictates that a term cannot be implied on the basis of fairness or mutuality.

 

If I were you I would write to both the court and the bank stating that a recent judgement has just been published which is highly relevant to your claim and which you wish to include within your submissions and rely upon at the hearing.

 

In the meantime put some work in on preparing your case on the unjust enrichment aspect. Gather some relevant passages of Sempra as well as Westdeutsche - the ones above for starters - and try to apply them to the facts of your case.

 

Which bank is it? Did they respond to the interest claim in their defence? Have they submitted a bundle?

[Montablanc]

I agree to a point - I personally don't think you could say that the M&R route is back open becouse that relies on an implied term and there is settled law which dictates that a term cannot be implied on the basis of fairness or mutuality.

 

I do think that this will give you a fighting chance though - I can't see it being too much of a problem introducing new evidence and arguments as long as the claim is in the small claims track.

 

If I were you I would write to both the court and the bank stating that a recent judgement has just been published which is highly relevant to your claim and which you wish to include within your submissions and rely upon at the hearing.

 

Which bank is it? Did they respond to the interest claim in their defence? Have they submitted a bundle?

 

 

Thanks Gary - that's reassuring. It's RBS, they did, although I ahve modified the claim via N244 and claiming charges plus interest (not interest on interest, IYKWIM). No Bundle submitted by them - still responding to N244

[Montablanc]

In the meantime put some work in on preparing your case on the unjust enrichment aspect. Gather some relevant passages of Sempra as well as Westdeutsche - the ones above for starters - and try to apply them to the facts of your case.

 

 

Thanks Gary - I've got the Sempra and Westdeutsche judgments to sample. Are there any other sources on unjust enrichment you can point me to? PM me if you need.

 

BTW - Cobbetts did state that the 29.84% rate should not apply as it is an average rate, and that it could not apply to an account that had been in credit at some point during the claim. It's for this reason (as I couldn't be sure of a counter argument) that I modified the POCs to the simple compounded schedule for unauthorised and authorised in the alternative

 

Cheers

Monty

[Capitulator]

Steven,GaryH et al.

 

Not being a trained banana, or even someone capable of reading in the right direction I think, perhaps, it is my interpretation of the phrase "personal claims where there was no question of failure to account as a fiduciary" that is mistaken !

 

I have been interpreting the phrase as meaning that "the failure to account as a fiduciary is not under question" rather than "the failure to account as a fiduciary does not come into it".

 

(Capitulator - do try and keep up )

sums it up quite nicely - I do solemnly swear to try much harder in future !

 

Tks for your enduring patience and ever-present humility !

 

Tim aka Capitulator

[steven4064]

Steven4064,

 

Hmmmm........................................................................................

.....................................................

 

1 - 0 to you but.......

 

I'm not trying to take the banks' side but

 

 

 

The bit in bold seems to refer to the statement above ? (Yesss! 1 - 1 )

 

But...I recall in one of your other posts you wrote

 

 

 

You win 2 -1 at full-time ! (At least I hope you do ! ) I'm just trying to find that para in the judgment

THe paragraph is part of the minority view in Westdeutschland which has now been upheld in Sempra