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leepy9 v HSBC. Court Bundle Stage


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Hi am just doing my statement of evidence required by stockport county court for 20th July. Which i was also going to send DG a copy off.

Along with this i was going to supply:


Statement of Evidence

a) A list of my charges

b) Letter between myself and HSBC (see point 7.)

c) OFT Report

d) Parliment Early Day Motion

e) Money Programme Report

f) Nicole Rich Report


below is my statement of evidence, could someone check over make sure i havent made a silly mistake.

Also what should my covering letter say when writing to the court??






1. The Claimant submits that the charges levied to his bank account, as set out in the enclosed schedule, are, notwithstanding the defence of the defendant, penalty charges arising from and relating directly to breaches of contract, both explicit and implied, 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.


2. It is admitted that the Defendants 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 10 above, exercises the contractual term in respect of such charges with a view to profit.


3. 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.


4. 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.


5. 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 of £2444.50.


6. 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".


7. 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. In correspondence with HSBC’s ‘Service Quality Team’ department in February 2007, Colin Langdale, who is the senior service quality manager of the department, stated this in a letter: “The bank does not agree that our charges are in any way unfair or unenforceable”. This was in response to a direct and plain request to justify HSBC’s charges. Throughout the letter, no mention was ever made of the charges as being the cost of any sort of ‘service’.


8. Additionally, the claimant believes there to be a high possibility that the terms and conditions of the claimants account contract explicitly describe the charges as to be levied in instances of breaching those terms. This is true of the contracts of other customers of the defendant that the claimant is aware.


9. 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”.


10. 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 Defences contention that they are legitimate contractual service charges.


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


12. 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."


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.


The cost of HSBC’s charges have increased twice during the period in which my account was held, neither time was I given the opportunity to negotiate, or even notified of this increase. This means the bank has unilaterally altered the terms of my account contract to my detriment, and to their advantage.



13. 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.


14. 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.


15. 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"


16. 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.


17. 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 fulfil his obligation to pay a disproportionately high sum in compensation;"


18. On numerous occasions, the Claimant has requested that the Defendant justify its charges by providing details of the costs incurred as a result of my contractual breaches. Each time those requests were rebutted or ignored.


19. 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.


20. The Defendant, or indeed any of the UK banks, has never published any information to support how their charges are calculated, or what their actual costs associated with such breaches are, or what revenue they derive from such charges.


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 Defendants 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 £2444.50 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. Additionally, I asked the Defendant to provide evidence of any manual intervention that may have occurred in relation to my account, under a Data Protection Act 1998 right of subject access request. No such information was forthcoming.


24. 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".


25. The Claimant also cites a radio interview in 2004 with Lloyds TSB’s former head of personal banking, Peter McNamara, in which he states bank charges are used to fund free banking for all personal customers as a whole.


26. 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.


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



Signed....................................... dated..............................

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It seems pretty good. But...


1. The mention of UCTA 1977 in 1 is irrelevant. UCTA has nothing at all to do with our cases. I'm not sure when people started putting it in, but it doesn't apply. UCTA applies only to exclusion clauses in contracts: i.e. clauses which seek to limit a party's liability (e.g. "HSBC accepts no liability for any death caused by its cash machines" would be a clause that UCTA would invalidate). You can save yourself some pages in your bundle by leaving it out.


2. The UTCCR stuff at 12 is wrong. There is a specific exemption in Sch 2(2)(b) for banks in relation to clauses like (j). They are allowed to change their charges and their interest rates as much as they want, BUT this comes with the proviso that "the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract immediately." - to be honest, I don't know whether the courts would find that the banks were in breach of this requirement to inform us of changes; it might be considered enough that the charges are included in your monthly statement, or that they are published at branches.



So... my advice is to leave out any mention of UCTA in point 1, and to remove (j) and the final paragraph from point 12.


Although I should perhaps stress that it doesn't matter if you leave those bits in - they would just be the first bits to be defended if it ever got to court.

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