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Halifax Summary Judgment application


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Intended for filing as soon as the defence is served -


Claim Number: XXXXXXX


In the XXXXXXX County Court
























1. I, XXXXXXXX, the claimant and applicant, of [address] make the following Witness Statement in support of my application dated xx/xx/xx for Summary Judgment to be given against the Defendant in respect of the above claim in its entirety.


2. CPR Part 24, entitled "Summary Judgment", contains provisions as follows;


"24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –


(a)it considers that –

(i)that claimant has no real prospect of succeeding on the claim or issue; or

(ii)that defendant has no real prospect of successfully defending the claim or issue; and


(b)there is no other compelling reason why the case or issue should be disposed of at a trial."


3. The application for Summary Judgment is made under CPR 24 because the applicant believes that on the evidence, which is set out below and attached where specified, the respondant has no realistic prospect of successfully defending the claim at trial, and further, that there is no other reason why the disposal of the claim should await trial.


The Claim


4. The claimants claim is based in contract. The nature of the claimant’s case in relation to the allegation that the provision of the bank account contract which permits the defendant to levy specific charges to the claimants account is unenforceable as a penalty clause is set out in the Particulars of Claim.


5. The contractual document which governed the account in question ("The Agreement") and pursuant to which each and every charge now reclaimed was levied is attached to this application as exhibit XXX1. Relevant terms include;


i) There was an express term of The Agreement that the overdraft would be subject to a maximum limit of £XXXX.


[i) There is a “special” express term of the agreement that the account will provide no overdraft or credit facilities.]


ii) Clause 12.2 of the standard terms provides;


“You must not use your card to guarantee a cheque if the amount of the cheque is more than you have in your account.”


iii) Clause 18.1 of the standard terms provides;


“If you have a Cardcash account, you must not allow your account to go overdrawn. If you have a Halifax current account then unless we agree that you can do so, you must not use your account or allow anyone else to use it if this would make your account go overdrawn or over your overdraft limit."


iv) Clause 18.3 of the standard terms provides;


“If we pay a cheque, charge interest, make charges on your account or carry out a withdrawal or other transaction and this makes your account go overdrawn, this does not mean we have agreed to allow you to have an overdraft.”


v) Clause 18.4 of the standard terms provides;


“If without agreement your account goes overdrawn, we will charge you interest on the amount of your overdraft at the unauthorised rate we set which applies to your account. You must immediately pay us the amount you are overdrawn (and any charges) so that you are no longer overdrawn.”


vi) From the Defendant’s published charges tariff which forms part of the standard terms of the Account;


“Paid Items fee - £30

A charge for each card payment, cheque, standing order or direct debit that we pay that means you have an unauthorised overdraft.”


“Unpaid Items fee - £39

An administrative fee charged when we return unpaid any cheque, card payment, direct debit, standing order, or any transaction that we decide not to pay when there are insufficient funds to pay the transaction.”


“Unauthorised overdraft charge - £28

An unauthorised overdraft charge is applied when you have gone into an unauthorised overdraft or when you have gone over your authorised overdraft limit.”


6. The above terms of the contract between the claimant and the defendant provide that allowing the account to become overdrawn beyond the contractually agreed limit is unauthorised and that the claimant is expressly prohibited from making any payment which would cause the creation of such an unauthorised overdraft. [There is an express term which states no overdraft or credit facilities are available.] Thus by virtue of these terms the charges now claimed by the claimant arose directly as a result of breaches of the account contract on the part of the claimant.


The Defence


7. The defendant in its defence pleads in summary;


i) That the charges were debited pursuant to the terms of The Agreement;


ii) That the charges are levied for breach of contract and that such charges are enforceable as they reflect and are proportionate to the Defendants administrative expenses incurred as a result of the claimant's breach;


iii) That if it is said that the Claimant did not breach the terms of the Agreement the charges were applied for banking services.


8. By virtue of the terms of the Agreement referred to in paragraph 5 above, the claimant was in breach of the contract by exceeding the overdraft limit or allowing it to be exceeded, and thus the defendant's contention that the charges are "In the alternative" fees for banking services is irrelevant.


The Central Question


9. The central question is of whether the charges imposed by the Defendant are, as the defendant contends, a pre-estimate of damage caused by the breach and thus enforceable as liquidated damages; or, as the claimant contends, disproportionate and unrelated to any damage and thus unenforceable as penalties.


10. It is long settled and cannot be disputed that the fundemental requirement of a clause amounting to liquidated damages is that it must provide for a payment which is a genuine pre-estimate of the damage likely to be incurred as a result of the breach. It must not be a clause designed to profit from or to deter the breaching of the contract; such a clause will be found to be a penalty.


11. The test of whether a clause amounts to a penalty and how such a clause can be distinguished from a liquidated damages clause was set down by Lord Dunedin in the leading authority of Dunlop Pneumatic Tyre Co v New Garage & Motor Co [1915] AC 79;


"1. Though the parties to a contract who use the words ‘penalty’ or ‘liquidated damages’ may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The Court must find out whether the payment stipulated is in truth a penalty or liquidated damages. This doctrine may be said to be found passim in nearly every case.


2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.


3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.


4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:


- It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.


- There is a presumption (but no more) that it is penalty when ‘a single lump sum is made payable by way of compensation, on the recurrence of one or more or all of several events some of which may occasion serious and others but trifling damage."


12. Its submitted therefore that the fundemental issue central to this case is a simple one of fact – specifically whether the actual cost to the bank of the breach is proportionate to the charges it imposes.


13. The claimant accepts that the position is less clear and far more open to legal interpretation when establishing whether or not a clause is a penalty if the pre-estimate proves later to be inaccurate, and how inaccurate an estimate can be before it is found to be unenforceable as a penalty. However, on the evidence of this case it is clear that those issues of interpretation hold no relevance. The claimant’s case, backed up with clear evidence, is that the £39 per item charges imposed are completely unrelated to any damage, are not based in any way on an estimate of costs (whether reasonable or otherwise), and are unconscionable in relation to the damage actually incurred. The charges therefore cannot under any circumstances be considered liquidated damages, but are a penalty.


The Evidence


14. The claimant's evidence that the charges imposed are not related to an estimate of costs, are a source of material profit and are excessive and unconcionable in relation to the damage incurred as a result of the breach of contract and are thus unenforceable as penalties is set out in summary as follows;


a) The charges are imposed automatically


i) The defendant disclosed information to the Competition Commission that the processes relating to the application of charges is automated. In appendix 4.6 paragraph 42 of the report, it is stated that;


“Some banks, eg Halifax and Nationwide have fully automated systems which decide whether or not to make payments….”


b) The charges are a significant source of profit


The defendant told the Competition Commission that the level of its charges were not determined by an estimate of costs. The report also confirms that overdraft charges are a significant source of revenue for the banks in relation to personal current accounts, and that the banks who submitted data used charges to subsidise “fee-free” banking for personal account customers as a whole. Appendix 4.6 and 4.10 are attached in support of this statement as exhibit [XXX2] Some relevant sections of the report are reproduced as follows;


Appendix 4.6;


"12. Most of the banks made reference to monitoring of their costs, and sought to recover cost increases through their charges. However, as such costs tended to arise across a range of bank activities there was no direct feed through from particular cost increases to particular charges, but would be spread across the charging structure with regard to competition on these charges.


13. None of the banks told us that their charges were determined mainly by estimates of costs..


17. [] states “as is always the case the biggest impact in terms of service income price increases lies in penal charges such as unpaids and referral items, and I have had little option but to concentrate on these in an attempt to achieve the [] targeted increase in income". []


24. Some inference on unauthorized overdraft charges can be seen in the banks’ moves to fee-free accounts, as analysed in Appendix 4.8. As covered previously, Ulster’s proposals for fee-free banking rebalanced to an extent the loss of fee-income from transactions with an increase in unauthorized overdraft charges. BoI had developed proposals for a similar fee-free account where income loss would be approximately offset by increased unauthorized overdraft charges.


25. Charges are a significant source of revenue for the banks on PCAs. [] said that increased unauthorized overdraft fees were part of the strategic imperative to turn the PCA into a profitable business over time. The charges were significantly less than a number of its competitors."


Appendix 4.10;


46. Banks earn revenues on PCAs in three forms:



NII on credit balances (value of funds elsewhere in bank less interest paid to customer);

(b) NII from debit balances (interest received from customer less cost of providing funds); and

© charges.


48. NII and charges are both important sources of revenue for all banks. Although there are slight variations for individual banks, for the eight banks on average the banks earn more than half their total income from NII on credit balances, over 40 per cent from charges and 5 per cent from NII on debit balances.


67. Given the information provided, especially by the non-clearers, it is difficult to comment on the breakdown of charges in respect of these banks. Although there is some uncertainty surrounding the estimate, it was clear that unauthorized overdraft charges are a key source of income. Based on the information provided by the banks, it appears that the eight banks earned £31 million in 2005 from unauthorized overdraft charges, representing 47 per cent of all charges. This is likely to be an underestimate because the analysis from some of the banks allocated no income to unauthorized overdraft charges. We estimate that a more realistic figure for 2005 might be around £35 million, representing over half of all income from charges. We note that, given the recent and future changes in the clearers’ charging structures, unauthorized overdraft charges are likely to become a more important source of income in the future."


ii) Peter McNamara, a leading figure in the banking industry, stated in 2004 in a radio interview that the banks use charges to subsidise “fee-free” banking for personal account customers as a whole. This evidence is attached to this statement [XXX3].


c) Actual costs/damage


i) Clydesdale, Yorkshire and Northern Bank’s operate a structured, detailed and auditable system for costing, tracking and refining their costs of conducting various operations within the bank including the processing of default events of delinquent accounts. A Yorkshire Bank informant who is a former high level employee at the bank stated on television and in an affidavit that even assuming the highest level of manual intervention any single process of default would never cost more than £2.00 and that this cost is calculated and traceable using the system, which is called CYNthesys. This evidence is attached to this statement [XXX4].


ii) Along with another professor and a banking industry expert, Professor John Struthers of the University of Paisley recently conducted in depth research into the costs to a bank of processing a default event. Their conclusion was that even assuming the most labour intensive procedure, the cost of processing a bounced direct debit or unauthorised overdraft event would never be more than £2:50. This evidence is attached to this statement [XXX5].


iii) Data Processing costs are nominal. This evidence is attached to this statement [XXX6].


iv) ‘Space and time’ comparisons. Penalty charges have increased from around £5 in 1990 to nearly £40 in 2007, at a time when computer automation is undoubtedly making the actual costs progressively less and less. The defendant, Halifax Plc, to its Republic of Ireland current account customers charges £3.38 (5 euros) for unauthorised overdraft charges and £6.77 (10 euros) for unpaid item charges. A Halifax customer a few miles the other side of the UK border in Northern Ireland and in the rest of the UK is charged £39 for exactly the same process. The Halifax Ireland charges tariff is attached [XXX7]. On this evidence it is plain that either Halifax Ireland is suffering incomprehensible losses from its customers contractual breaches, or Halifax UK is making huge profits.


v) The figures quoted at i) and ii) above are based on a certain level of manual involvement. In view of the fact that the defendant has confirmed to the Competition Commission that its charges are processed automatically, the claimant estimates that the actual cost to the defendant per each event of breach is in the region of £0.50 - £1.50.


15. The claimant submits that the available evidence satisfies over and beyond the balance of probabilities and furthermore beyond reasonable doubt that the charges levied are not based on an estimate of damage, are excessive and unconscionable in relation to the damage caused as a result of the breach, are a source of material profit, seek to deter the breaching of the contract and are thus penalties.


16. The defendant either cannot, or will not, produce any further evidence to adequately refute the claimant’s evidence or otherwise substantiate its limp assertion that the charges are a genuine and reasonable pre-estimate of damage and are thus liquidated damages.


17. The claimant is aware of in excess of 400 claims of similar or identical nature to the present case which have been brought against the Defendant bank in the last 18 months. In a significant number of these cases disclosure orders have been made obliging the defendant to substantiate its charges by providing details of its costs. I understand that each and every time that such an order has been made, or indeed any other directions order, it has been breached by the Defendant who chooses instead to settle each and every claim without liability, typically shortly in advance of the scheduled hearing.


18. In view of the preceding paragraphs, along with the fact that the defendant has settled vast hundreds of identical claims breaching numerous disclosure orders in the process, the claimant submits that the defendant’s chance of success is not realistic, nor is it merely improbable, but is fanciful.

19. At this juncture, the respondant's attention is drawn to CPR rule 24.5(1).


The Office of Fair Trading Test Case


20. The OFT Test Case does not demonstrate that the defendant has a defence with a real prospect of success at trial.


21. The relevance of the OFT test case should be viewed strictly in context. The test case between the banks and the OFT is primarily to determine whether or not the terms permitting the banks to levy their ‘overdraft charges’ are subject to an assessment of fairness under the Unfair Terms in Consumer Contracts Regulations 1999. The fundamental issue to be tested is whether the contractual provisions permitting such charges are subject to an assessment of fairness under the Regulations and fall within the ambit of regulation 5, as the OFT contend, or whether they are, as the banks contend, excluded by virtue of Regulation 6 because they are a core term; I.e that they relate to the adequacy of the price or remuneration, as against the goods or services supplied in exchange. (The OFT's Particulars of Claim are attached in support of this assertion as exhibit XXX8)


22. This is a complex issue of legal interpretation and should be viewed against the background of the banks’ recent policy of restructuring their account contracts to present the charges as being fees for banking services as opposed to damages payable on a breach. All terms expressly prohibiting the exceeding of overdraft limits and making payments without sufficient funds have been re-drafted so as to present the event leading to a charge being made as an “informal request” for an increased overdraft limit. It is in this respect that the test case will determine whether or not the charges are subject to the assessment of fairness notwithstanding such re-drafting of contract terms.


23. There are no such complex issues in the present case. This claim is not primarily based upon the UTCCR, and indeed the claimant is prepared to drop that aspect from the claim. The basis of this claim is that the charges imposed arise directly from breaches of contract. This is evidenced by the terms of the account agreement and furthermore, is accepted by the defendant in its defence. In consequence, the charges are subject to the long settled principles of common law relating to contractual penalty clauses, as pleaded in the particulars of claim. The issue therefore is a simple one of fact – specifically whether the actual cost to the bank of the breach is proportionate to the charges it imposes.


24. Furthermore, the OFT case in the Commercial Court cannot overturn over 100 years of decisions from higher courts, including unanimous House of Lords decisions, establishing the definition and prohibition of contractual penalty clauses. If a charge arises from a breach of contract it will be subject to those long settled provisions notwithstanding the result of the OFT test case. The charges in the present case are accepted by the defendant as being levied for breach of contract; therefore the claimant submits that any reference by the defendant to the OFT case as being significantly relevant to the present case is spurious.




25. In view of the matters set out in the preceding paragraphs, the claimant submits that to stay this claim on the basis of a test case which will not test the principles upon which this claim relies is innapropriate and would serve no useful purpose.


26. Furthermore, the claimant has submitted within this application clear evidence that the charges imposed are unenforceable as penalties. The issues are of fact and can, and should, be easily and expeditiously disposed of by the County Court either with or without a full trial.


27. Therefore it is submitted that to put a claimant's right to recover charges which are clearly demonsterable as contrary to law on indeterminate hold, whilst allowing the defendant to remain at liberty to continue levying such charges without redress, is wholly unjust and would have the obvious effect of favouring a well resourced financial institution over a self-litigating consumer.


Defendant’s Conduct in Other Claims


28. At least 400 claims have been brought against the defendant this year involving the same or similar issues. This is evidenced by a sample list of settled claims, which is attached [XXX9]. Despite flatly denying its customers complaint in the preliminary stages then subsequently always indicating an intention to defend, the defendant has compromised each and every such claim in advance of the hearing, usually following unnecessary and protracted litigation. The defendant purports to settle these claims without liability for ‘costs’ or ‘commercial’ reasons, yet on many occasions previously, as the court may already be aware, it has gone to the expense of setting aside default judgments only to settle the claim shortly after. The defendant continues to spuriously defend claims only to subsequently settle them, flagrantly breaching multiple court orders and provisions of the CPR as it does so.


29. It is submitted that the defendant’s conduct is notorious and that the court can and should consider its knowledge of the defendant’s conduct in other cases when considering the application in the present case. It is settled that not only is the court entitled to take notice of such matters, but also that it is fulfilling a constitutional function by doing so. This position was stated by Otton LJ in the case of Mullen v Hackney LBC [1997] 1 WLR 1103;


“The central question is whether the court, when considering the penalty, was entitled to take into consideration other previous breaches in other cases? In order to answer that question it is necessary to look at the nature and scope of judicial notice. It is well established that courts may take judicial notice of various matters when they are so notorious, or clearly established, or susceptible of demonstration by reference to a readily obtainable and authoritative source that evidence of their existence is unnecessary….. Moreover, a judge may rely on his own local knowledge where he does so "properly and within reasonable limits". This judicial function appears to be acceptable where "the type of knowledge is of a quite general character and is not liable to be varied by specific individual characteristics of the individual case". This test allows a judge to use what might be called "special (or local) general knowledge". County courts fall within the scope of the rule relating to courts which have been held to be local courts, and thus courts whose members are not merely permitted to use their local knowledge, but who are regarded as fulfilling a constitutional function if they do so.”


30. Furthermore, many County Courts now consider the litigation tactics employed by banks in these cases as an abuse of court process and are regularly striking out their defences as a result. A number of examples by way of strike out orders are attached to this statement [XXX10].


Overriding Objectives


31. The claimant respectfully submits that to allow this claim to proceed to trial would not accord with the overriding objectives. To allow a case to proceed at significant further expense when their is overwhelming and irrefutable evidence against a defendant notorious for its wilful refusal to comply with court orders and the litigation process in general is not just, nor is it expeditious, nor is it proportionate to the amount of money involved. To allow the case to proceed to trial would be a waste of expense and would allow a disproportionate share of resources to be given to the case, resources which would be more appropriately allotted elsewhere.


32. Referring to the courts powers to dispose of a claim or defence under CPR Part 24 if it considers that it has no realistic prospect of success or there is no other compelling reason why it should go to trial, in the case of Swain v Hillman [2001] 1 All ER 91 Lord Woolf stated;


“It is important that a judge in appropriate cases should make use of the powers contained in Part 24. In doing so he or she gives effect to the overriding objectives contained in Part 1. It saves expense; it achieves expedition; it avoids the court's resources being used up on cases where this serves no purpose, and I would add, generally, that it is in the interests of justice.”


33. The Claimant therefore asserts that upon the facts and circumstances of this case, as set out in the proceeding paragraphs, it is just and appropriate for the court to give effect to the overriding objectives and excercise its powers under part 24 to grant summary judgment in favour of the claimant.


Conditional Orders


33. Without predudice to the claimant's position stated above, if the court is minded to allow the claim to proceed, pursuant to CPR Part 24 (PD 4) it is respectfully requested that the court issues an order containing the following conditions;


a) that the defendant be ordered to comply with an order, a draft of which is attached, requiring the disclosure of all facts and matters required to substantiate its assertion that the charges imposed are proportionate to its damage incurred as a result of the claimants breach;


b) In view of paragraphs xx - xx, that the defendant be refused permission to apply for any stay on the basis of the Office of Fair Trading Test case.


c) That the defendant be ordered to cease any collection, default, enforcement or closure action on the account until the outcome of these proceedings.



33. Statement of Truth


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


Any thoughts on this? I'm trying to figure out any risks or pitfalls but tbh at the moment I can't see any - not in the small claims track anyway. Apart from the fact it'll cost £65!


Obviously we'd also have to make clear that they would have to attend a hearing - but even then if they weren't prepared to do that they shouldn't have filed the claim in the first place.


On the plus side, it should predominate over the stay issue and IMHO they should at least get a conditional order if nothing else. Obviously even just a few successes with it would be brilliant for us publicity wise.

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Any advice or opinion is offered informally & without liability. Use your own judgment and if in doubt seek advice of a qualified and insured professional.

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