Common Law Penalty Charge Rules v UCTA

[thoughtcriminal]

Hey guys,

 

There seems to be a lot of discussion on the power of the court to rule a term out as being unfair under the Unfair Contract Terms Act/Unfair Terms in Consumer Contracts Regulations.

 

There's a much simpler way of getting penalty charges set aside which people seem, at least at the moment, to be overlooking.

 

From Halsbury's Laws of England:

 

"1065. Liquidated damages distinguished from penalties.

The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. If this sum is a genuine pre-estimate of the loss which is likely to flow from the breach, then it represents the agreed damages, called 'liquidated damages', and it is recoverable without the necessity of proving the actual loss suffered. If, however, the stipulated sum is not a genuine pre-estimate of the loss but is in the nature of a penalty intended to secure performance of the contract, then it is not recoverable, and the plaintiff must prove what damages he can. The operation of the rule against penalties does not depend on the discretion of the court, or on improper conduct, or on circumstances of disadvantage or ascendancy, or on the general character or relationship of the parties. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation."

 

So, if you use this method:

The burden of proof lies with the Bank to prove the charges were reasonable, not on you to prove they were unreasonable as, debatably, it does with UCTA/UCTTA. This essentially means it's much easier for you to win your case.
 
This is the best bit - the court cannot use any discretion. It's simple - if the bank are charging you more then the cost to them when you overdraw your account, the judge has no option but to grant you your money back.

 

In my opinion, this ancient common-law stuff is a far better weapon in this case than all the modern statutes! It's just impossible to find without access to a law library.

 

I'd appreciate any comments anyone has... and I'm happy to do a bit of digging if anyone would like any further information!

[thoughtcriminal]

Hey guys,

 

There seems to be a lot of discussion on the power of the court to rule a term out as being unfair under the Unfair Contract Terms Act/Unfair Terms in Consumer Contracts Regulations.

 

There's a much simpler way of getting penalty charges set aside which people seem, at least at the moment, to be overlooking.

 

From Halsbury's Laws of England:

 

"1065. Liquidated damages distinguished from penalties.

The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. If this sum is a genuine pre-estimate of the loss which is likely to flow from the breach, then it represents the agreed damages, called 'liquidated damages', and it is recoverable without the necessity of proving the actual loss suffered. If, however, the stipulated sum is not a genuine pre-estimate of the loss but is in the nature of a penalty intended to secure performance of the contract, then it is not recoverable, and the plaintiff must prove what damages he can. The operation of the rule against penalties does not depend on the discretion of the court, or on improper conduct, or on circumstances of disadvantage or ascendancy, or on the general character or relationship of the parties. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation."

 

So, if you use this method:

The burden of proof lies with the Bank to prove the charges were reasonable, not on you to prove they were unreasonable as, debatably, it does with UCTA/UCTTA. This essentially means it's much easier for you to win your case.
 
This is the best bit - the court cannot use any discretion. It's simple - if the bank are charging you more then the cost to them when you overdraw your account, the judge has no option but to grant you your money back.

 

In my opinion, this ancient common-law stuff is a far better weapon in this case than all the modern statutes! It's just impossible to find without access to a law library.

 

I'd appreciate any comments anyone has... and I'm happy to do a bit of digging if anyone would like any further information!

[BankFodder]

Very interesting. Thanks

 

... invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation."

 

 

Does Halsbury's give any sources for this please.

Halsbury is a useful source we need authority.

[BankFodder]

Very interesting. Thanks

 

... invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation."

 

 

Does Halsbury's give any sources for this please.

Halsbury is a useful source we need authority.

[stax68]

You have misinterpreted this as far as the burden of proof goes. Penal charges are unenforceable - so the situation Halsbury envisages is one where someone is being sued for nonpayment of penalty charges - i.e. where someone is trying to enforce a penal clause, not challenge one. That's why it says 'The burden of proving that a payment obligation is penal' rather than 'isn't penal'.

 

The passage about burden of proof would apply if the bank had taken one of its customers - the 'person who is sued under the obligation' - to court to make them pay the charges. And it would act in the bank's favour in such a case.

 

Of course it's not likely to come up as banks can just dip their sticky fingers straight in and debit the account without even asking, let alone going to court.

[Mad Nick]

Hi, I'm afraid that I don't agree with stax68 - I think the extract in the OP is quite applicable to our situation. Just one problem though - as far as I can tell, "Halsbury" is just a digest of existing law; it is not in itself an authority.

http://en.wikipedia.org/wiki/Halsbury's_Laws_of_England

In any case, the threat of UTCCR + Dunlop is enough to face the Banks down. Regards Mad Nick

[stax68]

Yes, Halsbury is not an authority (though you do see counsel refreeing to things like textbooks, law comm reports and scholarly articles in the appeal court + higher).

 

But I don't see why you disagree with me. It seems quite clear - the burden is on the person who denies they are obliged to pay the charges.

 

Don't misunderstand me as saying this is a significant problem though. The burden of proof is one thing, the standard of proof quite another. Although the burden is on us, it's not a very weighty one. We only need to 'prove' the charges are penal on the civil standard - the balance of probabilities.

 

I assume that's why the OFT ruling is mentioned in the standard templates - because even though it's about credit card charges, it might be enough to make it seem more-likely-than-not that these charges are penal. Once you can do that, the opposition have to try and produce some evidence to swing the probabilities back in their favour.

 

In a way, it may be best not to spend too much time looking too deeply into the legal stuff, especially the more obscure stuff like the 'principle of reciprocity' etc. The templates work, it won't go to trial, so why waste time on the technicalities?

[Mad Nick]

Hi stax68, I think we end up violently agreeing but I had just thought you had interpreted the extract too narrowly.

 

It doesn't matter whether the penalty charges have been paid or not - they can still be challenged as not genuine pre-estimates and/or penalties. Clearly, if you've already paid the charges the other party is hardly going to sue you - but you can still challenge them retrospectively within the relevant period of Limitation (ie you are suing them, not them you).

 

Hence, the last sentence of the OP extract is rather confusing : "The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation." from whence came your interpretation that it just applied to "a situation where someone is being sued for nonpayment of penalty charges - i.e. where someone is trying to enforce a penal clause, not challenge one. That's why it says 'The burden of proving that a payment obligation is penal' rather than 'isn't penal'."

 

That was the extent of me disagreeing with you. I totally agree with your last post. Regards, Mad Nick

[stax68]

Ah yes, I see. I didn't express myself very well. I didn't mean to suggest that the rule (if it really is a rule) described in Halsbury didn't apply to our situation. I was just pointing out that the situation they describe wasn't the same as our situation - i.e. they were assuming a situation in which the plaintiff is the person seeking to apply the charges - and that as a result, the point about teh burden of proof had been interpreted back-to-front. Anyway, I didn't get where I am today by indulging in extended lovefests of mutual agreement, so let's leave it at that. (In fact, I got where I am today by a combination of excessive drinking and extreme laziness.)

[thoughtcriminal]

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