Contractual Interest - Precedent - LOST

[steven4064]

Your holiness

 

CAn you clarify what interest you are claiming - is the CI an estimate of the interst Cap1 applied to the uunlawful charges or is it instead of s69 interest (or both)?

[hisholinessthepope]

Your holiness

 

CAn you clarify what interest you are claiming - is the CI an estimate of the interst Cap1 applied to the uunlawful charges or is it instead of s69 interest (or both)?

 

I claimed Contractural with Statutory in the alternative. The £125 in charges were from just over 6 years ago and the account was open for only 14 months. So Cap1 have repaid the charges, plus all the interest ever charged on the account (around £30) and the court fee. But my claim for CI came to around £700 on top of the £125.

[steven4064]

One last question - what rate did you use for the CI?

[hisholinessthepope]

One last question - what rate did you use for the CI?

 

Cap1's usual rate 29.8% I think it was. It was that rate when the account was running as well.

[steven4064]

My view on CI is this:

 

s69 interest is supposed to compensate you for the fact that the defendant has had your money for however long. In real life, 8% simple interest does not really do this - it goes some way, but not far enough. In real life you would have to borrow to replace this money at a commercial rate and with compound interest. This principle is now in common law post-Sempra.

 

However, you would not borrow money at Cap1's rate, you would borrow it at your bank's authorised borrowing rate or loan rate. Therefore, the spirit of Sempra is that you should claim CI at some realistic rate, say 14.9%.

[Fred_Funk]

GaryH, steven4064

 

As ever, thanks for your guidance.

 

A couple more questions, if I may:

 

(1) In post #348, you suggest adding some more detail. Could you clarify, is this in addition to or instead of my suggested amendments in post #347?

 

(2) Can I ask why you don't give 8 per cent as an alternative? Is it simply because you think you may be perceived as more likely to settle for this if you offer it as an option or is there another reason?

 

(3) If you don't offer 8 per cent as an alternative is it conceivable you may be denied it or could you still argue for it should the need arise?

 

Thanking you in anticipation

Fred_Funk

[GaryH]

Instead of the paragraph 4 bit and in addition to 'and the claimant claims.." bit.

[steven4064]

On the 8% - In my GE Money claim I only went for 8% because it was before I had got the compound interest stuff sorted in my head. I am currently doing a Goldfish claim and, in that, I am going for compound interest at some reaslistic rate (probably 14.9% a that is my bank's authorised borrowing rate) and I am thinking about what to do about the 8% as an alternative.

 

I think you have identified the issue - if you give 8% as an alternative the court might justsettle on that as the easiest optionthe alternative might make them consider the issue but, on the other hand, they may just dismiss it out of hand and you get nothing. I think this is less likely and a well argued case like Gary's should stop that happening.

 

Of course, Gary may have a completely different reason (no '8' on his calculator, maybe )

[photoman]

My view on CI is this:

 

s69 interest is supposed to compensate you for the fact that the defendant has had your money for however long. In real life, 8% simple interest does not really do this - it goes some way, but not far enough. In real life you would have to borrow to replace this money at a commercial rate and with compound interest. This principle is now in common law post-Sempra.

 

However, you would not borrow money at Cap1's rate, you would borrow it at your bank's authorised borrowing rate or loan rate. Therefore, the spirit of Sempra is that you should claim CI at some realistic rate, say 14.9%.

 

Steven,

 

If I may, I beg to differ on your analysis here.

 

IMHO, one should forget the arguments about the purpose of awarding of compound interest as a means to compensate you for your further losses (eg lending money elsewhere), but instead you need only emphasise that it is to remove the benefits had by the defendant from having had use of your money over the period in an attempt at some form of restitution.

 

If it were to compensate you for your losses, then there could well be some onus upon yourself to perhaps prove such. eg. that you really did have to go and borrow money elsewhere at whatever rate (ie; prove your additional liquidated damages).

 

Whereas, to claim instead that the defendant has been unjustly enriched from use of said funds over the period, is more likely to be considered as having really been the case by a judge (especially given the nature of their business). Thus you seek the award of compounded interest upon this contention (ie; removing their gain as opposed to restoring your loss) and how a limitation to simple interest would otherwise unfairly allow them to retain their additional gains. The judgement in Sempra is a very powerful argument in favour of this.

 

Using this basis, IMHO one should therefore use the income to profit ratio to calculate how the money taken from you has most likely been put to use by them.

IMHO I see no need to use any artificial percentage, such as their published lending rates/ overdraft rates or whatever.

 

PM:)

[steven4064]

The judgement in Sempra is a very powerful argument in favour of this.

But that is not the basis on which the judgement in Sempra was made. Unjust enrichment was part of it, but the reason Sempra were awarded compound interest was the lost the use of the money - both the principal and the interest on it (see para 225 of the judgement). You are right - this is not quite as I had described it - I have claimed loss of interest in the opposite sense, that I would have had to borrow money to replace it, which I think is more reaslistic in real-life personal cases. The Sempra judegment was based on the assumption that Sempra could have invested the money and therefore lost the opportunity of gaining interest.

[GaryH]

I think your both right.

 

Sempra based their compound interest claim in two alternative basis' (well, 3 in fact.)

 

One as compensatory damages - which is claimed on the basis of the claimants loss, I.e the fact that the claimant has borrowed money elsewhere and paid x amount which they wouldn't have if the money had not been wrongfully taken.

 

The other was in restitution - which is on the basis of taking back the defendants gain. This is where 'time value' comes in. Full restitution would require that the benefit of the wrongfully aquired sums would be passed back to the claimant.

 

Sempra's preferred basis was restitution, because the fact that they pleaded mistake meant also that the limitations act would not apply.

 

It was held that compound interest was recoverable under both principles, as compensatory damages and in restitution on funds paid under a mistake. The judgment concerned both seperate issues and they occasionally intertwined somewhat, so it does get slightly confusing.

 

The problem with the damages aspect is that you've got to plead and prove your losses and satisfy all the usual remoteness tests. For our purposes the claim in restitution is far, far preferable because we're claiming against a lending institution who's very business is to put money to work. There can be no question of whether they were enriched or not, its inevitable, and furthermore you have not got to prove exactly what they did with it.

 

The fact that you have lost x amount by borrowing elsewhere is an excellent secondary argument and should always be included but IMHO our compound claims should always be fundamentally based in restitution - for the return of the time value of the money.

 

However, if you can actually prove your losses then you may wish to base your claim for compound primarily, or even solely, as damages.

 

(Thats my understanding anyway.)

[steven4064]

Thanks Gary.

 

There is another part to this though and that is to do with what a reasonable interest rate would be. For restitution, presumably a rasonable rate would be the best rate I can get by investing that amount of money - 5-6% tops. For compensation it would be the rate I would have to borrow at, about 15%. Could be quite a difference.

[hisholinessthepope]

Good post GaryH #361 exactly the bits I have highlighted in Sempra. But I have only read the first 70 paragraphs out of the 240!

 

While doing research for the original claim using M+R, I found the accounts for Cap1 from 2000 and 2001 and both years they made just over 30% profit. So I am planning on continuing at around 29% but am happy to consider any further debate on this.

 

My biggest issue is that now Cap1 paid the original charges I am going to struggle to get a judgement that they are unlawful! One option am considering is to resubmit POC and when Cap1 defend, if the defence questions charges are unlawful will request a stay until after OFT test case.

[Fred_Funk]

Sorry to butt in on a most interesting debate but could one of you guys, please, point me in the direction of a link to the Sempra judgement (as I can't find the one I'd noted down)?!

 

Much obliged!

Fred_Funk

[steven4064]

Sempra

[GaryH]

Thanks Gary.

 

There is another part to this though and that is to do with what a reasonable interest rate would be. For restitution, presumably a rasonable rate would be the best rate I can get by investing that amount of money - 5-6% tops. For compensation it would be the rate I would have to borrow at, about 15%. Could be quite a difference.

Its not what you could have earned on it, its what they could have (not necessarily did) earned on it. The reasonable market value of the money to the bank.

 

I accept this is a bit of a moot point though. Most of the banks lending is probably on mortgages, which are lower rates. However, I see no reason you can't keep it in the context of personal banking, in which case the reasonable market value is the usual overdraft rate.

[photoman]

Thanks Gary and Steven for some interesting points, and lively debate.

 

(Steven, I do hope that my original post did not come across as being a bit cocky? No offence meant mate).

 

Gary, yes I agree on all points. Sempra's case was also based upon loss, but as you also say (and I too mentioned earlier), if you pleaded likewise, you may actually be called to prove your losses.

 

Calling for a restitution of the defendants position to what it should be had it not had the benefit of your money, to invest and relend repeatedly (all the while compounding) over the years, is a stronger argument and more difficult to counter.

 

How exactly to calculate a realistic % rate is a debatable question, but I still personally think that a simple division using the annual profits to income ratio as a % is actually not unreasonable, and difficult to contend otherwise.

 

PM

[steven4064]

(Steven, I do hope that my original post did not come across as being a bit cocky? No offence meant mate).

Not at all, as you say "lively debate".

[hisholinessthepope]

I have to knock together a revised POC between now and end of this weekend - would you mind if I posted them on here for comment, revisions and hopefully refinement!

[steven4064]

I have to knock together a revised POC between now and end of this weekend - would you mind if I posted them on here for comment, revisions and hopefully refinement!

Of course.

[elsinore]

 

How exactly to calculate a realistic % rate is a debatable question, but I still personally think that a simple division using the annual profits to income ratio as a % is actually not unreasonable, and difficult to contend otherwise.

 

PM

 

 

Just for once I have to disagree with you PM.

 

I had also thought about using this basis of calculation for my own LTSB claim, the bank’s recent profit percentage being seductively (but coincidentally) close to the unauthorised borrowing rate.

 

However, the majority of the bank’s income is composed of that very interest which it will have charged borrowers when lending them our money. To use the profit percentage derived from that income (interest) as a quid pro quo is therefore not reasonable. Would one want to use this equation if the banks profit percentage happened to be lower than the authorised lending rate? Or indeed lower than 8%?

 

If one intends to claim compound interest then I believe the only rate to use is the rate which the bank will charge when lending our money to others, i.e. the authorised lending rate.

 

Els

[steven4064]

If one intends to claim compound interest then I believe the only rate to use is the rate which the bank will charge when lending our money to others, i.e. the authorised lending rate.

I agree absolutely

[photoman]

Actually guys, I do sort of see your points.

 

I agree that the majority of income for a Bank is from interest from loaning out our money.

 

However, whether the initial capital they've had available to use & loan out to generate such interest is from; our deposited savings, their own reserves, or money they have taken from us by way of charges, IMHO makes no difference?

 

They have still used whatever money they had available, and pound for pound managed to generate x% profit on it.

 

Also, it is only a supposition that monies taken by way of charges would have been loaned out at their basic lending rates.

It may possibly be that Banks reserve money taken in such a manner to lend to higher risk borrowers and/or cover unauthorised borrowings (rather than using their depositors savings), and so then charge higher rates of interest upon them?

 

Without Disclosure, an Account of Profits or an Injunction, we will never know.

 

If they wish to argue and disprove the simple income to profit ratio, they would need to reveal; firstly how much profit these charges generated for them, and secondly how this money was then actually put to use.

 

PM

[steven4064]

If they wish to argue and disprove the simple income to profit ratio, they would need to reveal; firstly how much profit these charges generated for them, and secondly how this money was then actually put to use.

And they are going to be pretty secretive about telling us that given how coy they are about telling us how charges are made up!

[photoman]

And they are going to be pretty secretive about telling us that given how coy they are about telling us how charges are made up!

 

Exactly !!

 

This is the intial profit they must be forced to relinquish, along with any subsequent unfair gains from the further use of such.

 

In fact, even using the income to profit reasoning is a compromise.

Actually, 100% of all the money acquired in interest through the repeated use of your money (and also subsequent use of any further income gained from such) is money they would not have otherwise had, and so should be stripped of, with no account for their expenses.

 

In order to to argue against the submission for interest to be paid out using their own income to profit ratio, they will first need to produce evidence of how much gross profit the charges generated.

They will then need to show how much of the their published gross annual income from interest etc was then generated as a result of lending and relending out this money, (along with the lending and relending of the subsequent income from such, and so on and so forth).

They would then have to relinquish that amount in full, with no account for their expenses.

 

Also, in response to Elsinore's reasonings.

IMHO, It makes no difference what rates they were loaning money out at, it is the actual profits generated from the use of the money that is of importance.

If you used your reasoning, then if say for example the bank were loaning money out at a basic rate of only 1%, but as they had so much vast capital available (through vast amounts of charges taken), still managed to generate a 29% profit, would you by your own reasoning accept that you were only entitled to charge them 1% ?

 

PM