Contractual Interest - Precedent - LOST

[chezt]

I'm sure dad will correct me if I'm wrong, but my understanding is that Halifax paid the charges + OD interest + 8% s.69 interest and contested the 29.9% CI.

 

At least that is what they have done in all other CI claims until now.

 

OK thanks for that Gary ... just tryna get the full picture as to what actually happened IYKWIM? Is the general advice still to accept this sort of offer as f&f settlement or is there encouragement & arguement for folks to proceed then?

 

I've been away on holiday a few weeks but didn't think I'd seen anything changing regarding the advice on this? Thanks again

[GaryH]

There is a precedent against the awarding of "contractual" interest on the implied term basis.

 

If you've claimed CI pleaded on the basis of mutuality and reciprocity then you should accept any offer of charges + 8%. If you have been paid the charges + 8% already and are pursuing only for CI you should withdraw.

 

Willful pursual of a claim solely for CI is now highly likely to be met with a (successful) summary judgement application from the bank, and you could be liable for costs.

[steven4064]

Do you have a link to that?

 

http://www.gov.im/lib/docs/fsc/handbooks/guides/csps/cspappendixe2.pdf

 

Steven

 

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[roscodog18]

I am claiming Lloyds,

 

this week they paid out charges + 8%

they issued a part 18 request which stated that they did not recognise mutuality and reprocity as a legal justification for CI ( 29.8%)

Should I bow out at this point?

 

Roscodog

[chezt]

There is a precedent against the awarding of "contractual" interest on the implied term basis.

 

If you've claimed CI pleaded on the basis of mutuality and reciprocity then you should accept any offer of charges + 8%. If you have been paid the charges + 8% already and are pursuing only for CI you should withdraw.

 

Willful pursual of a claim solely for CI is now highly likely to be met with a (successful) summary judgement application from the bank, and you could be liable for costs.

 

Thanks again for another well executed explanation!

[Josie8]

I am claiming Lloyds,

 

this week they paid out charges + 8%

they issued a part 18 request which stated that they did not recognise mutuality and reprocity as a legal justification for CI ( 29.8%)

Should I bow out at this point?

 

Roscodog

If thats the only part of your claim then yes because of the precedent - though it might be worth holding on till the judgement is actually published and the mods see how the judges decision was arrived at i.e. his thinking behind it.......... Does anyone know if the media has picked up on this at all? If not I'm suprised the bank concerned hasn't had a press conference to trumpet it loud and wide

[GaryH]

I am claiming Lloyds,

 

this week they paid out charges + 8%

they issued a part 18 request which stated that they did not recognise mutuality and reprocity as a legal justification for CI ( 29.8%)

Should I bow out at this point?

 

Roscodog

Yes. See the post above.

[dad]

Just to clarify what GaryH said:

 

If you have only been offered charges + 8%, the you need to go back with a counter of (Charges + Overdraft interest on the Charges) + 8%.

 

My note of what the judge actual said is:

The customer has a right to the charges, any interest deducted and a right to claim statutory interest for the period he was deprived of the deductions, provided he brings proceedings to recover them.

[GaryH]

Quite right, yes, sorry if that wasn't clear. I've never disputed the right to recover any OD interest which you've already paid the bank as a result of charges.

[TANZARELLI]

What about going for account of profits instead of CI as a restitutioary remedy?

[steven4064]

 

The problem is always going to be establishing the existance of a trust - and this was confirmed in his response to my PM earlier.

 

Even if one could be established, and then you could demonstrate it had been breached (which isn't an easy task as you might think either), there is nothing to say the judge would grant you the contractual rate. You could propose it, yes, but it would be the courts discretion as to what rate is deemed to provide an equitable remedy under the circumstances.

 

I spent some time researching this last night.

 

In my bank's (NW) T&Cs it says "The Bank may act on instructions (including written and verbal) by any means (including phone and electronic) that are given or reasonably appear to be given by you."

 

Superficially, this would seem to put the bank in the role of agent and therfore possbly in a fiduciary relationship to me. However, the real relationship is - I ask them to do something, they do it and get paid for it - this is obviously a service. (the fact that they 'get paid' be lending my money at interest is not fiduciary as they do it for their benefit not mine!). To be a fiduciary relationship there must be an element of initiative - ie the trustee acts on their own initiative on behalf of the principal (ie me).

 

It is not necessary to show that the fiduciary relationship is breached, merely that the trustee profited from it since, in common law, all profit in a fiduciary/principal relationship belongs to the principal. The trustee has no rights to it.

 

Now, consider the case of Direct Debits. Nat West's T&Cs say

 

"For the purposes of assessing whether you have sufficient funds available to cover the withdrawal, or whether the withdrawal would cause an agreed overdraft limit to be exceeded, we will look at the cleared balance (plus, where applicable, any unused agreed overdraft facility) on your account at 3.30pm on the working weekday before we recieve the instruction to withdraw funds.

• Examples of our receiving instructions to withdraw funds include cases

where: ......

– standing orders and direct debits fall due to be paid...."

 

In the case of a DD, the timing and the amount of the withdrawal are in the control of the payee. Further, the bank makes a decision whether to pay or not based on information only it is party to at the time, since I have no means of determining what my balance is at any given time until after the event. In this case, the bank makes a decision on my behalf of its own initiative. I think you could argue that, in the case of Direct Debits, the bank puts itself in the position of agent and therefore takes on a fiduciary relationship with me.

 

(In the Westdeutsche case referenced above it says the basis of all trusts is conscience, ie that both parties know. In this case, it is quite clearly stated in the bank's T&Cs.)

 

In acting as my agent, the bank may then decide not to pay a Direct Debit because they estimate there will not be sufficient funds to cover it. That is fine, but under common law they must not profit from this decision (it would be a conflict of interests if they could). We know that the cost to them of this process is far less than what they charge us for it because it is in fact completely automated. Therefore they do make a profit contrary to common law out of a fiduciary relationship.

 

Any comments?

 

Steven

 

If this post is helpful, please click the scales

Any opinions are without prejudice & without liability.

Almost everything I know concerning the law I learned from this site

[Fred_Funk]

There is a precedent against the awarding of "contractual" interest on the implied term basis.

 

If you've claimed CI pleaded on the basis of mutuality and reciprocity then you should accept any offer of charges + 8%. If you have been paid the charges + 8% already and are pursuing only for CI you should withdraw.

 

Willful pursual of a claim solely for CI is now highly likely to be met with a (successful) summary judgement application from the bank, and you could be liable for costs.

 

I understand what you're saying but, playing Devil's Advocate for a minute, if you can avoid your claim being split - ie going to court purely to argue for contractual interest (compounded) - then why shouldn't you proceed as before?

 

I dare say I'm being stupid but, surely, the banks will continue to pay up rather than proceed to court, where they will be asked to account for their unlawful charges?

 

Or am I missing something?! ;-)

[bally35]

Yes but within fiduciary arrangement, banks on behalf of all their customers invest in companies, something which they do take the iniative on.

Say for their bonds etc, they decide who to invest in , that cannot be dicated by customers therefore on their own iniative to apparently benefit customers.

Also they allegedly offer free banking to customers in credit means that they have taken thei niative to charge the rest of us to benefit them. lol

[bally35]

So actually what we need is some lucky sod who has never been charged to take the bank to court on this abuse of the fiduciary relationship

[TANZARELLI]

Yes but within fiduciary arrangement, banks on behalf of all their customers invest in companies, something which they do take the iniative on.

Say for their bonds etc, they decide who to invest in , that cannot be dicated by customers therefore on their own iniative to apparently benefit customers.

Also they allegedly offer free banking to customers in credit means that they have taken thei niative to charge the rest of us to benefit them. lol

 

This is true however they are not allowed to profit from breahes in contract under the UTCCR. This is why Banks are blatently cloaking or veiling their charges as service fees. Profits can be made from service fees.

[bally35]

Aye, First Trust have noe changed their "penalty fees "in their t&c to read "unauthorised borrowing fee" from 29/05/2007.

So though I would ask them via e-mail how this differs from their old (and yes published) "penalty fees"

HEE HEE HEE

[monkey_uk]

I'm currently in the process of claiming against halifax, my MCOL will be issued in the next week or so, as soon as I have the funds.

 

I'm claiming for 2 bank accounts and 1 credit card, but keeping it as 2 claims (1 claim for the 2 bank accounts and 1 claim for the visa card). I'm not claiming the interest that they took from me for being overdrawn, I'm only claiming the charges plus CI@28.8% APR.

 

They've offered me 50% of the charges back for each of my 2 bank accounts. I called up to reject this (they'd already credited it to my account without my knowledge). I was asked "have you spoken to anyone who tried to negotiate with you". When I replied "No", I was then asked "Has noone even offered you the full amount" I said they'd not and that I wouldn't accept it anyway as I beleive I am just in claiming interest at Hfx's unauthorised overdraft rate (around 28.8% If i recall correctly).

 

Does anyone have any advice for me in light of this alleged High Court Precedent?

 

Should I still file my claim, including CI, as I've not had a formal written offer of the full amount of charges, it was merely mentioned "in passing" in a telephone convo.

 

I've had an offer for £220.00 for my Visa card charges, as full and final settlement. I can only see that they've charged me £182.00 but Hfx maintain that they owe me £220 in charges. I don't understand it.

 

So, should I accept this offer (which came waaaay outside the deadline I set them) or file my claim including CI?

[steven4064]

My note of what the judge actual said is:

The customer has a right to the charges, any interest deducted and a right to claim statutory interest for the period he was deprived of the deductions, provided he brings proceedings to recover them.

 

In my GE Money claim I claimed charges, interest at 29.9% from the date of the charge to the date of the claim and then s69 interest on top thereafter, except that it apppears I could have claimed s69 interest from the date of the charge (and on the interest too) rather than the date of the claim, at least that's what the quote above seems to say. How does this differ from what dad did?

 

[voyager9]

hi everyone theres something that is puzzling me as well

 

The Appeal came before Mr Justice Underhill last week (8 June 2007) on the basis of what happens if the charges are unlawful penalties. While he agreed I had an arguable case, he rejected my appeal because the courts will only imply what it is necessary to do. He held that he could find no necessity for the term the I sought to imply, because he a customer has a right to recover the charges, any interest deducted and a right to claim statutory interest for the period he was deprived of the deductions, provided he brings proceedings to recover them.

He further decided that 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. In this case the court held that in the general law there is no title to compound interest on debts

He did leave open the possiblility that a claim for compound interest could be made on the basis of 'custom and usage', but that I had provided no evidence of such usage.

Because this case was heard in the High Court it is now a precedent for other courts to follow.

 

its the bit in blue surely if thats the case then when we have an unauthorized overdraft( ie a debt) as per this part of bos t&c`s

 

18.8 if your account is closed, we will work out how much interest you owe us for each day your account is overdrawn in the month in which the account was closed (including the day on which it is closed). you have to pay us this sum plus any interest owed under condition 18.5 which has not yet been applied to your account. you will also have to pay any overdraft and charges which you owe us.

 

is`nt that exactly what the banks are doing charging daily compounded contractual interest becuase its a debt?

 

and therefore going off the same principle they have no right in doing so?

 

if i have got totally wrong end of stick please someone correct me, i thought a debt is a debt whether its us that owe the bank or vice versa?

 

voyager9

 

plus in my case they didnt actually close account for year and half although they stoppped charging etc

[Glenn UK]

I know this may not be strictly relevant but I found these definitions in the FIDUCIARY SERVICES ACTS 2000 and 2005 (which is an IOM Act)

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This seems to imply (in the IOM at least) the the holding of money belonging to another is considered a fiduciary responsibility and hence the depositing of money in a bank account would constitute a trust.

(Is there a corresponding definition in any of the UK legislation or settled cases?)

 

As to the breaching of that trust, surely the fiduciary profiting from the trust to the detriment of the client would constitute such a breach.

 

Or am I being too simplistic?

 

Steven

 

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Any opinions are without prejudice & without liability.

Almost everything I know concerning the law I learned from this site

 

I think you need to be careful this act from the IOM sets out what activities do and do not constitute those which give rise to a fiduciary relationship.

 

I'm pretty certain the current accounts are not within that definition.

 

JMHO

 

Glenn

[steven4064]

I'm pretty certain the current accounts are not within that definition.

Glen

 

That's the conclusion I've come to in general (see post #36) because a fiduciary relationship implies that the tustee (the bank) exercises initiative on behalf of the principal (me). In most current account transactions they are merely following orders (where have I heard that before?).

 

However, I think there is a case to argue a fiduciary agent/principal relationship in the way Nat West (at least) handles Direct Debits (again see post #36).

 

[Glenn UK]

Steven

 

I was not really commenting on the relationship and the customer in general only the reference to the IOM act.

 

I believe the bank acts a s a fiduciary, it also 'sells' itself as such to the consumer.

 

As to acting on instruction's this may be so in general terms however, i am pretty certain that my T&C doesn't include a term that says it will give me my money back and therefore there is an element of trust between the consumer and the bank that they will in fact give me my money back.

 

There may also be terms that restrict how much and how often a consumer can get their money out. bearing in mind there is also a term allowing the bank to unilaterally alter the T&C there is an element of trust on the part of the consumer that the bank will actually give them their money back.

 

Glenn

[steven4064]

I was not really commenting on the relationship and the customer in general only the reference to the IOM act.

I appreciate that. I only quoted it because it seemed a useful definition and to see if there was something similar in English law (I can't find anything)

 

I believe the bank acts a s a fiduciary, it also 'sells' itself as such to the consumer.

Obviously in some ways they do - in savings accounts, ISAs, etc, they must. But for current accounts, most of what they do does not fall into this category and I think that must be the case, since the common law does not allow a profit to be made from a fiduciary relastionship (or so I have been led to believe). Obviously, the banks do need to make some profit from current account activities.

 

As to acting on instruction's this may be so in general terms however, i am pretty certain that my T&C doesn't include a term that says it will give me my money back and therefore there is an element of trust between the consumer and the bank that they will in fact give me my money back.

 

There may also be terms that restrict how much and how often a consumer can get their money out. bearing in mind there is also a term allowing the bank to unilaterally alter the T&C there is an element of trust on the part of the consumer that the bank will actually give them their money back.

I'm sureyou are right, but the it's the operation of the account we are talking about and that may be different. Possibly.

 

The reason that a fiduciary is not allowed to make a profit for themselves and that the law says that any profit (even if dishonestly come by) belongs to the principal, is because of conflict of interest. The fiduciary might be tempted to maximise their own profit at the expense of the principal's interests. In the Direct Debit case I gave, I think the bank may be in just such a position. They can maximise their profit (by making a £38 charge) at my expense (choosing to refuse to pay a DD).

 

[Glenn UK]

Re fiducairy and profit,

 

It absoluetly cannot be the case otherwise no fidicuairy could earn money, clealry they do, investment bankers do, doctors do, etc etc.

 

if you can point to statue or case law says otherwise be interested to know of course?

 

Glenn

[steven4064]

Re fiducairy and profit,

 

It absoluetly cannot be the case otherwise no fidicuairy could earn money, clealry they do, investment bankers do, doctors do, etc etc.

 

if you can point to statue or case law says otherwise be interested to know of course?

 

Glenn

 

The rule preventing trustees from making unauthorised profits and from getting into positions of conflict of interest dates from the 19th century.

 

In Bray v Ford (1896), the House of Lords explained that the purpose of the rule was not to punish immoral behaviour, but to prevent fiduciaries succumbing to the risk of temptation.

 

The decision of Mr Justice Lewison in Ultraframe (UK) v Fielding (2005) clarifies and develops the no-profit and no-conflict rules. He made it clear that a fiduciary may make an authorised profit, since otherwise no one could be paid for being a director or solicitor. But there is an absolute rule against the making of unauthorised profits, which is tempered only by the court's discretion when ordering an account of profits.

(extracted from The test of time - 13 March 2006)

 

unauthorised is the key word.