(675)  FAIRNESS OF BANK CHARGES A DIFFERENT QUESTION IN SCOTLAND

 

The summer of 2007 saw various newspapers and individuals campaigning against unfair bank charges, leading – directly or indirectly – to a High Court case in England initiated by the Office of Fair Trading (see http://www.oft.gov.uk/news/press/2007/126-07) with a hearing due in January 2008. The case focuses on whether unauthorised charges for overdrafts are unfair under the Unfair Terms in Consumer Contract Regulations (UTCCR). One of the intentions in this general action is to stay a plethora of cases raised in the English county courts by individuals seeking repayment of charges, pending an authoritative High Court ruling.

However, no equivalent action has been raised in the Scottish courts where, accordingly, some similar actions are still being brought by individuals – apparently about 120 altogether. The first detailed judgment in a Scottish bank charges since the OFT action was announced appeared on the Scottish courts website on 10 September 2007 in Coleman v Clydesdale Bank and Thomson v Bank of Scotland  (see http://www.scotcourts.gov.uk/opinions/clyde.html), small claim and summary cause cases raised in Inverness and heard by Sheriff Derek Pyle.  In these cases the pursuers were customers seeking to recover the bank charges on two grounds: (a) that the charges were penal (and thus unenforceable); and (b) that the charges were unfair under the UTCCR. In both cases the banks (represented by the same counsel) argued that the case should be sisted pending the decision in the English High Court case.  In the 120 cases in Scotland decided prior to Coleman all bar one had been sisted on this ground. The banks argued that sisting was essential as a result of the OFT action, and the similarities between Scots and English law in the area. The banks also argued that a multiplicity of actions would cause uncertainty as well as administrative pressures on the Scottish courts (a floodgates argument – now it’s not every day that you see one of those).

In the Inverness cases, however, Sheriff Pyle rejected the motion to sist, in a carefully reasoned decision relying on general principles of civil procedure and fundamentals of the Scots law of judicial precedent. His starting point was that sisting an action was at the discretion of the court, and the onus of establishing that an action should be sisted lay with the party so arguing. He was unconvinced by argument that a High Court decision would resolve matters. He pointed out that, under the doctrine of stare decisis, even where consideration is given to UK legislation a decision of the High Court in England does not bind a Scottish court.  He also equated the position of a judge in a High Court to that of a Lord Ordinary in an Outer House case in Scotland, pointing out that in civilibus a single Outer House decision does not bind a sheriff.  The sheriff’s trump card came next.   The OFT case is only on the UTCCR, without reference to the penalty issue.  The sheriff noted that counsel for the banks indicated that the argument in the High Court would take the penalty issue into account – but from the published documents the sheriff justifiably further noted, not yet. Accordingly, the application to sist the action was premature.

Sheriff Pyle also dismissed the issue about administrative burden, noting that the administrative burden on the courts per se is not a relevant consideration in deciding whether to sist a cause. It is the responsibility of the court, with the assistance of the Scottish Court Service, to provide proper facilities for litigation to proceed, for rights to be vindicated and remedies provided. It should be no concern of the pursuers in the instant actions that an additional administrative burden may be placed on precious resources simply because others wish to seek the same remedy as they do.  However, after reframing the argument to concentrate on the waste of resources he then dismissed that too, indicating that in considering potential waste of resources he should consider only the case before him. The sheriff noted:

It seems to me that I ought to have regard only to the burden on the defenders in each of the instant cases and not in any other similar cases which may arise in this court or in other courts in Scotland. Looking at the matter in this way, I consider that such a burden is insufficient to offset the respective pursuers’ right to have their claims adjudicated upon with proper dispatch. Even if I am wrong in that and do have to consider the administrative burden on the defenders in similar actions, I still do not consider that they have discharged the onus upon them, bearing in mind that to date there are only 350 actions or so proceeding in Scotland involving all of the banks who are the defendants in the OFT action. I was not told how many of these actions are against each of the defenders, but it must be only a fraction of that total.

Among the sheriff’s other observations is one pointed note on the OFT case. If the case had been raised before the commercial court in the Court of Session an authoritative ruling that would bind the sheriff courts would be in the offing, and he might have reached a different decision.