Fairness of bank charges: a sist for the Scottish legal system?

Regular readers of Scots Law News will recall previous posts on the sisting of Scottish sheriff court cases in which the fairness of certain bank charges is being challenged, to await the outcome of a test case on the same issue in England; a practice against which Sheriff Derek Pyle of Inverness had heroically held out on the basis that what happens in England cannot determine what should happen in Scotland (Nos 675, 745).

The latest development to come to the notice of Scots Law News, courtesy of consumer law correspondent Professor Kenneth Reid CBE, is a decision of Sheriff Nigel Morrison sitting in Edinburgh, Morton v Bank of Scotland plc, issued on 26 August 2008.  The pursuer began his challenge to certain charges on his personal and business accounts in April 2008.  The defender bank argued for a sist, to await the outcome of the continuing English test case.  It appears that that case is now going ahead on two fronts: (1) the banks' appeal against Andrew Smith J's decision that the charges in question are caught by the Unfair Terms in Consumer Contracts Regulations 1999; (2) a further argument before Andrew Smith J on other terms and conditions used by the banks, where a decision is expected in September 2008.  It seems that the terms and conditions on Mr Morton's personal account are the same as those currently before Andrew Smith J.  Sheriff Morrison granted the sist on 16 July and has now given his reasons for doing so.

The four main factors identified by the learned sheriff are –

  • overlap in that the English case was to deal with the same terms and conditions; 
  • similarity of the law to be applied in the cases (the Unfair Terms Regulations apply throughout the UK, while the law on penalty clauses is similar in the two jurisdictions (in particular both have the rule that a clause can only be a penalty if it becomes enforceable on breach of contract);
  • likelihood that the courts in the two jurisdictions would reach similar results and that if not, the differences would be resolved in a uniform way ultimately by the House of Lords;
  • uncertainty if there were conflicting decisions in the two jurisdictions, which would be unhelpful to the UK banking business.

However although Sheriff Morrison was "impressed by the selfless concern of the banks for the administrative burden of the courts" (para 18), he was ultimately "unmoved" by their argument that this too was a ground for sisting the action.

Sheriff Morrison notes the decisions of his brother Pyle in Inverness and accepts that "prima facie it is a matter of right to either party to insist upon a cause going on and that the onus lies on him who wishes to stop it" (para 20).  That onus, he thinks, has been discharged by the banks in this case; "it does not follow," the sheriff adds "simply because the Office of Fair Trading or anyone else raises for whatever reason a test case, or agrees with others to raise proceedings, in England, that proceedings in Scotland raising similar issues will be sisted" (para 20).

There are several troublesome issues here.  Sheriff Morrison's factors are certainly all pertinent points; but one has to ask what were the assumptions of the parties raising the English test case, in particular the Office of Fair Trading and the supposedly Scottish banks (who always trade under English law anyway).  Clearly there are issues in these bank charge cases that are UK-wide, and doubtless there will be other such cases in the future.  Is it beyond the wit of our legal systems to devise some joint procedure involving both Scots and English judges to produce rulings that will be binding in both systems?  Could this be a role for the new UK Supreme Court the launch of which is now not much more than a year away?  As things stand, the Scottish legal system is not even being treated as a junior partner in the UK legal structure by either the OFT or the banks, and Scottish litigants are being denied the opportunity to have their complaints considered with the compliance of several of the Scottish judges.  Someone in a position to do so ought to be doing something about it.

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