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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Teasdale v HSBC Bank Plc [2010] EWHC 612 (QB) (23 March 2010)
URL: http://www.bailii.org/ew/cases/EWHC/QB/2010/612.html
Cite as: [2010] 4 All ER 630, [2010] 4 Costs LR 543, [2010] EWHC 612 (QB)
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Neutral Citation Number: [2010] EWHC 612 (QB)
Case No. 9SF01225
IN THE HIGH COURT OF JUSTICE
QUEEN-S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
MERCANTILE COURT
Date: 23 March 2010
Before:
HIS HONOUR JUDGE WAKSMAN QC
(sitting as a Judge of the High Court)
BETWEEN:
Case No. 9SF01225
ANTON TEASDALE
Claimant
and
HSBC BANK PLC
Defendant
AND BETWEEN:
Case Number 9MA06132
ERICA BROOKES
Claimant
and
HSBC BANK PLC
Defendant
AND BETWEEN:
Case Number 9MA08165
GERARD JEMITUS
Claimant
and
BANK OF SCOTLAND PLC
Defendant
1
AND BETWEEN:
Case Number 9MA02780
BRIAN BACKWELL
Claimant
and
THE ROYAL BANK OF SCOTLAND PLC
Defendant
AND BETWEEN:
Case Number 9MA07104
ANDREW MILLS
Claimant
and
MARKS AND SPENCER FINANCIAL SERVICES PLC
Defendant
AND BETWEEN:
Case Number 9MA08427
HELEN CUTHBERTSON
Claimant
and
TESCO PERSONAL FINANCE PLC
Defendant
AND BETWEEN:
Case Number 9MA11185
ROBERT ATKINSON
Claimant
and
BANK OF SCOTLAND PLC
Defendant
David Uff and James Malam (instructed by BPS Solicitors) for Anton Teasdale and Brian Backwell
David Uff and James Malam (instructed by MSB Solicitors) for Erica Brookes and Gerard Jemitus
Andrew Mills, Helen Cuthbertson and Robert Atkinson did not appear and were not represented
Sonia Tolaney and Richard Hanke (instructed by Addleshaw Goddard LLP Solicitors) for HSBC
Bank Plc and Marks and Spencer Financial Services Plc
Julia Smith (instructed by DLA Piper (UK) LLP Solicitors) for The Royal Bank of Scotland Plc
Fred Philpott (instructed by SCM Solicitors) for Bank of Scotland Plc
James Ross (instructed by Cobbetts LLP, Solicitors) for Tesco Personal Finance Plc
Hearing dates: 8 and 9 March 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this
Judgment and that copies of this version as handed down may be treated as authentic.
2
INTRODUCTION
1. On 23 December 2009 I handed down a lengthy judgment in Carey v HSBC [2009] EWHC 3417 which dealt with various issues arising in a very large number of County Court cases
in relation to s78 of the Consumer Credit Act 1974 (-the 1974 Act-). Following the decision
in Carey (and in some instances before) many Claimants in such cases sought to discontinue
their claims but on the basis that the Defendant banks should pay all or part of their costs.
On 8 and 9 March 2010 I heard such applications in the 7 cases set out above. While
recognising that costs are in the discretion of the judge dealing with any given application it
was thought sensible by all those who had been party to Carey and those with similar cases
pending, that some useful guidance might be given by a detailed ruling by me on costs in
some chosen cases. The cases which I heard were selected by agreement of the parties at and
following a CMC which took place on 2 February 2010.
THE LAW
2. CPR 38.6 (1) provides as follows:
-Unless the Court orders otherwise, a claimant who discontinues is liable for the costs which a
defendant against whom the claimant discontinues incurred on or before the date on which notice of
discontinuance was served on the defendant.-
3. It is also relevant in my view to refer to CPR 44.3 (4) which provides that:
-In deciding what order (if any) to make about costs, the court must have regard to all the
circumstances, including -
(a) the conduct of all the parties-
(c) any admissible offer to settle made by a party which is drawn to the court-s attention.-
4. Sub-paragraph (b), dealing with whether a party has succeeded on part of his case, is not
relevant here since by discontinuing the Claimant has disabled the Court from deciding
whether it had succeeded or not.
5. In the course of submissions from both sides I have been referred to the following
authorities: In re Walker Wingsail Systems Plc [2006] 1 WLR 2194, Official Receiver v
Doshi [2007] BPIR 1135, RBG Resources plc v Rastogi [2005] EWHC 994 (Ch), Maini v
Maini [2009] EWHC 3036 (Ch), RTZ Pension Property Trust v ARC Property
Developments [1999] 1 All ER 532 and Far Out Productions v Unilever [2009] EWHC 3484.
6. I set out in particular the following extracts from the judgment of Chadwick LJ in Walker:
-12 In the following ten paragraphs-paras 9-18 of his witness statement-the liquidator explained why
he continued to take the view that the claims against Mr Walker and the estate of the late Mrs Walker
remain well founded. That is, of course, wholly and hotly disputed by Mr Walker. But it is no part of
the function of a court on an application to discontinue to attempt to reach a decision whether or not
the claim would succeed. I am content, as the judge was, to assume that the liquidator has a serious
claim deserving of argument at the trial. This is not a claim which could be dealt with on a summary
basis; and it is not a claim that could be struck out as having no real prospect of success....
24.....The form in which that rule [CPR38.6] is expressed-which differs from the earlier rule, Ord 21, r
3 in the Rules of the Supreme Court 1965-makes it clear that the normal order on discontinuance is
3
that the claimant bears the defendant's costs up to the date on which notice of discontinuance is
served. The rule makes it clear that a court may order otherwise; but the burden is on the party who
seeks to persuade the court that some other consequence should follow; and the task of the court is to
consider whether there is some good reason to depart from the normal order.....
36 It is clear that the test formulated as "one just has to look at the state of the action as it is and see
what the fair and just thing to do is at the moment in time" influenced the judge in this case. For my
part, I doubt whether the test is as simple as that under CPR r 38.6. Plainly, under the new rule, the
court has to be persuaded that it is just to depart from the normal consequences of discontinuance. The
rule recognises that justice will normally lead to the conclusion that a defendant who defends himself
at substantial expense against a plaintiff who changes his mind in the middle of the action for no good
reason-other than that he has re-evaluated the factors that have remained unchanged-should be
compensated for his costs.-
7. In my judgment the following principles may be derived from those cases:
(1) When a party discontinues, there is a presumption by reason of CPR38.6 that the
Defendant will get his costs. The burden is firmly upon the Claimant to show that
there is good reason to disapply it; see the judgment of Chadwick LJ in Walker at
paras. 24 and 36. See also the judgments of Lightman J in RBG at para. 48 and
Proudman J in Maini at para. 11;
(2) The fact that the Claimant would have, or might well have succeeded at trial (a point
sometimes advanced by a discontinuing Claimant) is not itself a good reason. This is
because the Claimant has, by discontinuing, chosen not to have a trial by which the
claim could be determined. Once there is to be no trial, it is not the function of the
Court to attempt to decide whether or not the claim would have succeeded. See
Walker paragraph 12;
(3) I would only add this: if it is plain to the Court that the claim would have failed at
trial that must be a relevant factor against disapplying the presumption because it
suggests that all that discontinuance has done is to bring forward the day of defeat;
see the judgment of Nicholas Strauss QC in Far Out at para. 9. See also the final
sentence of para. 12 of the judgment in Walker which shows that it could be relevant
that the claim could have been struck out as having no real prospect of success;
(4) The mere fact that the Claimant-s decision to discontinue may have been motivated
by practical, pragmatic or financial reasons as opposed to a lack of confidence in the
merits of the case will not, without more, assist. This is because the Claimant has
taken the risk of litigation by commencing it and exposing the Defendant to the costs
involved in defending it. See Maini at para. 11 and Far Out at para. 3. Thus a simple
re-evaluation of the commercial point in proceedings, as with a re-evaluation of the
merits, is not enough. See paragraph 11 of Maini;
(5) In most cases, in order to show good reason, the Claimant will need first to show a
change of circumstances since the claim was made. This will demonstrate at least
that there is something more than a simple re-evaluation. See Far Out at para. 3. But
even if circumstances have changed since the commencement of the claim, if they
result from the very fact of the claim, for example the Defendant has run out of
money because he has spent it all on defending it, the Claimant cannot invoke that. It
may be different where the Defendant has rendered the Claimant-s claim worthless
because of something he has done on his own initiative, for example embarking on
some other unsuccessful proceedings which led to his own bankruptcy. See Walker
4
para. 39 commenting upon the decision in Everton v World Professional Billiards
and Snooker Association 13 December 2001. Equally, if the chances of success had
reduced in the Claimant-s eyes because of what the Defendant produces on
disclosure or because of some argument raised in the Defence it would be very
unlikely that this would assist the Claimant on costs if he then discontinues. That is
because such changing -circumstances- are part and parcel of litigation;
(6) In truth it is difficult to see how any change of circumstance could amount to good
reason unless it is connected with some conduct on the part of the Defendant which
deserves to sound in costs against him. Thus paragraph 11 of Maini refers to -active
misconduct-. And at p541 of RTZ Potter LJ refers by way of example to the case of a
Defendant -who perversely encourages a plaintiff into action by concealing the
existence of a defence although reasonably invited prior to proceedings to make
disclosure.- Another example is the unnecessarily aggressive approach and totally
unreasonable and unjustified stance taken by the Defendant in relation to
negotiations before discontinuance, as found by Lightman J in para. 53 of RBG. Or
the failings by the Defendant accountant in his professional obligations to the
liquidator in Doshi; it is to be noted that in the last two cases the result was a
percentage reduction in the Defendant-s recoverable costs, not an order that they pay
any part of the Claimant-s;
(7) And even if there has been some conduct by a Defendant which has caused a change
of circumstances this should not have an adverse impact against him if, having
regard to all the circumstances it does not amount to a good reason to disapply the
presumption; so a change of circumstances is simply the beginning of the enquiry,
not the end of it;
(8) Thus the context for the Court-s mandatory consideration of all the circumstances
under CPR 44.3 is the determination of whether there is a good reason to depart from
the presumption imposed by CPR 38.6.
8. It follows from the above that I reject the approach advocated by Mr Uff at paragraph 19 of
his Skeleton Argument which is that the Court should -take an overview of the case as a
whole and reach a conclusion based on two questions: (i) who has succeeded in the action
and (ii) what order for costs does justice require?- That approach, set out in BCCI v Ali (No.
3) (1999) 149 NLJ 1734, is cited in the White Book p1174 in the very different context of
CPR 44.3 (2) where there has been a trial and by reference to the general rule that the
unsuccessful party should pay the costs but the Court may make a different order.
9. I now consider each of the cases before me in turn.
THE SEVEN CASES
10. When reading this judgment it will be necessary to have to hand my judgment in Carey
since all of the cases here involve issues substantively dealt with there. In each, it is
necessary, in order to apply the principles referred to above, to examine with some care, the
chronology and content of the proceedings, what the case was really -about- from the
Claimant-s point of view and what lay behind the decision to discontinue.
5
Teasdale
11. On 11 August 2008, Credit Issues Limited, a claims management company, wrote to HSBC
requiring documents under s78 and under the Data Protection Act 1998 (-the 1998 Act-).
Under the former, they sought -the copy of the executed agreement- as well as the varied
terms. On 2 September 2008, HSBC responded saying that it could not at that stage locate a
copy of the original agreement, being a clear reference to the entirety of the document
actually signed by Mr Teasdale. But it did enclose what it called a generic signature box but
which was in fact an entire blank application form together with the terms and conditions
applying at the time of the making of the agreement, and a copy of the most recent terms.
See A/1/2.8-2.41. The effect of my judgment in Carey was that this complied with s78 save
for the omission of Mr Teasdale-s name and address.
12. Nothing further happened until 20 January 2009 when BPS Law, solicitors for Mr Teasdale
wrote to say that there was still no compliance but they did not say in what respect. A
generic claim form was enclosed which had not yet been particularised for that case. So it
would have included allegations of breach of s78 not in fact relevant. Neither side in
Teasdale has produced the actual document sent at that stage. Although it probably included
an allegation that the name and address was omitted I do not think that this document should
be treated as having put HSBC on any particular kind of notice. At this stage very many
such claims were being intimated by many solicitors, including BPS, against many banks.
When a situation arose whereby a bank sent back documents in purported compliance with
s78 but the Claimant-s representatives disagreed, it behoved them to say precisely why, so
that the bank could deal with the matter efficiently and proportionately. The letter of 20
January also said that if the bank did not make -satisfactory settlement proposals- within 21
days proceedings would be issued. It is not clear what BPS was expecting but it was
obviously something more than merely an acknowledgment that HSBC could not enforce
under s78 (6) (itself a somewhat attenuated benefit for the card-holder as a result of the
decision in McGuffick v RBS [2010] 1 All ER 634). Then, on 9 February 2009 a draft of the
Particulars of Claim to be issued in this case was supplied. At the same time -satisfactory
settlement proposals- were sought by 13 February in default of which proceedings were
issued. There was no response from HSBC in the meantime and proceedings were issued on
18 February 2009.
13. The claim here, drafted by Mr Uff, is limited to a complaint of a s78 breach and associated
relief. Paragraph 8 (1) said that what had been provided by HSBC was not a -true copy- of
the executed agreement. As Mr Uff accepted in argument, this was a platform for the major
point advanced by him on behalf of Claimants like Mr Teasdale, that a reconstituted copy of
the executed agreement was not sufficient for the purposes of s78. This formed Issue 1 (a) in
Carey. I decided that issue against Mr Uff. In short, a reconstituted copy would do. See
paragraphs 46-54 of Carey.
14. Paragraph 8 (3) made the specific point that the name and address was omitted and this was
a breach of s78. The need or otherwise for a name and address formed Issue 1 (c) in Carey. I
decided, in Mr Uff-s favour, that the name and address was needed. However I rejected his
contention that the source of the name and address had to be the original signed agreement
itself, as opposed to some other record of the bank. See paragraphs 58-62 of Carey.
6
15. HSBC responded to the Particulars of Claim in the form of a witness statement (-WS-) from
Sharon Mattu of HSBC dated 10 March 2009. It included further terms as varied but also a
blank application form now including the name and address. According to my rulings in
Carey this meant that the bank had now complied with s78.
16. However the claim was not discontinued then. It was listed, with others, for a CMC before
HHJ Holman on 22 July 2009 and was then listed for a CMC before me on 8 October 2009.
It was not selected as one of the cases to be heard by me in the week commencing 30
November 2009 and was accordingly stayed pending the outcome of what was to become
Carey. Following that decision and on 21 January 2010, HSBC took the initiative and wrote
to BPS stating that in the light of Carey the claim in Teasdale stood no chance of success
and should be withdrawn. If the claim was discontinued then, HSBC would agree no order
as to costs. If not, it would apply to strike it out. BPS responded by saying that -Following
the decision ...in Carey...and upon review of the documents...- their client intended to
discontinue and apply for his costs up to the date of the provision by the bank of the name
and address. HSBC was invited to consent to that but declined. Following some further
correspondence, Mr Teasdale issued an application to discontinue on 29 January 2010 in
which he claimed all the costs of the action. Before me Mr Uff was not so ambitious and he
sought instead Mr Teasdale-s costs to 10 March 2009 and that there be no order for the
period thereafter. The grounds referred to in the application were essentially that prior to the
issue of proceedings HSBC had not complied with its s78 obligation and did not do so until
10 March 2009.
17. In argument, Mr Uff-s essential points were that (a) Mr Teasdale had a legitimate interest in
making his claim (b) although it had to discontinue after 10 March 2009 because the s78
claim was going to fail, that situation was brought about by HSBC-s failure to provide the
correct documents at an early stage, before proceedings were issued and if it had, the
proceedings would not have been necessary, and (c) the Court should exercise its discretion
and find that in substance Mr Teasdale had in fact been successful because what he wanted
was compliance with s78 and eventually he got it. These points were attractively put and had
a deceptive simplicity about them - but they are wrong for the reasons given below.
18. First and foremost, this claim was not simply a dispute about the need for the name and
address to be provided. Had it been, it would have no doubt been discontinued shortly after
10 March 2009. One of the reasons why there was more to it than that was the Issue 1 (a)
point being taken in paragraph 8 (1). Indeed Teasdale could well have been selected as a
preliminary issue case on that point although in the event it was not. Mr Uff says that
paragraph 8 (1) could have been maintained simply as an umbrella for the Issue 1 (c) point
specifically alleged in paragraph 8 (3). Perhaps it could but that was not why it was there.
Not only was the Issue 1 (a) point live in Teasdale after 10 March but so was Mr Uff-s
particular take on what was required of the source of the name and address. The reason why
no discontinuance occurred until after Carey was because that is when it was made clear that
these other points being taken in Teasdale would fail. That analysis is supported by the fact
that BPS-s first letter on the point expressly made reference to -following the decision ..in
Carey..-
19. So although there was a change in circumstances brought about by HSBC after issue of
proceedings - supply of name and address - it does not amount to a good reason to rebut the
7
presumption under CPR 38.6. The action would have - and did - continue anyway and after
Carey, was destined to fail.
20. As to Mr Uff-s point about legitimate interest, he contended that Mr Teasdale had a proper
interest in bringing these proceedings so that he could see whether s78 was complied with.
But this does not assist him here because:
(1) The mere fact that a party has a legitimate interest in bringing his claim is not
relevant to what happens to costs on discontinuance. Most parties do have such an
interest but they still take the risk if they bring the claim to a premature end;
(2) Moreover, it is far from clear to me that Mr Teasdale did have a legitimate interest in
the sense of a proper case for a declaration as to breach of s78 because he did not
advance (whether in the Particulars of Claim or in evidence at the time or for the
purpose of this application) any details as to why there would be real utility in him
having such a declaration - see paragraph 170 of Carey in relation to Issue 3. I do
not accept Mr Uff-s submission that the Court is simply not entitled to enquire why a
particular Claimant seeks this relief and must assume a proper case for such relief
without more. That is in conflict with paragraph 170 of Carey. Nor is it to the point
that some Claimants- cases were put forward for the hearing in Carey for the purpose
of the preliminary issues. In those cases it was agreed on both sides that they would
form the context for deciding some issues of law, but it hardly follows from this that
every Claimant (including Mr Teasdale) must be viewed as having a particular
interest in knowing what the limits of s78 are. And it is not suggested that this was
the case for Mr Teasdale anyway. 1
21. Nor do I accept Mr Uff-s argument that in truth Mr Teasdale succeeded in his claim just
because HSBC produced the name and address. First, that ignores the fact that Mr Teasdale
was also alleging that the name and address had to be in a particular form and that there
could not be a reconstituted copy. The claim would have failed on those points not because
of what HSBC supplied in March 2009 but because of the decision in Carey and the
reconstituted copy itself had been provided before proceedings started. Second, the claim
was not for an order that a s78 copy be produced. It was for a declaration that there was a
breach of s78. On this it was bound to fail. The fact that the upshot was that a s78 copy was
made complete after the claim started does not in my view change the nature of what was
sought. Mr Uff argued that since the only remedy open to a card-holder who seeks a copy of
a card is non-enforcement under s78 (6) if it is not produced, he has no choice but to litigate
on that basis in order to obtain a s78 copy. But that seems to me to ignore the fact that the
sanction expressly provided by statute for non-compliance is the negative one under s78 (6).
After all, if the bank states that it cannot comply, that is the end of the matter under s78 save
for the operation of s78 (6). (As noted in paragraph 231 of Carey the question of whether
injunctive relief may be granted is an open one, but Mr Uff-s argument here proceeds on the
basis that such relief is not available and of course it was not sought in Teasdale).
1
Mr Uff placed reliance upon paragraph 169 of my judgment in Carey but this simply said that a debtor -might well-
have a legitimate interest in having the question decided - as one of a number of reasons given why it was unwise to be
prescriptive either way on what were matters of discretion. The approach to be taken in any particular case is that set
out in paragraph 170.
8
22. Finally, HSBC-s conduct cannot be examined in a vacuum. First, the -agenda- for the claim
seems to have been wider than merely the declaration actually sought given that BPS were
seeking some form of settlement other than a simple acknowledgment of a failure to comply
with s78. On any view HSBC were acting reasonably in my view in resisting the call for
such proposals. If this made the issue of proceedings (and the cost thereof) inevitable it can
hardly be laid at HSBC-s door. Second, it has to be borne in mind that banks like HSBC had
very many such claims to deal with and this may well cause delay in producing all the
correct documents. See paragraph 21 of the statement of Naomi Simpson dated 2 March
2010. I also adverted to this in paragraph 169 of Carey. One also cannot ignore the question
of proportionality here. At best one would be talking about the issue fee and even then
discounted to take account of the fact that the arguments in play were not in truth limited to
the simple supply of name and address.
23. In respect of the costs for the period after 13 March 2009 Mr Uff contends that there should
be no order. There is no logic to that in my view. The alleged change of circumstance had
been and gone with no discontinuance and the fact that not much happened thereafter is not
a reason for denying HSBC its costs. In fact some costs must have been incurred because the
case featured in two subsequent CMCs.
24. In all of those circumstances it is plain that there is no good reason for disapplying the
presumption under CPR 38.6 and HSBC should have all of its costs in the usual way.
Brookes
25. This is a case which was also pleaded by Mr Uff and brought by MSB Solicitors. The s78
request was made on 13 August 2008 and a copy of the -original agreement- was sought.
HSBC replied on 2 September enclosing the same collection of documents as they had
provided in Teasdale. HSBC clearly thought that it was being asked to provide a copy of the
actual signed agreement because it said that it could not presently locate it, but nonetheless
the documents supplied complied with s78. On 9 September, MSB then asked HSBC to say
when it would be able to locate the original or alternatively to say that it no longer had a
copy. On 26 September HSBC repeated that it had complied with s78. MSB wrote again on
17 December not taking any further point under s78 but seeking the original agreement
under the 1998 Act. HSBC responded on 23 December saying that it had complied with s78
and was not obliged to produce the original under the 1998 Act.
26. Nothing more happened until 6 March 2009 when MSB sent a copy in draft of the claim
form it intended to issue. (There is an issue of fact as to whether this draft was in fact
received by HSBC but this is not something which I can resolve on this application and for
present purposes I shall assume that it was received.) In the letter MSB also said that -We
require your confirmation by close of business on 23rd March that the agreement in question
is unenforceable. We further require that you reduce the balance outstanding to zero and
remove any negative data you have submitted to the Credit Reference Agencies [CRAs].-
There was no response by 23 March and on 9 April proceedings were issued, and they were
served on 5 June.
27. The Particulars of Claim is in the same form as that served in Teasdale save that there is an
additional claim in paragraphs 10 - 13. It is pleaded that in the alternative to the claim that
there was no s78 copy, if the documents provided did constitute such a copy then the
9
agreement was an improperly executed agreement (IEA). This was because the terms of the
agreement as varied were not capable of having been signed in the prescribed manner by the
parties because they post-date the original agreement and the documents which were capable
of being so signed omitted the prescribed terms. Further relief in that regard under s127 (3)
and s142 of the 1974 Act was claimed in the Prayer.
28. Then, on 22 June 2009 ie shortly after service, HSBC provided a WS from Ms Mattu which
included a reconstituted copy with Ms Brookes- name and address on it. But the action was
not discontinued then and its procedural history thereafter was much as in Teasdale. After
Carey, and on 21 January 2010 HSBC wrote to MSB in the same terms as it had written to
BPS in Teasdale requesting that the claim be discontinued forthwith. This crossed with a
letter from MSB of the same date saying that having reviewed the documents here, there
was still no compliance because the varied terms provided by Ms Mattu were in fact those
applicable in 2006 and not in August 2008 when the s78 request was made. It enclosed a
proposed consent order by which the claim was withdrawn with an admission of non-
compliance by HSBC and an order that it pay Ms Brookes- costs. On 29 January HSBC
replied, providing the terms applicable in 2008. It said that HSBC was entitled to comply
with s78 at any time and disagreed with MSB-s proposals for costs. Instead it offered a
discontinuance with no order as to costs. This was not accepted and on 9 February an
application to discontinue with payment of all of Ms Brookes- was issued reciting that s78
compliance had now been effected. As with Teasdale Mr Uff modified that claim, seeking
Ms Brookes- costs until 22 June 2009 and then no order after that. He did not seek costs
beyond 22 June 2009 because the point about the varied terms not being the latest one was
not taken until January 2010.
29. In my judgment the position on costs under CPR 38.6 is essentially the same as in Teasdale
and the result should be the same for the following reasons in particular:
(1) The fundamental Issue 1 (a) point on the insufficiency of a reconstituted copy was
still being taken; there was also the point about the source of the name and address;
(2) The letter before action on 6 March sought relief other than a declaration of non-
compliance or unenforceability to which Ms Brookes on any view was not entitled.
First, there was no basis for the account to be reduced to zero because the absence of
a s78 copy does not itself entail an unfair relationship without which the Court does
not have power to make such an order. And even if there was an IEA this does not
itself give rise to an unfair relationship. See my judgment in Carey on Issues 3 and 6.
Second, non-enforcement by reason of s78 (6) does not prevent reporting to CRAs.
See McGuffick (supra). Mr Uff agreed that these further claims were simply
ambitions on the part of MSB and should be ignored. I disagree. They are highly
pertinent to costs because the letter clearly states that without them proceedings
would be issued, and it is principally the need for and the costs of proceedings which
are at stake here. I am entitled to and do assume that if HSBC had not agreed to those
parts of the letter the claim would have been issued;
(3) Although there was strictly a further non-compliance not resolved until 2010, it was
a point not raised by BPS before then and once raised it was dealt with immediately;
(4) The points made in paragraphs 20 and 21 above as to legitimate interest and whether
Ms Brookes in truth succeeded apply equally here;
10
(5) The existence of the alternative IEA claim was not said by Mr Uff to support his
claim for costs and if anything it counts against him. That is because, since there
came a time when a s78 copy was provided, that should have led to the alternative
IEA claim. The only -new- documents since issue of proceedings were the further
version of the varied terms and the name and address. That IEA claim was therefore
on the table as it were but in the event it was not proceeded with. And if it had been
proceeded with it would have been bound to fail without more since the purpose of a
s78 copy was not to -prove- the original agreement for the purpose of s61. I make it
clear, however, that even without this feature, the claim for costs by Ms Brookes here
would fail.
Jemitus
30. This is a case which was also pleaded by Mr Uff and brought by MSB Solicitors. The
request was made on 26 June 2008. A true copy of the original agreement was sought under
s78 along with documents under the 1998 Act. Halifax replied on 15 July and enclosed the
documents to be found at 2/13 of the Jemitus bundle. They included a copy of the typed
agreement with the name and address on it but only in the varied form. On 19 August MSB
sought a copy of -our client-s original signed consumer credit agreement/application form-.
There was no response and on 10 February 2009 MSB said that there was still no s78
compliance. On 10 March MSB wrote enclosing a draft of the claim to be issued and
seeking by 26 March an acceptance by Halifax that the agreement was not enforceable that
the balance would be reduced to zero and removal of any negative history at the CRAs.
There was no response by May and on 5 May the claim was issued and then served on about
15 June 2009.
31. The claim was in essentially the same form as Teasdale. However in the section on breach
the specific point taken was not the absence of name and address but the fact that only the
varied terms were provided and paragraph 8 (1) stated that there was no true copy of the
executed agreement. However, in addition to the relief sought in Teasdale there was here in
paragraph 10.3 a claim for an injunction to restrain Halifax from taking any step to enforce
the agreement and in paragraph 10.4 a claim for an order under s140B requiring Halifax not
to report any default to a CRA and to remove any prior negative report. The claim under
paragraph 10.3 was not necessary and that made under paragraph 10.4 was misconceived
because of my finding on Issue 3 in Carey and the decision in McGuffick.
32. Halifax served its defence on 4 September 2009. It denied any s78 breach and said that all
the material terms were either on the front or the reverse of the application form. With it was
served a copy of the actual application form and terms (see pp81-82 of the Jemitus bundle)
and it was common ground before me that at this point there was s78 compliance. But at the
time there were still thought to be issues between the parties because at the CMC on 8
October Jemitus was chosen as one of the cases to be heard in the week commencing 30
November under Preliminary Issues 2 (variation) 3 (s78 and unfair relationships) and 4
(declaratory relief). But then, on 22 October MSB said that it wished to withdraw the claim
but only on the basis that Halifax paid all the costs. Halifax refused. On 13 November, a
Notice of Discontinuance was served based on late s78 compliance. Mr Jemitus sought all
her costs to date. SCM Solicitors, for Halifax, then wrote on 19 November 2009 objecting to
any discontinuance on the basis that if the case was removed from the forthcoming hearing,
the Lloyds/HBOS group would not be represented at it, and asking that the discontinuance
be withdrawn. It also referred to the fact that SCM was considering applying to set aside the
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discontinuance (if not withdrawn). A Skelton Argument from Mr Philpott about this was
also served on 19 November. MSB refused to withdraw the Notice and after further letters
from MSB a telephone hearing was held by me on 24 November attended by Mr Philpott
and Mr Malam for Mr Jemitus. The upshot was that a replacement case was found, being
Atkinson (see below) and the discontinuance of Jemitus stood.
33. In my judgment, the outcome here should be the same as in Teasdale:
(1) In truth the case was about more than simply the issue on variation. The fundamental
point on Issue 1 (a) was there as well. While in Carey the banks lost on the variation
point (Issue 1 (b)) they succeed on the former point;
(2) The real -agenda- in Jemitus included the prevention of reporting any default to
CRA-s. That was a claim which could not be made good under s78 (6) as McGuffick
has shown;
(3) Moreover, and as recognised in the selection of Jemitus as an Issue 3 case, the relief
claimed in paragraph 10.4 was premised on the existence of an unfair relationship.
As I found in Carey, however, the absence of a s78 copy does not without more give
rise to such a relationship so the case would have been lost on that point;
(4) Further, the claim for declaratory relief was not supported by any detail as to why it
would have real utility for Mr Jemitus in his case. Nor has any detail or evidence
been submitted on this application. The additional claims to stop reporting to CRA-s
rather suggest that it did not, absent this further relief.
34. Accordingly Halifax should have its costs up to the date of discontinuance on 13 November.
However, I consider that Mr Jemitus should have his costs of the matter from 13 November
onwards, including dealing with SCM-s letter of that date and Mr Philpott-s Skeleton
Argument because I cannot see how a party can be prevented from discontinuing just
because the other party has a general interest in the case being litigated as a test case. There
were costs for the Lloyds/HBOS group, no doubt, in seeking and finding a replacement case
but they cannot be laid at the door of Mr Jemitus.
Backwell
35. The claim here was pleaded by Mr Uff and was brought by BPS. Here the request was made
by Credit Issues Limited on 7 August 2008. On 22 August RBS responded and enclosed a
copy of the front page of the original application form together with an up-to-date version of
the prescribed terms and the prescribed information, containing the figures for charges and
interest rates that were applicable at the date of the response. On 7 October Credit Issues
wrote saying that this was not a copy of the executed agreement under s78 though it did not
say specifically why not. It also said that RBS should not make any report to a CRA because
this was a -disputed liability- although in fact it was not since s78 (6) does not remove the
underlying liability - see McGuffick. Then, on 20 January 2009 BPS produced a generic
Particulars of Claim and gave RBS 21 days to make -satisfactory settlement proposals-. The
generic claim is at pages 70B-G of the Backwell bundle. Paragraph 7 included allegations of
a lack of name and address, lack of original terms and illegibility. An alternative IEA claim
much as in Brookes was also made.
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36. On 9 February BPS sent a draft of the claim to be made in that case to RBS saying that
satisfactory settlement proposals had to be made by 13 February 2009 or proceedings would
be issued. On 17 February the claim form was issued. Paragraph 8 (1) said that there was
only the front page of the agreement and varied terms and conditions. On 26 March 2009
RBS wrote to say that it could not locate the agreement but it nonetheless remained valid
and payments should be made. On 9 April 2009, DLA Piper, RBS-s solicitors, wrote
acknowledging the inability to comply with s78 and inviting BPS to withdraw the claim on
the basis of that acknowledgment as the declaratory relief being sought would serve no
purpose. BPS wrote on 14 May to say that it was taking Counsel-s opinion, and enclosing
notice of funding in relation to an insurance policy. On 22 May BPS said that as the
admission that the agreement was lost only came after proceedings were started, RBS should
pay Mr Backwell-s costs. But BPS also sought, as part of a proposed consent order, an
undertaking by RBS that it would not make any report to a CRA, relief to which Mr
Backwell was not in fact entitled. RBS by letter dated 2 June refused to give that
undertaking or pay costs and proposed that there be no order as to costs instead. This was
not accepted and subsequently, on 19 June, BPS pressed on with the claim, enclosing draft
amended Particulars of Claim. DLA consented to the amendments on 16 July. A new
paragraph 13 alleged that RBS threatened to report Mr Backwell to CRAs notwithstanding
that the agreement was not enforceable due to RBS-s failure to comply with s78. Paragraph
14 then alleged that any such report would make the relationship between the parties unfair.
There was in fact no basis for either of those claims. On 16 July DLA also asked if Mr
Backwell still had a copy of his original agreement. BPS said that as far as it was aware he
did not but it took instructions and reverted on 14 August to say that he did not.
37. Backwell was listed as an Issue 4 case at the CMC on 8 October 2009, and was dealt with at
the hearing commencing on 30 November. On 7 January I ordered that Mr Backwell should
pay RBS-s costs in relation to Issue 4 (a). Then, on 29 January BPS issued an application to
discontinue and recover all of Mr Backwell-s costs from RBS. The application said that
-Following the decision.. in Carey-and the -admission..the claimant is satisfied that the
agreement is unenforceable..-, claiming that he discontinued because of RBS-s admission of
26 March 2009. As with Teasdale and Brookes Mr Malam has in fact limited the costs
sought to be paid by RBS to those incurred up to that date.
38. The fact is, however that the claim was not discontinued then but was kept going, with
amendments and for the purpose of a preliminary issue which went against it. Again, I
would decline to disapply the presumption, for the following reasons:
(1) The claim here was doing more than simply seeking an admission; what Mr
Backwell wanted was an embargo on reporting to the CRAs as is clear from the BPS
letters of 7 October 2008, 22 May 2009 and the amendments; this was relief to which
he was not entitled; if a simple admission had been all that Mr Backwell had wanted
he would no doubt have discontinued shortly after 26 March, without more. As
against this, Mr Malam argued that in truth Mr Backwell intended to discontinue in
any event after 26 March 2009 and up to then the further relief had not been claimed.
But if so, one has to ask why he did not discontinue then and why the further relief,
foreshadowed in the letter of 22 May 2009, was added to the Particulars of Claim;
(2) In fact Mr Backwell did not succeed in his objective to prevent reporting to CRAs
and could not have done so;
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(3) Further, and as with Jemitus the claim for declaratory relief was not supported by any
detail as to why it would have real utility for Mr Jemitus in his case. Nor has any
detail or evidence been submitted on this application. The additional claims to stop
reporting to CRAs rather suggest that it did not, absent this further relief.
(4) Even the application to discontinue suggests that it was in part based upon the
decision in Carey;
(5) Even if RBS had made the admission before issue of proceedings, the letter of 13
February 2009 suggests that they would have gone ahead absent -satisfactory
settlement proposals-.
Mills, Cuthbertson and Atkinson - Introduction
39. It will be noted that the Claimants in Mills, Cuthbertson and Atkinson are described above as
not having appeared and not being represented. This is because although Mr Burley of
Consumer Credit Litigation Solicitors (-CCLS-) attended on Monday 8 March to deal with a
quite separate matter concerned with a costs application against his firm, he was not in a
position to make submissions on behalf of these three Claimants, represented by his firm,
whose cases had been earlier selected. Nor had representation been arranged. He made an
initial application to adjourn those applications on Monday afternoon but I was not in a
position to deal with it until the following day. I was later informed that he was seeking in
the course of Monday to arrange some representation for the following day, it being
accepted that the applications would not be reached until then anyway. In the event he did
not appear on Tuesday and instead Ms Carson appeared from CCLS. She unfortunately had
no proper instructions and could not assist the Court save to ask for an adjournment. I
declined it for reasons given at the time in a short ruling. Although I had no submissions
from the three CCLS Claimants on the costs issues relating to their discontinuance I did
have extensive submissions from Mr Uff who dealt not only with the facts of the cases
involving him but also the relevant principles to be applied when considering the question of
discontinuance and costs in this context. I doubt whether they could have been improved
upon from a Claimant-s point of view. And as to what actually happened in each of the
CCLS cases this was clear from the bundles of documents which had been supplied prior to
the hearing.
40. Nonetheless, as the CCLS Claimants did not appear and were not represented they have the
usual right under CPR23.11 to have their applications relisted so that they can seek to set
aside or vary my order as it affects them. The relevant banks have also agreed that they will
not enforce any adverse costs order against any of these particular Claimants (as opposed to
CCR or any other additional party made liable for them), without leave of the Court. This
will therefore hold the position as far as the individual Claimants are concerned pending any
application under CPR23.11. I should also add that the relevant claims management
company, Cartel Client Review Limited (-CCR-) has agreed to be bound jointly and
severally with these particular Claimants in any event insofar as any adverse costs order is
made against those Claimants.
Mills
41. In this case, CCR made a request to Marks and Spencer Financial Services Plc (-M & S-)
dated 5 September 2008 for a s78 copy. According to CCR, M & S responded on 24
September providing what it said was a conforming copy of the agreement. M & S have no
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record of such a response but for these purposes I accept Mr Mill-s position (as set out in the
Particulars of Claim later issued) that they did and that what was supplied conformed to s78.
Indeed paragraph 3 of the Defence admits paragraph 5 of the Particulars of Claim which
pleads the sending of the letter of 24 September. Furthermore, documents relating to Mr
Mills- agreement (including the front of the application form) had been exhibited to the
Particulars of Claim so they must have been obtained somehow.
42. M & S says that the next it heard was the service of the Particulars of Claim, issued on 7
April 2009. A witness statement dated 1 December 2009 from Mr Kelly, a trainee solicitor
with CCLS, says that a letter of claim was sent to M & S on 23 February 2009 setting out
how it was said that there was an IEA. He then says that M & S responded on 18 March
2009 saying that the copy agreement was believed to be legally enforceable. M & S has no
record of this further exchange and Mr Kelly did not exhibit it. For present purposes I can
derive nothing useful from the fact of any exchange as I have not seen it.
43. While the Particulars of Claim accepted that there had been compliance with s78, paragraph
6 alleged that there was an IEA because the agreement failed to include all the prescribed
terms and paragraph 7 alleged that it was thereby irredeemably unenforceable. Paragraph 9
pleaded that as a result there was an unfair relationship. Paragraph 10 sought relief pursuant
to s140B of the 1974 Act including rewriting the balance to zero and repayment of all sums
paid thus far by Mr Mills to M & S.
44. In the defence dated 30 April 2009 all of those claims were denied. The documents supplied
with the Defence included the front of the application form and what appears to be its
reverse embodying the prescribed terms. On the face of it these documents showed a s61
compliant agreement.
45. However the case was pursued and on 8 October 2009 I ordered it to be heard on
Preliminary Issues 4 (declaratory relief) 5 (how prescribed terms are to be -contained- in the
agreement) and 6 (whether an IEA entails an unfair relationship). Then, on 16 November,
CCLS made a request for further information under part 18, asking whether the document
(this must mean the document containing the prescribed terms) was within Issue 5 (a) - (c)
ie on a sheet referred to on the piece of paper signed by the debtor, or attached to it, or
supplied with it. In response Addleshaw Goddard said that the s61 prescribed terms were on
the reverse of the application form and s62 terms and conditions were on a separate sheet.
46. Then, by an application dated 1 December 2009, Mr Mills sought his costs -upon the
Claimant discontinuing- by reason of the disclosure of documents on 23 November. For
present purposes I treat this application as a Notice of Discontinuance, seeking costs. It was
accompanied by the WS of Mr Kelly of the same date. Mr Kelly makes no reference to the
Defence, or the documents supplied with it. He contends however that the facts of M & S-s
case have substantially and materially changed from that which was previously understood
from its pleading and previously disclosed documents and there had been no prior indication
of such documents and Mr Mills did not know that they existed.
47. Ms Tolaney responds to that suggestion by saying that in truth all that happened on 23
November is that in a voluntary disclosure exercise M & S explained that the prescribed
terms which it had always said were there, were in fact on the reverse of the application
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form. It is to be noted that the Particulars of Claim never actually spelled out why, according
to Mr Mills, the agreement had not contained such terms and M & S of course contended in
its Defence that it did. What has happened here is that further down the line both parties
considered the issue of how it did and M & S produced an answer that was incontrovertible.
The only -revelation- here appears to me to be the fact that the prescribed terms were on the
reverse of the form supplied. In my judgment this is nothing more than the normal course of
litigation. Discussion of this issue was brought forward because Mills was due to feature in
the hearing on 30 November but that cannot make any difference. Evidence adduced which
shows that the claim will fail is not in my judgment a -change of circumstance- or if it is, it
does not provide a good reason to disapply the presumption here.
48. Furthermore, the real agenda in this case, or a substantial part of it, in my judgment, was the
relief claimed in paragraph 10. This could never have succeeded because even if there was
an IEA that would not of itself lead to an unfair relationship - see Issue 6 in Carey.
49. Accordingly, M & S should have its costs of the discontinued action in the usual way.
Cutherbertson
50. On 28 August 2008, CCR made a s78 request on behalf of Mrs Cuthbertson. On 23
September, Tesco Personal Finance (-Tesco-) supplied what it said were documents in
compliance with s78 including a copy of the front of the signed application form.
51. Proceedings were then issued on 6 May 2009. Paragraph 5 accepts that a s78 copy was
indeed provided on 23 September. However paragraph 6 alleges that there was an IEA
because the agreement did not contain the prescribed terms and the reason appears to be that
set out in paragraph 8 namely the prescribed terms were to be found only in a separate terms
and conditions document. It was then claimed that the agreement was irredeemably
unenforceable, that the IEA gave rise to an unfair relationship that there should be relief
under s140B of the 1974 Act like that claimed in Mills. The simple point made in the
Defence dated 6 July was that the original terms and condition were attached to the
agreement, and were thus contained in it. Allocation questionnaires were filed by both sides
and on 8 October the case was listed for the hearing on 30 November under Issues 5 and 6.
Then, on 20 November Tesco issued an application to strike out or obtain summary
judgment dismissing the claim. It contained detailed evidence as to precisely how the signed
agreement would have looked at the time including the fact that the prescribed terms or
information would have been on the reverse of the application form. What that evidence
demonstrated was that there was simply no IEA case. On 27 November CCLS intimated that
the claim would be discontinued but Mrs Cuthbertson would be seeking her costs. A consent
order was drawn up removing the case from the hearing on 30 November and seeking a
costs hearing at a later date. It was so removed although a signed consent order was not sent
to the Court. Assuming (as I do) that this document is to be treated a Notice of
Discontinuance, it then became subject to my orders of 2 and 16 February 2010. It was one
of the cases nominated to be heard by me. No grounds for a different costs order under CPR
38.6 were provided by 16 February 2010 pursuant to paragraph 4 (b). I would not hold that
particular date against CCLS simply because the orders were not drawn up until 1 March
although Mrs Cutherbertson was represented at the hearing on 2 February and her case was
included in the list with the agreement of CCLS. But the fact remains that no grounds have
16
been adduced at any stage. However, I am not going to treat the application for costs as
struck out on that account. Instead, as with the others, I deal with it under CPR 38.6.
52. It is in fact difficult to discern the grounds on which it could be said that the presumption
should be disapplied. It might be said that the full evidence showing that Mrs Cuthbertson
had no case on the facts was only served on 20 November but that in my judgment falls to
be considered as part and parcel of the litigation. And in fact Tesco had denied in the
Defence that the prescribed terms were in some separate document, albeit that it said there
that they were -attached-. Nor is there any evidence that Mrs Cuthbertson articulated
precisely her s61 complaint before proceedings began.
53. Moreover the point about the claim-s real agenda, made in paragraph 48 above, applies with
equal force here.
54. In those circumstances I can see no basis on which it can be said that there is good reason to
disapply the presumption.
Atkinson
55. On 3 June 2008, CCR requested a copy of the -signed credit card agreement-, application
form and other documents from Halifax. It was sought under the 1998 Act and under s78 if
the agreement was regulated. On 25 June 2008 Halifax replied enclosing what it said was a
copy of the credit card agreement and terms and conditions. A further s78 letter was sent on
19 December 2008, in general terms to which there appears to have been no response. On 25
May 2009 the claim was issued. It alleged in paragraph 7 that there was no s78 copy because
the form of agreement was of a kind which could only have been drafted after 31 May 2005,
or in 2006, whereas the original agreement was entered into before September 2000. There
is nothing to suggest that this particular point was made to Halifax prior to the issue of
proceedings.
56. Paragraph 10 is in the same terms as paragraph 9 of the Particulars of Claim in Adris, set out
in paragraph 187 of Carey. Paragraph 11 then alleges that the breach of s78 gave rise to an
unfair relationship. Paragraph 13 says that the late payment charges were in breach of a
decision of the OFT. Paragraph 14 then seeks s140B relief, in particular that the Defendant
should comply with the s78 request in 28 days failing which the balance should be reduced
to zero and all payments made be returned, an account of all excess payments made and a
declaration that the agreement is irredeemably unenforceable.
57. A Defence was served on 3 July 2009 putting Mr Atkinson to proof that there was no s78
copy but in any event firmly denying any s61 breach. In particular paragraph 5.8 alleged that
all the prescribed terms were on the reverse of the application form.
58. The case went forward to the CMCs on 22 July and 8 October but was not selected
originally for the hearing on 30 November. However on 24 November it was substituted for
Jemitus and it would have featured as an Issue 5 case.
59. In the course of the hearing which commenced on 30 November, Mr Philpott sought to
explain by way of example how the original agreement would have looked and this led to a
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total of three WSs from Mr Scott Greenwood, a solicitor at HBOS, dated 2 and 3 December
2009. They demonstrated that there was nothing in Mrs Cuthbertson-s s61 claim. On Friday
4 December Mr Say, then Counsel for Mr Atkinson, sought to withdraw or discontinue the
claim subject to costs and I allowed that application. No grounds in support of the
application for costs have been adduced but I do not dismiss it on those grounds.
60. I can see no basis for disapplying the presumption here for the following reasons:
(1) While it could be argued that Halifax should have provided the documents supplied
in December, at an earlier stage, there was no specific indication to Halifax before
proceedings began as to why the documents given on 25 June did not comply with
s78;
(2) Moreover the real thrust of the Particulars of Claim was the s61 claim. This was
denied at the time and all that happened in December was that Halifax demonstrated
ahead of disclosure that there was nothing in it; this, again, is simply part and parcel
of the litigation;
(3) There are also aspects of the Particulars of Claim which were clearly unfounded in
any event:
(a) Paragraph 10 seeks to reverse the burden of proof of a properly executed
agreement which I found to be misconceived in the case of Adris, in
paragraphs 196-200 of Carey.
(b) The unfair relationship claim could not have succeeded either since breach of
s78 does not without more, entail it. See Issue 3 in Carey;
(c) The claim for the return of late payment charges would not have succeeded
because there was no enforceable OFT decision about a £12 maximum, and in
any event, by discontinuing, Mr Atkinson abandoned this separate head of
claim which had nothing to so with s61.
A General Point
61. I have referred above to a number of instances where a particular claim would not have
succeeded as a result of the decisions in McGuffick or Carey. The fact that when the claims
were made those decisions had not yet been made does not, of course, assist any of the
Claimants. As with any Claimant, they take the risk that the legal issues might be
determined against them and if so, that is no reason why the other party should pay their
costs. That principle applies irrespective of whether the discontinuance occurred before or
after those decisions.
Basis of Costs ordered against Claimants in the CCLS cases
62. Mr Ross for Tesco and Ms Tolaney for HSBC seek an indemnity costs order in respect of
the claims brought by Mr Cuthbertson and Mr Mills in relation to the costs of those
discontinued actions. I have also been informed that once I have determined, after a further
hearing, whether Mr Wright and/or CCLS should be liable for costs in those cases brought
by CCLS (as CCR has already agreed) there will be applications by at least RBS that CCR
and any other additional party made liable should pay the costs awarded already (on a
standard basis) against the individual Claimants in the cases of Adris, Brownlow and
18
Mandal, but on an indemnity basis. On those applications, such additional parties will no
doubt be making representations as to the basis of costs. As similar considerations may arise
(and which will affect those additional parties) in Cutherbertson and Mills I do not intend to
deal with the basis of costs in those actions within this judgment. I will hear Counsel on how
best to deal with this following hand-down of this judgment.
CONCLUSION
63. I therefore dismiss the Claimants- applications for a different costs order under CPR 38.6 in
all seven cases. Subject to any further order as to the basis of costs, the relevant Defendants
are entitled to their costs of those actions.
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