SHERIFFDOM OF GRAMPIAN, HIGHLAND AND ISLANDS at INVERNESS

 

 

NOTE

 

by

 

SHERIFF DEREK C W PYLE

 

in causa

 

CLYDESDALE BANK plc, having its registered office at 30 St Vincent Place, Glasgow G1 2HL

Pursuers

 

against

 

STUART WRIGHT, Clansman, 1 Millbank Crescent, Nairn IV12 4QB

 

Defender

 

 

 

This summary cause action has a chequered history. In it the pursuers sought recovery from the defender of advances on a current account. The defender's response was to lodge defences and a counterclaim for the recovery of bank charges. After sundry procedure, including an unopposed appeal to the Sheriff Principal against a decree by default in favour of the defender, the case came before me in respect of the pursuers' incidental application to sist the cause pending the decision in the OFT case before the High Court in London. The pursuers are no longer seeking recovery of the advances. Accordingly, the only live issue between the parties is the defender's claim for recovery of the bank charges.

 

The background to claims such as this are set out in my earlier decision in Coleman v Clydesdale Bank and Thomson v Bank of Scotland, unreported, 7 September 2007, but available on www.scotcourts.gov.uk.

 

Counsel for the pursuers told me that the OFT test case had proceeded as planned before the Commercial Division of the High Court in London and that the court's decision was expected within the next twelve weeks. He was also able to provide me with a copy of the final pleadings (or at least some of them) in that action.

 

He submitted that there were five reasons why the application to sist the cause should be granted. These were very similar to the arguments presented by counsel in the Coleman case and indeed as presented on many other occasions before me and other sheriffs throughout Scotland over the last year. The reasons can be summarised as follows:

1. There was an overlap between the issues in the present case and the issues in the OFT case, ie whether the charges were a penalty and therefore unlawful and whether they were governed by the Unfair Consumer Contract Regulations 1999;
2. The law is identical in England, Wales and Scotland;
3. To allow the present action to proceed would create uncertainty for the parties and for the pursuers in other cases of this nature;
4. There was an unnecessary administrative burden on the courts;
5. Administrative measures had been taken to ensure that the interests of consumers and bank customers are protected.

 

I discuss each ground in turn:

 

1. Overlap of issues

Counsel provided me with copies of the Amended Particulars of Claim of the OFT, the Defence and Counterclaim of the pursuers, the amended Defence and Counterclaim of HBOS plc and Joint Reply and Defence to Counterclaims of the OFT. While these documents do not provide me with a comprehensive record of the whole pleadings, counsel assured me that they did show the issues upon which the High Court had been asked to pronounce. On that basis I agree that it is clear that the issues are indeed identical to the issues raised in the present case. This is materially different to the position which I was presented with in Coleman, where, as I said in that case,

"for aught yet seen, the competing contentions in the action may alter even in subtle ways that would bring into question whether they fully address the issues raised in the instant actions."

That uncertainty has now been removed.

 

2. The law is identical

I discussed this issue in Coleman and expressed the view that the decision of the Commercial Division of the High Court should be regarded as similar in standing to a decision of a judge sitting along in the Outer House. I also cited the view of Professor Sir T B Smith in Judicial Precedent in Scots Law (at p19). I concluded:

"In my opinion, it is one thing to seek to sist an action pending a decision by a court which is binding on the courts below; it is quite another to seek to sist an action pending a decision in a foreign jurisdiction which does not have that force. Putting to one side for the moment what the defenders will do in the event that they do not achieve the result they seek before the High Court in England, it is in my view unsatisfactory to compel a pursuer to be delayed in the remedy he seeks merely for a decision of a foreign court, which will guarantee no certainty in defining the law which ought to be applied."

I have never been addressed fully on the issue of precedent and I now understand that there is some doubt about the view expressed by Professor Smith, not least by himself. (See his article, "Precedent in the Sheriff Court" 1988 SLT (News) 137, but cf Maher 1988 SLT (News) 209; Cromarty Leasing Ltd v Turnbull 1988 SLT (Sh Ct) 62; Chalmers v Trs of the Harbours of Peterhead 1991 SLT 98 at p101; cf Farrell v Farrell 1990 SCLR 717) Nevertheless, Counsel expressly conceded that the views I had expressed in Coleman were correct.

 

In my view, it is wrong to express the position between Scotland and England as identical law. On the issue of penalty, there is no doubt that the law in both jurisdictions derives from the same authority, namely Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79. It is not unheard of, however, for the law in both jurisdictions to develop in different ways from a common source. An illustration of how the law can develop differently is the approach of the two jurisdictions to the construction of commercial contracts. Thus in England the modern approach is defined by the dicta of Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, while the modern Scottish approach was expressed by the Inner House in Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657. The point is that there is no guarantee that whatever the English courts decide their decisions and reasoning will be applied in Scotland simply because the original statement on the law is the same. The same point can be made about the regulations - the issue is not that the regulations apply in both jurisdictions but is their construction.

 

3. Uncertainty

I confess never to have fully understood this argument. I can understand that the defenders, like any litigant (particularly a commercial one), regard certainty of law as desirable. Counsel submitted that there was a risk of uncertainty if there was a divergence of decisions in England and Scotland. That is, with respect, a statement of the obvious, but I have difficulty in understanding why it is a relevant factor in deciding whether to grant the sist. The risk of uncertainty arises simply because the defenders trade in different jurisdictions with different legal systems. While it is doubtless desirable for the defenders that the law is the same in Scotland as in England, it does not follow that such a desire should be satisfied. Of course, the Scottish courts have from time to time stated that a reason for preferring one construction of a statute as opposed to another is that it is in line with the approach adopted in England and Wales, but it is not unknown for the Scottish courts to take a different view on the construction of a UK statute.

 

4. Administrative burden

Counsel said that there some 410 bank charge cases in Scotland, of which 26 are not sisted. I do not see how 26 cases spread throughout the sheriff courts of Scotland can be regarded as an administrative burden on the courts. Doubtless, if they all reached the stage of appeals it would not be so easy to accommodate them in the system, but even then I cannot see it as a burden. As I said in Coleman, the issue is the waste of resources. For the reasons I gave in Coleman, I do not consider the alleged administrative burden to be a reason to grant the sist.

 

5. Administrative measures

Counsel explained that where a sist is granted the defender's interests are protected. The Financial Services Authority had agreed with the pursuers and the other banks involved in the OFT case that a waiver be granted to the banks so that they do not need to deal with complaints from customers about bank charges within the normal time restraints. This waiver is reviewed every two months. The FSA had agreed that the waiver would be withdrawn if at any point it was clear that the customers were being prejudiced by the delay in the banks dealing with complaints because of the OFT case. The FSA guidance makes clear that the waiver will be withdrawn if no material progress is being made in the OFT case without good reason, if the duration of the OFT case is likely to cause prejudice, or if it becomes clear that the OFT case will deal with only some of the issues such that the customer complaints can be progressed in the normal way in parallel with the OFT case.

 

I do not understand how this can be said to be of benefit to the defender. He, like all bank customers, is protected through the FSA against delay by a bank in dealing with his complaint. The waiver has plainly been negotiated for the benefit of the pursuers and the other banks. As I said in Coleman, in the absence of the banking code agreed with the FSA, the banks would presumably be in a position simply to deny liability for refund of charges and leave it to the dissatisfied customer to seek his remedy in law, if there be one. That is not, in my view, a matter about which a court should be concerned.

 

 

 

In my opinion, the matter comes down to this: whatever the status in Scots law of a decision of the Commercial Division of the High Court in London, have the pursuers satisfied me that it is appropriate to sist this action because another court is considering the same issues? Scottish judges, even inferior ones, have a responsibility to uphold the integrity of the system of Scots Law separate from other legal systems. It may well be that many commercial organisations regard the differences between Scots and English Law as an unnecessary inconvenience. (I do not suggest that the pursuers hold that view.) Until the UK Parliament decides (and considers it can competently do so) to abolish Scots Law as a separate system, the court should be slow to make any decision which would, in even a small way, undermine that system. English case law is full of citation of authority from former dominions of the British Empire. In the course of counsel's submissions, I asked the rhetorical question (admittedly tongue in cheek): If there had been a case before a court in New South Wales on the penalty issue, would the English court have agreed to a stay of the London proceedings? That of course ignores the issue of the regulations, but it is a useful way to express the overall point.

 

We now know, however, that substantial progress has been made. An outcome in the OFT case is likely in less than three months, which is probably no longer than it would take to complete proceedings in the present action if the sist was refused. The decision in the OFT case might favour the defender's position. There is no certainty, however likely, that the banks will appeal in that circumstance. It therefore seems to me that the balance of competing factors has shifted significantly since Coleman. There is in my opinion a utilitarian value in granting the sist at this stage. I do however reserve my opinion on whether it would be appropriate after the OFT judgment is issued for the action to remain sisted pending an appeal.

 

 

 

Inverness

20 February 2008