Bank charges case - next date

The next hearing in the test case on bank charges brought by the Office of Fair Trading against seven banks and one building society will be held on 7 July 2008 and is expected to last three days.  The Court will determine:

• whether any other terms and conditions in the bank’s documents that were not covered by the previous judgment could give rise to charges capable of being penalties at common law; and
• whether the terms imposing charges contained in the representative sample of historic terms and conditions which were disclosed in the course of the litigation can also be assessed for fairness under UTCCR.

An apology and some law

Bank Law Blogger’s loyal reader must think BLB spends too much time watching credit crunch and her shares plummet to write posts for the Blog.  It’s true.  That, combined with an enjoyable secondment to a client has distracted her a trifle.  But with the passing of a snowy Easter, BLB has pulled herself together and is back in action.

Grosvenor Casinos Ltd v National Bank of Abu Dhabi

This case last month shows that the Uniform Rules for Collection (URC) 522 did not create privity of contract between the principal and the collecting banks.   The claim based on breach of contract and fraud was dismissed.  It was brought by a London casino against a UAE bank and arose out of the bank failing to honour two cheques created by a customer of the casino.

Companies Act 2006 - 6 April 2008 implementation

Another stage of implementation of the Companies Act 2006 happened on 6 April 2008. Provisions now in force include:
Part 12: Company secretaries
Section 44: Execution of documents
Part 15: Accounts and reports, other than ss417 and 463.
Part 16: Audit, other than ss485-488
Part 19: Debentures
Parts 20: Private and public companies and 21: Certification and transfer of securities
Part 23: Distributions
Part 26: Arrangements and reconstructions

The biggie - changes to registration of charges - will come in on 1 October 2009.

Remaining commencement dates

Corporate insolvency law

For a review of the important insolvency cases in the last twelve months, try to get hold of an excellent article in Sweet & Maxwell’s Company Law Newsletter this month (August 2007) by Prof. David Milman of the University of Lancaster.  David draws together themes, puts the case-law in context and suggests how things might move forward next year.

Guarantee - effect of change to principal contract

If you are relying on a guarantee, there is usually an anxiety in the back of your mind that a change to the terms of the underlying arrangement that gave rise to the need for the guarantee in the first place, might destroy or reduce the effectiveness of the guarantee.  The Court of Appeal have decided in Wittman v Willdav Engineering that where the defendant had guaranteed payment of the price of goods being bought by its subsidiary, arrangements made later by the claimant (who was selling the goods) and the subsidiary with finance companies, did not discharge the principal contract and the guarantee remained effective.

Syndication’s Arranger had no duty to bond purchaser

The Court of Appeal have upheld a decision that the arranger of a syndicated investment did not make implied representations or owe a duty of care to disclose misleading information in an information memorandum where they believed the error to be of no importance.  The IFE Fund had purchased bonds and warrants as part of a provision of syndicated credit facilities in an acquisition;  it later transpired the target’s financial position was not as shown in the audited accounts.  The court upheld the finding that there was no express representation that the bank would review the information  before the claimant acquired the bonds.  There was of course an implied representation of good faith (which was not breached) but there was no duty of care by the bank to the claimant.

The defendant bank had had cause to doubt the reliability of the audited accounts after receiving two reports from investigating accountants but as the claimant could not establish the bank had actual knowledge of information which had caused the two reports to be misleading, the first instance decision was correct that there had been no duty of care.

The case is linked on BAILII, here.

Law-Now has a piece on the first instance case here.

Bank charges: test case to go to High Court

A test case relating to unauthorised overdraft charges will be taken to the High Court.  The FSA has announced a “waiver” from its complaints handling rules that apply to unauthorised overdraft charges complaints today: this means that, until the test case is resolved, any bank or building society that applies for the waiver will not be required to handle complaints relating to unauthorised overdraft charges within the time limits set out in the FSA rules.

The Office of Fair Trading and the Financial Ombudsman  have also announced the agreement with a number of banks to take a test case to the High Court.  This means that the Financial Ombudsman, banks and other current-account providers will put cases on hold, pending the “test case” decision.

Once the law has been clarified, it should then be possible for these cases to be settled in line with what the High Court decides. 

Retention of title

Mixing goods which are subject to a “retention of title” clause with other goods does not lead to loss of title.  This was re-affirmed in re Music Zone Services Ltd, an unreported case that this month’s issue of Sweet & Maxwell’s Insolvency Bulletin has flagged up. 

Mark Phillips QC says in a useful article in Insolvency Intelligence  that arrived by the same post (vol 20 no 6 July 2007 page 81-4),  it is an “urban myth” that a seller who cannot identify his own goods has lost his title to those goods.  The position is more complex.  You would need to look at whether the seller had agreed the goods could be stored together with other goods to decide how much the seller is entitled to in claiming the value of the goods.  If the goods had wrongfully been mixed with other goods, then the seller should be entitled to recover the value of the goods.  If the seller had agreed to the mixing, he shares the proceeds as tenant in common with the merchant.  If the goods had been consumed, or incorporated into other goods, then the seller would lose his title. 

In passing, I would mention that at some stage during the proposed reforms of English security law last year, it was suggested that “ROT” claims be awarded a more formal status and a registration process as “Quasi-security”.  That proposal was an early casualty of the doomed proposals, which this time have come to nothing.  Would the reforms have led to a simpler, clearer status for ROT goods - or just more paperwork?

No misrepresentation by lending bank

The Royal Bank of Scotland plc has successfully defended an action brought by Rabobank over loans made to the Yorkshire Food Group, in which more than £101m damages were claimed for alleged fraudulent misrepresentation by National Westminster Bank. In a complex judgment that runs to 129 pages, the court carefully considered the detailed factual evidence and concluded no tort was committed by the Bank. 

Link to the case on BAILII: National Westminster Bank plc v Rabobank Nederland [2007] All ER (D) 186 (May

SOCA wrong that only bank can apply to use frozen account

Bank accounts were frozen on the bank making an authorised disclosure to the Serious Organised Crime Agency.   On a request by a third party (who had an interest in the smooth operation of the account) to SOCA asking them to revisit the decision to freeze the accounts, SOCA refused, saying the application needed to be made by the bank.   The court held that s 335 of the Proceeds of Crime Act did not require the request to be made by a bank, and that SOCA must give the bank consent to release funds from the account when there was no longer any good reason for withholding consent.  The claimant was an offshore finance company who were applying for judicial review of SOCA’s decision.  The accounts in question were held by the bank for one of its customers who dealt with funds held on trust for the claimant.

R (on the application of UMBS ONLINE LTD) (Appellant) v SERIOUS ORGANISED CRIME AGENCY (Respondent) & REVENUE & CUSTOMS (Interested Party) (2007) CA (Civ Div) (Ward LJ Sedley LJ Hooper LJ 2 May 2007

Guarantee-stripping CVA disapproved

The high court handed down its judgment in the Powerhouse case on 1 May 2007: the threat to the value of commercial property has been averted.  The court disapproved of Powerhouse’s Company Voluntary Arrangement because it ”unfairly prejudiced” the landlords by stripping them of their rights to claim on Powerhouse’s insolvency under guarantees given by the company’s parent.  

Bank Law Blogger posted about this before.