Bank charges Judgment expected

Judgment in the bank charges case will be handed down tomorrow, Wednesday 25 November.   It’s a dangerous game, predicting the outcome of cases that you haven’t been involved in and whose judgments are kept under securely fastened wraps, but I will play it anyway: the word on the street is that the Supreme Court is likely to find that the OFT do have the right to challenge the fairness of banks’ terms that impose a charge for unauthorised overdrafts.  Then the hard work will start: assessment of the fairness of each bank’s terms in specific cases.  The BBA have issued a “Test Case Fact Sheet” for customers.  Six month’s have passed since the House of Lords allowed the appeal (last post) and in that short time, the House of Lords legal function has passed to the Supreme Court. 

The Supreme Court.

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. 

Bank confidentiality – a thin line?

The impact of the change to court procedure allowing third parties to view court documents still has to be felt in full. In October 2007, the rules changed: only to find themselves immediately frozen pending judicial review the following December. The effect of the review was to make the rules apply only to court documents filed after 2 October – originally the rule had been retrospective. So banks have had fair warning to be careful when drafting statements of case since that time and to plead only what is necessary to protect their interests. 

An article in this month’s Butterworth’s Journal of Banking and Financial Law (04.07, 216) by Joanna Ludlam points out the problem for banks: how can they reconcile their legal duty of confidentiality with the public nature of a statement of case? The author suggests that it is only a matter of time before a claim for breach of confidence is brought although some steps can be taken to minimise the bank’s exposure.