Bank Charges: Scottish court takes different approach

01.01.08

Bank Charges: Scottish court takes different approach


A recent decision in a Scottish Sheriff court starkly illustrates how it is never safe to assume that the Scottish courts will deal with an issue in the same way as their English counterparts even when the regulatory framework is identical.

As many readers will know, there has been a staggering volume of litigation involving consumers suing their banks in an attempt to recover what they regard as illegal bank charges. The level of public interest, and the pressure this was placing on the court system, resulted in a number of the leading UK banks and the relevant public authorities, including the OFT, the FSA and Financial Ombudsman Service, concluding that the issues were of such importance that the matter should become the subject of a 'test case' in High Court in London.

The 'test case' proceedings were raised in England on 27 July 2007, although a full hearing of the issues is not expected to take place until early 2008.

At the time the test case was started it was also agreed that the FSA would issue a direction relieving the banks (subject to certain constraints) of their day to day obligations to deal with customer complaints of this nature within specified time limits. One further outcome was that almost all current cases on this topic in the English courts have been effectively stayed pending the outcome of the test case.

The Scottish Position

The test case will not, however, be binding on the Scottish courts. Nevertheless, on an issue of this kind, the views of the High Court in England would be expected to carry some weight. In the event of the case going to appeal there is little doubt that the reasoned judgement of the Court of Appeal will usually be extremely persuasive on a Scottish court.

All of the Scottish litigation of this kind has taken place at Sheriff Court level. The banks involved in the cases have applied to the relevant Sheriff Courts to have their respective cases sisted (or stayed) pending the outcome of the English test case. While the vast majority of Sheriffs have granted these applications, in the cases of Coleman v Clydesdale Bank and Thomsom v Bank of Scotland, which were heard at Inverness Sheriff court in September 2007, the applications to sist were refused in both instances.

In the hearing before Sheriff Pyle, Counsel for the banks submitted that there five reasons why the actions should be sisted including the claim that there would be a significant overlap between the cases and the OFT action since the issues and the contractual terms are identical. He also asserted that the law on the two issues is very similar in England and Scotland and the regulatory regime applies UK wide.

Sheriff Pyle concluded that none of the five reasons put forward by counsel for the banks was compelling. In particular he placed emphasis on the different common laws applying in the two jurisdictions. In addition he felt that, until the written pleadings in the 'test case' and the Scottish cases are finalised it would be premature to conclude that the issues are identical. As a result he decided that the interests of justice required that, at least at this point in the proceedings, the cases should proceed. In reaching his decision the Sheriff went on to say that, in contrast to the position in England and Wales where a decision of a single High Court judge is binding on inferior courts, this was not true in Scotland. In his view, even a decision of a single judge in the Court of Session (Scotland's superior court), far less an English High court judge, is not binding on a Sheriff.

Although Sheriff Pyle's Opinion is likely to be the subject of an appeal these cases still highlight the dangers in assuming that Scottish courts will necessarily deal with issues, even those involving UK wide regulation, in exactly the same way as their English counterparts.