Abbey: Court Bundle & Witness Statement

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Abbey Court Bundle & Witness Statement

Make sure you submit your bundle in full and on time in accordance with the specific directions which have been ordered.

Your bundle should contain as its first page an index. At the top should be the title and number of the claim, then each item of the bundle should be listed in order and given an exhibit reference. I.e the witness statement is exhibit ***1, correspondance exhibit ***2, and so on.

(***= your initials)

Contents of court bundle for Abbey claims

1. Witness Statement

See section below

2. Pre-litigation correspondance

3. Schedule of charges

4. Statement sheets

5. Account Terms & Conditions and charges tariff

We should have these available in the document library soon. In the meantime obtain them from the Abbey website where I believe old ones can be downloaded, or some are available from the other sticky thread in this forum. Please make sure the terms quoted in the witness statement are relevant to your account. If they are not, please remove or replace with those that are.

6. Dunlop Pneumatic Tyre Co v New Garage & Motor Co [1915] AC 79

See here

7. Director General of Fair Trading v First National Bank [2001] UKHL 52

8. Case Law summary

Can be found in the Basic Court Bundle.

9. Unfair Terms in Consumer Contracts Regulations 1999

10. Part 18 request + any response (if applicable)

11. Subject Access Request + response

12. Data Processing Price List

13. The Competition Commission Report

Appendix 4.6

Appendix 4.10

14. Australian Default Fees Report

15. BBC Commission Conclusion

16. OFT Report April 2006

17. House of Commons EDM

18. Radio 4 interview with Peter McNamara

Abbey specific Witness Statement.

Please read carefully and amend or remove anything which does not apply to you or your claim.

1st Witness Statement of [you]

Exhibit ***1


In the XXXXXX County Court

Claim Number: *********









1. I, the Claimant, am a litigant in person in this case.

2. I make this Witness Statement in support of my claim against the Defendant for the refund of penalty charges levied to my bank account by the Defendant bank.

3. I make this Witness Statement from information and facts within my own knowledge and which I believe to be true.

4. On [date] I wrote to the Defendant, setting out the nature of my complaint and requesting that the Defendant either justify the legitimacy and legal status of its charges or alternatively refund them.

5. Upon no/unsatisfactory response from the Defendant, [date] I again wrote to the Defendant requesting a refund of said charges and advising I would file a claim should I not receive a satisfactory response.

6. Upon no/unsatisfactory response to my complaint, on [date] I filed a claim online at Northampton County Court for the return of the charges levied by the Defendant, as particularised and detailed in the Particulars of Claim.

7. The Defendant acknowledged service of the claim on [date]

8. The Defendant filed its defence on [date]


9. It is submitted that the charges levied to my bank account, as set out in the enclosed schedule, are default penalty charges arising from breaches of the contract between myself and the Defendant. The Defendant confirms in paragraph ** of its defence that the charges are indeed payable upon breach of contract.

10.It is admitted that the charges were levied in accordance with the terms and conditions of the account in question. However, it is submitted that the charges are not related to or intended to represent any actual loss caused by the breach of contract, but instead unduly enrich the Defendant, thus the charges are penalties, which by virtue of the legislation and provisions cited in paragraph 9 above, exercises the contractual term in respect of such charges with a view to profit.

11. As a contractual penalty, it is submitted that the charges are unenforceable by virtue of the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR") and numerous long-settled principles of the common law.

Relevant Terms of Contract

12. Relevant terms of the account agreement include;

i) There was an express term of the contract that the account was subject to an agreed overdraft limit of £XXXX

ii) Clause 24.3 of the 2002 Terms and Conditions and clause 6.3 of the 2004, 2005 and 2006 Terms and Conditions [exhibit *** ] states:

"An Unauthorised overdraft occurs if without our agreement you overdraw your account or exceed the limit of your overdraft which we have agreed. If you overdraw your account when we have not given you an overdraft then you are in breach of these conditions and must immediately pay sufficient money into your account to put it into credit, taking into account any interest and charges you will have incurred. Similarly, if you exceed the limit of an overdraft which we have given you, you must immediately pay sufficient money into your account to bring yourself within the overdraft limit." iii) Clause 24.4 of the 2002 Terms and conditions and clause 6.4 of the 2004, 2005 and 2006 Terms and Conditions [exhibit ***] states:

“If you have an unauthorised overdraft, you will be charged as set out in our tariff of charges or specified to you and these may include fees for transactions we are unable to process due to lack of available funds in your account.”

iv) Clause 16.3 of the 2002, 2004, 2005 and 2006 Terms and Conditions [exhibit ***] states:

“You must not use your card to guarantee a cheque for more than the available funds in your account.”

v) Clause 5.8 of the 2004, 2005 and 2006 Terms and Conditions [exhibit ***] states;

"We may charge you a fee for any administration costs incurred by us as a result of any breach of this agreement by you."

vi) From the Defendant’s published 'Tariff of Charges' [exhibit ***] which forms part of the Terms of the Account;

"Unauthorised overdraft monthly fee - £20

For each item we pay which results in an unauthorised overdraft or while you have an unauthorised overdraft - £30

For each bounced standing order/cheque/direct debit - £35"

13. Thus by virtue of the terms quoted above and furthermore as stated by the Defendant in its defence, the charges from the defendants tariff of charges arise as a result of breaches of contract on the part of the Claimant.


14. It is not disputed that the Defendant is entitled to recover its damages following my breaches of contract, and it is entitled to include a liquidated damages clause. I accept without reservation the banks right to recover its actual losses resulting from each breach of contract or otherwise a true and genuine pre-estimate thereof. However, it is long settled that a clause which provides for a payment of money which is excessive, unconscionable and not proportionate or related to the loss incurred as a result of the breach is a penalty and thus unenforceable.

15. In the case of Castaneda and Others v. Clydebank Engineering and Shipbuilding Co. Ltd. [1904] 12 SLT 498 the House of Lords held that a contractual party can only recover damages for actual or liquidated losses incurred from a breach of contract as opposed to a charge which represents a penalty.

16.Lord Dunedin in the case of Dunlop Pneumatic Tyre Co v New Garage & Motor Co [1915] AC 79 [exhibit ***] set down a number of principles in definition of a penalty clause. Two of these principles being;

"It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greater loss that could conceivably be proved to have followed from the breach"


"The essence of a penalty is a payment of money stipulated as in-terrorem of the offending part; the essence of liquidated damages is a genuine covenanted pre-estimate of damage"

17. I will further rely on numerous recorded authorities dating throughout the 20th century to the most recent case of Murray v Leisureplay [2005] EWCA Civ 963, all of which have upheld and reinforced the principles set down by Lord Dunedin defining contractual penalty clauses and the unenforceability thereof. See the “Relevant Case Law Summary” contained within the court bundle [exhibit ***].

18. Whether the Defendant’s charges amount to a penalty is therefore a simple issue of fact – specifically how the level of charge paid by the claimant compares with the actual loss suffered by the Defendant as a result of each breach. On numerous occasions, I have requested that the Defendant justify its charges by providing details of the costs incurred as a result of my contractual breaches. Each time those requests were rebutted or ignored.

The cost to Abbey Plc of a default event

19. I estimate the loss incurred by the defendant in respect of each of my contractual breaches to be in the region of a minimum of £0.25 to a maximum of £1.50 per each single event of default. I am unable to provide a more accurate figure at this time, due to the fact that the Defendant, and indeed all of the UK banks, remains highly secretive regarding the mechanisms of their systems and the costs associated in the charging process and of the events of default leading to a charge being made.

20. I am aware of in excess of 200 claims similar or identical in nature to the present case which have been brought against the Defendant bank in the last 18 months. In a significant number of these cases disclosure orders have been made obliging the defendant to substantiate its contention from paragraph * of its template defence that;

“The fees reflect and are proportionate to the Defendant's administrative expenses incurred due to the Claimant's breach of contract and are a genuine pre-estimate of the damage suffered by the Defendant.”

I understand that each and every time that such an order has been made, or indeed any other directions order, it has been breached by the Defendant who chooses instead to settle each and every claim without liability, typically shortly in advance of the scheduled hearing.

21. It is submitted that if the Defendant’s contention were to hold, it would be easily within the Defendant’s capability to halt the current flood of litigation being brought against it simply by disclosing details of its costs, thereby substantiating its contention that the charges are proportionate to its loss incurred as a result of the breach of contract from which they arise. I believe that is in the interest of the parties in the present case, the court, and of the wider public interest, for the Defendant to do so.

22. In view of the proceeding paragraphs, a preliminary request for information and clarification under CPR Part 18 was submitted to the Defendant on [date], relating specifically and directly to paragraph 9 of the defence, requesting information in respect of the "administrative expenses" referred to in the defence and how such expense is incurred - I.e whether manually or by a specific automated system or otherwise. A copy of the request is contained in the court bundle as [exhibit ***]. Upon the compliance of the Defendant I would then have been in a position to conduct further research and present to the court within submissions an accurate figure based upon the nature of the specific systems employed by the Defendant to process events of default. Regretfully, the Defenant chose to completely ignore the request.

My estimate of £0.25 - £1.50 is based upon the following;

23. My assessment of the costs of the charging process

Prior to the commencement of these proceedings, I asked the Defendant to provide evidence of any manual intervention that may have occurred in relation to my account, under a Subject Access Request pursuant to s.7 of the Data Protection Act 1998. No records of any manual intervention or involvement whatsoever could be provided. My Subject Access request letter and Abbey’s response letter are attached in support of this statement as exhibit ***.

Therefore, It is submitted that the Defendant’s charges are applied by a completely automated and computer driven process. This process consists of a computer system;

a) sending a computer generated letter if a customer exceeds authorised overdraft limit (even if by only a few pence) to advise the customer of the breach and resultant charges, or

b) returning a 'bounced' cheque plus notice to the customer, or

c) ‘bouncing’ a direct debit or standing order.

The costs of Data processing are nominal. Following some research into these processes and their costs I was able to obtain a list of prices from 'The Data Processing Company UK' which confirm that such costs can be reasonably measured in pence rather than pounds. Please find this list attached in support of this statement as exhibit ***.

It is therefore impossible to envisage how the Defendant can incur costs of £35 by carrying out a completely automated process. Note that the letter received notifying of a charge is identical in every instance, and if multiple breaches occurred on the same day, a separate letter will be sent in each instance, in separate envelopes. Two samples of these letters are attached to this statement as exhibit ***.

24. CYNthesys Disclosures

Disclosures were recently made to the BBC and subsequently to Andrew George MP and journalists at a meeting at the House Commons revealing that the Clydesdale, Yorkshire and Northern Banks operated a structured, detailed and auditable system for costing, tracking and refining their costs of conducting various operations within the bank including the processing of default events of delinquent accounts. The system, which was apparently introduced in 2002 was called CYNthesys- Clydesdale Yorkshire Northern the system.

A Yorkshire Bank informant who is a former high level employee at the bank stated on television and in an affidavit that even assuming the highest level of manual intervention any single process of default would never cost more than £2.00 and that this cost is calculated and traceable using CYNthesys.

It is submitted that it is inconceivable that such a system with the same or similar mechanisms, characteristics and costs is not also employed by Abbey Plc, the Defendant in the present case. Basic business principles and marketplace competition dictate that if such a system is in existence, available and operated by an organisation, that its competitors in the marketplace will also seek to employ a system which is equally efficient and cost effective or perhaps even more so. Abbey Plc is is far larger institution than the CYN banks, therefore econimies of scale would suggest that in fact the cost to it would in fact be less.

Further, note the end charge to the customer of the CYNthesys banks (for example Yorkshire Bank) is almost identical to those of Abbey Plc.

Abbey charges tariff

Unauthorised overdraft fee - £30

Bounced direct debit/cheque/standing order - £35

Taken from “Tariff of charges” at

Yorkshire Bank charges tariff

Debit card abuse fee - £35

Bounced direct debit/cheque/standing order - £35

Taken from “Table of charges” at

25. The Competition Commission

Northern Ireland Competition Commission report from October 2006 revealed that figures contributed by eight banks, including the Defendant, Abbey Plc, showed that around 12% of the banks annual revenue is generated by "overdraft charges". The report clearly demonstrates that the banks make significant profits from their penalty charges and that they know about it, depend upon it and that they calculate for it. It is submitted that this report is clear evidence that the Defendant is aware that the income derived from its default charges is calculated to generate material profits and is not merely a means of recouping losses incurred in relation to specific events of default.

Some relevant parts of the report are reproduced as follows;

Appendix 4.6

Policies on setting unauthorised overdraft charges

"9. The answers were consistent across all the banks that responded, that unauthorized overdraft charges were set in the same way as other fees and charges. Thus banks tended to look across all their products and all their charges and sought to ensure their products were competitive with their rivals. This would be assessed through price comparisons, and also by monitoring account recruitment and retention. In the main, the clearers paid particular attention to the other clearers. The non-clearers set their pricing UK-wide and so particularly monitored the UK wide banks and the banks based in Great Britain. However, that said, there were clear examples of banks concluding that it would be profitable to raise charges above competitors (eg see paragraphs 20 and 22 in Annex 1).

12. Most of the banks made reference to monitoring of their costs, and sought to recover cost increases through their charges. However, as such costs tended to arise across a range of bank activities there was no direct feed through from particular cost increases to particular charges, but would be spread across the charging structure with regard to competition on these charges.

13. None of the banks told us that their charges were determined mainly by estimates of costs.

17. [􀀈] states “as is always the case the biggest impact in terms of service income price increases lies in penal charges such as unpaids and referral items, and I have had little option but to concentrate on these in an attempt to achieve the [􀀈] targeted increase in income". [􀀈]

24. Some inference on unauthorized overdraft charges can be seen in the banks’ moves to fee-free accounts, as analysed in Appendix 4.8. As covered previously, Ulster’s proposals for fee-free banking rebalanced to an extent the loss of fee-income from transactions with an increase in unauthorized overdraft charges. BoI had developed proposals for a similar fee-free account where income loss would be approximately offset by increased unauthorized overdraft charges.

25. Charges are a significant source of revenue for the banks on PCAs. [􀀈] said that increased unauthorized overdraft fees were part of the strategic imperative to turn the PCA into a profitable business over time. The charges were significantly less than a number of its competitors. "

Appendix 4.6 of the report titled “Unauthorized Overdraft charges” is attached in support of this statement as exhibit *** .

26. Australian Default Fees report

In a study undertaken in Australia, (Nicole Rich, “Unfair fees: a report into penalty fees charged by Australian Banks”) it was estimated that the cost to an Australian Bank of a customers direct debit refusal was estimated to be in the region of 54 cents. By reviewing the charges to the customer against the actual cost to the bank, the study estimated that banks could be charging between 64 to 92 times what it costs them to process a direct debit refusal. The study’s key findings stated that the Australian Bank’s cheque and direct debit refusal fees were likely to be penalties at law. The reports summary is attached in support of this statement as exhibit *** . The penalty charging regimes of the Australian banks as well as the automated systems employed to process default events are similar to those of the UK banks, and the laws relating to contractual penalty clauses are also similar to those in the UK.

27. BBC Commission Report

For the recent BBC2 documentary "The Money Programme", the BBC appointed a commission of former senior banking industry figures and business academics to attempt to ascertain the actual costs to the UK banks of processing a customer's breach of contract. They concluded that the absolute maximum conceivable cost that could be incurred by a direct debit refusal or overdraft excess is £2.50, and of a returned cheque £4.50. They did state however, that the actual cost is likely to be much less than this. The commission also estimated that the UK banks collectively derive as much as £4.5billion in profit a year from their charging regimes. The commissions conclusion is attached in support of this statement as exhibit ***.

28. I will further rely on the statement from the Office of Fair Trading (April 2006) [exhibit ***], who conducted a thorough investigation into default charges levied by the British financial industry. While the report primarily focused on Credit card issuers, it is important to note that the OFT stated in the overview of its report that the principle of their findings would also apply to current account charges. They ruled that default charges at the current level far exceeded the costs of administering each default and were therefore unfair and thus unlawful within their interpretation of the UTCCR’s.

29.On 22nd May 2006, the House of Commons passed an early day motion [exhibit ***] which welcomed the OFT's statement that current account and credit card default charges should be proportionate to the actual loss incurred as a result of the breach. The House described such charges as "exorbitant" and "excessive".

30.In a BBC radio interview in 2004, Lloyds TSB's former head of personal banking, Peter McNamara, stated that revenue derived from bank charges is used to subsidise free banking for personal all customers as a whole. [Exhibit ***]

31. It is thus submitted that the charge is an unconscionable penalty as it is extravagant, unrelated to and greatly exceeds any loss that the Defendant could ever have expected to have incurred as a result of the Claimant’s breach, and seeks to deter the Claimant from breaching the contract.

Unfair Terms in Consumer Contracts Regulations 1999

32. Under the Regulations, which are included in the court bundle as exhibit ***, schedule 2 (1) includes to define an example of an unfair clause as -

"(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation"

As submitted in the proceeding paragraphs, the Defendant's charges greatly exceed and are disproportionate to the loss incurred as a result of the claimant's breach of contract. It is submitted that clause 5.1 of the account agreement amounts to an unfair term under schedule 2 (1)(e) and is thus unenforceable by virtue of regulation 8.

33. Further under the UTCCR, Regulation 5 provides:

"5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.

(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.

(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a pre-formulated standard contract.

(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was.”

Schedule 2 also includes such clauses (to define examples of unfair clauses) as:

(i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract;

(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;

(m) giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract, or giving him the exclusive right to interpret any term of the contract."

34. It is submitted that the charges are unfair under regulation 5 because contrary to the requirement of good faith they cause a significant imbalance in the parties’ rights and obligations under the banking contract. The charges are most likely to penalise those customers with little or no credit and the charges could be imposed repeatedly with interest levied on top at the higher rate. The cumulative effect is therefore to substantially increase the debt burden on the customer who incurs the charges making it increasingly likely that further and repeated charges and interest would be charged.

35. The defendant is a powerful multi-national corporation. The term regarding charges was inserted unilaterally in contract. The contract was pre and mass produced and I had no opportunity to negotiate the clause, or indeed any part of the contract.

36. The cost of the Defendant's charges have increased substantially and indiscriminately during the period in which my account has been in operation, neither time was I given the opportunity to negotiate, or even notified of this increase. This means the bank, a powerful financial institution, has unilaterally altered the terms of my account contract to my significant detriment, and to their advantage.

37. It is submitted that the account contract is within the ambit of the Regulation 5 as it was not individually negotiated. The requirement of good faith was described by Lord Bingham in Director General of Fair Trading v First National Bank[2001] UKHL 52 [exhibit ***] as:

"Good faith in this context is not an artificial or technical concept... It looks to good standards of commercial morality and practice. It lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the regulations are designed to promote. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position"

38. The Claimant submits that the charging regime operated by the Defendant by charging those who can least afford it to subsidise free banking of other customers takes advantage of the Claimant’s necessity indigence and weak bargaining power. The objectives which the Regulations are designed to promote include the protection of Consumers from commercial entities.

39. The Defendant may assert that the charges are within the requirement of good faith as they were in the published terms and conditions and the Claimant was aware of them. However, this is a purely procedural argument and according to Lord Steyn in Director General of Fair Trading v First National Bank:

"Any purely procedural or even predominantly procedural interpretation of the requirement of good faith must be rejected."

40. I thus assert that the substance of the clause is of paramount importance in looking at the requirement of good faith also the way it was packaged so as to deceive the consumer into believing it was a legitimate charge to compensate loss.


41. As set out above, the Defendant’s charges can in no way be considered to be liquidated damages. They are not a pre-estimate of, or in any way related to, the Defendant’s loss incurred as a result of the breach of contract. The charges are punitive and held "in-terrorem" - I.e. the clause is designed to deter the claimant from breaching the contract. The charges imposed are disproportionate, excessive, exorbitant and extravagant in comparison to the greatest loss which could have occurred as a result of the breach, and they unduly and substantially enrich the Defendant. As such, they are contractual penalties and unenforceable at law.

42. Accordingly, the claimant seeks judgement in respect of;

a) Charges in the sum of £**** (as particularised in the Particulars of claim).

b) interest at the rate of 8% per annum under County Courts Act 1984 s.69 in the sum of £** until [date], and further the daily rate of £** thereafter (as particularised in the Particulars of Claim);

c) Issue fee of £**

d) Allocation fee of £** [if applicable]

e) Further costs under CPR 27.14(d) or other such costs allowed by the court.

43. Statement of truth

I, the claimant, believe the facts stated within this Witness Statement to be true, and submit it as Exhibit ***1 comprising of ** pages.



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Text in Blue = Personal details, etc. Fill in/amend to suit.

Text in Red = CPR Part 18.

Only leave in if you have previously issued Abbey with a CPR part 18, as per this thread - New strategy v Abbey - CPR Part 18 Requests

If you have not issued a part 18 request, remove the section in red and re-number the paragraphs accordingly.

PLEASE NOTE: If you have not issued a part 18 request by this stage then it is now too late. The time to issue a part 18 is after you receive a defence but before allocation.