Page last updated at 15:37 GMT, Tuesday, 15 May 2007 16:37 UK

Was the bank victory an accident?

By Ian Pollock
Personal finance reporter, BBC News

Lloyds TSB customer
Did Lloyds TSB win its case by mistake?

The victory of Lloyds TSB in a bank charge case at Birmingham County court is interesting for several reasons.

One is that it seems to have come about by accident.

The policy of all banks has been the same when fending off claims from customers accusing them of charging too much for unauthorised overdrafts.

The banks stall and stall - then usually pay up before a claim is actually heard in court.

Tens of thousands of people around the country have had this experience, in some cases receiving cheques for thousands of pounds to pay them off.

Judge Cooke said: "I have not been made aware of any case in which the merits of such a claim have been ruled on by a court."

Written defence

So how did a relatively small claim make it all the way to the judge in Birmingham County Court for him to make a decision?

In all other cases...terms of settlement had been reached between the parties, usually involving payment in full
Judge Cooke

Initially the claimant, Kevin Berwick, tried to sue for his money using the government's online service for small claims.

This operates out of Northampton County Court.

If a claim is defended than it is automatically referred to a real court.

Lloyds TSB offered a partial settlement but Mr Berwick rejected it, so the bank duly filed a written defence.

The bank's lawyers did not turn up for the hearing before the judge in April and, unusually, did not try again to settle with Mr Berwick beforehand.

In fact he had had no contact with the bank for a couple of months before the hearing.

Absent lawyers

When Judge Cooke eventually handed down his ruling a month later, the Lloyds TSB lawyers did not even turn up to hear the good news, although admittedly they had known in advance what the decision would be from his draft decision.

Judge Cooke commented on the bank's inaction since filing its written defence.

It was "unusual in that the defendant appears to have taken no further action since doing so," he said.

"In all other cases in the same list, including several involving this defendant, terms of settlement had been reached between the parties, usually involving payment in full on the amounts claimed, without admission of liability," he pointed out.

Usually, when a bank's lawyers fail to turn up to defend their clients, judges automatically find in favour of the claimant.

But in this case Judge Cooke decided to ask Mr Berwick some questions, before going away to do some research and then coming up with his opinion on the legal position.


The Lloyds TSB headquarters only appeared to know of the case when informed by the BBC after the judgement was delivered.

The banks have been terrified of losing a case in court in case it set a legal precedent.

Losing might have opened up the disagreeable prospect of paying hundreds of millions of pounds to other customers in similar circumstances.

The Birmingham case does not in fact set a precedent, as it was decided by a district judge.

But even so it would have been very embarrassing to lose a case there.

So it hardly seems likely that one of the biggest, and most profitable, banks in the world would have willingly allowed a legal case to go ahead, with no one in court to argue its side.

Campaigners against bank charges have suggested that the banks are so swamped by claims that they, and the outside legal firms they employ, are in some cases simply losing track of the paperwork, and that this one slipped through.

Mr Berwick suggested in court that might have been the case with him.

"He may be right in that," commented Judge Cooke.

What happens next?

Mr Berwick is pondering whether or not to appeal and has 14 days to make up his mind.

If he does then the case might eventually go to a division of the High Court, and that is where things would really get interesting.

Cases decided in the High Court do set a precedent for lower courts to follow.

If Lloyds TSB lost there that would be most unfortunate - for it - but would almost certainly be pursued further up the legal food chain.

Either way, Lloyds TSB may be feeling pleased with itself today - but that feeling may evaporate quite soon.

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