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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Kelly, R. (On the Application Of) v Shawbrook Bank Limited [2017] EWHC 3581 (Admin) (13 December 2017) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2017/3581.html Cite as: [2018] CTLC 107, [2017] EWHC 3581 (Admin)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice
		Wednesday, 13th December, 2017

(NB: Mr Kelly remote from microphone)

Philip Mott QC:

1. On 21 February 2007 the Claimants entered into a loan agreement with GE Money Consumer Lending Limited ("GE Money"). It was a loan of £7150 for a 10 year period, repayable by monthly instalments of £137.78, with the last payment being due in February 2017. Clause 1 provided that GE Money could transfer the agreement to any person without the Claimants' consent. Clause 9(1) provided that the Claimants must notify GE Money of any change of address.
2. At the time of entering into the loan agreement the Claimants lived at 68 Bampton Road, London SE23. On 14 November 2013 they moved to their present home, 21 St Augustine's Avenue, South Croydon. However, they omitted to tell GE Money about their change of address.
3. No problems arose until 2016, as the Claimants continued to make monthly debt repayments to GE Money as required under the loan agreement. Then in July 2016 GE Money transferred the loan agreement to Shawbrook Bank Limited ("Shawbrook").
4. Two letters were sent out to the Claimants (and, I imagine, other borrowers). The first, dated 6 July 2016, was from GE Money, telling them that the loan agreement would be transferred to Shawbrook on 15 July 2016. This has been referred to in this hearing as the "Goodbye Letter". The second, dated 14 July 2016, was from Shawbrook, telling them that it was now the legal and beneficial owner of the loan. This was referred to as the "Welcome Letter".
5. Both letters were sent to the Claimants old address, which was the only one know to GE Money, and therefore to Shawbrook. Neither letter reached the Claimants, who only know about them from what has happened since.
6. On 3 August 2016, whilst abroad, Mrs Kelly received a text message from her bank showing a payment to Shawbrook. That name meant nothing to her. Fearing fraud, the Claimants asked their bank to stop such payments in future.
7. Mrs Kelly then found a telephone number for Shawbrook online, and contacted them. She was told that they had taken over the loan agreement, but was still suspicious as the Claimants had received no notification of this from GE Money. Shawbrook gave her the address they had, which was the old Bampton Road address.
8. Shortly after this, whilst still abroad, the Claimants contacted GE Money and were told that the loan was "no longer with" them. GE Money would give no further details.
9. Mrs Kelly then says that she contacted Shawbrook again and asked them to provide documentary evidence to show that they had taken over the loan agreement. This request was repeated in a number of telephone calls. Shawbrook apparently have no record of any such contact after 3 August 2016.
10. On 24 October 2016 Shawbrook wrote to the Claimants at their South Croydon address requesting payment of outstanding instalments and threatening additional charges. The letters made no reference to the GE Money loan agreement. The Claimants responded with repeated requests for a copy of the Welcome letter, but none was sent.
11. Further correspondence ensued, including a Final Response Letter dated 14 December 2016. Eventually, on 6 March 2017, Shawbrook sent a copy of its Welcome letter to the Claimants. The following day the Claimants repaid the outstanding balance on the loan.
12. Meanwhile, on 7 November 2016 the Claimants complained to the Defendant about Shawbrook's conduct. The first decision was from an investigator, who issued her findings on 27 February 2017. The complaint was not upheld. The Claimants exercised their right to ask for the complaint to be considered afresh by an ombudsman. His decision was issued on 4 April 2017. It is that final decision which is the subject of this challenge.

Law

13. The Defendant is the "scheme operator" administering the Financial Ombudsman Scheme which was established under Part XVI and Schedule 17 to the Financial Services and Markets Act 2000. Rules were made under that Act, which are set out in the "Dispute Resolution: Complaints" section of the FCA Handbook ("DISP"). Section 228(2) of the Act provides that a complaint determined under the scheme "is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case".
14. DISP 3.6.1R mirrors this provision. DISP 3.6.4R goes on to provide that in considering what is fair and reasonable the ombudsman will take into account relevant law and regulations; regulators' rules guidance and standards; codes of practice; and good industry practice at the time.
15. A number of principles are discernable from the abundance of authority to which I have been referred.

i) A decision letter must give reasons, and those reasons must be sufficient to enable a complainant to know why he has won, or perhaps more importantly, why he has lost, in clear and comprehensible terms. But a decision letter is not a legal judgment, it must be read as a whole and in a common sense way.

ii) The test of what is fair and reasonable is a subjective one. The ombudsman has a wide discretion, and it is not for this court to substitute its own opinion. Irrationality only arises if the decision is one which could not reasonably have been arrived at on the facts as found.

iii) The Defendant exercises specialist knowledge and experience. As in other such cases (the Parole Board, the Office of the Independent Adjudicator for Higher Education) this court will allow an appropriate margin of deference to that expertise.

The Claimants' Challenge

16. The Claimants have acted in person in these proceedings. Mr Kelly is a local government lawyer, and presented the case on their behalf. Their Grounds, skeleton argument and bundles have been meticulously prepared, and set out their case well.
17. The Claimants challenge is based on three alleged errors, in respect of which permission was granted on paper:

i) Ground 1 – Procedural Error. The Defendant misunderstood or mis-stated the nature of the complaint. The Claimants were complaining that Shawbrook had repeatedly failed to provide documentary evidence of their entitlement to the loan instalments, and had also failed to ensure that the Claimants' credit rating was not affected by any delay in making payment. The Defendant's final decision, on the other hand, describes the complaint as being that Shawbrook did not inform Mrs Kelly in good time that they had taken over her debt. This misunderstanding, it is argued, fatally undermined the investigation and findings.

ii) Ground 2B – The Defendant applied the wrong test. The statutory requirement is to determine the complaint by reference to what is fair and reasonable. The decision appears to have considered only what Shawbrook was required to do.

iii) Ground 3 – Irrationality. The Defendant's conclusion that Shawbrook's failure to resend the Welcome letter did not create any of the issues raised by the complaint is irrational, though that may arise as much from the misunderstanding of the nature of the complaint (Ground 1) as inherent irrationality.

The Defendant's Response

18. In its Detailed Grounds of Defence, the Defendant raises a number of points:

i) Ground 1 – The ombudsman understood and squarely addressed the complaint. In paragraph 35 of the Detailed Grounds of Defence it is accepted that this complaint was "that they wanted to be sent written evidence that their loan had been transferred to the Interested Party including a copy of the Interested Party's welcome letter". It is said that the Ombudsman was well aware of this because the Claimants pointed it out a number of times in correspondence.

ii) Ground 2B – The ombudsman expressly applied the "fair and reasonable" test. It was perfectly fair and reasonable to conclude that the arrears on the loan, and the consequent effect on the Claimants' credit ratings, was not caused by the failure to supply a copy of the letter, but by the Claimants' failure to continue paying instalments to Shawbrook before they had seen written evidence of its entitlement.

iii) Ground 3 – The decision was not Wednesbury unreasonable. The conclusion was open to the Ombudsman on the facts before him.

Discussion

19. The starting point in relation to the Defendant's involvement is the complaint form dated 4 November 2017. I understand that this was completed by the Defendant's staff as a result of a telephone complaint by Mrs Kelly. As printed in the bundle it is incomplete. Thus the response in the section "the kind of product or service you're complaining about" reads as follows:

"The fact that they are telling me I am in arrears and I don't even know the ba…"

20. The response in the section "please tell us what your complaint is about" is complete, and reads as follows:

"I have received a letter from a bank telling me I am in arrears with a payment. I do not know bank [sic]. I have never heard of the bank. I do not know how they got my address. They have told me if I do not make the payments my credit rating will be affected. They have also told me that if I do not contact them immediately that I will incur additional fees or charges. They have told me that they have sent me other letters; I have received no other letters. There is a total lack of information on the letter and I do not like the tone."

21. That does not clearly identify the complaint which is now at the heart of the Claimant's case. But the complaint form has a further section entitled "How do you want the business to put things right for you?". The answer is as follows:

"I want them to send me in writing details of how I owe the money. I want to know how they got my new address. I want them to ensure that my credit rating will not be affected by this. I have never had a bad credit rating. I want them to ensure that I will not incur any charges."

22. This complaint was investigated and a letter dated 27 February 2017 sets out the initial findings. The investigator said:

"You've said that you didn't want to make payments to Shawbrook until you'd confirmed that they were responsible for administering the loan. You asked Shawbrook to send copies of theirs and GE Money's letters to you in July 2016 to confirm this. I agree that Shawbrook should have sent you the letters when you asked for them.

But I also consider that you could've contacted GE Money to confirm they'd transferred the loan to Shawbrook. Once GE Money confirmed this, you could've continued to make payments to Shawbrook and avoided incurring any late payment charges.

You've said you contacted GE Money but they refused to speak to you as the loan wasn't with them anymore. I'm not disputing what you've said. But I think GE Money would've been able to tell you that the loan had been transferred to Shawbrook. They wouldn't be breaching data protection rules by telling you this.

If you can send me evidence to confirm that you contacted GE Money, such as a copy of your phone bill then I can consider this further. Otherwise my opinion will remain the same.

I don't think Shawbrook should refund the late payment charges to you as they've been applied correctly in line with the loan agreement."

23. Although these findings are not the subject of the present challenge, it does appear that the investigator was disputing what Mrs Kelly had said about her contact with GE Money. But what is clear is that the investigator understood the core point that "you didn't want to make payments to Shawbrook until you'd confirmed that they were responsible for administering the loan", and that Shawbrook's failure to send copies of the July letters led to late payment charges being added to the account.
24. The Claimants' response to the investigator's findings came in a letter of 3 March 2017 (though incorrectly dated 3 February 2017) written by Mr Kelly. He repeats in detail the Claimants' account of what happened. He explains that they did not want to allow payments to Shawbrook without proof of their entitlement as "it could potentially be fraud" and unless they stopped the payments from their bank they risked not being compensated by the bank. He goes on to say this:

"Ms Steward [the investigator] acknowledges that, despite our asking for the Welcome Letter, Shawbrook did not send this to us. Ms Steward states in her letter: "I agree that Shawbrook should have sent you the letters when you asked for them". This is exactly the point we have been making all along! In fact, this was the very reason my wife contacted the Ombudsman Service, namely, out of sheer frustration that Shawbrook would not send us their letter."

25. Further paragraphs in that letter point out that Shawbrook had a copy of the GE Money Goodbye letter, as they provided it to the Defendant, yet never sent a copy to the Claimants. This was despite Shawbrook having the Claimants' correct address since 24 October 2016 and being asked repeatedly to provide written confirmation that they had taken over the loan agreement. Their failure to do so had led to adverse credit ratings because the loan instalments were unpaid.
26. Mr Kelly's letter concluded by asking the Defendant to make three findings:

i) That Shawbrook was entitled to the remaining instalments due under the loan agreement (though the Claimants intended to settle the balance before then).

ii) That Shawbrook should not impose any late penalty charges or interest since 24 October 2016.

iii) That Shawbrook should permanently remove all adverse credit entries so that the Claimants' credit rating would not be damaged by this incident. This, Mr Kelly said, was by far the most important issue.

27. I should add that the same identification of the core issue, and requests for remedial action, were set out by the Claimants in a letter to Shawbrook dated 9 January 2017, sent in reply to Shawbrook's final response of 14 December 2016.
28. The Defendant's final decision of 4 April 2017 is a short determination, running to a page and a half, but none the worse for that if it deals appropriately with the points in issue.
29. It is set out in sections. The section headed "complaint" reads as follows:

"Mrs K complains that Shawbrook Company Limited did not inform her in good time that they had taken over her debt from another company."

30. Then there is a section headed "background". The next section headed "my findings" contains the following statements:

"At the time of the transfer, I think that Shawbrook took all appropriate steps to inform Mrs K. They confirmed the correct situation to her over the telephone when she queried the change in payment names. Mrs K spoke with the other company, who confirmed that the account had been transferred.

I think that once Shawbrook knew of the correct address, they could have resent the introductory letter. But I do not think that they were required to, nor that their failure to do so created any of the issues here.

Shawbrook were, throughout the relevant period, contacting Mrs K on the correct telephone number in relation to a debt which had been properly transferred. Mrs K had not kept her contact details up to date with the other company, which meant that the letters which were required to be sent were 10not received. I think that Shawbrook took the proper steps to keep her informed, given the information that they had."

31. In conclusion, the complaint was not upheld, and no recommendations were therefore made for relief.
32. This is not a reasons challenge, but the absence of adequate reasoning is relied on in support of the substantial challenge that there has been a failure to take into account the real complaint. Whether the ombudsman did take account of the real complaint is to be determined on the basis of the reasons he gave for his decision.
33. The reasons for this decision singularly fail to identify or deal with the core points that the Claimants did not want to pay instalments without written proof that Shawbrook was entitled to receive them, that this insistence arose from their fear of fraud, and that Shawbrook's failure to provide such proof in the form of a copy of the Welcome Letter had led to late payment charges being applied and the Claimants' credit rating being compromised.
34. The summary of the complaint at the start of the decision is so far from the accurate summary in paragraph 35 of the Detailed Grounds of Defence that it is impossible to conclude that the decision-maker had properly in mind the issue he was supposed to be deciding.
35. To say that the Ombudsman was well aware of the true complaint because the Claimants pointed it out a number of times in correspondence is a non sequitur. Of course the Ombudsman should have been aware of the true complaint, but he should have set it out accurately in his decision to show that he was in fact aware of it. The inaccurate way in which the complaint is summarised at the start of the decision supports the inference that he had misunderstood it.
36. That inference is further supported by the way in which the "my findings" section ends, with the conclusion that "Shawbrook took the proper steps to keep her informed, given the information that they had". This return to the position as it was in July 2016 completely misses the point that the Claimants, having acknowledged their fault in not notifying their change of address, and therefore not receiving the Goodbye Letter or the Welcome Letter, were now seeking documentary evidence to protect them against fraud.
37. Thus, even reading the decision as a whole, and applying the tests I have summarised above when dealing with the law, it is impossible to say that this decision engages with the complaint as it really was. It wholly fails to deal with the effect of Shawbrook's failure to resend the introductory letter, which had clearly led the Claimants, rightly or wrongly, to suspend payment of instalments under the loan. That in turn clearly led to the imposition of late payment charges and adverse entries in the Claimants' credit ratings. There is no mention in the decision of these adverse effects. For the decision-maker to say that he does not think "that their failure to do so created any of the issues here", without further explanation, is wholly insufficient.
38. The explanation of the decision proposed in the Detailed Grounds of Defence is mere speculation, and a gloss on what actually appears in the decision. It is a conclusion which might have been open to the Defendant, if the issue had been properly identified and the conclusion sufficiently explained. In fact neither was done, and the decision, even read as a whole as a non-lawyer's document, does not bear the interpretation now urged upon me.
39. As an aside, I note that a similar misunderstanding about the real complaint appears in the letters from Shawbrook to the Claimant dated 14 December 2016 and to the Defendant dated 14 February 2017. That makes it more likely that the decision-maker had truly misunderstood the complaint, rather than simply summarised it inaccurately, although my decision does not depend on this analysis.
40. For this reason Grounds 1 and 3 (which are effectively two sides of the same coin) succeed.
41. Ground 2 fails because the argument involves pulling the phrase "I do not think that they were required to" out of context. The real problem, as it seems to me, is that the misunderstanding of the complaint meant that the decision-maker never went on to consider the fair and reasonable test at all in the right context.
42. For these reasons this claim for judicial review succeeds. I shall quash the decision of 4 April 2017 and direct the Defendant to reconsider the complaint and make a fresh decision.

THE JUDGE: So far as orders are concerned, Mr Potts?

MR POTTS: I have volunteered to help, if I can, with the drawing up of the order.

THE JUDGE: Would you do so? I think I am right, unless Mr Kelly suggests otherwise, that all I am asked to, and should, do is to quash the decision and it is for the Defendant then to reconsider the complaint afresh and make a fresh decision.

MR POTTS: Yes, exactly so.

THE JUDGE: Yes, that will only leave issues, possibly of costs. I will just see what Mr Kelly has to say firstly about the term of the order. Mr Kelly, are you content that that is what I do — simply quash the decision, and then a new decision is made?

MR. KELLY: Yes, my Lord.

THE JUDGE: It would be a matter for you in correspondence with the Ombudsman Service to decide where the matter goes and whether you simply are invited to restate your complaint so as to start matters afresh or how it is dealt with. I think that can be dealt with as part of the informal approach and then it will need to be dealt with obviously by somebody quite separate within the Ombudsman Service. No doubt it will be dealt with with great care but I give you no guarantee of what the result will be because that is a matter for them.

MR KELLY: I suppose there is just the one comment I would make, my Lord — I would ask that the Defendant actually takes into consideration all your comments.

THE JUDGE: They have the judgment. It is over to them. If that is all this required of the order, what else? Normally, if you were represented, your representative would be asking for an order for costs. Presumably you have some costs, do you? Do you make an application?

MR KELLY: Yes, sir, I'd like to, with your permission, your Lordship. Have you got a copy of the—I did submit this——

MR POTTS: It is there, if necessary. It has been served——

THE JUDGE: Was there one submitted? It may be that I have had it and haven't filed it correctly. I have seen the Defendant's one, I think, but I don't think——

MR POTTS: I do have a spare one.

THE JUDGE: Thank you.

MR KELLY: I think my maths let me down again. So, I've made some corrections.

THE JUDGE: Right. Maybe it is a separate document. No, I've got it here, thank you very much. Shall I take that because it is punched, and then I can put it in here in a moment to see where we are? (Pause) Is this a little revision? Is that simply arithmetical?

MR KELLY: Yes.

JUDGE: Have you seen this, Mr. Potts?

MR POTTS: Yes, I've seen it and the correction, which looks correct to me.

JUDGE: So that comes down to 726. And that then has to be taken over to add a little bit to the total. Have you done the arithmetic there? Yes, somebody has. The claim there is for £1,886.35. You would like me firstly to order costs and, secondly, to assess those summarily, rather than ask it to go to assessment. Mr Potts, anything to be——

MR POTTS: Nothing to say about the principal. On the amounts, under Practice Direction 46, para.3(4) the amount to be allowed to a self-representing litigant is £19 per hour, whereas £33 is claimed here. That will reduce the total somewhat. You might want to take a broadbrush approach to assessing the amount.

THE JUDGE: I need to have a look at that. Have you been told about that and had a chance to think about that, Mr Kelly?

MR KELLY: My understanding, and I defer to my colleague here, but my understanding was that that was not a hard and fixed rule — that where a Defendant can show—The £33 an hour is what I am basically paid per hour for a—I work for a local authority as a solicitor and that is my hourly rate.

THE JUDGE: Right. Well let's just have a look. Litigants in Person — Rule 46, PD(3).

MR POTTS: The rule itself is 46(5).

THE JUDGE: I was just going to look back to that. (Pause) Two-thirds cap, but that is not the point here, I do not think.

MR POTTS: No, it is really 4, which is the two methods of assessing it. One — the litigant can prove financial loss, and that is what Mr Kelly is relying on.

THE JUDGE: The costs below.

MR POTTS: Or (b) — if they can't prove financial loss in an amount for the time reasonably spent at the rates set out in the Practice Direction. Then, in the Practice Direction para.3(2), "Where a self represented litigant wishes to prove that the litigant has suffered financial loss, the litigant should produce to the court any written evidence relied on to support that claim —" which we haven't had. Over the page, para.3(4) this is the rate under 4(b): if one hasn't proved financial loss then it is £19 per hour.

THE JUDGE: Yes, I see. It looks as if that is right, Mr Kelly, that you really have the choice of either a flat rate of £19 an hour, where you don't have to prove any loss or, if you want a higher rate you need to produce written evidence to support the claim, and serve a copy on the other party 24 hours before the hearing, at which the question may be checked.

MR KELLY: I haven't done that.

THE JUDGE: Well, probably then you are stuck with it and I doubt if it is going to be economically worthwhile either of you to apply for an adjournment or — nor is it going to be proportionate for me to grant one, I don't think.

MR KELLY: Sir, it's not overly (Inaudible)

THE JUDGE: All right. Well, I'll make that £19 per hour and someone can do the arithmetic. Mr Potts perhaps already has——

MR POTTS: Yes.

THE JUDGE: — or is already in the process of doing it.

MR POTTS: (Pause) That brings the schedule of work done at the bank to £418 based on 22 hours.

THE JUDGE: 418

MR POTTS: And then there are five hours on the front sheet, which is £95. And then the other costs I believe are fixed; travel presumably is rail fare or whatever.

THE JUDGE: That is £513, plus the extras.

MR POTTS: Which I make——

THE JUDGE: 1,541.35.

MR POTTS: I have got a little over one five; 1,508.35.

THE JUDGE: £1,508.35, subject to any arithmetical errors, which could be corrected if somebody puts in a written submission or an agreed variation of the order. But as long as the arithmetic is right, I will make the order for costs in the Claimants' favour in the sum of £1,508.35.

MR POTTS: (Pause) My Lord, I am taking instruction that fourteen days will be fine.

THE JUDGE: Yes. Fourteen days to pay that.

MR POTTS: My Lord, if I may, I seek permission to appeal on the basis that the Court of Appeal may take a different view on Grounds 1 and 2.

THE JUDGE: You have to ask me, but I will refuse it and you will have to persuade one of the Lord Justices that there is reason to grant you permission. I don't know to what extent this generally reflects the practice of the Ombudsman and I say this only to assist. Cases of this sort could avoid coming to hearing whatever the conclusion is. Certainly in the case of the Home Office, who do, as you will know, hundreds and hundreds of decisions in immigration cases from time to time errors are pointed out, and somebody looking at the decision concludes it is not most happily expressed, and rather than come to a final decision on whether it actually falls one side of the line or the other, the Home Office will issue a supplementary decision or revoke it and reissue a decision in one form or another. In appropriate cases it may well be worth the Ombudsman Service looking at that as a way of dealing with a problem like this.

It is a case where I think Mr and Mrs Kelly initially asked for review, and the view was taken it was too late because there had been a final decision. Whether that is appropriate is of course a matter for the Ombudsman Service and whether it is effective is a matter for decision in any particular case, but it might be worth looking at.

Thank you both for the concise way in which you dealt with this.