Coutts & Co v Sebestyen

For a bank’s current-account overdraft, the relevant documentation conditions depend on the nature of the credit agreement. Condition (b) concerns an express agreement for credit. Condition (c) concerns tacit credit, including payments exceeding an agreed overdraft limit.

“Charges” means charges relating to the granting of credit, not ordinary account or transaction charges unrelated to credit. The requirement to give information no later than seven days after the end of the three-month period imposes a final deadline, so earlier notice is valid. The appeal was dismissed because the conditions had been satisfied.

Coutts claimed repayment of an overdraft balance from its customer, Gabriel Oscar Alan Sebestyen. The Central London County Court entered judgment for Coutts for £20,073.92, with interest and costs.

The appellant challenged the judgment under the documentation requirements in Part V of the Consumer Credit Act 1974 and the conditions attached to the Office of Fair Trading’s 1989 Determination under section 74(3). Permission to appeal was limited to those issues. The central questions concerned the distinction between express and tacit credit, the meaning of “charges”, and the timing of notice under condition (c).

The appeal was dismissed. The Court of Appeal proceeded on the assumption, without deciding, that conditions (b) and (c) of the Determination applied notwithstanding section 82(4) of the Consumer Credit Act 1974. Since the conditions had been satisfied, their applicability to the unauthorised payments was academic.

1. Conditions (b) and (c). Condition (b) applies to an express agreement between bank and debtor for the granting of credit. Condition (c) applies to a tacit, unexpressed or implied agreement, including payments made beyond a previously agreed overdraft limit. The conditions are mutually exclusive in that sense.
2. Condition (b). Coutts’s letter of 5 April 2002 contained the information required for the original £2,000 overdraft agreement. “Charges” means charges relating to the granting of credit. It excludes ordinary charges for maintaining or operating a current account and transaction charges not incurred for providing credit. Section 82(2)(a) did not alter that conclusion.
3. Condition (c). The words “not later than 7 days after the end of” the three-month period impose a final deadline, not a seven-day window. Information supplied before that period begins is valid and need not be repeated.
4. Application. Coutts’s letters of 26 and 28 June 2002 stated the applicable annual interest rate. There were no applicable credit charges in the relevant sense. Condition (c) was therefore satisfied and the overdraft claim remained enforceable. Lord Justice Rix and Lord Justice May agreed with Lord Justice Jonathan Parker’s reasons.

• Court of Appeal (Civil Division): [2005] EWCA Civ 473. Appeal dismissed.
• Central London County Court: HHJ Michael Dean QC entered judgment for Coutts on 28 October 2004 for £20,073.92, with interest and costs.