By Ian Pollock
Personal finance reporter, BBC News
A High Court judge has warned banks to stop behaving unreasonably when customers accuse them of levying unlawful overdraft charges.
The London Mercantile Court has received more than 300 cases
Judge David Mackie QC issued the warning at the London Mercantile Court, in the Royal Courts of Justice.
He said some banks were wasting the time of claimants and the courts by pretending they would defend claims when they had no intention of doing so.
He added if banks continued to do this he might award damages against them.
About 300 claims for refunds of allegedly unlawful charges have been lodged at the London Mercantile Court this year.
Typically these have been referred from County Courts in the hope that one might be heard in the High Court and produce a test decision.
"If the banks had won, many fewer customers would have sued," said Judge Mackie.
"If the banks had lost, the claims would have been much easier to sort out than they are now," he added.
In such cases banks have so far settled out of court, usually a few days before their case is due to be heard.
Expressing some frustration at this situation, Judge Mackie said: "On the face of things each case raises serious issues which the court would permit to proceed to trial.
"But this is fantasy because, at least for the moment, we all know that there will be no trial."
Brian Capon, of the British Bankers Association, defended the stance taken by banks saying they were confident their fees are legal.
"They take the court process very seriously, but ultimately they would prefer to settle disputes with their customers outside the court process," he said.
"Where a customer's complaint dates back over a long period or is complex the bank will need longer to investigate the complaint properly."
The consumers association Which? rejected this.
"It seems that the banks are deliberately dragging their feet in the hope that their customers will either give up or accept part of the money they are owed," said a spokeswoman.
Judge Mackie pointed out that in some cases bank customers had tried to claim damages for stress and inconvenience.
Such claims have been unsuccessful so far, but he warned he would award damages in future if banks and their lawyers continued to:
- fail to respond to some claimants letters
- fail to negotiate for months and until a hearing date is set
- demand extra information from the claimants, knowing they had no intention letting a court hear the matter
- settle the case without telling the claimants they need not attend court
- fail to show up in court
"Looked at in the real world where there will be no trial these steps, which place completely pointless work and some anxiety on litigants in person, constitute unreasonable behaviour," said Judge Mackie.
"From now on we will generally be treating such conduct as unreasonable behaviour thus enabling any claimant who has been put to unnecessary work and inconvenience to be compensated for this."
Judge Mackie's comments appear to reflect growing judicial annoyance at the banks' attempts to avoid a test case at all costs.
Last month, Leeds Mercantile Court listed 77 cases in one day, all of which were settled out of court.
Afterwards, Judge Roger Kaye QC said "it would be helpful if there was a decision taken at High Court level to clarify the situation nationwide".
In Bristol County Court a successful claimant was recently awarded £84.41 in costs as the judge ruled Lloyds TSB wasted the court's time because it had had no intention of defending the claim.
In January, a Judge at Lincoln County Court threatened to strike out some banks' defences for abusing the legal process for the same reason.
At the time Judge Paul Collins, speaking on behalf of county court judges in London, said: "It would be very desirable to have a test case to see whether the arguments being put forward by the banks are sustainable or not," he said.
The latest warning from Judge Mackie left the banks with what sounded like a final warning.
"There may be a need for a more radical approach if the number of cases continues to grow," he said.