Bank of Scotland v Johnson (Rev 1)

This judgment is in five parts, namely:

This is an appeal to the Court of Appeal by a bank against an order made against it in proceedings for unlawful harassment. The appellant in this court and defendant in the action is Bank of Scotland Plc, to which I shall refer to as "the bank". One division of the bank comprises what was formerly the business of Halifax Plc, to which I shall refer as "Halifax". The respondent in this court and claimant in the action is Mrs Marian Pamela Johnson, who is a customer of the bank. In this judgment I shall refer to the Protection from Harassment Act 1997 as "the 1997 Act".

Section 1 of the 1997 Act provides:

“(1)

A person must not pursue a course of conduct —

(a)

which amounts to harassment of another, and

(b)

which he knows or ought to know amounts to harassment of the other.

….

(2)

For the purposes of this section, the person whose course of conduct is in question ought to know that it amounts to or involves harassment of another if a reasonable person in possession of the same information would think the course of conduct amounted to or involved harassment of the other.”

Section 2 of the 1997 Act provides that harassment is a criminal offence. Section 3 of the 1997 Act provides that harassment is a civil wrong which may be the subject of a claim for damages in proceedings. Subsequent sections of the Act provide for the court to make an injunction, if appropriate, restraining harassment.

Section 7(3) of the 1997 Act provides:

I will refer to the Civil Procedure Rules 1998 (as amended) as "CPR". After these introductory remarks, I must now turn to the facts.

The claimant and her husband, Mr Stephen Johnson, have for many years been customers of Halifax. On 17 September 2007 Halifax transferred its undertaking to the Governor and Company of the Bank of Scotland. Since that date Halifax has operated as a trading division of Bank of Scotland. In January 2009 Lloyds TSB Group Plc acquired Bank of Scotland.

Both the claimant and her husband have held a number of different Halifax accounts. In particular, the claimant has for many years had a current account number 00454543, to which I shall refer as "543". The claimant had an overdraft facility of £1,500 on this account until 4 August 2008. On that date Halifax withdrew the facility and required the claimant to repay the overdrawn balance, which then stood at £1,387.01.

The claimant was in poor health. Both she and her husband were in financial difficulties. Over the next three years the claimant made modest but regular payments to Halifax in order to reduce indebtedness. By 20 August 2011 the overdrawn balance on account 543 was £945.44.

Meanwhile, Halifax decided to seek immediate repayment. On 14 June 2011 Halifax instructed Eversheds LLP to collect the debt. Eversheds in turn instructed Fairfax Solicitors, to whom I shall refer as "Fairfax", to deal with the matter.

On 4 July 2011 Fairfax sent a letter to the claimant on behalf of their client, Halifax. Fairfax demanded immediate repayment of £975.44, which they said was due on account number D/39046240-4. This was a roll number which Halifax had allocated to the claimant's current account. Unfortunately, Fairfax did not make this clear in their letter. Fairfax then went on to threaten legal proceedings if they did not receive payment within nine days.

Over the next few weeks Fairfax sent further letters, although they did not commence proceedings. On 28 September 2011 Fairfax sent the following letter to the claimant:

The account number quoted in this letter (to which I shall refer as "4086") was a new number. Apparently Halifax had allocated this new number to the claimant's current account as part of the process of integrating the systems of Bank of Scotland with the systems of Lloyds TSB Group Plc. Once again, no-one appears to have explained this to the claimant. As both the claimant and her husband had several different accounts with Halifax, the use of this new number, 4086, caused some confusion and uncertainty.

On 2 October 2011 Halifax’s customer relations department sent a letter to Mr and Mrs Johnson apologising for any inconvenience caused and stating:

Thereafter Fairfax continued to correspond with the claimant, demanding payment of £945.44 and referring to account number 4086. In their letter of 13 October 2011, Fairfax warned the claimant that legal proceedings against her would involve a county court judgment and, after such a judgment, application would be made to the court to enforce it by means of warrant of execution, attachment of earnings order or a charging order. The letter contained a brief explanation of each of those methods of enforcement.

In addition to sending letters, Fairfax also made phone calls to the claimant. Both the claimant and her husband became frustrated by these events. On 17 October 2011 Mr Johnson wrote to both Fairfax and the bank, threatening to claim damages for harassment. This letter did not achieve its objective.

In December 2011 Halifax instructed Robinson Way Limited, to which I shall refer as "Robinson Way", who are debt collectors based in Salford. Robinson Way proceeded to pursue the claimant, both by letters and phone calls seeking payment. Robinson Way gave the account number as 4086 and said that £930.44 was due on this account.

The claimant and her husband took the view that the bank's conduct amounted to unlawful harassment. Accordingly they commenced the present proceedings.

On 29 December 2011 the claimant issued an application in the Chelmsford County Court for an injunction to restrain Bank of Scotland from harassing her by telephone or correspondence in respect of account 4086. On 17 January 2012 the claimant issued a claim form under CPR Part 8 in the Chelmsford County Court. In a long handwritten attachment to this claim form, the claimant set out much fuller details of the harassment which she alleged.

The issue of proceedings did not affect the flow of correspondence from Robinson Way. That firm continued to send letters demanding payment, although in March 2012 they reduced their client's claim to £792.01.

Bank of Scotland notified the court that they intended to defend the claim. On 3 February 2012 District Judge Hodges gave directions as follows. The claimant had permission to serve the proceedings out of the jurisdiction. That presumably was because the head office of Bank of Scotland was in Scotland. The judge directed that the defendant should file and serve the evidence upon which it wished to rely by 28 February. The judge directed that the claimant do file and serve any written evidence upon which she intended to rely by 9 March. He then adjourned this litigation to 19 March at 2 p.m with a time estimate of 30 minutes.

On 1 March 2012 the defendant served its evidence. This comprised a witness statement by Miss Kelly Duffy, a senior legal assistant within SCM Solicitors. SCM Solicitors are part of the in-house litigation department of Lloyds Banking Group Plc. In her statement, Miss Duffy denied that the letters and phone calls to the claimant constituted harassment. She explained that 4086 was the new number assigned to the claimant’s current account. She said that the outstanding overdrawn balance on this account was now £792.01. Her final sentence reads as follows:

The exhibit to Miss Duffy's statement included copies of many letters chasing payment which the bank or Fairfax or Robinson Way had sent to the claimant. The exhibit did not include all of those letters, as others have been produced to us in a bundle prepared by Mr Johnson. The exhibit also included copies of Robinson Way's record of phone calls made to the claimant.

The claimant did not file any evidence in response to Miss Duffy's statement. Accordingly, the matter proceeded to a hearing on 19 March 2012. The court notified the parties that the purpose of this hearing was to consider the claimant's application for summary judgment.

On 19 March 2012 Mr Johnson attended the hearing on behalf of the claimant. Miss Keira Gore attended as counsel for the bank. The matter was listed before Deputy District Judge Keating. At an early stage of the hearing, Miss Gore said this:

Mr Johnson was not satisfied by this statement of the bank's position. The deputy district judge, however, took the view that counsel's statement constituted sufficient reassurance and effectively gave the relief which the claimant was seeking.

The deputy district judge noted that the claimant had not furnished any sworn evidence and was not present at court. He saw no need to adjourn the case for further hearing. Accordingly, he made the following order:

The claimant was aggrieved by that decision and appealed to a circuit judge. The grounds of appeal were that it was unjust to dismiss the claimant's claim; the claimant's case had not even been heard. Furthermore the claimant's husband had made it clear that the claims which were being put forward concerned harassment in respect of account number 4086 and this was an account which the claimant had never owned.

Unfortunately, the bank did not comply with the assurances which its counsel had given and which the deputy district judge had recorded in his order of 19 March. Robinson Way continued to send letters to the claimant demanding payment.

On 22 May 2012, there was a directions hearing at Chelmsford County Court before HHJ Staite. The judge made the following order:

On 11 June 2012 SCM Solicitors sent an offer of settlement. The offer was that the bank would settle the claimant's claim by writing off the debt on account 543, also quoted as account 4086. The parties would keep the terms of settlement confidential and it was to be recorded that the bank made no admission of liability.

The claimant did not accept this offer for a number of reasons. Mr and Mrs Johnson objected to the statement in SCM's letter that the claimant's claim was without merit. This was a form of words which any lawyer upon receiving an offer would ignore. It must be remembered, however, that litigants in person may see things differently and take seriously anything which is said in a letter from opposing solicitors. Mr and Mrs Johnson did in this case. They also considered that they were entitled to their costs of the action.

On 21 June the defendant filed and served the evidence which Judge Staite had required in paragraph 1 of her directions dated 22 May. This evidence comprised a second witness statement of Miss Duffy. In essence, Miss Duffy said that there were various misunderstandings and crossed wires, and Robinson Way had not complied with the instructions sent by the bank.

On the same day there was another important development in the action. By letter dated 21 June 2012, SCM Solicitors informed the claimants that the bank was writing off her indebtedness on her account number 543, also known as 4086. Consequently neither the bank nor its agents would be sending any further correspondence to the claimant about this account.

This letter did not cause the claimant to abandon her appeal. In a letter to the bank dated 2 July 2012, the claimant explained that she required the bank also to admit liability and to pay her costs.

On 2 July 2012 the claimant issued an application for an order that the claimant's current account 543 had a zero balance on 2 October 2011. This application was clearly an attempt to link the statement by the bank that the account now stood at zero with the letter which the bank had sent on 2 October 2011, stating that an unidentified bank account of the claimant had then stood at zero.

On 31 July 2012 Judge Staite gave directions which were intended to take account of recent developments. She directed that the hearing on 3 August 2012 should be used to resolve all outstanding issues between the parties. She gave directions in relation to the preparation of a bundle for the hearing. She noted in her directions that the bank was willing to write off the claimant's debt and, in the circumstances, on the grounds of proportionality, she directed that witnesses need not attend to give oral evidence and, in particular, she discharged paragraphs 3(a) and 3(b) of her order dated 22 May 2012.

On 3 August 2012 the claimant's application for permission to appeal and appeal came on for hearing before HHJ Staite at Chelmsford County Court. Mr Johnson represented the claimant. Mr David Grant, instructed by SCM Solicitors, represented the bank. Mr Grant furnished a helpful skeleton argument with an annex setting out the law of harassment. The judge heard the submissions of both sides. She engaged in some general discussion about the case and then reserved her decision.

On 3 September 2012 the judge read out her reserved judgment. I would summarise the judge's findings and conclusions as follows:

In order to give effect to this decision, on 5 September 2012 the judge made the following order:

The bank was aggrieved by the judge's decision. Accordingly, the bank has appealed to the Court of Appeal.

By an appellant's notice filed on 24 September 2012 the bank appealed against Judge Staite's decision on a number of grounds relating to procedural unfairness and one substantive ground. The one substantive ground was that the judge erred in making a finding of unlawful harassment.

The parties have exchanged skeleton arguments. The bank has indicated that it relies on one authority, namely Frey v Labrouche [2012] EWCA Civ 881. The bank furnished a copy of that authority to Mr and Mrs Johnson.

At the hearing of the appeal today Mr David Grant represents the bank, as he did in the court below. Mr and Mrs Johnson are both in court. Mr Johnson is speaking on behalf of his wife, as he did in the court below. I am most grateful both to Mr Johnson and to Mr Grant for the considerable assistance which they have given to this court.

In relation to the judge's finding of harassment, Mr Grant submits that the judge adopted an unfair procedure. She gave directions that the factual witnesses on both sides need not attend and therefore they did not attend. This necessarily meant that the appeal would proceed by way of review under CPR Rule 52.11 rather than rehearing. Furthermore, at the hearing on 3 August 2012 there was no investigation of the facts. There was no argument about the statutory tort of harassment, and whether the elements of that statutory tort had been established in the present case. Accordingly, the judge was not entitled to make a positive finding of harassment based upon her subsequent private reading of the bundle.

Mr Johnson on behalf of the respondent submits that the evidence before the judge established a strong case of harassment. He stated that his wife has been much distressed. He added, "She feels the level of harassment was really high". He asserted that his wife did not owe any money to the bank on account 543, which is also referenced 4086. Clearly in support of that submission, he relies on the bank's letter dated 2 October 2011.

Mr Johnson submits that there is similarity between the bank's conduct in this case and the conduct of the defendant in Ferguson v British Gas Trading Limited [2009] EWCA Civ 46; [2010] 1 WLR 785.

I set out a review of the law of harassment and its application to banks chasing up debts in Bank of Scotland v Roberts[2013] EWCA Civ 882.I adopt but do not repeat my summary of the law in Part 5 of that judgment. I accept Mr Johnson's submission that Ferguson is a relevant authority to take into account when considering whether the bank's account has reached such a level of severity as to constitute harassment.

On the substantive issue, I am persuaded by Mr Johnson's submissions to this extent. The letters in the bundle and the records of phone calls cumulatively made out a case of harassment which was well arguable. On the other hand, I am persuaded by Mr Grant's submissions that the judge was not entitled to make a positive finding of harassment in her judgment of 3 September 2012. The judge had not heard the oral evidence of either party. Indeed, she had dispensed with the attendance of witnesses. There had been no investigation of the facts during the short hearing before the deputy district judge. There was no investigation of the facts and no consideration of the law of harassment during the hearing before Judge Staite on 3 August 2012. In short, there had not been a trial at which the bank could present its case. Furthermore, this was not an action in which summary judgment was appropriate.

Out of fairness to the judge I should add that although she fell into procedural error, there is no analogy between this case and Frey v Labrouche, upon which the bank relies. The judge obviously spent a great deal of time after the hearing (no doubt during her summer holiday) studying the voluminous and confusing bundles of documents. She carefully analysed the written material. Furthermore, once it was clear that the bank had written off the debt, the judge strove to keep costs down, first by releasing the witnesses, and secondly by making an order which would bring an end to litigation which had become academic. The judge's sole error was to make a finding of harassment before the bank had had a proper opportunity to present its case on that issue.

Having reached these conclusions, I must consider whether the error made by the judge invalidates her order. This is an important issue because under section 16 of the Senior Courts Act 1981, an appeal only lies against the order of the court below, not against its judgment (see Lake v Lake [1955] P 336, a decision of this court concerning an earlier provision in the same terms as section 16 of the 1981 Act).

In my view, the error made by the judge does not invalidate her order. She was quite right to hold that the deputy district judge fell into error in dismissing the claimant's claim. Accordingly, the judge was correct to grant permission to appeal and to allow the claimant's appeal against the deputy district judge's order.

Mr Grant submits that, having set aside the deputy district judge's order, Judge Staite should have either remitted the case for re-hearing before a different district judge or, alternatively, given directions for the full trial of the action to take place before herself.

I do not accept this submission. By August 2012 the original issues between the parties had become academic. The bank had written off the debt on account 543. The bank and its agents had therefore stopped pursuing the claimant for payment of the overdue balance on that account. The claimant for her part was not seeking damages for harassment; all she was seeking was an order to prevent the bank or its agents from telephoning her and sending letters demanding payment. The claimant had a good arguable case for obtaining such an injunction at the time of the hearing before the deputy district judge. That case, however, had evaporated by August 2012. The one and only remaining issue between the parties was the claimant's claim for her costs of the action.

It would be grossly disproportionate for the judge to direct a full trial on the merits simply to determine the claimant's claim for costs assessed at litigant in person rates. In my view, the order which the judge made was the proper order to make, regardless of whether the claimant's claim for harassment had been proved or not.

Let me now focus on the questions of costs. Mr Grant submits that the judge was unduly generous in awarding the claimant half her costs. In all the circumstances, the judge should have directed that there be no order for costs. On this issue Mr Johnson adopts a more moderate position. He told us that, although he would have wished to recover all his wife's costs, he does not challenge the judge's award of 50 per cent of the claimant's costs. He submits that the judge's costs order should stand.

On this issue, I accept the submissions of Mr Johnson and reject the submissions of Mr Grant. In my view, the judge properly took into account all relevant factors including the fact that the claimant had succeeded in her appeal against the deputy district judge's decision. The judge's decision to award to the claimant one half of her costs was a proper exercise of discretion under CPR rule 44.3.

Having analysed the individual issues under debate today, I must now draw this judgment to a conclusion.

Let me turn back once more to the order made by the judge. She records in the recitals that the bank had written off the claimant's debt in account number 5434, also referenced 4086. That is an important and necessary recital, because the former indebtedness on that account was the cause of the letters and phone calls said to constitute harassment. The additional words "also referenced 4086" were omitted from the original draft of the order but added in at Mr Johnson's suggestion. This was a very sensible suggestion, because it closed the door on any future argument that there might be another account number 4086 on which monies were still owing.

Paragraphs (1) and (2) of the judge's order are plainly correct. She granted permission to appeal and she allowed the appeal. It was plainly wrong for the district judge in the circumstances prevailing in March 2012 to dismiss the claimant's action.

Having allowed the appeal, the judge did not need to grant any substantive relief or to keep the action alive because the real issues had been resolved. All that remained was the question of costs, which the judge dealt with entirely properly in paragraph (3) of her order.

There was a time when Mr and Mrs Johnson had concerns about the judge's order. Indeed, on 21 September 2012 Mr and Mrs Johnson filed a proposed notice of appeal against Judge Staite's order at the Chelmsford County Court. This proposed notice of appeal challenged the judge's decision to award the claimant only half her costs. The proposed notice of appeal was ineffective because, so far as I can see, it was never sent to the Court of Appeal. Be that as it may, Mr Johnson has made it clear today that both he and his wife are now content with the judge's order and seek to uphold it. They no longer challenge the judge's decision to disallow half of the claimant's costs.

Let me now draw the threads together. I reject all of the grounds upon which the bank challenges the order made by HHJ Staite. I find that the judge fell into error in holding that there was proven harassment on the part of the bank. The judge should have simply held that the claimant had established an arguable case of harassment. That error, however, has had no practical consequences. The order which the judge made was an appropriate order for the disposal of the proceedings.

Since I can find no fault with the judge's order, in my view this court should uphold that order. If my Lords agree, this appeal will be dismissed.

I agree with my Lord, Jackson LJ, and have nothing to add.

I also agree and wish to add only a little by way of footnote to my Lord's judgment.

Like my Lord, it seems to me that the Deputy District Judge was entitled to decline to award summary judgment at the hearing before him in March 2012, and it was certainly open to him to decline to grant an injunction. It was proper for him to record the assurance that had been given to the court by counsel. Another judge might have wished to reinforce that assurance by asking for an undertaking or in some other manner. But at all events it was legitimate for the District Judge to record that assurance, and on that footing not to grant any substantive or indeed interim relief at the hearing in March 2012. But it seems to me that there was no proper basis on which he could go further and dismiss Mrs Johnson's claim entirely. It remained to be seen whether the assurance, not backed up as an undertaking or by an injunction, would prove effective, and regrettably it turned out that it was not. That being so, it seems to me that it was entirely proper for Mrs Johnson to take the view that her claim ought to have been allowed to remain in being because, if it had still been subsisting at the time of the further contact from Robinson Way and other agents on behalf of the bank, it would then have been a simple matter of going back to the Chelmsford County Court and applying for an injunction.

Accordingly, while I would commend the District Judge for seeking a sensible, effective and economical resolution of the issue before him, it seems to me that he went one step too far by ordering the dismissal of the claim. That being so, it seems to me that Mrs Johnson was entirely within her rights and justified in appealing against the dismissal of her claim. It may be that in the course of her appeal she sought relief that was not properly open to her, as my Lord has referred to, when seeking the declaration as to the status of the 543 account at an earlier date. But at all events it seems to me that she had a valid and proper appeal against the dismissal of her claim.

The matter then came before HHJ Staite at the hearing which my Lord has described on 3 August last year, and she held the hearing at which, as is shown by her case management directions, she also intended to seek a sensible, effective and satisfactory resolution of the dispute.

I regret only one thing, or perhaps two connected things, about Her Honour's judgment. First is the fact that, after the hearing, she was drawn into a very detailed examination of the documents in the case, as she describes it in paragraph 30 of her judgment. The second is that this led her to make a number of comments and observations and apparent findings in relation to the bank's conduct, both itself and by its agents, on matters many of which were not in issue in the proceedings and, insofar as they were in issue in the proceedings, had not been investigated in anything like a proper trial, or indeed a trial at all. I therefore agree with my Lord that it was not a proper course for the judge to find, as she did in paragraph 30 of her judgment, that conduct of the bank and the agents, which was described only in general terms, did amount to harassment within the meaning of the legislation to which my Lord has referred.

But, like my Lord, I agree that, although this was a serious error in the sense that it could have had unfortunate consequences for the bank, did not in any way subvert the order that she made.

In paragraph 37, which is a critical point in her judgment, she starts by recording her conclusion that the Deputy District Judge was wrong to dismiss the appellant's claim in the circumstances of the case. As I have said, with that I agree. She goes on to refer to the fact that she has already found, as she did in paragraph 30, a proven case of harassment. With that I disagree. It seems to me that she could have proceeded, and should have proceeded, on the basis, as my Lord says, that there was both before the Deputy District Judge and before her an arguable case of harassment which, if it needed to be resolved, would have to be resolved at trial. But for the purposes of the hearing before the District Judge, and for the purposes of the hearing before herself, it was perfectly adequate for her to accept that there was an arguable case of harassment, and not to investigate, as she could not investigate and conclude in the circumstances that were before her, whether that case had been made out as a matter of fact.

Reading paragraph 37 of her judgment, therefore, in a modified way to give effect to that observation, and so as referring to the background as an arguable case of harassment, I would on that footing agree with the Circuit Judge's observation that the District Judge should have adjourned the appellant's claim pending further consideration of the matter, which would have included the question of whether the bank's assurance before the Deputy District Judge turned out to be made good or not.

In those respects, therefore, I agree with the approach adopted by HHJ Staite, while not accepting the propriety of her going as far as finding harassment to be proved.

Having read a great deal of the papers in the case as Her Honour did, I find it understandable that, out of sympathy for Mrs Johnson, the judge wished to place a number of matters on record by way of comment on the bank and its agents’ conduct. All I would say in that respect is this. In the autumn of 2011 Mr Johnson drew to the bank's attention the problem that he and his wife had with correspondence addressed to them referring to the 4086 account number being a number of an account which Mrs Johnson never had, and not referring to the account number 543 which was an account that she did have, and in respect of which at any rate at a previous time money had been owing. I think it is a matter of great regret that the bank did not take the opportunity of explaining to him then, as it later explained in the evidence before the Chelmsford County Court, that the account number was indeed and remained throughout 543 and that the 4086 number was not, as it had been represented, an account number, but rather a reference number which had been allocated to the 543 account for some internal purpose. It is also very unfortunate that both Fairfax and Robinson Way used the 4086 number, and for that matter that the bank in its own correspondence did not always quote the account number to which its letter related.

That is a comment with hindsight. It may be that those advising the bank will have pointed that out long since. As it seems to me, as I say, it is a matter of regret that Her Honour was drawn into a detailed consideration of the facts and to making apparent findings on things that were not properly open before her on the appeal. On the other hand, I commend the approach that she adopted as regards the order that she made, reflecting the fact that by the time of her order the dispute was in effect resolved and that it could be best carried forward by the recital in her order to which my Lord has referred, and by allowing the appeal, which was entirely proper, and by making an appropriate order as to the costs of the appeal.

In relation to those costs, of course as in almost every case the learned judge had open to her a range of possible orders which could rationally be made. I would not criticise in any way the order that she made, which reflected the offer made by the bank and the fact of the writing off of the account in the meantime, some six weeks or thereabouts before the hearing of the appeal. As it seems to me, Mr Grant's submission that she ought to have made no order for costs is an optimistic one. It is one that he might have made, perhaps he did indeed make to her, but it seems to me that to award Mrs Johnson half of her costs of the appeal, leaving in place the “no order for costs” order that the Deputy District Judge had made, was very well within the ambit of her discretion as to costs, and those are the reasons for which I would concur with my Lord in dismissing the appeal while, as he has done, disapproving of the learned Circuit Judge having found harassment to be proved when it was not open to her to do so.