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Millions of customers hoping for refunds of unauthorised overdraft charges were disappointed yesterday after a surprise decision in the Supreme Court.

In a landmark ruling, the five judges of the court unanimously decided that the Office of Fair Trading (OFT) did not have the authority to determine the fairness of the charges — which can be as much as £35 for a single slip into the red.

The decision, which overturned rulings by the High Court and the Court of Appeal, means that an estimated one million customers who have lodged demands for the return of their money are likely to be turned down unless they can prove that they are suffering financial hardship.

Politicians and consumer groups expressed surprise and dismay at the ruling, amid calls for a change in the law.

Nick Clegg, the leader of the Liberal Democrats, said: “The decision will be a bitter blow to the millions of people who’ve had to pay extortionate fees to their banks just because a cheque has bounced or they’ve unintentionally gone overdrawn.

“Regardless of the legal position, it simply isn’t right that someone on a low income should pay £25 or more to their bank just because they’re overdrawn by a pound or two. The only way to protect millions of customers from being ripped off is to change the law.”

Sarah McCarthy-Fry, Exchequer Secretary to the Treasury, said: “We would prefer to see the banks voluntarily agree a fairer system of charges for the future, but we don’t rule out further measures if this doesn’t deliver the kind of change we need.

“We are examining options for a compulsory system alongside discussions with the banks. The bottom line is that we need a system of charges that is more proportionate and more transparent, so that the fees are fair and people are clear about what they are signing up to.”

Customers who go into an unauthorised overdraft or breach their agreed limit can be charged for each payment while they are in the red, as well as additional monthly fees. Campaigners say that the actual cost to the banks of processing the transactions could be as little as £2.50.

Peter Vicary-Smith, the chief executive of Which?, said: “The ruling effectively allows the banks to charge whatever they like, irrespective of whether it is fair or reasonable, and that cannot be right. The banks ought to remember that taxpayers have handed them a big cheque to bail them out.”

The Office of Fair Trading said it would consider the detail of the judgment before making a decision on whether to continue to investigate the charges. A further announcement is expected next month.

In response to the Supreme Court’s decision, the Financial Services Authority (FSA) lifted the waiver on processing customer complaints that has been in place since July 2007, when the test case began. The FSA, the banks and the OFT decided on the test case and waiver after the county courts and the Financial Ombudsman Service became overwhelmed with customers’ applications for refunds after an organised consumer campaign against the charges.

The removal of the waiver means that the majority of customers who complained will receive letters over the coming weeks explaining that they will not receive a refund. Only those customers who can show that they are in financial difficulty may get their money back.

Lloyds, the banking group that is 43 per cent owned by the taxpayer, confirmed that customers suffering financial hardship might still receive a refund, but would not elaborate on the exact criteria that would be used to judge who qualifies.

Some consumer groups argued that bank customers should not accept defeat. Martin Lewis, of moneysavingexpert.com, the consumer website that helped to spearhead the campaign against such bank charges, said that the OFT could yet bring a second legal challenge against the banks, although he conceded that the chances of success were slim.

He said: “In Justice Walker’s summing-up, he said that the OFT may be able to look at fairness by another route. The fact that this was deemed important enough to be said in his very short statement is of great significance. Analysis of the full report reveals the court’s coded message to the OFT was, ‘You took this case on too narrow a legal basis’.”

A spokesman for the British Bankers Association said: “We shall examine the new case that Martin Lewis presents but we maintain that fees for unarranged overdrafts are fair.”

Despite widespread opposition to overdraft charges, the millions of bank customers who do not incur any charges and therefore receive their current account services at no cost, or even receive interest, will welcome the Supreme Court’s decision.

If the banks had lost, it could have cost the industry up to £3 billion a year in lost revenue and led to refund payments of up to £10 billion. The likely outcome would have been the introduction of monthly account charges and increases in other fees, such as cash machine withdrawals, as the banks looked to recoup the lost revenue.

Calculations by moneynet.co.uk, the financial website, suggest that the banks would have had to charge current account customers between £2.50 and £3 a month to replace the lost revenue if the OFT had capped charges at £12, as it has done with credit card fees. However, the fees would have probably been much higher to recoup the money paid in refunds of charges. But as the ruling has gone in favour of the banks, this expected transformation in the way we bank is unlikely to materialise — for the time being.

Most experts agree that there will be a cooling-off period as the banks assess their options. Many in the industry would still like to introduce regular account fees, as is already the norm in much of continental Europe, because they provide a regular and reliable income. Over the past few months, in expectation of defeat in the court case, most banks have been restructuring and even cutting overdraft charges but that process is likely to stop now.

Consumer groups have called on the banks not to introduce new charges or increase existing ones, but this is unlikely. With banks determined to boost profits, and restore their decimated balance sheets, new charges are inevitable.

Source : The Times

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Revenues at Linklaters, Britain’s second-biggest law firm, fell by nearly 10 per cent to £591 million in the six months to October 31, from £653 million in the same period last year. This is despite Linklaters winning big legal work in coping with the downturn.

Its work on the administration of Lehman Brothers’ European division generated nearly £70 million in fees and it continues to act for the Royal Bank of Scotland on its response to the crisis.

Simon Davies, managing partner, said that the fall in fee income reflected the continued slump in global mergers and acquisitions, but he said that activity had picked up in recent weeks, particularly in emerging markets, such as Brazil, India and China.

Linklaters’ performance was similar to that of Allen & Overy, the only other member of the “magic circle” to have disclosed its first-half revenue. Allen & Overy reported a 7 per cent fall in fee income to £511 million.

At the end of its financial year last April, Linklaters’ revenue stood at £1.3 billion, up 1 per cent on the previous year. It was the top-grossing magic circle firm, followed by Freshfields Bruckhaus Deringer, on £1.29 billion, Clifford Chance, with £1.26 billion, and Allen & Overy, with £1.1 billion. Slaughter and May, the other member of the elite group, does not publish its figures.

Clifford Chance, which is more reliant than its rivals on work from investment banks, private equity firms and commercial real estate, was the worst-performing of the top firms last year. Its revenue dropped by 5 per cent and partners’ profits fell by 37 per cent from £1.15 million to £733,000. It lost its crown as the world’s biggest law firm by revenue to DLA Piper, which is based in London but is not considered part of the magic circle.

Yesterday Clifford Chance said that David Childs, its global managing partner, would stand uncontested for a second four-year stint as head of the firm. Mr Childs, 58, was one of Clifford Chance’s star dealmakers before taking the top post in 2006. He is regarded internally as a tough, decisive leader and is not seen as being culpable for the firm’s troubles this year.

Under his leadership, Clifford Chance became the first big firm to announce drastic cutbacks in response to the financial crisis: about 200 staff have been made redundant in London, while about 15 per cent of partners — as many as 90 worldwide — are expected to leave as part of a reshaping of the firm’s senior ranks. Mr Childs will take up a second four-year term in May after his appointment is confirmed by partners next month.

Among the top 20 firms that have announced half-year figures, Lovells’ turnover was flat at £260 million, Simmons & Simmons fell 16 per cent to £120 million and Pinsent Masons dropped 7 per cent to £98 million.

Source : The Times

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Police are routinely arresting people simply to record their DNA profiles on the national database, according to a report published today.

It also states that three quarters of young black men are on the database. The finding risks stigmatising a whole section of society, the equality watchdog has warned.

The revelations will fuel the debate about the DNA database, the world’s largest. They are included in a report by the Human Genetics Commission, an independent government advisory body. It criticises the piecemeal development of the database and questions how effective it is in helping the police to investigate and solve crimes.

Jonathan Montgomery, commission chairman, said that “function creep” over the years had transformed a database of offenders into one of suspects. Almost one million innocent people are now on the DNA database.

Professor Montgomery said: “It’s now become pretty much routine to take DNA samples on arrest, so large numbers of people on the DNA database will be there not because they have been convicted, but because they’ve been arrested.”

Recorded crime has fallen every year since 2004-05, but the number of people arrested in England and Wales annually is rising. Latest figures show that arrests rose by 6 per cent to 1.43 million in 2005 and a further 4 per cent to 1.48 million in 2006-07.

Professor Montgomery said there was some evidence that people were arrested to retain the DNA information even though they might not have been arrested in other circumstance.

He said that a retired senior police officer told the commission: “It is now the norm to arrest offenders for everything if there is a power to do so. It is apparently understood by serving police officers that one of the reasons . . . is so that DNA can be obtained.” He said that the tradition of only arresting someone when dealing with serious offences had collapsed.

The Equalities and Human Rights Commission said the proportion of black men on the database created an impression that one race group represented an “alien wedge” of criminality.

The report’s foreword states that the DNA profiles of 75 per cent of black men aged 18 to 35 are recorded. But the commission admitted that it had “hardened up slightly” earlier estimates quoted in Parliament.

The Crime and Security Bill heralded in last week’s Queen’s Speech proposes cutting to six years the time that innocent people’s profiles are kept. Those arrested but not charged, or those cleared in court, currently remain on the database for ever. There are no plans to reduce police powers to take samples from everyone arrested.

Chris Grayling, the Shadow Home Secretary, has said that innocent people should not have their DNA retained by the police once they are acquitted of a crime.

The commission report said that the database should be placed on a clear statutory basis and overseen by an independent authority. Isabella Sankey, of Liberty, said: “Not only are we stockpiling the most sensitive information of innocents who have never been charged, let alone convicted, we are also creating a perverse incentive to arrest people solely to get their details on the database.”

The Home Office suggested that the over-representation of young black men on the database was linked to disproportionality in other areas of the criminal justice system.

Source : The Times

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Hundreds of partners at the City’s leading law firms earned more than £1 million this year, despite the sudden downturn in the commercial legal market.

The number of lawyers who took home seven-figure sums was lower than last year, when a record eight firms had average profit of more than £1 million per partner, yet the sector still produced an enviable number of millionaires. Partners at the ten biggest firms earned an average of £872,000 in 2008-09, down 20 per cent, according to a report published today by PricewaterhouseCoopers (PwC).

However, not all City lawyers did so well. Partners at firms outside the top ten suffered a 28 per cent fall in average profits, from £614,000 per partner to £444,000, PwC said.

Alistair Rose, head of PwC’s professional partnerships advisory group, said that the top ten firms had emerged from the downturn as clear winners and had extended their lead over the chasing pack.

After five years of double-digit growth, most City law firms suffered a decline in revenue and profit in 2008-09, PwC said. A sudden decline in big transactions and pressure to reduce fees led many firms to take drastic measures to cut costs, including trimming their partnerships, making swingeing redundancies and freezing salaries.

However, the City’s premier firms were spared the worst of the downturn by their network of overseas offices and a steady stream of financial bailout work.

Allen & Overy, Linklaters and Freshfields Bruckhaus Deringer all reported profits of more than £1 million per partner this year, with those at the top of the pecking order at Freshfields receiving £1.7 million. Slaughter and May does not disclose its financial results, but its top partners are expected to make upwards of £2 million, making them the best-paid in the City.

Ashurst, Clifford Chance, Herbert Smith and Macfarlanes all slipped out of the elite £1 million-per-partner club this year, but pay of the top partners was still close to seven figures.

Among the City’s highest-paid lawyers are David Cheyne, senior partner at Linklaters; Nigel Boardman, of Slaughter and May, who advises Marks & Spencer and Arsenal Football Club; and Sir Nigel Knowles, co-chief executive of DLA Piper, the world’s largest law firm.

Partners at second-tier firms fared much worse this year than their “magic circle” rivals, PwC said.

The firms ranked No 11 to No 25 in size experienced a 9 per cent slump in revenue, in part because of their reliance on practices such as private equity, mid-market mergers and acquisitions and commerical property, which were hit badly by the downturn.

Two thirds of those firms issued a capital call in the past year, with the average partner required to contribute £44,000, PwC said.

Overall, the number of hours billed by lawyers at City firms fell 20 per cent, the survey found. Many firms suffered a dramatic loss of productivity in their overseas offices, with partners in the Middle East the least busy.

Salaries for junior lawyers fell by 8 per cent on average, according to Hughes-Castell, the legal recruiter.Competition for talent had pushed starting salaries as high as £100,000 in recent years.

However, since the start of the crisis many firms have frozen salaries and cut up to a tenth of their staff. A quarter of firms imposed shorter working weeks or sabbaticals to slash their wage bills.

Those who lost their jobs had little chance of finding other work, with vacancies down 95 per cent in the first six months of this year from the market peak in 2007.

Source : The Times

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Allegations are mounting from lawyers at a number of major firms that redundancy rounds have been used to jettison a disproportionate number of female lawyers.

Insiders at Allen & Overy say they were so concerned about the number of women walking out the door they asked HR to provide a breakdown. This was declined. A spokesman for the firm claimed “The criteria used for redundancies were gender neutral and agreed with our staff representatives, nearly three-quarters of whom were women.”

Similar rumours are coming out of Linklaters and Clifford Chance - and both firms have also refused to give any figures relating to redundancies. And while Freshfields has had no official redundancy programme, four real estate associates left the firm back in November 2008. All of them were women.

Nor are these allegations restricted to City firms. Burges Salmon’s real estate group made 36% of its female lawyers redundant but just 18% of its men. In the past nine months four female associates and one female partner have left. That means that while there are still seven female associates (compared to 17 male associates) there isn’t a single remaining female partner – compared to 15 men!

Apparently this lamentable state of affairs led to a meeting of Burges Salmon real estate fee earners last week to discuss career options for women. At which one partner allegedly remarked that if they wanted flexible working, he’d heard there was a high street firm in Henleaze (a suburb of Bristol) that offered such a scheme.

A spokeswoman for Burges Salmon commented that the firm didn’t comment on internal meetings.

Source : Roll on Friday

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A British woman left almost penniless by divorce goes to the Supreme Court this week in a case that will test London’s reputation as the divorce capital of the world.

Sikirat Agbaje, 68, is challenging a divorce award made in her native Nigeria and upheld by the Court of Appeal in London that left her with just under £7,000.

Her former husband, Olusola, 71, a barrister to whom she was married for 40 years, took £616,000, including two properties in London.

But Mrs Agbaje, of New Barnet, North London, argues that the divorce in 2005 should have been heard in Britain, where she would be entitled to a far bigger share of the assets.

She was successful in the High Court in London, where she was awarded £275,000, only for her former husband to take the case to the Court of Appeal, which to ruled that the original Nigerian award should stand.

Now, after several court hearings and rulings by six senior judges in London, at a cost of tens of thousands of pounds’ legal aid, the case is going before the Supreme Court.

It is being keenly watched by family lawyers who say that the original divorce award, which will leave her without a home, is an “appalling injustice”.

But there is growing concern about London’s reputation as the divorce capital of the world and the way that wives in international marriages choose to divorce here because they will do better than abroad.

The couple, who have five children, all born in Britain, were born in Nigeria and came to England in the early 1960s. They met in December 1965 and married in 1967, acquiring British citizenship in 1972.

In 1973, Mr Agbaje returned to Nigeria and his wife and children followed the next year, establishing their home and life mainly in Nigeria. They separated in 1999 and at that time, Mrs Agbaje says, she came back to England and set up home.

Her husband then began divorce proceedings in the High Court in Lagos, Nigeria, and four months later Mrs Agbaje issued divorce proceedings in England.

At the High Court in London, Mr Justice Ryder said there was “no evidence that substantial justice cannot be obtained by the wife in the courts of Nigeria” and the divorce award was subsequently made in Lagos.

Mrs Agbaje then lodged fresh proceedings and won permission in London’s High Court to apply for financial relief under the Matrimonial and Family Proceedings Act 1984, after an overseas divorce.

The judge, Mr Justice Munby, said that he was satisfied that there were “exceptional circumstances” in the case and that she would suffer “hardship — real hardship — if I do not give leave”.

The case then led to Mr Justice Coleridge awarding her a housing fund of £225,000, saying her primary need was for a home. He ordered the sale of a property in London that is in the husband’s name, with 65 per cent of the proceeds to be given to Mrs Agbaje.

Mark Harper, a leading family lawyer with Withers, the City law firm, said: “This raises important issues as to when English views of fairness and hardship should apply when a foreign divorce is granted to a couple with significant English connections.

“The Court of Appeal [which ruled against her] clearly wants to reduce forum shopping and begin to change London being the divorce capital of the world.”

Dismissing Mrs Agbaje’s case in the Court of Appeal, Lord Justice Ward said that “sadly, compassion is not the test”, adding that he did “feel sorry” for the wife’s “parlous plight” which means that she will be homeless and penniless unless her appeal to the Supreme Court succeeds.

Source : The Times

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