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A stitch in time

04 Oct 2019 / Legislation Print

A stitch in time…

The High Court, in AIB v Counihan ([2016] IEHC 72), a judgment of this author, acknowledged the ex officio obligation existing under ECJ case law for a national court to assess, of its own motion, whether a contractual term falling within the scope of the Unfair Contract Terms Directive (93/13/EEC) is unfair.

That judgment was delivered by reference to the decision of the ECJ in such case law as Aziz (Case C-415/11).

This article considers certain themes that might be perceived to arise from the above case law and related decisions (see also Gazette, April 2017, pp40-43).

Ex officio obligation

There is a slew of binding ECJ case law concerning the ex officio obligation. The Irish courts seek always to implement obligations incumbent upon them under binding ECJ case law.

Separate from Counihan, the ex officio obligation has now been accepted in Ireland in EBS Ltd v Kenehan ([2017] IEHC 604).

Moreover, various judges of, for example, the High Court, have repeatedly discharged the ex officio obligation in numerous cases.

So the ex officio obligation is both recognised and realised by the Irish courts.

Adversarial justice system

The inquisitorial nature of the ex officio obligation might be contended to sit uneasily in our common law/adversarial justice system. At least two points, however, can be made in this regard.

First, the ECJ has repeatedly pointed to the existence of the ex officio obligation. It would be surprising if a court that includes Irish, and (for now) British, judges never recalled in those decisions that Ireland and Britain have adversarial justice systems.

Second, looking to the rationale that informs the ex officio obligation, being the need for the imbalance between consumer and seller/supplier to be corrected by positive action unconnected with the parties to the contract, this is clearly an issue that affects consumers in common and civil law jurisdictions.

It follows that, although the form of the obligation may seem unusual, any notion that the ECJ perceives the benefit of the obligation to be confined to consumers in civil law jurisdictions is unconvincing.

Unfair terms presenting

One possible surprise, post-Counihan, is that there does not appear to be any reported case law in which unfair terms have been identified by an Irish court in the exercise of its ex officio obligation.

One commentator suggests that the reason this may be so, in the mortgage/repossession context, is that: “All borrowers understand that the fundamental essence of mortgage agreements is that, if scheduled loan repayments are missed, the secured asset may be repossessed.

“The sad reality is that the overwhelming majority of repossession cases turn simply on that fundamental principle” (Martin, E, 24(4) Commercial Law Practitioner 71, 76).

Carefully drafted

Another possibility is that all consumer contracts considered by the courts to this time, in the discharge of their ex officio obligation, have been carefully drafted with the directive in mind.

A further possibility is that, while unfair terms may exist, consumer debtors do not typically seek in their pleadings to assist the courts by identifying such terms as they consider to be unfair and/or to operate unfairly in their particular context.

It is not necessary that consumer debtors should do so, and I do not mean to suggest that unfair terms have ever passed muster before the courts.

However, it would seem likely to assist consumer debtors if a court were to be informed – albeit that it would not be limited in its analysis – as to the particular concern(s) that a particular consumer considers to present in her or his case.

Main subject-matter

Article 4(2) of the directive states: “Assessment of the unfair nature of the terms shall [not] … relate to the definition of the main subject matter of the contract nor… insofar as these terms are in plain intelligible language.”

Article 4(2) has given rise to difficulty across the EU. As the European Commission notes in a relatively recent working document issued as part of a ‘fitness check’ of European consumer law (SWD [2017] 209 final, 23 May 2017), “There is … a degree of uncertainty about the meaning of the [term] … ‘main subject matter’.”

In Kearney v Permanent TSB plc ([2018] IEHC 159), which seems to be the sole written judgment to this time that indicates article 4(2) expressly to have been raised as an issue, the point was met by the court’s finding that those proceedings were not concerned with terms defining the main subject-matter of the contract before it.

Future case law

This aspect of the directive may yet arise for further consideration in future case law.

Can consumers have cause for complaint regarding a contract if they took legal advice on that contract before it was concluded?

A number of points might be made:

  1. The directive draws no express distinction between consumers aided/unaided by a lawyer,
  2. Any emphasis on the involvement of a lawyer when a contract was concluded sits uneasily with the observation of the ECJ in Faber (Case C-497/13) that whether a consumer is assisted by a lawyer or not cannot alter the effectiveness of the protection of EU law,
  3. It seems to follow from (2) that, to have regard to the fact that a consumer was so assisted, would depart from the paradigm of ex officio assessment arising under ECJ case law,
  4. To have regard to the involvement of a lawyer when a contract was concluded appears to assume (a) an equality of expertise in all practice areas among all lawyers, and (b) that a consumer client’s instructions necessarily embraced the seeking of advice in relation to the directive, as implemented.

Legislative change

In the UK, the ex officio obligation has now been placed on a formal footing by the Consumer Rights Act 2015.

If Irish civil procedure legislation has to change to accommodate the binding requirements of ECJ case law, directed to the laudable end of protecting vulnerable consumers, then it
has to change.

Potential financial implications

A possible further incentive for any necessary change is that, for example, in Tomášová v Sloven-ská Republika (Case C-168/15), the ECJ has signalled that there can be potential financial implications for a member state in the, admittedly unlikely, event of manifest infringement by a last instance court of EU law, or breach by such a court of well-established ECJ case law.

To ensure the protection of vulnerable consumers, the need for demonstrable compliance with the ex officio obligation cannot, perhaps, be overstated.

Though a matter ultimately for lawmakers, it might be contended that an optimal way of delineating the scope of, and ensuring ongoing compliance with, the ex officio obligation would be to place it on a legislative footing, whether through statute or otherwise.

Max Barrett
Max Barrett is a judge of the High Court of Ireland. Any views expressed in this article are personal