Unfair Contract Terms Directive, Article 3 Unfair Contract Terms Directive, Article 4 Unfair Contract Terms Directive, Article 6 Unfair Contract Terms Directive, ANNEX I, 1., (e) Unfair Contract Terms Directive, ANNEX I, 1., (j)

The County Registrar is not required to determine under EU law whether a particular term is ‘unfair’ but should transfer the matter to the Circuit Court if there is an arguable case The borrowers in the instance case had failed to establish how the particular clauses were unfair.

The appellant/defendant borrowers entered into a loan agreement with the respondent/plaintiff lending institution in 2007 which was secured on their partly built family home, property which was the subject of these proceedings. The appellants/defendants fell into arrears in 2009 and following various engagements between the parties, a civil bill for possession was issued in 2014. This case concerned an Order for repossession of the borrowers' home granted by the County Registrar. The borrowers failed to appeal that decision on time. The High Court refused their application for an extension of time. This refusal was subsequently appealed to the Supreme Court.

The substantive issue in the appeal was that the County Registrar had failed to assess the fairness of the terms of the borrowers' mortgage agreement with the plaintiff/respondent lending institution as required by the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995, which transposed Directive 1993/13 on unfair terms in consumer contracts in Irish law. The borrowers argued that Allied Irish Banks PLC v. Counihan and Counihan [2016] IEHC 752 ought to be applied. In that case, Mr Justice Barrett held that a Court, when considering a consumer contract, must of its own motion conduct an assessment of whether it contains any unfair terms. The plaintiff/respondent lending institution argued that this case was, in fact, considered by the County Registrar. The appellant/defendant borrowers also argued that the following terms of their loan agreement were unfair:

1. The "price variation" clause, which provided that the interest rate would vary at thelender's discretion;

2. The "acceleration" clause which provided that the entirety of the secured debt wouldbecome due and payable on demand on the happening of any event of default. This provision also referred to the power to enter into possession of the property in the event of a missed payment or other breach; and

3. The "transfer of rights" clause which entitled the lender to sell on all or part of the security without notice to the borrower.

Were any terms in the loan agreement ‘unfair’? Did the own motion obligation pursuant to Directive 1993/13/EEC apply to a County Registrar?

The Supreme Court held that:

1. On the face of it, the "interest/price variation" clause comes within the exemption in the Regulations (which relates to the Directive, Annex, para (j)) permitting a lender to reserve the right to alter the interest rate without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party at the earliest opportunity and that the latter can dissolve the contract immediately. The Court also noted the protection afforded by the 2016 Consumer Mortgage Credit Agreements Regulations, which includes an obligation that a lender must inform borrowers of any change in their interest rate.

2. The “acceleration” clause was also not in fact invoked against the appellants. However, that does not mean that the Court is not required to examine it for unfairness, and if necessary, to draw appropriate conclusions. Accordingly, an "acceleration clause" might well be found to be unfair if it permitted the lender to call in the entirety of the debt and enforce the security in the event of a single late or missed payment. However, the Court noted a number of measures that prevented such a result. These included the obligation to notify a borrower in the event of default by the latter and to give an opportunity to remedy any such default, and the Central Bank Codes of Conduct.

3. The Court noted the considerable number of decisions endorsing the views of Peart J. in Wellstead v Judge White & Featherstonehaugh [2011] IEHC 438, that "transfer of rights" clauses are neither unusual, mysterious nor unlawful. The Court also noted that the borrowers had not given any indication as to how the clause, in this case, would have been unfair to them.

4. Regarding the role of County Registrars in possession cases, the Court expressed the view that it might raise constitutional issues if a Registrar, who is not a judge appointed under the Constitution, were to be called upon to make findings that particular terms in a contract were unfair and thus unenforceable. Instead, the appropriate approach would be for the Registrar to consider the contract by reference to the relevant EU jurisprudence, for the purpose only of deciding whether there is a potential defence to the lender’s claim. This should be done whether the defendant appears or raises any particular objection or not. If there is a potential defence, the matter should be transferred to a Circuit Court Judge.

URL: https://www.bailii.org/ie/cases/IESC/2020/2020IESC2_0.html

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Supreme Court dismisses an appeal from High Court and affirms refusal to extend the time for appeal from a decision of the County Registrar for an order of possession.