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Case Details

Case Details
National ID 4 Ob 265/02b
Member State Austria
Common Name link
Decision type Other
Decision date 17/12/2002
Court Oberster Gerichtshof (Supreme court)
Subject
Plaintiff
Defendant
Keywords

Unfair Contract Terms Directive, Article 3, 2. Unfair Contract Terms Directive, Article 5 Unfair Contract Terms Directive, Article 7 Unfair Contract Terms Directive, ANNEX I, 1.

1.Class action proceedings as laid down in §§ 28 and 29 KSchG should make it possible to control the content of STCs or pro forma contracts as a precautionary measure. This is designed to prevent from the outset the use of inappropriate contract clauses.
2.Contract clauses are thus not to be used if they are generally not permissible, ie impact on a large number of cases.
3.If this is the case, then the facts of the case should be interpreted assuming the worst case scenario for the consumer. And, with this in mind, there should be an assessment of whether there is a breach of the law or an infringement of good moral practice.
4.Any clause that permits a quarterly interest rate adjustment in either direction, thus also to the benefit of the borrower, does meet the requirement of even-handedness. However, the subsequent rounding up of the adjusted interest rate to the nearest 0.125% works to the exclusive detriment of the consumer. Thus, under § 6 para 1 line 5 KSchG, the entire clause becomes invalid.
5.In each daily report it produces taking into account the unacceptable clause, the bank is actively applying the disputed clause as per § 28 para 1 KSchG.
In the autumn of 1999, the defendant, a bank, signed credit agreements with consumers using a pro forma contract that contained the following clause: “The lender is entitled to alter the terms of the agreement in line with the prevailing monetary, credit and capital market conditions. For consumers, the interest rate will be adjusted on the first day of each quarter to bring it into line with the lender’s new refinancing costs. The effect of the adjustment is to be rounded up to the nearest 0.125%”
The Austrian Consumers’ Association (one of the bodies entitled under §§ 28 ff KSchG to bring a class action) requested that the defendant sign, by 28th March 2001 at the latest, a statement pledging to desist from using the clause and securing this against a penalty for non-performance. The defendant did not comply with the request until April 2001, by which time the Association had already brought a class action.
In May 2001, the Association, invoking the defendant’s pledge to desist from using the clause, requested that it retrospectively recalculate credit agreements that had been signed after 1st March 1997 using the clause in question. It argued that, because the adjustments had been rounded up, the existing interest rates might either be too high and/or insufficient to cover the outstanding capital. Any refusal by the defendant to take this course of action would be tantamount to applying the illegal clause it had pledged not to use. The defendant, however, held that the agreement did not include a commitment to backdate the adjustment and thus refused to recalculate retrospectively.
In its class action lawsuit, the Association essentially requested an injunction ordering the defendant firstly not to apply the relevant clause in its commercial transactions with consumers and secondly to desist from using the excessive interest rates and/or the inadequate capital coverage (the result of invalidly rounding up the adjustments) as the basis for future settlements. At the same time, it requested that the verdict be made public. The defendant applied for the case to be dismissed.
The Court of First Instance upheld the claim and the Court of Appeal essentially concurred with the verdict.
The OGH rejected the defendant’s appeal, arguing that while terms covering the rounding up of adjustments are permissible in principle in interest rate escalation clauses, the question of whether they are even-handed must be taken into consideration. The unacceptable clause did in itself allow for a reduction as well as an increase in the interest rate. However, the subsequent rounding up of the adjusted interest rate to the nearest 0.125% worked to the exclusive detriment of the consumer. A provision for rounding a figure must, under the KSchG, allow for the figure to be rounded down as well as up. Thus, the entire clause was in breach of § 6 para 1 line 5 KSchG.
The OGH rejected the defendant’s objection. The defendant argued that the simple fact that it had established the clause as the basis for interest rate calculations up to the point where it pledged to desist from using it was not tantamount to applying the clause and thus was not in breach of the pledge under § 28 para 1 KSchG. The court held that the materials covering § 28 para 1 KSchG made it clear that it was not permissible either to use the unacceptable clause in future contracts or to apply it in old contracts. A danger of repetition could only be ruled out if it was certain that the supplier was neither using the unacceptable clause in future STCs, nor applying it to existing contractual relationships. A bank credit was agreed between bank and customer essentially through a customer’s current account. The daily account balance (bank report) was to be regarded as the bank’s statement on outstanding debts. This did not constitute a legal claim by the bank. However, the statement, which constituted an active undertaking by the bank, was based on an invalid clause. Thus, the defendant was continuing to apply this clause. Even if the clause were no longer being applied to future interest rate calculations, the existing interest rate was nonetheless a product of applying the clause in the past. Since the daily reports alone were not designed to provide an up-to-date balance, it could not be assumed that a bank customer, by passing no comment on the relevant reports, was formally acknowledging the novation.
The defendant’s pledge to desist from using the clause did not work retrospectively since the pledge also encompassed an interdiction ban on basing the existing calculation of current account balances on a premise that had been found to be illegal. While the defendant continued to use the calculation method it had adopted thus far, it was not making clear any willingness to stop applying the unacceptable clause. There was therefore a danger of repetition. As the clause constituted a standard term as per § 28 para 1 KSchG, it was invalid in its entirety.
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