Legal Literature

Unfair Contract Terms Directive, link

This case note outlines the High Court decision in AIB v Counihan [2016] IEHC 752 and in particular the impact of the decision of the Court of Justice in Aziz v Caixa d'Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa (C-415/11) that a court is obliged to consider questions of unfairness in contract terms of its own motion. No particular term of the relevant loan contract was alleged to be unfair, but the judge, Barrett J. noted (at para.10) that the Court of Justice appears to contemplate a court acting in an inquisitorial manner, even in an adversarial system, such as in Ireland. He added:

“[A] summary application for debt seems to the court to afford a classic example of proceedings in which the potentially ruinous consequences for a consumer of the court's judgment… on the basis of relatively limited argument, requires that the above-mentioned task be undertaken if consumers are to be protected in the manner contemplated by Directive 93/13/EEC…”.

Accordingly, he set-out a three-step process (at para 13) whereby:

1) The court should identify whether any terms may be unfair within the meaning of the 1995 Regulations.

2) To the extent that the court identifies any potential arguable defence which has not been the subject of argument at the summary application, it should invite the parties to make any further submissions in this regard.

3) If, after hearing these further submissions, the court considers that such potential arguable defences as it has posited may arise, it should send the matter for plenary hearing.

Ultimately in Counihan, counsel for the defendants acknowledged that none of the contractual terms relied upon were actually unfair, and Barrett J. agreed. His comments in respect of the Unfair Contract Terms Directive are therefore obiter (not legally binding under the doctrine of precedent). The case was adjourned to plenary hearing on other grounds.