Bank charges – EC law – Fairness – Unfair contract terms

Abbey National Plc & seven ors v Office of Fair Trading: CA (Civ Div) (Sir Anthony Clarke, Master of the Rolls, Lords Justice Waller (vice-president), Lloyd): 26 February 2009

The appellant banks appealed against a decision ([2008] EWHC 875 (Comm), (2008) 2 All ER (Comm) 625) that the respondent Office of Fair Trading was entitled to assess the fairness of certain bank charges.

The charges comprised unpaid item charges, paid item charges, overdraft excess charges and guaranteed paid item charges (the relevant charges). The charges were made when the banks were requested or instructed by customers with current accounts to make a payment for which the customer did not have the necessary funds and which was not covered by a facility arranged with the customer. The issue was whether an assessment of the fairness of the relevant charges related to ‘the adequacy of the price or remuneration, as against the goods or services supplied in exchange’ within regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations 1999, in which case such an assessment would be precluded.

Held: It was common ground that the 1999 regulations were to be construed so as to give effect to the terms and purpose of Council Directive 93/13. It followed from the reasoning of the House of Lords in Director General of Fair Trading v First National Bank Plc [2001] UKHL 52, (2002) 1 AC 481 that what article 4(2) of the directive was seeking to exclude from the assessment required by the national authorities (here the OFT) was the core bargain or the core price but not ancillary or incidental provisions, First National Bank applied. Regulation 6(2)(b) should be so construed. That view was supported by the travaux preparatoires to the directive and by numerous academic writings. It was therefore necessary to decide whether the relevant charges were part of the essential bargain between bank and customer.

Having regard to all the circumstances, the answer was no. The contingent nature of the charges and the fact that the relevant terms were not specifically negotiated were strong pointers to the conclusion that the charges were not ‘the price or remuneration’ within the meaning of article 4(2) of the directive and regulation 6(2)(b) of the regulations. Accordingly, an assessment of the fairness of the relevant charges was not excluded by regulation 6(2)(b).

Appeal dismissed.

Ali Malek QC, Richard Brent (instructed by Ashurst) for Abbey National Plc; Iain Milligan QC, Andrew Mitchell, Simon Atrill (instructed by Simmons & Simmons) for Barclays Bank Plc; Richard Salter QC, John Odgers (instructed by Addleshaw Goddard) for Clydesdale Bank Plc; Robin Dicker QC, Timothy Howe QC, Jeremy Goldring (instructed by Allen & Overy) for HBOS Plc; Richard Snowden QC, Daniel Toledano, Patrick Goodall (instructed by Freshfields Bruckhaus Deringer) for HSBC Bank Plc; Bankim Thanki QC, Richard Handyside, James Duffy (instructed by Lovells) for Lloyds TSB Bank Plc; Geoffrey Vos QC, Sonia Tolaney (instructed by Slaughter and May) for Nationwide Building Society; Laurence Rabinowitz QC, David Blayney (instructed by Linklaters) for Royal Bank of Scotland Group Plc; Jonathan Crow QC, Richard Coleman, Jemima Stratford, Sarah Love (instructed by in-house solicitor) for the respondent.