Office of Fair Trading (OFT) v Abbey National Plc and Others: SC 25 Nov 2009

The banks appealed against a ruling that the OFT could investigate the fairness or otherwise of their systems for charging bank customers for non-agreed items as excessive relative to the services supplied. The banks said that regulation 6(2) could be used neither by the OFT, nor by individual consumers to object to their charges.
Held: The banks’ appeal succeeded. The charging system had to be looked at as a package. An investigation of the charges would relate to the adequacy of the price as against the services supplied, and therefore be incorrect with 6(2)(b). The charges complained of did not relate solely to the immediate tranactions. The two sub-paragraphs of regulation 6(2) must be given their natural meaning, and ‘read in that way they set out tests which are separate but not unconnected. They reflect (but in slightly different ways) the two sides (or quid pro quo) of any consumer contract, that is (a) what it is that the trader is to sell or supply and (b) what it is that the consumer is to pay for what he gets. The definition of the former is not to be reviewed in point of fairness, nor is the ‘adequacy’ (appropriateness) of the latter.’
There was no sufficient point of doubt to require any reference to the European Court.
Lord Walker said: ‘Charges for unauthorised overdrafts are monetary consideration for the package of banking services supplied to personal current account customers. They are an important part of the banks’ charging structure, amounting to over 30 per cent of their revenue stream from all personal current account customers. The facts that the charges are contingent, and that the majority of customers do not incur them, are irrelevant. On the view that I take of the construction of Regulation 6(2), the fairness of the charges would be exempt from review in point of appropriateness under Regulation 6(2)(b) even if fewer customers paid them, and they formed a smaller part of the banks’ revenue stream. ‘
Lord Mance said: ‘Article 4(2) and regulation 6(2) are as exceptions to be construed narrowly. Nevertheless, the concepts of ‘price or remuneration’ must, I think, be capable in principle of covering, under a banking contract, an agreement to make a payment in a particular event. The language of regulation 6(2)(b) is on its face therefore capable of covering a customer’s commitment, under the package contracts put before the House, to pay the Relevant Charges in the specified events. There is no reason why a customer should not be given free services in some circumstances, but, as a quid pro quo, be expected to pay for them in others.’

Lord Phillips, President, Lord Walker, Lady Hale, Lord Mance, Lord Neuberger
[2009] UKSC 6, Times 26-Nov-2009, [2009] 3 WLR 1215
Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) 6(2), Council Directive 93/13/EEC on unfair terms in consumer contracts
England and Wales
CitedDirector General of Fair Trading v First National Bank HL 25-Oct-2001
The House was asked whether a contractual provision for interest to run after judgment as well as before in a consumer credit contract led to an unfair relationship.
Held: The term was not covered by the Act, and was not unfair under the . .
At First InstanceOffice of Fair Trading v Abbey National Plc and seven Others ComC 24-Apr-2008
The Office sought a declaration that the respondent and other banks were subject to the provisions of the Regulations in their imposition of bank charges to customer accounts, and in particular as to the imposition of penalties or charges for the . .
See alsoOffice of Fair Trading v Abbey National Plc and others ComC 8-Oct-2008
The director sought a further judgment as to whether charges imposed by banks on a customer taking an unauthorised overdraft, and otherwise were unlawful penalties. . .
Appeal fromAbbey National Plc and others v The Office of Fair Trading CA 26-Feb-2009
The OFT had sought to enquire as to the fairness of the terms on which banks conducted their accounts with consumers, and in particular as to how they charged for unauthorised overdrafts. The banks denied that the OFT had jurisdiction, and now . .
CitedChichester Diocesan Board of Finance v Simpson HL 21-Jun-1944
The court was asked whether a gift in a will to the trustees ‘for such charitable institution or institutions or other charitable or benevolent object or objects in England’ as they should select, was valid.
Held: ‘The fundamental principle is . .
See alsoOffice of Fair Trading v Abbey National Plc and others ComC 21-Jan-2009
. .
CitedBairstow Eves London Central Ltd v Smith and Another QBD 20-Feb-2004
. .
CitedThe Office Of Fair Trading v Foxtons Ltd ChD 10-Jul-2009
The OFT alleged that certain standard terms in the defendant’s letting agent contracts were unfair. The agent had withdrawn the former terms, but relief was still sought on those terms and their effect, and as to the fairness of the new ones. The . .
CitedCollege of Estate Management v Customs and Excise HL 20-Oct-2005
The college supplied educational services by distance learning. The commissioner sought to argue that printe daterials supplied with the course were ancillary and did not have the same exemption form VAT.
Held: The supplies did benefit from . .
CitedFreiburger Kommunalbauten GmbH Baugesellschaft and Co. KG v Ludger Hofstetter, Ulrike Hofstetter ECJ 1-Apr-2004
ECJ Directive 93/13/EEC – Unfair terms in consumer contracts – Contract for the building and supply of a parking space – Reversal of the order of performance of contractual obligations provided for under national . .
CitedSrl CILFIT v Ministero Della Sanita ECJ 6-Oct-1982
ECJ The obligation to refer to the Court of Justice questions concerning the interpretation of the EEC Treaty and of measures adopted by the community institutions which the third paragraph of article 177 of the . .

Cited by:
CitedCavendish Square Holding Bv v Talal El Makdessi; ParkingEye Ltd v Beavis SC 4-Nov-2015
The court reconsidered the law relating to penalty clauses in contracts. The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raised the issue in relation to two clauses in a substantial commercial contract. The second appeal, . .

Lists of cited by and citing cases may be incomplete.

Banking, Consumer, European

Updated: 10 November 2021; Ref: scu.381455