CR1-09-11-25-Judgements_IMX30_1.mxf

Session: judgment
Session date: 2009 Nov 25

CASE ID: UKSC 2009/0070
Case name: Office of Fair Trading (Respondents) v Abbey National plc & others (Appellants)
Case summary:
Judgment: The Supreme Court unanimously allowed the appeal by the banks.
Reasons for the judgment: Lord Walker made clear that the scope of the appeal was limited – the court did not have the task of deciding whether or not the system of charging current account customers was fair, but whether the OFT could challenge the charges as being excessive in relation to the services supplied in exchange (Paragraph 3). As Lord Phillips stated, even if such a challenge was not possible, it might still be open for the OFT to assess the fairness of the charges according to other criteria (Para 61). The key issue was whether the charges constituted the ‘price and remuneration’ as against ‘the goods or services supplied in exchange’ within the meaning of the Regulations. The Supreme Court considered and decided a number of arguments as to whether the charges could be said to be ‘price or remuneration’ under Regulation 6 (2) (b):(1)The charges were not paid ‘in exchange’ for the transactions to which they related – eg. honouring a cheque when the customer had insufficient funds to do so (Para 75).(2)The Court of Appeal was wrong to find that Regulation 6 (2) (b) did not apply to charges that were ‘ancillary’ to the core contract between the bank and customer (Paras 38-41, 47, 78, 112). Lord Walker commented that Regulation 6 (2) (b) contained no indication that only the ‘essential’ price or remuneration was relevant. In fact, any monetary price or remuneration payable under the contract would naturally fall within the language of Regulation 6 (2) (b) (Para 41). (3)The charges were not concealed default charges designed to discourage customers from becoming overdrawn on their accounts without prior arrangement (Paras 88, 114). The High Court had rejected this argument and was right to do so. (4)The charges were properly to be regarded as falling within the scope of the Regulations (Paras 43, 80, 104). They were in fact part of the price or remuneration paid by the customer in exchange for the package of services which made up a current account (Paras 47, 89). The fact that liability to pay the charges depended on specific events occurring was irrelevant to that conclusion (Paras 47, 104). Accordingly, since any assessment of the fairness of the charges, which related to their appropriateness as against the services supplied in exchange, fell within Regulation 6 (2) (b), no such assessment could take place and so the appeal would be allowed (Paras 51, 90, 92, 118, 119).Further Comments Lord Phillips also noted that in the absence of the charges the banks would not be able profitably to provide current account services without a fee (Para 88). He stated that it might be open to question whether it is fair to subsidise some customers whose accounts always remain in credit by levies on others who experienced events they did not foresee when they opened their accounts (Para 80). Lord Walker commented that ministers and Parliament had decided to transpose the directive as it stood rather than to confer the higher degree of consumer protection afforded by the national laws of some other member states. Parliament might wish to consider whether to revisit that decision (Para 52). Lord Mance endorsed this comment (Para 118). Lady Hale commented that if Lord Walker’s invitation to ministers and Parliament was to be taken up, it might not be easy to find a satisfactory solution. She questioned whether the real problem was not the charging model, but the lack of competition between the banks as to the product they offered (Para 93). No Reference to European Court of Justice The court decided that although the interpretation of the European directive which the Regulations implemented was a question of European law it was not necessary to refer the matter to the European Court of Justice (Paras 49, 91, 115, 120).