The Irish High Court has refused an application by AIB for summary judgment against a Dublin couple, with Mr Justice Max Barrett ruling that the European Communities (Unfair Terms in Consumer Contracts Regulations) 1995 (the EU Regulations) should apply. As a result of Mr Justice Barrett’s judgment, Irish courts faced with summary applications must take account of the EU Regulations, and must undertake an assessment of the fairness of the terms of the contract before them.
The case arose from a 2009 loan agreement between AIB and Peter and Mary Counihan; by 2016, the Counihans were in over €1 million of debt and arrears. The summary judgment procedure allows a lender to apply for a judgment against a borrower without a full trial, giving the lender recourse to all the borrower’s income and assets, regardless of what originally constituted security for the loan. It is used in situations where the defaulting borrower has no arguable defence to such a judgment being made.
The EU Regulations provide that an unfair term in a consumer contract is not binding on the consumer. An unfair term is defined as causing significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer. Accepting the Counihans’ submission that the EU Regulations should apply as lending comes within ‘services’ for the purposes of the Regulation, Mr Justice Barrett stated that its provisions “mandate fair and open dealing”.
Mr Barrett considered the European Court of Justice Aziz case, in which it was held that national courts have a duty to assess whether contract terms are unfair, in order to re-establish the ‘equality of arms’ between the consumer and the seller or supplier. Rejecting AIB’s submission that this duty was confined to the facts of Aziz, it was held that the duty was one of general application, requiring Irish courts to act in an inquisitorial manner in examining whether a contract contains unfair terms for the purposes of the EU regulations.
Mr Justice Barrett described the summary application procedure as posing “potentially ruinous consequences” for consumers, without a full plenary hearing. As such, examination of contracts for unfair terms in summary proceedings are necessary to protect consumers in the manner contemplated by the EU regulations. In terms of procedure, this means that when faced with a summary application, Irish courts must identify any potentially unfair terms which would yield an arguable defence to summary proceedings, invite further submissions from the parties and then decide on whether the matter should go to a full plenary hearing.
Mr Justice Barrett declined to grant the relief sought by AIB; while it was held that no terms in the Counihans’ contract offended the EU Regulations, but accepted other arguments that the matter should go forward for a full hearing.
Click here for the full judgment in AIB v Peter and Mary Counihan.