Abbey National Plc & Ors v The Office of Fair Trading

Regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations 1999 excludes review of the adequacy of the core price or remuneration forming part of the essential bargain. It does not exclude ancillary, incidental or contingent payment terms merely because they relate to a service. The exception must be construed restrictively, with regard to the typical consumer, the contractual package, prominence, negotiation and whether the payment is recognisable as part of the essential bargain. Unarranged-overdraft charges were outside that core bargain and could therefore be assessed for fairness.

Eight banks appealed from Andrew Smith J’s declarations following the Office of Fair Trading’s investigation into charges imposed on personal current-account customers. The Commercial Court judgment and order were reported at [2008] EWHC 875 (Comm). The judge held that assessment of the relevant terms and charges was not precluded by regulation 6(2) of the Unfair Terms in Consumer Contracts Regulations 1999, and dealt separately with plain intelligible language and penalty issues. The central question before the Court of Appeal was whether assessment of the charges concerned the adequacy of price or remuneration as against services supplied in exchange within regulation 6(2)(b).

1. Disposition. The appeal was dismissed. Applications by Abbey and HBOS for permission to appeal on the plain intelligible language issues were refused.
2. Construction. Regulation 6(2) must be interpreted consistently with article 4(2) of Council Directive 93/13/EEC. The two limbs are distinct and should not be read conjunctively. Rejection of a conjunctive construction does not mean that every payment term is exempt. Each limb is confined to the core or essential bargain.
3. Core exemption. The reasoning in The Director General of Fair Trading v First National Bank plc [2001] UKHL 52 and the travaux préparatoires showed that the exclusion protects the substance of the bargain, including the essential price or remuneration, but not ancillary or incidental provisions. The exception must be construed restrictively, while respecting the statutory language and the Directive’s consumer-protection purpose.
4. Relevant inquiry. Whether a payment is part of the essential bargain is a broad, fact-sensitive question. Relevant considerations include the nature of the services as a whole, the presentation of the standard documentation, the amount and operation of the payment, its relationship with other payments and services, whether it was negotiated, and whether it would be recognised by the typical consumer as the price or remuneration. The more contingent, ancillary, undisclosed or unrecognisable the payment, the less likely it is to fall within the exclusion.
5. Application. The relevant charges were not part of the core bargain. They were imposed in contingent circumstances, were not directly negotiated, were not prominent in advertising, and were unlikely to be understood by the typical consumer as the price of the current-account package. Their fairness could therefore be assessed under the 1999 Regulations. The court agreed with the judge, although on broader reasoning.
6. Plain language. The average consumer is reasonably well informed, observant and circumspect. Non-contractual material available when the contract is made may be considered. The judge correctly treated conflicts and inconsistencies in the banks’ documentation as capable of preventing plain intelligible language. Those issues were impressionistic and fact-specific.

• Court of Appeal (Civil Division): Appeal dismissed. Applications by Abbey and HBOS for permission to appeal on the plain intelligible language issues refused.
• Commercial Court: Andrew Smith J made the relevant declarations by order dated 23 May 2008, following judgment reported at [2008] EWHC 875 (Comm).