ABBEY NATIONAL V OFFICE OF FAIR TRADING

[2009] UKSC 6, United Kingdom Supreme Court, Lord Phillips, Lord Walker, Lady Hale, Lord Mance, Lord Neuberger, 25 November 2009

Banking - Overdraft charges - Banks charged customers substantial charges for overdrafts on current accounts - OFT argued that these did not form part of the price of the account but were ancillary charges subject to assessment under UTCCR 1999 - Overdraft charges held to be core payment terms excluded from fairness assessment of consumer contracts - Preliminary reference declined - Unfair Terms in Consumer Contracts Regulations 1999, Regulation 6(2) - Council Directive 93/13/EEC on unfair terms in consumer contracts, article 4(2) - Article 234 Preliminary reference to the European Court of Justice

This was the Supreme Court judgment in the litigation between the Office of Fair Trading and several large banks about the fairness of the banks' overdraft charges. The Supreme Court allowed the banks' appeal. The leading speeches were given by Lord Walker and Lord Mance. It was held that the overdraft charges were to be considered an integral part of the price of the current account, rather than merely payment for the bank's ancillary service of accepting the overdraft without previous agreement. There was no reason why the remuneration for the banks' services should not be a contingent liability. The current account services ought not to be split into parcels for the purpose of assessment under Regulation 6(2) and the same applied to the price paid. As a result, the charges were exempt from assessment as to the fairness of their cost under the Unfair Terms in Consumer Contracts Regulations by Regulation 6(2) which excluded any term relating to price from the scope of application of the Regulations. The fact that the charges were contingent, and that the majority of customers did not incur them was irrelevant. The Supreme Court declined to refer the matter to the European Court of Justice because the matter was in fact acte clair. The Court of Appeal had been in error in asserting that the test was whether the term in question was negotiated or not, when by definition the UTCCR 1999 applied only to non-negotiated terms. The application of the Directive and resulting Regulations was a matter of domestic and not European law. Further, since the overdraft charges formed part of the price paid, their assessment under the UCCTR 1999 was not at issue and a reference under article 234 would therefore not impact on the outcome of the case.