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Last week xxx represented a claimant (nobody we know) in a credit card case at Harrogate County Court which he won. He argued before the judge his long held belief that under UTCCR ''In any claim in which the unfairness of contractual terms in a consumer contract are raised as an issue, the evidentual burden rests with the seller or supplier to prove that the relevant terms are not unfair.''
The judge agreed and told the defendant (don't know who) to justify the £13.46 they claimed was the cost of administering the £12 default charge. Needless to say they wouldn't and Tom's client was awarded £2500 in costs.
This could have major implications not just for credit cards but the way in which all claims are made. It also might shed some light on the format of the litigation of the substantive issues in the test case ie it could be that the onus will be on the banks to prove the terms are fair rather than the OFT having to prove they're unfair.
Below is the section of skeleton argument that deals with the burden of proof issue.
The judge agreed and told the defendant (don't know who) to justify the £13.46 they claimed was the cost of administering the £12 default charge. Needless to say they wouldn't and Tom's client was awarded £2500 in costs.
This could have major implications not just for credit cards but the way in which all claims are made. It also might shed some light on the format of the litigation of the substantive issues in the test case ie it could be that the onus will be on the banks to prove the terms are fair rather than the OFT having to prove they're unfair.
Below is the section of skeleton argument that deals with the burden of proof issue.
Burden of Proof in Consumer cases that raise the issue of fairness under the UTCCR
1. In any claim in which the unfairness of contractual terms in a consumer contract are raised as an issue, the evidential burden rests with the seller or supplier to prove that the relevant terms are not unfair.
2. This point has been firmly established by the European Court of Justice in a number of cases, starting with the joined cases of Océano Grupo Editorial SA v Roció Murciano Quintero (C-240/98), Salvat Editores SA v José M. Sánchez Alcón Prades (C-241/98), José Luis Copano Badillo (C-242/98), Mohammed Berroane (C-243/98) and Emilio Viñas Feliú (C-244/98) (hereafter referred to as “Océano”), where it was ruled that there is a duty on the Court to raise of its own motion the question of “unfairness” in respect of such terms:
“26 The aim of Article 6 of the Directive, which requires Member States to lay down that unfair terms are not binding on the consumer, would not be achieved if the consumer were himself obliged to raise the unfair nature of such terms. In disputes where the amounts involved are often limited, the lawyers' fees may be higher than the amount at stake, which may deter the consumer from contesting the application of an unfair term. While it is the case that, in a number of Member States, procedural rules enable individuals to defend themselves in such proceedings, there is a real risk that the consumer, particularly because of ignorance of the law, will not challenge the term pleaded against him on the grounds that it is unfair. It follows that effective protection of the consumer may be attained only if the national court acknowledges that it has power to evaluate terms of this kind of its own motion.
28…the court's power to determine of its own motion whether a term is unfair must be regarded as constituting a proper means both of achieving the result sought by Article 6 of the Directive, namely, preventing an individual consumer from being bound by an unfair term, and of contributing to achieving the aim of Article 7, since if the court undertakes such an examination, that may act as a deterrent and contribute to preventing unfair terms in contracts concluded between consumers and sellers or suppliers.
29 It follows from the above that the protection provided for consumers by the Directive entails the national court being able to determine of its own motion whether a term of a contract before it is unfair when making its preliminary assessment as to whether a claim should be allowed to proceed before the national courts.”
3. This judgment of the full court was followed in Cofidis SA v Jean-Louis Fredout (C-473/00), Elisa María Mostaza Claro v Centro Móvil Milenium SL (C-168/05), and more recently Pannon GSM Zrt. v Erzsébet Sustikné Győrfi (C-243/08).
4. In Pannon the ECJ reiterated the point thus:
“23…the aim of Article 6 of the Directive would not be achieved if the consumer were himself obliged to raise the unfairness of contractual terms, and that effective protection of the consumer may be attained only if the national court acknowledges that it has power to evaluate terms of this kind of its own motion.
24. It must be pointed out, in that regard, that, if that power is to be granted to the national court, Article 6(1) of the Directive cannot be interpreted as meaning that it is only in the event that the consumer has brought a specific application in relation to it, that an unfair contract term is not binding on that consumer. Such an interpretation would rule out the possibility of the national court assessing, of its own motion, in the context of examining the admissibility of the action which is before it, and without a specific application from the consumer to that effect, the unfairness of a contractual term.
…
28…Article 6(1) of the Directive must be interpreted as meaning that an unfair contract term is not binding on the consumer, and it is not necessary, in that regard, for that consumer to have successfully contested the validity of such a term beforehand...
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32. The court seised of the action is therefore required to ensure the effectiveness of the protection intended to be given by the provisions of the Directive. Consequently, the role thus attributed to the national court by Community law in this area is not limited to a mere power to rule on the possible unfairness of a contractual term, but also consists of the obligation to examine that issue of its own motion.”
5. All the above cases must be considered in the context of the jurisdictions from which they arise, namely legal systems that use an inquisitorial (i.e. judicial-lead) investigation of the facts and issues. In the UK we have an adversarial legal system, but the principles set out by the ECJ still apply. Indeed, as a result of section 3 of the European Communities Act 1972
“any question as to the meaning or effect of any…Community instrument, shall be treated as a question of law (and, if not referred to the European Court, be for determination as such in accordance with the principles laid down by and any relevant decision of the European Court).”
6. The above judgments of the ECJ establish a core legal principle, namely that a consumer does not have to successfully contest the validity of a contract term before it can be struck down by the court for “unfairness”. Indeed, the Court has a duty to raise of its own motion the issue of whether a term is “unfair”. It inevitably follows from these judgments that in the context of legal proceedings within the UK, the burden for establishing that a term is “unfair” cannot rest with the consumer, for the explicit reasons set out by the ECJ in those judgments. The duty for proving that such a term is not “unfair” therefore rests on the seller or supplier whenever the issue is raised, either by the Court of its own motion or by the consumer themselves.
1. In any claim in which the unfairness of contractual terms in a consumer contract are raised as an issue, the evidential burden rests with the seller or supplier to prove that the relevant terms are not unfair.
2. This point has been firmly established by the European Court of Justice in a number of cases, starting with the joined cases of Océano Grupo Editorial SA v Roció Murciano Quintero (C-240/98), Salvat Editores SA v José M. Sánchez Alcón Prades (C-241/98), José Luis Copano Badillo (C-242/98), Mohammed Berroane (C-243/98) and Emilio Viñas Feliú (C-244/98) (hereafter referred to as “Océano”), where it was ruled that there is a duty on the Court to raise of its own motion the question of “unfairness” in respect of such terms:
“26 The aim of Article 6 of the Directive, which requires Member States to lay down that unfair terms are not binding on the consumer, would not be achieved if the consumer were himself obliged to raise the unfair nature of such terms. In disputes where the amounts involved are often limited, the lawyers' fees may be higher than the amount at stake, which may deter the consumer from contesting the application of an unfair term. While it is the case that, in a number of Member States, procedural rules enable individuals to defend themselves in such proceedings, there is a real risk that the consumer, particularly because of ignorance of the law, will not challenge the term pleaded against him on the grounds that it is unfair. It follows that effective protection of the consumer may be attained only if the national court acknowledges that it has power to evaluate terms of this kind of its own motion.
28…the court's power to determine of its own motion whether a term is unfair must be regarded as constituting a proper means both of achieving the result sought by Article 6 of the Directive, namely, preventing an individual consumer from being bound by an unfair term, and of contributing to achieving the aim of Article 7, since if the court undertakes such an examination, that may act as a deterrent and contribute to preventing unfair terms in contracts concluded between consumers and sellers or suppliers.
29 It follows from the above that the protection provided for consumers by the Directive entails the national court being able to determine of its own motion whether a term of a contract before it is unfair when making its preliminary assessment as to whether a claim should be allowed to proceed before the national courts.”
3. This judgment of the full court was followed in Cofidis SA v Jean-Louis Fredout (C-473/00), Elisa María Mostaza Claro v Centro Móvil Milenium SL (C-168/05), and more recently Pannon GSM Zrt. v Erzsébet Sustikné Győrfi (C-243/08).
4. In Pannon the ECJ reiterated the point thus:
“23…the aim of Article 6 of the Directive would not be achieved if the consumer were himself obliged to raise the unfairness of contractual terms, and that effective protection of the consumer may be attained only if the national court acknowledges that it has power to evaluate terms of this kind of its own motion.
24. It must be pointed out, in that regard, that, if that power is to be granted to the national court, Article 6(1) of the Directive cannot be interpreted as meaning that it is only in the event that the consumer has brought a specific application in relation to it, that an unfair contract term is not binding on that consumer. Such an interpretation would rule out the possibility of the national court assessing, of its own motion, in the context of examining the admissibility of the action which is before it, and without a specific application from the consumer to that effect, the unfairness of a contractual term.
…
28…Article 6(1) of the Directive must be interpreted as meaning that an unfair contract term is not binding on the consumer, and it is not necessary, in that regard, for that consumer to have successfully contested the validity of such a term beforehand...
…
32. The court seised of the action is therefore required to ensure the effectiveness of the protection intended to be given by the provisions of the Directive. Consequently, the role thus attributed to the national court by Community law in this area is not limited to a mere power to rule on the possible unfairness of a contractual term, but also consists of the obligation to examine that issue of its own motion.”
5. All the above cases must be considered in the context of the jurisdictions from which they arise, namely legal systems that use an inquisitorial (i.e. judicial-lead) investigation of the facts and issues. In the UK we have an adversarial legal system, but the principles set out by the ECJ still apply. Indeed, as a result of section 3 of the European Communities Act 1972
“any question as to the meaning or effect of any…Community instrument, shall be treated as a question of law (and, if not referred to the European Court, be for determination as such in accordance with the principles laid down by and any relevant decision of the European Court).”
6. The above judgments of the ECJ establish a core legal principle, namely that a consumer does not have to successfully contest the validity of a contract term before it can be struck down by the court for “unfairness”. Indeed, the Court has a duty to raise of its own motion the issue of whether a term is “unfair”. It inevitably follows from these judgments that in the context of legal proceedings within the UK, the burden for establishing that a term is “unfair” cannot rest with the consumer, for the explicit reasons set out by the ECJ in those judgments. The duty for proving that such a term is not “unfair” therefore rests on the seller or supplier whenever the issue is raised, either by the Court of its own motion or by the consumer themselves.
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