As mentioned in Resolving the Mortgage Arrears Crisis Vol 1/2017, Barrett J in the High Court delivered his well-publicised judgment in AIB v Counihan on 21 December 2016. In that judgment, he observed that the Court has a general obligation to establish if any terms in a mortgage contract are unfair within the meaning of the Unfair Contract Terms Directive (as implemented in Ireland by the Unfair Contract Terms Regulations), even if the Court has not been specifically asked to look at the mortgage contract in that context.

AIB V COUNIHAN

In AIB v Counihan, Barrett J cited the decision of the European Court of Justice in Aziz, in which the ECJ ruled that a national court should assess (even if not asked to do so) whether any term of a contract that is within the scope of the Unfair Contract Terms Directive (Directive 93/13/EEC) is unfair.

If a contract term is found to be unfair, that term will not be binding on the consumer, although the contract will continue to exist if it is possible for it to do so without that term. No unfair term was identified by Barrett J in AIB v Counihan.

REACTION

The decision in AIB v Counihan received a considerable amount of attention. Minister of State Dara Murphy (on behalf of the Minister for Justice and in response to a question raised in the Dil) told TDs a short time later that the ruling was being examined by the Department of Justice. The Master of the High Court expressed his concern that, in repossession cases, there may not be sufficient experience at county registrar level to enable EU-based legislation, such as the Unfair Contract Terms Regulations (SI 27/1995 as amended), to be applied correctly. The then Minister for Justice also stated in the Dil that where such a defence is raised, it must be transferred by the county registrar to the judge's list at the first opportunity. The most recent update (in July 2017), indicated that the review by the Department of Justice and Equality in conjunction with the Attorney General was ongoing.

THREE RECENT CASES

The issue has again arisen in three recent High Court cases, details of which are set out in the table below.

In Cronin v Dublin City Sheriff, N Raifeartaigh J observed that Barrett J's comments in AIB v Counihan were obiter and that, in the case in front of her, she did not find it necessary to decide the scale of "any obligation" placed on the Irish courts in repossession cases in light of the Unfair Terms Directive and Regulations.

In Bank of Ireland v McMahon, Noonan J dismissed the borrower's argument that terms of their mortgage contract were unfair as the borrowers had not identified any particular term as being unfair, and he had not been able to identify such a term, but did not go into any detail regarding the scale of the review he had carried out

However, in EBS v Kenehan, Barrett J refused to let a Circuit Court order for possession stand because EBS had not placed all of the contractual documents before the Court to enable the Court to "discharge its Aziz-Counihan obligations".

"UNFAIR TERMS" LIKELY TO BE RAISED MORE OFTEN AS A DEFENCE

It is expected that the Unfair Terms Directive and Regulations will be raised with increasing frequency by borrowers by way of a defence to enforcement action.

In light of Barrett J's ruling in EBS v Kenehan, lenders should ensure that all documents that could be relevant to the Court's consideration of whether a term of the lender's contract with the borrower is unfair are placed before the Court.

Click here to view the links in the table below.