Director General of Fair Trading v First National Bank: HL 25 Oct 2001

The House was asked whether a contractual provision for interest to run after judgment as well as before in a consumer credit contract led to an unfair relationship.
Held: The term was not covered by the Act, and was not unfair under the Regulations. It was by way of a default condition, rather than a penalty. The provision excluding the award of statutory interest after judgment did not operate to exclude the contractual term, and the inconsistency would not defeat the regulations if such clauses were only allowed to operate if they fell fairly and squarely within the section. The 1999 Regulations set up a ‘a dual system of ex casu challenges and pre-emptive or collective challenges by appropriate bodies’, and ‘The system of preemptive challenges is a more effective way of preventing the continuing use of unfair terms . . than ex casu actions.’
Lord Bingham explained the regulations: ‘A term falling within the scope of the Regulations is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith. The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the Regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties’ rights and obligations under the contract. This involves looking at the contract as a whole. But the imbalance must be to the detriment of the consumer; a significant imbalance to the detriment of the supplier, assumed to be the stronger party, is not a mischief which the Regulations seek to address. The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4 (1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the Regulations are designed to promote.’

Lord Bingham of Cornhill Lord Steyn Lord Hope of Craighead Lord Millett Lord Rodger of Earlsferry
Times 01-Nov-2001, [2002] 1 AC 481, [2001] UKHL 52, [2001] 3 WLR 1297, [2002] 1 LLR 489, [2001] 2 All ER (Comm) 1000, [2002] 1 All ER 97, [2002] ECC 22, [2002] 1 Lloyd’s Rep 489
House of Lords, Bailii
Unfair Terms in Consumer Contracts Regulations 1994 (1994 No 3159), County Courts (Interest on Judgment Debts) Order 1991 (1991 No 1184), Consumer Credit Act 1974, County Courts Act 1984 71, Council Directive 93/13/EEC (OJ 1993, L95, p 29) on unfair terms in consumer contracts
England and Wales
Citing:
At First InstanceDirector General of Fair Trading v First National Bank Plc ChD 30-Jul-1999
The claimants sought an injunction under the regulations to prevent the defendant bank from including in any of its agreements a clause allowing them to claim interest on judgments on regulated agreements. . .
Appeal fromDirector General of Fair Trading v First National Bank Plc CA 15-Sep-1999
A bank had a clause in its standard terms which provided that it could continue to recover interest at the contract rate after judgment for default. The clause was an unfair term. The clause allowed a bank to impose an arrangement for repayment by . .
CitedIn re Sneyd; Ex parte Fewings CA 1883
The mortgagee’s costs, whether costs of an enforcement or a redemption action or included in ‘costs, charges and expenses’, are not recoverable from the mortgagor personally, but both as against the mortgagor and other persons interested in the . .
CitedEconomic Life Assurance Society v Usborne HL 1902
If the loan agreement provides that the contract term for payment of interest survives judgment, then the contract term remains enforceable after judgment. Lord Halsbury said: ‘My Lords, it seems to me that Fry LJ in the case of Ex parte Fewings . . . .

Cited by:
CitedBankers Insurance Company Limited v South, Gardner QBD 7-Mar-2003
The two defendants had been involved in a jet-ski accident on holiday in Europe. The claimant sought a declaration that it was not liable to indemnify its insured under the holiday insurance under which they travelled. The policy excluded liability . .
CitedOffice of Fair Trading v Abbey National Plc and seven Others ComC 24-Apr-2008
The Office sought a declaration that the respondent and other banks were subject to the provisions of the Regulations in their imposition of bank charges to customer accounts, and in particular as to the imposition of penalties or charges for the . .
CitedOffice of Fair Trading v Foxtons Ltd ChD 17-Jul-2008
Complaint was made that the Foxtons standard terms of acting in residential lettings were unfair. Foxtons objected to the jurisdiction of the Claimant to intervene.
Held: On a challenge to an individual contract, the court would be able to see . .
CitedAbbey National Plc and others v The Office of Fair Trading CA 26-Feb-2009
The OFT had sought to enquire as to the fairness of the terms on which banks conducted their accounts with consumers, and in particular as to how they charged for unauthorised overdrafts. The banks denied that the OFT had jurisdiction, and now . .
CitedOffice Of Fair Trading v Foxtons Ltd CA 2-Apr-2009
The OFT had sought and obtained an injunction regarding the use of certain standard terms in their estate agency business. Both parties appealed.
Held: The OFT’s appeal succeeded. The court had been wrong to restrict the effect of the . .
CitedThe Office Of Fair Trading v Foxtons Ltd ChD 10-Jul-2009
The OFT alleged that certain standard terms in the defendant’s letting agent contracts were unfair. The agent had withdrawn the former terms, but relief was still sought on those terms and their effect, and as to the fairness of the new ones. The . .
CitedOffice of Fair Trading (OFT) v Abbey National Plc and Others SC 25-Nov-2009
The banks appealed against a ruling that the OFT could investigate the fairness or otherwise of their systems for charging bank customers for non-agreed items as excessive relative to the services supplied. The banks said that regulation 6(2) could . .
CitedThe Office of Fair Trading v Ashbourne Management Services Ltd and Others ChD 27-May-2011
The OFT alleged that the defendant companies had been engaged in breaches of the Act and the Regulations in their practices in selling gym memberships. The defendant were selling and managing memberships for gyms. They advised as to the different . .
CitedRossetti Marketing Ltd v Diamond Sofa Company Ltd and Another QBD 3-Oct-2011
Rossetti_diamondQBD2011
The claimants sought compensation under the 1993 Rules. The defendants denied that the claimants were agents within the rules, since they also acted as agents for other furniture makers.
Held: Whether a party is a commercial agent within the . .
CitedRochdale Borough Council v Dixon CA 20-Oct-2011
The defendant tenant had disputed payment of water service charges and stopped paying them. The Council obtained a possession order which was suspended on payment or arrears by the defendant at andpound;5.00. The tenant said that when varying the . .
CitedPerpetual Trustee Co Ltd v Khoshaba 20-Mar-2006
Austlii (Supreme Court of New South Wales – Court of Appeal) CONTRACTS – Unjust contracts – Determination that a contract ‘unjust’ – Appellate review – Nature of decision appealed from – Conclusion that ‘unjust’ . .
CitedDu Plessis v Fontgary Leisure Parks Ltd CA 2-Apr-2012
The claimant, who owned a holiday mobile home on the respondent’s site challenged the raising of site fees, saying that the contract was unfair. Previously all site fees were equal within the site, but the respondent had introduced a scheme which . .
CitedChubb and Another v Dean and Another ChD 24-Apr-2013
The court considered whether it had power to award a post judgment interest at a contractual rather than the statutory interest rate.
Held: There is no power of the court in this claim to add any amount beyond the statutory interest to the . .
CitedParkingeye Ltd v Beavis CA 23-Apr-2015
The appellant had overstayed the permitted period of free parking in a retail park by nearly an hour. The parking was managed by the respondent who had imposed a charge of 85.00 pounds. The judge had found that the appellant was in breach of a . .
CitedGreen v Petfre (Gibraltar) Ltd (T/A Betfred) QBD 7-Apr-2021
Onerous Contract Terms Unclear – Not Incorporated
The claimant said that he had won a substantial sum on the online gaming platform operated by the defendants, but that they had refused to pay up. The defendants said that there had been a glitch in the game. The court faced a request for summary . .

Lists of cited by and citing cases may be incomplete.

Banking, Consumer, Litigation Practice

Leading Case

Updated: 01 November 2021; Ref: scu.166701