The recent High Court decision of Mr Justice Max Barrett in Allied Irish Bank PLC v. Peter Counihan & Anor highlights the low threshold for sending applications for Summary Judgment in consumer loan cases to Plenary hearing and may have implications for the way such applications are progressed in future.
In Counihan, Mr Peter Counihan and Ms Mary Counihan contended that they were acting as consumers within the meaning of the Consumer Credit Act, 1995 when they entered into a loan agreement with AIB on the 5th February 2009.
The loan agreement between AIB and the Counihans was documented as a business loan and AIB was seeking to enforce the agreement summarily. The issue before the Court was whether to grant summary judgment in favour of AIB or to grant leave to the Counihans to defend the proceedings at Plenary hearing.
The Court considered the impact of unfair terms in contracts where the bank’s customer is a consumer by reference to Directive 93/13/EEC of 5th April, 1993 which was implemented into Irish law by the European Communities (Unfair Terms in Consumer Contracts) Regulations, 1995, as amended. In his decision Mr Justice Barrett also gave due regard to the low threshold identified in Aer Rianta1 for sending matters to Plenary hearing and the limited scope of summary proceedings generally.
It now seems that in order for lending institutions to comply with the requirements of Directive 93/13/EEC of 5th April 1993 on unfair terms in consumer contracts, the Court needs of its own inquiry to apply the test outlined in the European Court of Justice decision in Aziz.2 The Court interpreted the three-part test in Aziz as follows:
- The Court should inquire as to the possibility that any terms of the loan agreement might be seen to be unfair to the borrower;
- In the event such a term is identified, the Court should invite submissions from both parties on the impugned term;
- If following any such submissions the Court forms the view that a potential arguable defence arises from the unfair term, the matter should be transferred to a Plenary hearing to decide, inter alia, whether any terms of the loan agreement are in fact unfair and what consequences such a finding will have for the debt recovery application before the Court.
Notwithstanding this, the Court spent comparatively little time considering the existence of any unfair terms in the contract in Counihan.
An alternative view would be that the Courts reference to item (v) in the Harrisrange decision includes the fact that consideration needs to be given to the 1993 Directive and the three-part test outlined in Aziz:
“where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure”3
Ultimately, the Court will need to provide clarification on the decision in Counihan and its impact for Summary Judgment applications in consumer loan cases. What is clear from the decision is that where the Defendant can put forward even an arguable defence, the Court will be remiss not to send the matter to Plenary hearing.
For further information, contact Richard O'Sullivan, Head of Debt Collection & Insolvency, or David Acres.
[1] Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 I.R. 607
[2] Aziz v. Caixa d’Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa) (Case C-415/11, Judgment of 14th March, 2013)
[3] Harrisrange Ltd v. Duncan [2003] 4 I.R. 1, at p. 7
