97. Since the Directive and Regulations are concerned with terms in contracts, it is first of all necessary to identify the relevant contracts. This is a matter about which the judge, Andrew Smith J, and the Court of Appeal took different views, although again it is not suggested that it raises on the facts of this case any particular issue of European law. The banks’ primary case is that the relevant contracts are the contracts for an overall package of banking facilities made by the banks with their customers. Andrew Smith J rejected this analysis as unnatural: payments by way of Relevant Charges could not be said to be paid in exchange for services supplied when an account is in credit; and the description “free-if-in-credit” connoted that there was no price to be paid when an account was in credit (paras. 398-9). Furthermore, if the relevant contract was taken to be the overall package, the Relevant Charges would represent no more than part of the price or remuneration, and an assessment of the fairness of such charges as against the package of services would be “beside the point” and “would not intrude upon the essential bargain” intended to be protected from assessment (para. 400).
98. There is in my opinion a flaw in this reasoning. It is not comparing like with like. Viewing the matter at the level of the banking contracts, the comparison is between, on the one hand, the package of services offered by the banks (some or all of which may or may not be used by any particular customer) and, on the other, the customer’s commitment to pay such charges as may arise from whatever facilities he does use. At this level, the banks’ case is that price or remuneration is or includes the customer’s potential liability for charges, rather than the payments which he or she has actually to make if and when such charges are incurred. In my opinion the Court of Appeal was right in para. 97 of its judgment to identify the relevant contract as being in the first instance the banking contract for an overall package of facilities. That is the contract in which the Relevant Charges appear and were agreed.
99. Further, any challenge to the fairness of a term must be to its fairness in the context of the relevant contract in which it appears. It is “beside the point” if it is not. If, on a proper analysis, the customer’s potential liability for the Relevant Charges is the or part of the “price or remuneration” in exchange for which the overall package of banking services is supplied, and it is challenged on the ground that it makes such price or remuneration disproportionate overall, then regulation 6(2)(b) excludes the challenge. If there is no challenge to the overall proportionality of the overall price or remuneration of the package, then I fail to see how a challenge to the proportionality of the Relevant Charges in relation to the cost of providing particular services in isolation can be admissible or relevant. A term which is proportionate in context cannot become disproportionate viewed out of context.
100. It is true that Relevant Charges are only incurred when a customer, either deliberately or inadvertently, gives an instruction or enters into a transaction, by which as a matter of law and contract he or she requests the bank to provide overdraft facilities. So, each time such a request is made and acted upon (even if only with the result that the request is declined), it is possible to identify a more developed contractual relationship as arising. Under that relationship, the Relevant Charges become payable in respect of the request (although not, the judge thought, in exchange for any services provided in consequence of the request). I do not however consider that this relationship can be the contract to which the Directive and Regulations refer. If the agreement to incur the Relevant Charges is part of an overall package contract, its vulnerability to challenge and, if permissible, any assessment of its fairness under the Directive and Regulations must, as I have said, depend upon an analysis of such agreement as part of the package contract. Otherwise, as Mr Sumption pointed out, a customer could challenge each separate part of a package in isolation, although as a whole the price or remuneration charged was unchallengeable.
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103. ... That power follows from the bank’s ownership of money deposited with or transferred to it. (Further, since the deposit with or transfer to a bank of money is the main or part of the main subject matter of a banking contract, any assessment of the fairness of it or its legal consequences would appear to be excluded under regulation 6(2)(a), rather than (b).) Alternatively, the OFT suggests, without committing itself, that, if there is any price or remuneration under a free-if-in-credit banking contract, it is more easily found in the customer’s agreement to pay overdraft interest.
104. In accordance with general European legal principle, article 4(2) and regulation 6(2) are as exceptions to be construed narrowly. Nevertheless, the concepts of “price or remuneration” must, I think, be capable in principle of covering, under a banking contract, an agreement to make a payment in a particular event. The language of regulation 6(2)(b) is on its face therefore capable of covering a customer’s commitment, under the package contracts put before the House, to pay the Relevant Charges in the specified events. There is no reason why a customer should not be given free services in some circumstances, but, as a quid pro quo, be expected to pay for them in others.