1. Chargebacks

If you pay for a transaction by a debit or card, and there are problems with it, you may be entitled to a chargeback, which is “reversal of a disputed sales transaction on a credit or debit card. … The card provider will decide if you are entitled to a refund based on the circumstances. …”. Assume you booked a flight some time ago, but, on the day of the flight, the destination was one in respect of which Government guidance was, for Covid reasons, that you should not travel. Let us further assume that the flight nevertheless operated, so that it was not cancelled, and the airline refused to refund your ticket price. In those circumstances, you could seek your money back via chargeback from your card provider. In most such circumstances, card providers do indeed decide to make the refund.

Now, let us assume that the airline in question is Ryanair. Article 7 of their Terms and Conditions deals with circumstances where they refuse to carry a passenger; it provides, in part:

Article 7 – Refusing to carry a passenger
7.1
We may refuse to carry you or your baggage on any flights operated by an airline of the Ryanair Group, if one or more of the following circumstances apply, or we have good reason to believe that they may apply.
…

You owe us any money in respect of a previous flight owing to payment having been dishonoured, denied or recharged against us

…
If we refuse to carry you for one of the reasons above, or have removed you from the plane, we may cancel any unused part of your ticket and refund you the price you have paid for this unused ticket …

Your chargeback comes within this clause. So, if you book a further Ryanair flight, they may rely on it to refuse to carry you until you have paid that amount to them. All of this features in a tragic story by Conor Pope in today’s Irish Times:

Ryanair bars passengers from flying unless they repay pandemic ‘chargebacks’

Ursula Barry’s bank refunded her for a 2020 flight she didn’t take due to Covid restrictions
…
On Friday October 1st Ursula Barry went to check in for a Dublin-bound Ryanair flight from Faro in Portugal. She had flown with Aer Lingus on the outward journey.

“When I tried to check in for this flight, Ryanair would not allow me to check-in,” she said. “After tedious hours spent trying to contact Ryanair, to find out what was happening, I finally got through. I was told that there was €210.95 owing to Ryanair and I would not be allowed to check in without paying the money. …”

She was told that a flight she had not taken in September 2020 because of government Covid restrictions was at the centre of the issue. …

“… I had to repay the refund of €210.95 or I wouldn’t be allowed to fly home. I had no choice but to pay”. …

Unsurprisingly, Ryanair are relying on Article 7.1 of their terms and conditions, but this has been met with widespread outrage. For example, in a very useful article on MoneySavingExpert.com, Guy Anker, deputy editor, said that “this is outrageous from Ryanair”. But he emphasised that this should not “put you off using chargeback. It is still a very useful scheme …”; indeed, British Airways, EasyJet, Jet2 and Virgin Atlantic all said they would not prevent passengers who had received a chargeback from travelling in future. And the MoneySavingExpert article provides advice as to what to try if, like Ursula Barry, you paid the chargeback to Ryanair to get on your subsequent flight, and want a refund of that payment:

Submit another chargeback with your card provider. You could always try it but there’s no guarantee of success. …
Use the small claims court as a final resort. …

2. Unfair Contract Terms

In Ireland, the Small Claims procedure is a service provided by District Court offices and is designed to handle consumer or business claims inexpensively without involving a solicitor. The claim cannot exceed €2,000 (but that is unlikely to be a limitation here; MoneySavingExpert.com suggest that, in the UK, the chargeback amounts in question range from £400 to £630, which would be approximately €470 to €740). The current fee to make a claim is €25. So, if you are prepared to stump up the €25 to sue Ryanair in the Small Claims Court, what legal arguments can you rely on? First, you can argue that the clause in Article 7.1 above is an unfair term and is thus not binding on the consumer (on foot of the Unfair Contract Terms Regulations (the European Communities (Unfair Terms in Consumer Contracts) Regulations, 1995 (S.I. No. 27 of 1995) (also here)). This is not the first time I have speculated on this blog that some of Ryanair’s Terms and Condition may be unfair having regard to the Unfair Contract Terms Regulations. Those regulations implement Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ L 95, 21.4.1993, p. 29–34) (the Unfair Contract Terms Directive) in Irish law (and subsequent amendments to the Directive and the Regulations do not amend any of the provisions at issue in this post). Regulation 3(3) of the Regulations provides that a term is to be regarded as unfair

if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer, taking into account the nature of the goods or services for which the contract was concluded and all circumstances attending the conclusion of the contract and all other terms of the contract or of another contract on which it is dependent.

In determining whether a term is contrary to the requirement of good faith, Schedule 2 sets provides that “particular regard shall be had to … the extent to which the seller or supplier has dealt fairly and equitably with the consumer whose legitimate interests he has to take into account”. This matter was emphasised by Lord Steyn in Director General of Fair Trading v First National Bank [2002] AC 481, [2001] UKHL 52 (25 October 2001) [36]; and Lord Bingham of Cornhill (Lords Hope, Millett and Rodger concurring) [17] explained that

The requirement of good faith in this context is one of fair and open dealing. … 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 of the [UK] regulations [which is the equivalent of Schedule 3 of the Irish Regulations (above)].

It would not be difficult for a Small Claims Court to conclude that Ryanair has not “dealt fairly and equitably with the consumer” in the circumstances encountered by you in our hypothetical (or, for that matter, by Ursula Barry). In particular, it would not be difficult to conclude that springing the obligation to pay the chargeback on an intending traveller at check-in “take[s] advantage of the consumer’s necessity” to fly at that time. As Ursula Barry put it, she “had to repay the refund” or she would not have been “allowed to fly home”; she “had no choice but to pay”. The same would be true for pretty much anyone presented with this eventuality at check-in.

As to the remainder of Regulation 3(3), in determining whether a term causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer, in the same case, Lord Bingham said [17] that this requirement 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”. And Lord Millett added [54] that it may be necessary to consider

… whether if [the impugned term] were drawn to his attention the consumer would be likely to be surprised by it; whether the term is a standard term, not merely in similar non-negotiable consumer contracts, but in commercial contracts freely negotiated between parties acting on level terms and at arms’ length; and whether, in such cases, the party adversely affected by the inclusion of the term or his lawyer might reasonably be expected to object to its inclusion and press for its deletion.

Again, it would not be difficult for a Small Claims Court to conclude that the clause in Article 7.1 is “is so weighted in favour of … [Ryaniar” as to tilt the parties’ rights and obligations under the contract significantly in … [their] favour”. In particular, it would not be difficult to conclude that a consumer such as you (or Ursula Barry) would be “surprised” by the clause; I would be very surprised if such a term were standard in freely-negotiated commercial contracts; and I would very much expect that the other party would indeed press for its deletion.

Finally, here, as to the application of Regulation 3(3) generally, in determining whether a term comes within this provision, Schedule 3 sets out a greylist of various indicative unfair terms, but so far as I can see, none applies directly here. In which case, it is a question of first impression as to whether the clause in Article 7.1 above is an unfair term. Having regard to the guidance provided by the speeches in Director General of Fair Trading V First National Bank, it would not be difficult for a Small Claims Court to conclude that the clause in Article 7.1 is an unfair term for the purposes of the Unfair Contract Terms Regulations, and thus not binding on you.

3. Duress

Even if the Court does not agree with you on the question of whether the clause in Article 7.1 is an unfair term, there is a second argument you could make. Even if the clause is valid and binding on a consumer as a matter of principle, it may not have been properly relied on by Ryanair. If the agreement to repay the chargeback was obtained by duress, then that agreement is voidable (ACC Bank v Dillon [2012] IEHC 474 (12 November 2012) [5.0] (Charleton J); the customer may set it aside, and recover the payment. So, the question arises as to whether Ryanair’s threat not to board a passenger unless a previous chargeback is repaid amounts to duress. Ryanair would argue that, if the clause in Article 7.1 is valid, then it is perfectly lawful for them to rely on it. But that is not the end of the matter. To constitute duress, the law requires that the threat or pressure brought to bear on the plaintiff “may be characterised as illegitimate and has constituted a significant cause inducing the plaintiff to enter into the relevant contract” (Dimskal Shipping Co SA v International Transport Workers’ Federation (The Evia Luck) (No 2) [1992] 2 AC 152, 165 (Lord Goff) following Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366, 384 [1981] UKHL 9 (01 April 1981) (Lord Diplock); Dillon [5.2]-[5.3]). As to what constitutes illegitimate pressure, “the critical enquiry is not whether the conduct is lawful but whether it is morally or socially unacceptable” (CTN Cash and Carry v Gallaher [1994] 4 All ER 714, [1993] EWCA Civ 19 (15 February 1993) (Steyn LJ); see also Ukraine v Law Debenture Trust Corporation plc [2019] QB 1121, [2018] EWCA Civ 2026 (14 September 2018) [157] (Gloster, Sales and Richards LJJ, in a joint judgment) (an appeal to the UK Supreme Court has been heard, and judgment is awaited).

Consequently, the principle that a threat to do a lawful act can sometimes be illegitimate and thus constitute duress was accepted by the Privy Council in a non-economic context in R v Attorney General for England and Wales [2004] 2 NZLR 577 [2003] NZPC 2, [2003] UKPC 22 (17 March 2003) and in an economic context by the UK Supreme Court in Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] 3 WLR 727, [2021] UKSC 40 (18 August 2021). Hence, in Borrelli v Ting (Bermuda) [2010] UKPC 21 (29 July 2010) and Progress Bulk Carriers Ltd v Tube City IMS LLC [2012] EWHC 273 (Comm) (17 February 2012) it was held that that threats of lawful action were nevertheless illegitimate and thus entitled the threatened parties to rescind the relevant contracts.

In Pakistan v Times Lord Hodge (Lords Reed, Lloyd-Jones and Kitchin concurring), effectively glossing what Steyn LJ said in CTN, held that the concept of illegitimate pressure is “closely aligned” with the equitable concept of “unconscionability” [20]-[22], but it is “not an overarching criterion to be applied across the board without regard to context. Were it so, judges would become arbiters of what is morally and socially acceptable” [23]. And he emphasised that it will be “a rare circumstance that a court will find lawful act duress in the context of commercial negotiation” [30]. However, the circumstances at issue where Ryanair refuse to board you when you are at the check-in are not those of a commercial negotiation. And taking advantage of the customer’s necessity has been held to constitute illegitimate pressure in similar circumstances. In Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989] 1 QB 833, Kafco were a small company which imported, sold and delivered basketware; they had a contract to supply baskets to Woolworths (then a national chain of retailers); and they hired Atlas to deliver the baskets to Woolworths. However, after it had delivered the first load to Woolworths, Atlas realised that it had underestimated its costs, So, for the second load, they sent an empty trailer to Kafco’s premises, with a message that unless Kafco forthwith made a new agreement, the trailer would be driven away unloaded.

On the one hand, it was clear to Atlas that the deliveries to Woolworths were essential to Kafco’s success and commercial survival. On the other hand, as Kafco could not afford to lose Atlas’s delivery services, Mr Arminger, one of Kafco’s directors, felt himself to be in a situation of “take it or leave it”; another director, Mr Fox, felt that they were “over a barrel”; and Kerr LJ held that they had been faced “with a disastrous situation in which there was no way out for them”. So, Mr Arminger agreed to the new charge, and Tucker J held that he did so “unwillingly and under compulsion”. Hence, he concluded that Kafco’s apparent consent to the agreement for the new charges “was induced by pressure which was illegitimate” which vitiated their apparent consent to the agreement ([1989] 1 QB 833, 841). Similarly, in B&S Contracts and Design Ltd v Victor Green Publications Ltd [1984] ICR 419 (CA), B&S had Victor Green “over a barrel”, because the threat by B&S to cancel the contract would have caused such serious damage to the Victor Green’s economic interests that they had no choice but to pay an additional sum, the Court of Appeal held that the money was paid under duress, and could be recovered. Eveleigh LJ (Griffiths and Kerr LJJ concurring) referred to the speech of Lord Diplock in The Universe Sentinel (above) and concluded that, on the question of whether the pressure was illegitimate, “it is sufficient to say that if the claimant has been influenced against his will to pay money under the threat of unlawful damage to his economic interest he will be entitled to claim that money back”. This outcome was approved by Charleton J in Dillon [5.3]. And, in Atlas Express v Kafco, Tucker J relied on this to conclude that Atlas had procured Kafco’s agreement to new charge by illegitimate pressure amounting to duress.

It would not be not be difficult for a Small Claims Court to conclude that Ryanair’s refusal to board you when you are at the check-in unless you pay the chargeback is “unconscionable” for the purposes of Pakistan v Times. In particular, the customer at check-in is just as much “over a barrel” in a situation of “take it or leave it” as Kafco and Victor Green were. This would mean that you (and Ursula Barry) would be entitled to recover the chargeback which you (and she) had paid at the check-in to board the subsequent flight.

Of course, this is not legal advice, nor is it a prediction that the Small Claims Court will inevitably hold in favour of plaintiffs who found themselves in situations similar to those in which Ursula Barry found herself. Instead, it is a hypothetical argument that things might not be entirely bleak for such plaintiffs if they stump up the €25 fee and sue Ryanair in the Small Claims Court for the return of the chargeback paid at the check in.



Update (14 October 2021): Conor Pope in today’s Irish Times reports that Bank of Ireland has admitted that it wrongly started a refund process against Ryanair in connection with Ursula Barry’s flight. The bank acknowledged that they “didn’t handle this matter appropriately” and they “have contacted the customer to rectify things”. This probably means that Ursula Barry is going to have the matter satisfactorily resolved, so she won’t have to brave the Small Claims Court. But this probably doesn’t cover anyone else is a similar position – by one estimate, there are probably no more than 100 such people – and it doesn’t change the analysis above that, if they do brave the Small Claims Court, they will have at least some legal legs to stand on.