Effect of Code
Courts have approached the question of whether Codes of conduct establish enforceable legal rights in different ways, specifically in legal proceedings, either through claims or defences. Most Codes and the legislation under which they are made, do not explicitly state their intended legal effect.
The primary consequence of a Code lies is that it is a regulatory obligation upon financial service providers. Such providers may face investigation and sanctions by the Central Bank for breaching Code obligations. Consumers, including small businesses, can file complaints with the ombudsman based on breaches of the Code.
Codes typically lack precise legal language, consisting instead of general principles and notations without technical jargon.
A notable aspect of the 2013 legislation is the authority granted to the Central Bank to replace Codes with statutory instruments outlining relevant rights. Breaches of regulations set by the Central Bank confer legal rights on both business and consumer customers.
Attempts to Use Codes
Several attempts to use Codes to legal effect arose within the context of lenders seeking summary judgment for sums owed, largely originating from pre-financial crisis borrowing. In many instances, efforts were made to transfer these applications from summary procedures to full trials on the issue.
In pivotal cases, arguments suggesting that the Consumer Protection Code implied contractual terms or created legal obligations as a defence were dismissed. Courts upheld that loan repayments were due based on the loan agreement, and were unwilling to accept that Codes provided a defence for monies dues under the terms of the agreement.
Under the Code of Conduct on Mortgage Arrears, specific steps are required to address mortgage repayment issues before legal action can commence. As the Code explicitly required exhausting this process before legal proceedings for repossession, courts deemed this obligation necessary. In other cases, courts, exercising discretion, adjourned and refused possession orders due to breaches of the Code.
However, beyond these specific instances, the general view of courts is that Codes usually do not create legally binding rights or defences. Nevertheless, their impact in a specific case depends on interpretation.
The Supreme Court concluded that the Codes imposed various obligations of varying importance and specificity. In cases like the Conduct of Mortgage Arrears, clear obligations existed before initiating mortgage proceedings. In contrast, other obligations were more general and less likely to create legal rights or obligations.
Generally, obligations within the Code are not enforceable, as legislation has not expressly made them so. A breach of a Code typically doesn’t alter an agreement’s enforceability, except in exceptional circumstances, such as the Code of Conduct on Mortgage Arrears, which mandates specific steps before legal proceedings can be initiated.