Detention complaint – still no response from the Supreme Cour

On 12 July 2023, the Supreme Court was to hear a case concerning an allegation of detention in matters related to Swiss franc loans and determine whether a loan agreement is a mutual agreement. Unfortunately, the hearing was postponed until October 2023, which prolongs the state of uncertainty and, in turn, adversely affects the situation of borrowers.

It should be recalled that the right of retention is an institution described in Article 496 of the Civil Code, which allows, in the event of a mutual agreement being declared invalid, to withhold performance until the other party offers to return the performance received or secures a claim for its return. In practice, this means that if a borrower has received, for example, PLN 300,000 from a bank under a loan agreement and has repaid a total of PLN 250,000, the bank, by effectively raising the defence of retention, is not required to perform its obligation to pay PLN 250,000 to the borrower until the borrower offers to return the PLN 300,000 to the bank or secures the return of that amount.

It should be remembered that the resolution of this issue is of significant importance for the cases currently pending, as some judges consider the retention defence to be valid. Although its acceptance does not lead to losing the case, it delays the enforcement of the payment claim until the borrower returns the benefits received or provides appropriate security for them, which hinders the swift enforcement of the judgment.

In addition, upholding the defence of retention means that the bank is not considered to be in default, which means that the borrower loses the right to interest. On the other hand, the bank is not liable for the delay in performance, but still has at its disposal the funds that should be returned to the consumer.

The defence of retention is also being examined by the CJEU in case C-424/22, following a request for a preliminary ruling from the Regional Court in Krakow on 31 January 2022. The court asked whether the provisions of Directive 93/13/EEC preclude the application of the right of retention in cases where a trader has used unfair contract terms and is therefore obliged to repay the borrower. In the opinion of the Regional Court, a credit agreement is not a reciprocal agreement, therefore the defence of retention should not be taken into account in cases concerning Swiss franc loans. The Regional Court found that its application is pointless, as it leads to an excessive and unnecessary burden on borrowers and violates the principle of non-binding nature of unfair contractual terms on consumers.

It is worth noting that the Regional Court in Krakow pointed out that postponing the effect of invalidity does not serve the restitutory purpose of the directive. The application of the right of retention continues to create difficulties for consumers in asserting their rights, making the enforceability of the judgment dependent on their collection of additional, often significant amounts. The Regional Court in Krakow rightly pointed out that the defence of retention is, in principle, applicable regardless of whether the borrower has repaid the nominal amount of the loan or not. This, in turn, makes it difficult to enforce the judgment and forces borrowers to raise funds again or at least secure the repayment of their performance, regardless of how much capital they have already repaid.

All this results in a double burden on consumers: they must not only settle the outstanding part of the debt, but also ensure the repayment of the entire amount of capital paid out in order to ensure the enforcement of the judgment. Such circumstances significantly affect the enforceability of the judgment.

The court rightly noted that the defence of retention is not acceptable, as banks have access to an effective instrument in the form of a set-off defence, which protects their claims for repayment of capital. In addition, the court noted that the banks raise the defence of retention only as an option, which means that they do not withhold performance because they have an effective claim against the borrowers, but because they simply deny the validity of the claim for annulment of the agreement.

The arguments presented by the Regional Court appear to be accurate and understood by some judges, but without a clear ruling on this issue by the Supreme Court or the CJEU, uniform case law on this matter cannot be expected.

Author: Mateusz Kołodziejak, attorney-at-law