C-481/99

4. By proceedings commenced in January 2. Three issues are raised by the two 1998 Mr and Mrs Heininger purported to questions referred. The first is whether the cancel their statement of intent to conclude doorstep-selling directive applies to mort- the loan agreement, in accordance with gage loan agreements. Assuming that it Paragraph 1 of the Gesetz über den Wider- does apply, the second issue relates to the ruf von Haustürgeschäften und ähnlichen operation of the right of cancellation given Geschäften (Law on the Cancellation of to the consumer. The third issue concerns Doorstep Transactions and Analogous Member States' discretion to place a time- Transactions, hereinafter the 'HWiG') of limit on the right to cancel a mortgage loan 16 January 1986. 5 agreement. 4 — See page 3 of the order for reference. In the Bürgerliches Gesetzbuch (German Civil Code), a Grundschuld ¡s distin- 1 — Original language: French. guished from a Hypothek by the fact that it is non-accessory 2 — OJ 1985 L 372, p. 31, hereinafter 'the doorstep-selling (Paragraph 1192(1)). It provides better collateral than a directive'. Hypothek because it subsists regardless of what becomes of the debt secured. 3 — OJ 1987 L 42, p. 48, hereinafter 'the consumer credit directive'. 5 — BGBl. I, p. 122.

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They claim they signed the agreement I I— The legislative background under the influence of an independent estate agent acting on the defendant's behalf. The estate agent had called to their home unsolicited on a number of occasions. He had 'talked them into' 6 buying the apartment and contracting the loan with- out telling them of their right to cancel the A — Community law contract.

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address of a person against whom that right may be exercised.

where the visit does not take place at the express request of the consumer.'

8. Article 3(2) provides:

Member States shall ensure that their national legislation lays down appropriate 'This Directive shall not apply to: consumer protection measures in cases where the information referred to in this Article is not supplied.'

12. Article 1 of the directive provides:

'1. This Directive applies to credit agree- ments.

13. Article 2 provides:

2. For the purpose of this Directive:

' 1 . This Directive shall not apply to:

(a) credit agreements or agreements pro- mising to grant credit:

B — German law11 17. Paragraph 5(2) of the HWiG makes an exception to the scope of the law by providing that where a transaction within the meaning of Paragraph 1(1) also con- 15. Paragraph 1 of the HWiG provides for stitutes a transaction within the scope of a right of cancellation by the customer, the the Consumer Credit Law (Verbraucherk- reditgesetz) only the provisions of the latter are to apply. 8 — This article sets out the particulars that must be contained in the credit agreement. 9 — Article 6 lays down consumer information requirements. 10 — Articles 7 to 12 deal with the rights and duties of the parties to a credit agreement and with the obligations of Member States. 11 — The HWiG and the VerbrKrG were amended by the Law of 27 June 2000 (BGBl. 2000 I, p. 897, 905-906). The amendment affected Paragraphs 1 and 7 of the VerbrKrG and Paragraphs 1 and 2 of the HWiG. The new Paragraph 19 of the VerbrKrG and the new Paragraph 9(3) of the HWiG provide that the existing versions of the two laws are to apply to agreements made prior to 1 October 2000. 18. Paragraph 1 of the Verbraucherkredit- For the purposes of this case, the relevant versions of the HWiG and the VerbrKrG are those in force as of the date gesetz (Consumer Credit Law Amending of the order for reference. the German Code of Civil Procedure and

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HEININGER

Other Laws, hereinafter the 'VerbrKrG') 12 2. Paragraph 4(1), fourth sentence, sub- defines its scope as follows: paragraph 1(b) and Paragraphs 7, 9 and 11 to 13 apply to credit agreements in which credit is conditional on the security of a charge on land and is granted on terms normal for credits secured by a charge on land and the '(1) This law applies to credit agreements interim financing of same...' and to credit intermediation agree- ments between a party acting in the course of a trade or profession who grants credit (creditor) or engages in credit arrangement or referral (credit intermediary) and a natural person, unless, under the terms of the agree- 20. Paragraph 7 of the VerbrKrG, which ment, the credit is intended for a establishes a right of cancellation by the business already being carried on by consumer, provides as follows: the natural person (the consumer).

III — The questions referred

Is the national legislature precluded by the doorstep-selling directive from applying the 21. Considering that the main proceedings time-limit on the right of cancellation raise an issue concerning the interpretation under the third sentence of Paragraph 7(2) of Community law, the Bundesgerichtshof of the Verbraucherkreditgesetz in cases stayed proceedings and referred the follow- where the doorstep transaction concerns ing two questions to the Court for a the grant of a mortgage loan within the preliminary ruling: meaning of Paragraph 3(2)(2) of the Ver- braucherkreditgesetz and where the notice required under Article 4 of the Directive was not given?'

25. Having made that preliminary point, I now turn to examine the request for At the hearing the defendant acknowledged interpretation referred to the Court. having encouraged Mr and Mrs Heininger to purchase a property and to take out a loan for that purpose. But it also pointed out that there was a seven-week gap between the agent's visit to the claimants' home and the actual execution of the loan agreement. It laid particular emphasis on the fact that Mr and Mrs Heininger had B — Answer to the question referred attended at the bank branch in order to sign the contract and complete the formalities relating to the agreement. If this claim proves correct, then the facts at issue in the main proceedings do not fall within the 26. By its first question, the national court scope of the doorstep-selling directive. essentially asks whether the doorstep-sell- ing directive applies to mortgage loan agreements.

13 — See, in particular, Salgoil (Case 13/68 [1968] ECR 453) Oehlschläger(Case 104/77 [1978] ECR 791, paragraph 4); 24. On this point, it may be recalled that in Dumon and Froment (Case C-235/95 [1998] ECR I-4531, paragraph 25, and Lirussi and Bizarro (Joined Cases proceedings under Article 234 EC, which is C-175/98 and C-177/98 [1999] ECR I-6881, paragraph based on a clear separation of functions 14 — See, inter alia, Oehslchläger, cited above, paragraph 4, between the national courts and the Court AC-ATEL Electronics Vertriebs (Case C-30/93 [1994 ] ECR I-2305, paragraph 16), and Phytheron international of Justice, any assessment of the facts in the (Case C-352/95 [1997] ECR I-1729, paragraph 11).

15 — In Travel Vac (Case C-423/97 [19991 ECR I-2195), the Court had to consider whether the doorstep-selling direc- tive applies to time-share contracts. There are two important points to bear in mind. First, time-share contracts have their own very specific character. They involve the purchase of a right to part-time use of a Secondly, it may reasonably be assumed property coupled with a supply of services. Secondly, the that if the authors of the doorstep-selling Court aid not give a clear interpretation of Article 3(2)(a) of the doorstep-selling directive in that case. It limited itself directive had intended to exclude credit to observing, in paragraph 25 of the judgment, that since 'a contract like that at issue in the main proceedings does not agreements from its scope they would have only concern the right to use a time-share apartment, but included express language to that effect, as also concerns the provision of separate services of a value higher than that of the right to use the property, that they did in the consumer credit directive. contract is not covered by the exception provided for in Article 3(2)(a) of Directive 85/577'. By this statement, in my opinion, the Court does not expressly exclude mort- gage loan agreements from the scope of the doorstep- selling directive. I therefore take the view that the issue has 16 — Johnston (Case 222/84 [1986] ECR 1651, paragraph 36) not yet been resolved by the Court. and Kreil (Case C-285/98 [2000] ECR I-69, paragraph 20).

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31. Furthermore, it is my view that credit 33. The second series of observations is agreements do not fall within the scope of concerned with the objectives of the door- Article 3(2)(a) of the doorstep-selling direc- step-selling directive. The directive expli- tive. On this point, I do not concur with the citly refers to the vulnerability of consu- argument of the Spanish Government mers where this type of commercial prac- which, in its observations, contends that a tice is employed. mortgage loan agreement made with a view to the purchase of the property charged is a contract concerning rights relating to immovable property on the ground that it creates a right in rem over the property.

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35. The objective of consumer protection 38. The purpose of the doorstep-selling has also been a constant and central directive is thus to protect the consumer concern in the Court's case-law. not 'because he purchases certain goods but because of the way in which the goods are purchased or the contract concluded'. 24

36. In Dietzinger 20 the Court held that the doorstep-selling directive 'is designed to 39. I should add that in Member States protect consumers by enabling them to where such contracts are executed before withdraw from a contract concluded on the an official whose function is to satisfy initiative of the trader rather than of the himself as to the parties' consent, legal customer, where the customer may have certainty is safeguarded by the involvement been unable to see all the implications of of this third party and by the measure of his act'. 21 The Court subsequently con- formality entailed. firmed this interpretation in Berliner Kindl Brauerei. 22

42. If the doorstep-selling directive does apply to a mortgage loan agreement, the national court essentially asks whether 46. The question does not arise in the same Article 5 of the directive must be inter- terms before this Court. As the Commis- preted as meaning that a consumer who has sion notes in its observations, 'the issue of entered into such an agreement in the the relationship between the two directives circumstances specified by the directive is not a matter of precedence...'. 26 may exercise the right of cancellation provided for by that article.

47. Article 2(1)(a) of the consumer credit directive does not apply here. To inquire as to a relationship of precedence between the two directives presupposes that they both apply to the case. But that is not the 43. Before answering this question, I wish position. to comment on the form of words employed by the referring court. That court inquires whether there is a relationship of 'precedence' as between the doorstep-sell- ing directive and the consumer credit directive. The use of the term 'precedence' in the order for reference is inapt, to my 48. I therefore take the view that the right mind. It seems to derive from considera- of cancellation provided for by the door- tions which relate exclusively to national step-selling directive applies to mortgage law. loan agreements entered into as doorstep transactions.

49. The referring court then asks about the

44. The VerbrKrG goes further than the period w i t h i n w h i c h this right of c a n c e l l a - consumer credit directive. There is no right of cancellation under the directive. The 25 — The order for reference reveals that there have been difficulties in German law with interpreting the application VerbrKrG, on the other hand, does confer of these two laws and that the academic authorities are in such a right on the consumer. disagreement on the 'precedence' question. 26 — At page 8.

54. However, the question to be answered is whether the national provisions referred to above satisfy the Community law requirements on consumer information as 52. Under Paragraph 7 of the VerbrKrG the laid down in the doorstep-selling directive. consumer has one week in which to give These may be readily identified. written notice of cancellation of the agree- ment. Two distinct circumstances are con- templated. 27 — See Paragraph 7(2) of the VerbrKrG.

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55. Article 4 of the doorstep-selling direc- 59. In addition, it is clear from Article 4 tive is meant to be explicit. It provides that that this information obligation rests on the 'traders shall be required to give consumers trader, who is 'required' to comply with it. written notice of their right of cancellation The obligation is one of result. within the period laid down in Article 5...'.

60. Failure to comply with the requirement constitutes an infringement of an individual 56. Article 5(1) of the doorstep-selling right enshrined in the originating directive. directive gives the consumer a period of not less than seven days from receipt of the information within which to renounce the effects of his undertaking.

The following point must be emphasised. If the consumer is not informed of the existence of a right of cancellation, it is impossible for him to exercise it. The 57. It is clear from these provisions that a effectiveness of this right thus depends time-limit is expressly prescribed only in entirely on the action of the trader. The the case where the consumer's right to doorstep-selling directive places a special information has been observed. responsibility on his shoulders because the consumer's right is dependent on his con- duct. Non-compliance by the trader can thwart the application of the directive.

62. In the present case, the one-year time- limit laid down by the national legislation is at variance with the mandatory nature of the right to information. Without notice of the existence of a right of cancellation the VII— Whether the temporal effect of the consumer is kept in the dark about his right judgment should be limited to go back on his initial decision to contract. That being so, the fixing of a time-limit is tantamount to implicitly authorising the trader to avoid an obliga- 66. In their observations both the defen- tion flowing from the EC Treaty and dant and the German Government drew the explicitly laid down in the doorstep-selling Court's attention to the financial conse- directive. quences that would ensue if the right of cancellation was not subject to a time-limit. They maintain that to apply the right of cancellation provided for under the door- step-selling directive to mortgage loan agreements would represent a significant financial risk for the lending institutions and one they certainly do not wish to 63. At the hearing the defendant argued absorb themselves. that the right of cancellation had to be subject to a time-limit in the interest of legal certainty.

67. Since I am suggesting that the Court answer the question referred in the affir- mative, I have to consider whether the conditions for limiting the temporal effects of the judgment are met. 64. That argument must be rejected. The defendant is bound to observe the consu- mer's right to information. That require- ment is not implicit. To allow a limitation of time would be to encourage the trader in his dereliction of duty vis-à-vis the consu- 68. According to the settled case-law, 'the mer. Court may exceptionally, having regard to

30 — Case C-57/93 Vroege [1994] ECR I-4541, paragraph 21, 71. On the other hand, I doubt whether the and Case C-128/93 Fisscher [1994] ECR I-4583, para- second condition of 'serious difficulties' is graph 18. 31 — Vroege, paragraph 21, and Fisscher, paragraph 18. A satisfied. The defendant has certainly out- perusal of the case-law also brings to light a third and lined the reasons why the judgment could equally important criterion: 'a limitation of the effects in time of an interpretative preliminary ruling can only be in have unbearable consequences for banks the actual judgment ruling upon the interpretation sought' (Vroege, paragraph 31). This condition clearly is fulfilled which have engaged in this form of mort- in this case since the Court has never previously given judgment on the application of the doorstep-selling gage lending. However, it has not adduced directive to mortgage loan agreements and on whether the right of cancellation can be limited in time where any specific evidence in support of its notice of that right has not been given. contention. I am therefore unable, on the 32 — See, inter alia, Case C-262/88 Barber [1990] ECR I-1889, basis of the available evidence, to suggest paragraph 43. that the Court limit the temporal effects of 33 — See, inter alia, Case 61/79 Denkavit Italiana [1980] ECR 1205, paragraphs 19 to 21. its judgment.

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Conclusion

72. In the light of these considerations, I propose that the Court give the following answers to the questions referred by the Bundesgerichtshof: