Office of Fair Trading v Foxtons Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 10 July 2009 |
| Neutral Citation | [2009] EWHC 1681 (Ch),[2008] EWHC 1662 (Ch) |
| Court | Chancery Division |
| Date | 10 July 2009 |
| Docket Number | Case No: HC08C00498 |
[2008] EWHC 1662 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Morgan
Case No: HC08C00498
Nicholas Green QC and Helen Davies QC (instructed by The Office of Fair Trading) for theClaimants
Michael Kent QC and Andrew Davis (instructed by Mishcon de Reya) for the Defendant
Hearing dates: 10 th July 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic
Introduction
1. This judgment concerns Council Directive 93/13/EEC on Unfair Terms in Consumer Contracts (“the Directive”) and the Unfair Terms in Consumer Contracts Regulations 1999 (“the Regulations”) and, in particular, the role of the Office of Fair Trading and the powers of the court in relation to the Directive and the Regulations.
2. The Office of Fair Trading (“the OFT”) was established as a body corporate by section 1(1) of the Enterprise Act 2002 (“the 2002 Act”). The functions of the OFT are carried out on behalf of the Crown: section 1(2). Section 1(3) gives effect to Schedule 1 to the 2002 Act. By paragraph 13 of Schedule 1, the OFT has power to do anything which is calculated to facilitate, or is conducive or incidental to, the performance of its functions. By sub-sections (1) and (2) of section 2, the functions of the Director General of Fair Trading are transferred to the OFT and the office of the Director is abolished. By section 2(3), references in earlier enactments to the Director are read as references to the OFT. As will be seen, the Regulations refer to certain functions being performed by the Director General of Fair Trading. By reason of the 2002 Act, those functions are transferred to the OFT.
3. Foxtons Limited (“Foxtons”) is a large and well-known estate and lettings agent. According to a circular letter sent by Foxtons to clients or potential clients, Foxtons have in excess of 90,000 potential residential tenants registered with them and seeking accommodation.
Foxtons' terms and conditions
4. Foxtons have a standard form of agreement which records the terms and conditions on which Foxtons will act as agents for a landlord in connection with a letting of that landlord's property. Those terms and conditions refer to two levels of service: a Lettings Service and a Comprehensive Management Service. It is not necessary for present purposes to describe the detail of those services.
5. Foxtons' standard terms and conditions may have changed from time to time but the set of terms which is relevant in the present dispute was the set of terms supplied by Foxtons to the OFT in 2007 when the OFT asked Foxtons for their current set of terms.
6. The set of terms referred to above includes the following terms:
“1.0 Introduction of Tenant
1.1 In the event that Foxtons introduces a tenant who enters into an agreement to rent the landlord's property, commission becomes payable to Foxtons Ltd. (Please see 6.3 regarding outstanding fees.) The commission fee is payable on or before the commencement of the tenancy and upon any extension(s), renewal(s) or hold-over(s) thereof, and for any further periods for which rental income is received (hereafter referred to as renewal commission, see 2.14 below), whether or not negotiated by Foxtons. The scale of commission fees charged is as set out on pages 1 and 2”.
1.2 The commission fee is payable for any tenant introduced to the property by Foxtons, whether or not the tenancy is finalised by Foxtons. The commission fee is charged as a percentage of the total rental value of the agreed term as specified in the tenancy agreement, or where the tenant extends and/or holds over indefinitely, commission will be payable for the same period as the initial agreement subject to clause 1.5 below.
….
1.5 If the landlord or tenant terminates the tenancy agreement prior to the end of the tenancy term, and if in accordance with any break clause contained in the tenancy agreement at the time the agreement was executed. Foxtons will refund the commission for the remaining period of the tenancy. The commission will be refunded within 14 days of the tenant vacating the property.
2.14 Renewals and Extensions
2.14.1 Foxtons will endeavour to contact both landlord and tenant before the end of the tenancy to negotiate an extension of the tenancy, if so required.
2.14.2 We will also draw up the appropriate documents for the renewal of the tenancy for signature by both parties. The charge to the landlord for this is £ 60.
2.14.3 Renewal commission will become due in respect of renewals, extensions and hold-overs or new agreements where the original tenant remains in occupation. It will also become due where the incoming tenant is a person, company or other entity associated or connected with the original tenant, either personally, or by involvement or connection with any company or other entity with whom the original tenant is or was involved or connected. Where there is more than one tenant, renewal commission will be payable in full where any or all of them remain in occupation. Commission is due whether or not the renewal is negotiated by Foxtons.
2.14.4 Renewal commission is charged in advance, either as a percentage of the rental value of the new agreed term or where the tenant extends and/ or holds over indefinitely, commission will be payable for the same period as the initial agreement subject to clause 1.5 above. The scale of commission fees charged is as set out on pages 1 and 2.
….
5.1 Sale of Property to Tenant
In the event that the tenant, occupant or licensee of the property enters into an agreement with the owner/ landlord to purchase the property, a commission of 2.5% of the purchase price becomes payable by the owner/ landlord to Foxtons when contracts for the sale of the property are exchanged. Foxtons reserves the right to defer payment of this commission until completion.
5.2 Sale of Property By Landlord
Where a property is sold, transferred or otherwise dealt with, with the benefit of a tenancy, Foxtons' fees remain the responsibility of the original landlord for the duration of the tenancy and for any extensions, renewals or periods of holding-over, irrespective of whether negotiations were carried out by Foxtons. The landlord should instruct his solicitor to assign responsibility for Foxtons' fees to the purchaser.”
The Claim
7. On 25 February 2008, the OFT brought the present proceedings against Foxtons. The proceedings were brought by a Part 8 Claim Form. The endorsement on the Claim Form is some 8 pages long and runs to some 15 paragraphs.
8. The Claim Form pleads various provisions of the Regulations. It then sets out the terms which are said to be Foxtons' standard terms, as set out above in this judgment.
9. Paragraph 11 of the endorsement states:
“TheClaimanthasreceivedcomplaintsfromconsumersconcerningFoxton's(sic)standardresidentiallettingsterms,andtakestheviewthatas,usedincontractsconcludedwithconsumers,Foxton's(sic)standardresidentiallettingstermsareunfairwithinthemeaningofregulation5(1)ofthe[Regulations]because:
(a) Clauses 2.14.3 and 2.14.4, together with those parts of clauses 1.1, 1.2 and 1.5 relating to renewal commission (collectively “the renewal commission clause”) of those terms (and their previous equivalents) purport to entitle Foxtons to charge a landlord renewal commission (“the renewal commission”) if a tenant introduced by Foxtons (or an individual or company or other entity introduced by, or otherwise connected, with that tenant either personally, or by involvement or connection with any company or other entity with whom the original tenant is or was involved or connected) renews, extends or otherwise holds over his or her tenancy agreement or signs a new tenancy agreement, including in circumstances where Foxtons does not negotiate the renewal, extension or hold-over or provide any service(s) to the landlord in relation to that renewal, extension or hold-over. Further, the renewal commission is charged in advance, either as a percentage of the rental value of the new agreed term or where the tenant extends and/or holds over indefinitely, for the same period as the initial rental agreement;
(b) Clause 5.1 of those terms (and its previous equivalents) (“the sales commission clause”) purports to entitle Foxtons to charge a landlord sales commission (“the sale commission”) in the event that he or she sells his/her rental property to the tenant, occupant or licensee of the property, even if Foxtons neither negotiates the sale price nor assists in any way with the sale. Further, such sales commission is payable at the rate of 2.5% of the sale price;
(c) Clause 5.2 of those terms (and its previous equivalents) (“the third party renewal commission clause”) purports to entitle Foxtons to recover any renewal commission from a landlord under the renewal commission clause, even after the landlord sells his interest in the rental property to another landlord.
10. Paragraph 12 of the endorsement states:
“Further or alternatively, and contrary to the requirements of Regulation 7(1) of the [Regulations]:
(a) the renewal commission clause, and in consequence, the third party renewal commission clause, is not expressed in plain or intelligible language. In particular, both clauses purport to extend the class of person or persons whose occupation of the rental property will trigger the obligation to pay a renewal commission to Foxtons beyond the original tenant, but fail plainly or intelligibly to specify the nature of the relationship required between the original tenant and any other person for that...
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