Office of Fair Trading v Foxtons Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Waller,Lady Justice Arden,Lord Justice Moore-Bick |
| Judgment Date | 02 April 2009 |
| Neutral Citation | [2009] EWCA Civ 288 |
| Docket Number | Case No: A3/2008/1939 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 April 2009 |
[2009] EWCA Civ 288
[2008] EWHC 1662 (Ch)
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Mr Justice Morgan
CHANCERY DIVISION
Before : Lord Justice Waller Vice-president Of The Court Of Appeal, Civil Division
Lady Justice Arden And Lord Justice Moore-bick
Case No: A3/2008/1939
Nicholas Green QC and Helen Davies QC (instructed by The Office of Fair Trading) for the Appellant
Michael Kent QC and Andrew Davis (instructed by Mishcon de Reya) for the Respondents
Hearing dates : 9th, 10th February 2009
Lord Justice Waller :
This appeal raises an important point relating to the scope of the relief that the court can grant in proceedings brought by the Office of Fair Trading (“the OFT”), under the Unfair Terms in Consumers Contracts Regulations 1999 (“the UTCCRs”). The UTCCRs implemented Directive 93/13/EEC on Unfair Terms in Consumer Contracts.
Morgan J in a judgment handed down on 17 th July 2008 has struck out from the prayer for relief sought by the OFT (claimed on the basis that it establishes the unfairness of certain standard terms) words which would otherwise injunct the respondents Foxtons Ltd (“Foxtons”) from enforcing those terms in current contracts. The judge distinguished between the general challenge, which a body such as the OFT can make, and the challenge that an individual can make if sued. He has held that Foxtons should not be prevented from enforcing individual contracts already entered into, since the circumstances of those individual contracts might establish that in that individual contract the term was fair, even if, on the general challenge, the term has been held unfair. This is the OFT's appeal from that decision.
There is also a cross-appeal by Foxtons, whereby they wish to challenge the jurisdiction of the court to grant declarations in a case where the parties before the court are not the parties to the contracts in which the terms appear. This challenge failed before the judge and in the result he awarded Foxtons only 40% of their costs.
The judge sets out the statutory provisions by which the functions of the Director of Fair Trading were transferred to the OFT. There is no need to repeat that paragraph but it is necessary to note that where in the UTCCRs Director of Fair Trading is used, it must be understood to refer to the OFT.
Foxtons' terms
Foxtons are a large and well known estate agent. They have a set of standard terms which record the terms on which they act for landlords. Many of those landlords are consumers. The judge sets out in some detail the terms handed to the OFT in 2007 as Foxtons' standard terms in paragraph 6, but for the purposes of this appeal it is sufficient to say that amongst those terms were the following:—
i) Terms which purport to entitle Foxtons to charge a renewal commission if a tenant introduced by Foxtons renews or extends his tenancy, even where Foxtons have not negotiated the renewal or extension (“the renewal commission”);
ii) A term which purports to entitle Foxtons to charge a sales commission where a landlord sells to a tenant introduced by Foxtons, even though Foxtons neither negotiates nor assists in any way with the sale (“the sales commission”);
iii) A term which purports to entitle Foxtons to recover a commission from a landlord where that landlord has transferred the property to another and it is the other landlord that has renewed again, without any intervention from Foxtons (“third party renewal commission”) .
OFT's Claim
As will be apparent from the Directive and the UTCCRs, which I will have to set out in some detail below, there are two processes whereby a challenge can be made to the fairness of standard terms in a consumer contract. A consumer may assert unfairness when sued (“an individual challenge”); alternatively a challenge can be brought by a body such as the OFT (“a general challenge”). It was under the procedure set out in the regulations for a general challenge that the OFT commenced proceedings against Foxtons challenging the fairness of the above terms in their standard form of contract.
They brought the proceedings under Part 8. The claim form appended the standard conditions. In the body of the claim form the pleader set out the regulations providing the jurisdiction for a general challenge. The pleading then set out in some detail Foxtons' standard terms. It then asserted that the OFT had received complaints from consumers and itself took the view that (i) the renewal commission terms (ii) the sales commission clause and (iii) the third party renewal commission clause, were unfair.
It also asserted that the clauses were not in plain and intelligible language.
The final paragraphs and relief I should quote in full:—
“13. All of these clauses are not individually negotiated and are unfair in that, contrary to the requirement of good faith, they cause a significant imbalance in the parties' rights and obligations, to the detriment of Foxtons' consumer landlord customers.
14. The Claimant has raised the unfairness of these clauses with Foxtons in correspondence. However, to the date hereof, Foxtons has not removed these clauses from its standard residential letting terms.
Relief sought
15. In the premises, and in order to prevent harm to the interests of consumers, the Claimant seeks:
(a) A declaration that the renewal commission clause, the sales commission clause and/or the third party renewal commission clause of Foxtons standard residential lettings terms, or any similar terms or terms having like effect, are unfair terms in contracts concluded with consumers and, accordingly, that these clauses are contrary to Regulation 5(1) of the UTCCRs and are not binding on consumers pursuant to Regulation 8(1) of the UTCCRs; and/or
(b) a declaration that contrary to the requirements of Regulation 7(1) of the UTCCRs the renewal commission clause, the sales commission clause and/or the third party renewal commission clause are not expressed in plain or intelligible language; and/or
(c) an injunction pursuant to Regulation 12 of the UTCCRs, restraining Foxtons (whether by itself, its agents or howsoever) from infringing the UTCCRs in the respects identified in paragraph 10 and/or 14 above or any of them and/or from using, recommending for use, enforcing, attempting to enforce or otherwise relying on any such terms and/or similar terms and/or terms having like effect in contracts concluded with consumers.
(d) costs.
(e) such further or other relief as the court may direct.”
The claim form is supported by a statement from Mr Allen of the OFT. All it is necessary to say in relation to that statement is that although he gives examples of complaints by reference to individual contracts he recognises that the court will not be dealing with any specific contract.
The application
On 17 th March 2008, Foxtons applied to strike out parts of the relief as claimed. The application originally related to paragraphs 15(a) and (b) and (e) (i.e. as to whether it was permissible for the court to make declarations) and to preventing relief being given in relation to “previous equivalent terms and/or superseded contractual terms”. But during the hearing the application was amended to seek to strike out “15(c) (insofar as it seeks to restrain enforcement of terms in existing contracts)”. It is on this amendment that the judge concentrated the main part of his judgment, ultimately ruling in favour of Foxtons and striking out certain words. It is this issue on which the main arguments in the court of appeal were concentrated.
The Directive
It is common ground that since the United Kingdom intended by the UTCCRs to implement the Directive, the starting point for any consideration of the scope of the UTCCRs is the Directive itself. It is for that reason I will almost invariably refer to the Directive rather than the terms of the UTCCRs.
The recitals are important as the judge recognised. They include the following:—
“4. Whereas it is the responsibility of the Member States to ensure that contracts concluded with consumers do not contain unfair terms;
6. Whereas, in order to facilitate the establishment of the internal market and to safeguard the citizen in his role as consumer when acquiring goods and services under contracts which are governed by the laws of Member States other than his own, it is essential to remove unfair terms from those contracts;
8. Whereas the two Community programmes for a consumer protection and information policy (4) underlined the importance of safeguarding consumers in the matter of unfair terms of contract; whereas this protection ought to be provided by laws and regulations which are either harmonized at Community level or adopted directly at that level;
14. Whereas Member States must however ensure that unfair terms are not included, particularly because this Directive also applies to trades, business or professions of a public nature;
15. Whereas it is necessary to fix in a general way the criteria for assessing the unfair character of contract terms;
16. Whereas the assessment, according to the general criteria chosen, of the unfair character of terms, in particular in sale or supply activities of a public nature providing collective services which take account of solidarity among users, must be supplemented by a means of making an overall evaluation of the different interests involved; whereas this constitutes the requirement of good faith; whereas, in making an...
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