Office of Fair Trading v Foxtons Ltd [2009] EWCA Civ 288, [2009] All ER (D) 31 (Apr)
Court of Appeal, Civil Division, 2 April 2009, Waller, Arden and Moore-Bick LJJ
Under the Council Directive (EEC) 93/13 (on unfair terms in consumer contracts) the court has power to determine existing as well as future contracts under Art 7 of the Directive. It also has jurisdiction to grant declarations in a case where the parties before the court are not the parties to the contracts in which the terms appeared.
Nicholas Green QC & Helen Davies QC (instructed by the Office of Fair Trading) for the claimant. Michael Kent QC & Andrew Davis (instructed by Mishcon de Reya) for the defendant.
The defendant was a large and well-known estate agent. It had a set of standard terms on which it acted for landlords. Many of its client landlords were consumers. In February 2008, the claimant issued proceedings under CPR Pt 8, contending that the defendant’s standard terms relating to, inter alia, renewals commissions, sales commissions and third-party renewals were unfair within the meaning of reg 5 of the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083). Those Regulations implemented the Directive. The claimant further alleged that certain clauses were not expressed in plain and intelligible language, contrary to Art 7(1) of the Directive.
The claimant sought declaratory and injunctive relief. The defendant applied to have aspects of the relief sought struck out on the ground that the claimant was not entitled to the breadth of injunctive and declaratory relief pleaded. The judge found that the injunctive and declaratory relief sought by the claimant was too wide and struck out the parts of the claims for relief which fell outside the scope of what was permissible on a collective challenge. The claimant appealed. The defendant crossappealed against a finding that the court had jurisdiction to grant declarations in a case where the parties before the court were not the parties to the contracts in which the terms appeared.
Waller LJ:
The claimant submitted that the obligation on member states under the Directive was to stop the use of unfair terms in consumer contracts, and that that required being able to injunct the continued reliance on unfair terms in existing contracts.
His lordship observed that the Regulations implemented the Directive and it was thus the proper construction of the Directive with which the court was primarily concerned.
His lordship was quite clear that Art 7 of the Directive was intended to cover existing as well as future contracts, and that thus an issue on a general challenge could be the fairness of a term in a current contract. The language “concluded” or “continued use” was capable of being construed so as to refer to contracts to be made or terms inserted into future contracts. They were also, however, well capable of being construed as applying to existing contracts.
It would be quite inadequate protection to consumers if a court on a general challenge, having found a term as used in current contracts to be unfair, had no power to prevent the supplier or seller from continuing to enforce that term in current contracts. It was therefore most unlikely that the Directive intended that a general challenge should not relate to a standard term in current contracts and did not intend the courts of member states to have power to prevent continued reliance on that term by a supplier or service provider against a consumer.
If a general challenge had failed, a consumer could not be precluded from asserting unfairness relying on the particular circumstances of the individual case. The consumer would have to demonstrate how in his case the findings of the general challenge were not apposite. In such a case the consumer would also have the term construed in the way most favourable to him thus possibly making it more difficult to establish unfairness.
It did not follow that a supplier had to have the right to continue to enforce a term in an individual case where a general challenge had succeeded. His lordship accepted that as between an individual and the estate agent one of the reasons why if the general challenge had failed an individual could still challenge the fairness in proceedings brought against that individual was that the decision on the general challenge was not res judicata.
It followed that if a general challenge had succeeded the matter was not res judicata as between the individual and the agent and that had to be as true for future contracts as current contracts. But once the issue had been decided as between the claimant office and the estate agents, it was that decision that entitled the claimant to seek an injunction preventing continued use by the agents of that term in future contracts and in existing contracts.
The object of providing for a general challenge was to provide an effective way of protecting consumers who might be reluctant to resist letters from or proceedings taken by the more powerful suppliers. If the general challenge succeeded in relation to standard terms being used in current contracts, the court would have found that those particular terms in use in a standard form of contract with consumers was unfair. It was a mischaracterisation of the court’s finding that it had simply found a term to be unfair in a “typical case”. The true position was that it had found those terms to be unfair in a consumer contract using as its touchstone the typical consumer so as to apply the Art 4 criteria as best it could.
Prima facie, in a situation where on a general challenge a court had found a term or terms in a set of standard conditions in use in current contracts unfair, it had to be a proper exercise of its power to grant an injunction to prevent enforcement of that term or terms in existing contracts. His lordship went on to allow the appeal and dismiss the cross-appeal.
