Letting agent – Standard terms and conditions – Unfair Terms in Consumer Contracts Regulations 1999 – Directive 93/13/EEC – Claimant alleging certain terms unfair and not binding on consumers – Claimant seeking injunctive and declaratory relief – Claim allowed
The defendant estate agent used a standard form of agreement setting out terms on which it acted for landlords. The claimant had received complaints with regard to those terms and it commenced proceedings against the defendant. It alleged that parts of the standard terms and conditions infringed the Unfair Terms in Consumer Contracts Regulations 1999, which implemented Directive 93/13/EEC.
The terms in question concerned the payment of commission on the extension, renewal or holding-over of a tenancy by a tenant, or a party associated with the tenant, or on the sale of a property to a tenant. They also provided for the landlord’s continued responsibility for fees following the sale of the property subject to the tenancy. The claimant claimed declaratory relief and an injunction to restrain the defendant from infringing the regulations.
The defendant applied to strike out certain parts of the claim on the basis that the relief claimed was too wide. The judge struck out the claim for an injunction to prevent continued reliance on the terms in existing contracts on the ground that this fell outside the scope of what was permissible on a collective, rather than an individual, challenge. However, he held that declaratory relief might be available: see [2008] EWHC 1662 (Ch); [2009] Eu LR 32; [2008] 29 EG 91 (CS).
The Court of Appeal allowed the claimant’s appeal against that decision: [2009] EWCA Civ 288; [2009] 14 EG 87 (CS). The defendant subsequently replaced a number of the disputed terms to address some of the complaints. At a hearing to determine the fairness of the terms, the claimant argued that: (i) the language of some of the disputed provisions was not plain and intelligible, as required by regulation 6 of the 1999 Regulations, so as to exclude a term from the consideration of fairness; and (ii) the provisions relating to renewal or sales commission and those requiring the payment of commission despite a sale of the landlord’s interest to a third party were unfair.
Held: The claim was allowed.
The exclusion from consideration of fairness effected by regulation 6 applied to the core elements of the bargain between the supplier and the consumer. In the instant case, the disputed provisions did not form part of the core bargain and did not escape a fairness inquiry, although that did not mean that renewal commission per se could never constitute part of the core bargain and be immune from a fairness challenge under regulation 6(2).
The core had to be seen as such by both the defendant and the typical consumer. Although the defendant saw the commission as an overall price for the overall benefit of introducing a tenant to the property, the typical consumer, when approaching the defendant for assistance with this, would be concentrating only on the initial terms of engagement. The defendant’s publicity material focused almost exclusively on that stage of the operation and it was likely it was for that that the landlord would think it was paying. The defendant did not present its services in such a way as to refer to the question of renewal commission.
Further, the regulation 6 exclusion applied only if the provision in question was in plain, intelligible language. The contractual terms put forward by the seller or supplier had to be sufficiently clear to enable the typical consumer to understand not only the words used but also how the term affected its rights and obligations and those of the seller or supplier under the contract.
In regulation 6(2), “term” did not refer to a particular clause or condition in the seller’s or supplier’s documentation; it was directed to how the contract set out a particular obligation or right, whether it was contained in a single clause or condition or was to be found by drawing together elements of it from different places in the contractual documentation. If the regulation was to exclude an assessment of the fairness of that right or obligation, it was that which had to be set out in plain, intelligible language.
The renewal commission provisions in the defendant’s old terms were not drafted in plain and intelligible language. Those introduced into the new terms only exacerbated the position by camouflaging the renewal commission. Accordingly, those terms did not escape a fairness inquiry. Furthermore, if the renewal commissions for the typical consumer landlord were unfair in respect of its own renewals, the third–party renewal clause was a fortiori unfair.
Finally, the provision that commission should be paid to the defendant in the event of a sale of the property to the tenant was unfair for the purposes of the regulations. That clause imposed a potentially large financial liability on the landlord in respect of a transaction in which the defendant would have played no material part. The introduction of the tenant as a tenant did not count for those purposes. The liability arose before the landlord received any sale money, and existed even if the contract for sale was not completed. There was an obvious imbalance and this was not the sort of clause that a consumer landlord would expect when asking a letting agent to find a tenant for its property.
Nicholas Green QC, Helen Davies QC and Sarah Love (instructed by the legal department of the Office of Fair Trading) appeared for the claimant; Michael Kent QC and Andrew Davis (instructed by Mishcon de Reya) appeared for the defendant.
Eileen O’Grady, barrister