Letting agent – Standard terms and conditions – Unfair Terms in Consumer Contracts Regulations 1999 – Directive 93/13/EEC – Appellant seeking injunction restraining respondent from enforcing contract terms and declaration that terms not binding on consumers – Whether relief available on “collective” challenge by appellant – Whether court properly striking out parts of claim – Appeal allowed – Cross-appeal dismissed
The respondent was a large and well-known estate agent, which operated a set of standard terms upon which it acted for landlords. The appellant had received complaints with regard to the terms of that contract, which prompted it to commence proceedings against the respondent. 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 a commission on any extension, renewal or hold-over of a tenancy by a tenant or person associated with the tenant, or on a sale of a property to a tenant, and the landlord’s continued responsibility for fees after any sale of the property subject to a tenancy. The appellant sought declaratory relief and an injunction restraining the respondent from infringing the regulations.
The respondent applied to strike out certain parts of the claim on the basis that the injunctive and declaratory relief that the appellant claimed was too wide. The judge struck out the claim for an injunction preventing continued reliance of 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 but held that declaratory relief might be available: see [2008] EWHC 1662 (Ch); [2008] 29 EG 91 (CS).
The appellant appealed. The respondent cross-appealed, seeking to challenge the jurisdiction of the court to grant declarations where the persons before the court were not the parties to the contracts in which the terms were included.
Held: The appeal was allowed; the cross-appeal was dismissed.
(1) (Moore-Bick LJ dissenting): Article 7 of the Directive was intended to cover existing as well as future contracts so that an issue on a general challenge could be the fairness of a term in a current contract. The words “concluded” or “continued use” could be construed so as to refer to contracts to be made or terms inserted into future contracts. However, they could also be construed as applying to existing contracts. Consumers would be inadequately protected 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. The system of pre-emptive challenges was a more effective way of preventing the continuing use of unfair terms than individual actions. 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 the power to prevent continued reliance upon that term by a supplier or service provider against a consumer. 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 the enforcement of that term or terms in existing contracts: Director General of Fair Trading v First National Bank plc [2001] UKHL 52; [2002] 1 AC 481 applied.
(2) The judge was right to find that the court could grant declarations. The respondent’s argument failed to take account of the fact that the appellant was given the power to make a general challenge whose object was to affect the rights of the service provider and consumers with which it dealt. That was the aim of the Directive in its pursuit of consumer protection. Accordingly, there was, as between the appellant and the respondent, an issue as to the fairness or otherwise of terms included in its standard terms. If the appellant succeeded in establishing the unfairness of certain terms or one or other of the terms, it would be entitled to a declaration of that which it had been given the right to prove. In cases such as the instant one it was likely to be useful and just to both parties to grant a declaration since, if unfairness were found, it would be important to identify which term and what aspect of it was unfair, and it would be better to have that in a declaration form rather than forcing persons to analyse the judgment in order to assess precisely what it decided: Gouriet v Union of Post Office Workers [1978] AC 435 and Meadows Indemnity Co Ltd v Insurance Corporation of Ireland plc [1989] 2 Lloyd’s Rep 298 considered.
(3) Per Moore-Bick LJ: The effect of an injunction, presumably in unqualified terms, prohibiting the supplier or service provider from seeking to rely upon the term in question in an existing contracts would be to shut out any argument as to the meaning and effect of that term and any reliance upon it. If the issue was not finally determined by the principles of estoppel by record, it would not be proper to achieve the same result by the exercise of the court’s discretionary powers. Nor was it appropriate in such cases to grant an injunction in unqualified terms on the grounds that the supplier could apply subsequently to have it varied. People needed to know where they stood.
Nicholas Green QC and Helen Davies QC (instructed by the legal department of the Office of Fair Trading) appeared for the appellant; Michael Kent QC and Andrew Davies (instructed by Mishcon de Reya) appeared for the respondent.
Eileen O’Grady, barrister