Letting agent – Standard terms and conditions – Unfair Terms in Consumer Contracts Regulations 1999 – Directive 93/13/EEC – Claimant seeking injunction restraining defendant from enforcing certain contract terms and declaration that terms not binding on consumers – Whether such relief available on “collective” challenge by claimant – Application to strike out allowed
The defendant was an estate and lettings agent that provided letting services to landlords pursuant to a standard form of contract. The claimant received various complaints regarding the terms of that contract, as a result of which it brought proceedings against the defendant alleging that certain of its standard terms and conditions infringed the Unfair Terms in Consumer Contracts Regulations 1999 and 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 claimant sought: (i) a declaration that those terms, or any similar terms or terms having like effect, were unfair in contracts concluded with consumers, contrary to regulation 5(1) of the 1994 Regulations, and were not binding upon them pursuant to regulation 8(1) and were not expressed in plain or intelligible language, contrary to regulation 7(1); and (ii) an injunction, pursuant to regulation 12, restraining the defendant from infringing the regulations and from “using, recommending for use, enforcing, attempting to enforce or otherwise relying on” such terms in contracts with consumers.
The defendant applied to strike out those parts of the claim that sought: (i) an injunction restraining the enforcement of terms in existing contracts or previous equivalent terms; and (ii) a declaration that the terms in question were not binding on consumers. It contended that such relief was not available on a “collective” challenge by the claimant concerning the use of such terms in general, rather than a challenge by an individual in which the specific circumstances of the particular case could be examined.
Held: The application was allowed.
(1) The injunction sought by the claimant was too wide to be granted in the present proceedings. A distinction had to be made between a collective or pre-emptive challenge to terms, where the claimant sought an injunction under regulation 12, and an individual challenge to a term, where the proceedings involved the consumer and the other contracting party. In an individual challenge, the court would be able to apply the requirements of the 1994 Regulations to the assessment of fairness on the specific facts of the case, including all the circumstances attending the conclusion of the contract, the other terms of the contract and the situation and bargaining position of the particular consumer. The court would be required on such a challenge to have regard to the actual circumstances and the actual parties involved. On the other hand, a collective challenge would provide no specific facts to enable the court to carry out the necessary assessment of whether there was in fact fair dealing. A collective challenge would proceed on the basis of a typical consumer and typical circumstances, and would not determine all the issues that might arise in individual cases: Director General of Fair Trading v First National Bank plc [2001] UKHL 52; [2002] 1 AC 481 applied. It was possible that a term that was considered unfair as part of a collective challenge would not be so considered on an individual challenge, and vice versa: Bryen & Langley Ltd v Boston [2005] EWCA Civ 973; [2005] BLR 508 applied.
Although an injunction concerning future contracts would have an effect upon future individual challenges, it would be open to the defendant to show that the position of the particular consumer in an individual case was materially different from the position of the typical consumer previously considered by the court such that the term was not unfair with regard to that consumer. An injunction in the terms sought by the claimant would deprive the defendant of that possibility; it would be deprived of its right to litigate and to have the determination of the court in an individual challenge to the term. The court would effectively be ruling on the defendant’s rights in every individual case without complying with the requirement to have regard to the specific circumstances of the case.
The court could not grant the injunction sought on the basis that: (i) a term was so irredeemably unfair that it could never be fair in any individual case; or (ii) it would be unfair in the majority of cases. On a collective challenge, the court could not be expected to assess whether, on the facts of cases that were not disclosed to the court, it was possible for a case to arise in which the term would not be considered unfair. Consequently, the reference to “enforcing, attempting to enforce or otherwise relying on” the terms in question would be struck out from the claimant’s claim. A declaration that the relevant terms were not binding upon consumers was objectionable for the same reasons.
(2) A declaration that certain terms were not expressed in plain and intelligible language could be granted on a collective challenge because the outcome of the issue depended upon the language used and not upon the circumstances of individual cases.
Nicholas Green QC and Helen Davies QC (instructed by the legal department of the Office of Fair Trading) appeared for the claimant; Michael Kent QC and Andrew Davies (instructed by Mishcon de Reya) appeared for the defendant.
Sally Dobson, barrister