Office of Fair Trading v Foxtons Ltd

The court considered the scope of the Unfair Terms in Consumer Contracts Regulations 1999 and Council Directive 93/13/EEC, in particular the powers of the Office of Fair Trading to bring a collective (pre-emptive) challenge under regulation 12. The judge confirmed the important distinction between collective challenges, decided with reference to a typical consumer and typical circumstances, and individual challenges, decided having regard to the actual circumstances of the contracting parties (including factors relevant to the requirement of good faith under Article 3 and regulation 5).

The court held that the OFT has locus to bring a collective challenge and to seek injunctive and declaratory relief, but that the injunction and declarations sought could not be framed so as to determine every past individual contract or to prevent litigation in individual cases where particular facts might lead to a different result. Consequently the judge struck out part of the OFT’s claimed injunction (words restraining Foxtons from "enforcing, attempting to enforce or otherwise relying on" the terms in existing contracts) and struck out the OFT’s claim for a blanket declaration that the terms are not binding on consumers.

Background and parties: The Office of Fair Trading (OFT), as successor to the Director General of Fair Trading, brought proceedings under the Unfair Terms in Consumer Contracts Regulations 1999 challenging parts of Foxtons Limited's standard residential lettings terms. The OFT relied on Council Directive 93/13/EEC and the Regulations, alleging certain renewal, sales and third-party renewal commission clauses were unfair and not in plain, intelligible language.

(i) Nature of the claim/application:

• The OFT issued a Part 8 claim seeking: (a) declarations that the renewal commission, sales commission and third party renewal commission clauses were unfair and not binding on consumers pursuant to regulation 8(1); (b) declarations that the clauses breached regulation 7(1) on plain intelligible language; and (c) an injunction under regulation 12 restraining Foxtons from using, recommending, enforcing or otherwise relying on such clauses (including in existing contracts).

(ii) Issues framed by the court:

• Whether the OFT may, by way of a collective/pre-emptive challenge under regulation 12, obtain relief that has the practical effect of determining the validity or enforceability of the challenged terms in every past individual contract.
• How to assess unfairness in a collective challenge (typical consumer/typical circumstances) as opposed to an individual challenge (actual circumstances).
• Whether the OFT could obtain the form of injunction and the blanket declaration sought, and procedural issues (particulars, disclosure, use of CPR Part 8).

(iii) Court’s reasoning and conclusions:

• The judge explained the distinction between collective/pre-emptive challenges and individual ex post challenges and relied on the reasoning in the First National Bank authorities to hold that a collective challenge is to be assessed with reference to a typical consumer and typical circumstances. In an individual challenge the court must consider the actual circumstances attending conclusion of the contract and all other terms of the contract.
• An injunction under regulation 12 is available to the OFT, but an injunction framed so as to prevent Foxtons from enforcing or relying upon the challenged terms in existing contracts in all circumstances would improperly preclude Foxtons from litigating individual defences or asserting that particular individual circumstances distinguish a case from the typical one used in the collective assessment. Such a broad injunction would go beyond what regulation 12 permits.
• The judge therefore struck out the words "enforcing, attempting to enforce or otherwise relying on" in the OFT’s claimed injunction (paragraph 15(c)) and struck out the OFT’s blanket declaration that the clauses are not binding on consumers (paragraph 15(a)), while preserving the OFT’s locus to pursue a regulation 12 injunction limited to prospective use and to seek declaratory relief on issues that properly fall to be decided in the collective inquiry (for example whether the wording is plain and intelligible).
• The court gave guidance on procedural matters: it refused to order disclosure of complainants’ unredacted identities where the complainants wished anonymity, directed that particulars be sought by CPR Part 18 if required, and permitted the claim to proceed under Part 8 subject to appropriate timetabling.

The court allowed the defendant’s strike-out application in part. It held that the OFT may bring a collective challenge under regulation 12 and seek injunctions and declarations, but an injunction or declaration may not be framed to determine the enforceability of the challenged terms in every past individual contract or to prevent Foxtons litigating individual defences. Accordingly the court struck out the words "enforcing, attempting to enforce or otherwise relying on" from the OFT’s proposed injunction (paragraph 15(c)) and struck out the OFT’s blanket declaration that the terms are not binding on consumers (paragraph 15(a)). The court gave directions on procedure and refused to order disclosure of complainants’ unredacted identities.