Abbott & Ors v RCI Europe

A contractual term permitting a timeshare exchange operator to use deposited rights for commercial purposes is not unfair merely because the operator may rent some inventory. The court must assess the contract as a whole, including the operator’s contractual duties to exercise discretion fairly and members’ ability to withdraw without penalty.

An unfair-term claim also requires proof of consumer detriment and causation. A contractual term is implied only where it is necessary for business efficacy or so obvious that it goes without saying. A fiduciary relationship does not arise merely because property is deposited with a commercial service provider and the provider has discretionary powers.

The claim was brought by four representative groups of timeshare members, together with other claimants, against the operator of the RCI Weeks exchange programme. The claimants alleged that RCI had removed or rented member-deposited timeshare rights, contrary to the contractual arrangements and representations made to members.

They relied on statutory unfairness, breach of contract, implied terms, fiduciary duties, misrepresentation and damages claims. The central issues were whether the contractual permitted-use clause was unfair, whether RCI owed fiduciary or custodial duties, whether representations were actionable and within time, and whether breach, causation and loss had been established.

1. Claim dismissed. The claimants established that, during the segmentation period, up to 20 per cent of deposited inventory was diverted before entering the exchange pool, contrary to the contractual description of the pool. They did not, however, prove that RCI’s conduct caused a shortfall in suitable exchange opportunities or exchanges of lower quality.

2. The permitted-use clause was not unfair under the Unfair Terms in Consumer Contracts Regulations 1999. The relevant assessment was of the contract as a whole. Members received trading power and access to an exchange system which RCI had to operate with reasonable care and skill and without exercising its discretion arbitrarily, capriciously or unreasonably. Membership could also be terminated without penalty, and deposited inventory could be withdrawn in the specified circumstances.

3. The clause did not alter the terms or characteristics of the service within Schedule 2 to the 1999 Regulations. If the clause had been unfair, regulation 8 would have prevented RCI from using inventory to the consumer’s disadvantage, but the claimants had not proved the necessary detriment or causation.

4. No implied term prevented RCI from removing or using timeshare rights for commercial purposes. Such a term was neither so obvious as to require no expression nor necessary to give the membership contract commercial or practical coherence.

5. No fiduciary, trust, agency or custodial relationship was established. The members retained no beneficial interest in inventory which they could no longer use. RCI could not act with single-minded loyalty to each member because members had competing interests in trading power and availability. The language of trust or fiduciary duty did not itself create such a relationship.

6. The misrepresentation claims failed. The relevant oral claims were time-barred, and the claimants had not established reliance on the brochure statements. In any event, the evidence did not establish loss caused by the representations. Claims based on the Consumer Protection from Unfair Trading Regulations 2008, the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010 and the Consumer Rights Act 2015 did not assist, principally because of their temporal or remedial limits.

7. The claims for compensatory, negotiating and account-of-profits damages also failed. Causation and quantum had not been properly pleaded or proved, and the exceptional conditions for an account of profits were absent.