Jones & Anor v Roundlistic Ltd

The majority held that the exclusion for contractual terms reflecting mandatory statutory provisions covers terms whose content is prescribed by legislation. It does not ordinarily cover a pre-existing term carried into a new lease simply because a renewal statute requires the new lease to contain the same terms. The relevant term for causation is the term in the current contract. Significant imbalance alone is insufficient: good faith is an additional requirement under the Unfair Terms in Consumer Contracts Regulations 1999. A statutory renewal procedure may support good faith where the consumer has legal advice and an opportunity to renegotiate or seek a tribunal determination, but does not do so. The term was therefore not unfair and the appeal was dismissed.

The appellants were lessees of a maisonette whose lease prohibited use other than as a single private dwelling occupied by the lessee and family. After obtaining a statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993, they sublet the property during an overseas posting.

The First-tier Tribunal found the covenant unfair and non-binding under the Unfair Terms in Consumer Contracts Regulations 1999. The Upper Tribunal reversed that decision, holding that the Regulations did not apply or, alternatively, that the term did not cause the imbalance and was not contrary to good faith: [2016] UKUT 325 (LC). The central issues on this second appeal were whether the statutory exclusion applied and whether the term was unfair.

1. Disposition. The appeal was dismissed unanimously, although the judges adopted different reasoning. The determination that the appellants had breached the lease therefore stood.
2. Regulation 4(2). Sir Andrew McFarlane P held that the exclusion applied because the landlord was obliged under sections 56 and 57 of the Leasehold Reform, Housing and Urban Development Act 1993 to grant a new lease on the same terms, subject to limited modifications. Lord Justice Underhill, with whom Lord Justice Singh agreed, took the contrary view. The exclusion is confined to terms whose content is prescribed by legislation or regulation. Section 57(1) prescribed continuity of terms, not their substance, so the provision did not exclude paragraph 4.
3. Causation. The President and Underhill LJ agreed that the relevant term was the term in the 2012 lease. The earlier lease no longer had legal force between the parties. The current term could therefore be the source of the significant imbalance for the purposes of regulation 5(1).
4. Good faith. The controlling majority held that good faith is an additional element of the unfairness test and does not merely repeat the significant-imbalance inquiry. Applying the principles in Director General of Fair Trading v First National Bank plc [2001] UKHL 52, Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa [2013] EUECJ C-415/11 and Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67, the court held that the statutory renewal process gave the lessee an opportunity to seek renegotiation or a tribunal determination under section 57(6)(b), with legal advice available. Proceeding without challenging paragraph 4 meant that the landlord could reasonably assume that the term would have been accepted in individual negotiations. The term was therefore not contrary to good faith and was not unfair.

1. Court of Appeal (Civil Division). The second appeal was dismissed unanimously: [2018] EWCA Civ 2284.
2. Upper Tribunal (Lands Chamber). The Upper Tribunal allowed Roundlistic Limited’s appeal from the First-tier Tribunal and held that paragraph 4 was not invalidated by the Unfair Terms in Consumer Contracts Regulations 1999: [2016] UKUT 325 (LC).
3. First-tier Tribunal. The tribunal had found paragraph 4 unfair and non-binding under the Regulations and determined that the appellants had not breached the lease on that basis.