OFT welcomes Court of Appeal Judgment in Foxtons case on Unfair terms

38/09 2 April 2009

The OFT has today welcomed a Court of Appeal Judgment confirming its views on the application of the Unfair Terms in Consumer Contract Regulations 1999 (UTCCRs) ahead of a substantive hearing against Foxtons Limited at the end of this month.

The OFT commenced High Court proceedings against Foxtons in February 2008 seeking an injunction under the UTCCRs preventing the estate agency using terms, considered by the OFT to be unfair, in its lettings agreements with landlords.

During the preliminary stages of these proceedings the OFT appealed against a ruling by Mr Justice Morgan which accepted arguments from Foxtons that any injunction on unfair terms could only apply to future contracts, rather than preventing the use or enforcement of unfair terms in existing ones.

Today, the Court of Appeal overturned this ruling, confirming the OFT's long-held view that it can take enforcement action under the UTCCRs to protect consumers in relation to both existing and future contracts. The Court of Appeal stated that the UTCCRs aim to protect consumers, and were of the view that traders should not have the freedom to pursue existing customers without restriction, in correspondence or by litigation, in order to enforce contractual terms that have been found to be unfair.

The fairness of the terms in any Foxtons' contract themselves have not yet been considered and this will form the substantive case listed in the High Court during the week commencing 27 April.

The Foxtons' terms on which the OFT has sought an injunction can potentially require landlords to pay Foxtons substantial sums in commission, where a tenant continues to occupy the landlord's property after the initial fixed period of the tenancy has expired when Foxtons plays no part in persuading the tenant to stay, and no longer collects the rent or manages the property. The OFT has also objected to Foxtons' terms that require a landlord to pay these sums after they have sold the property. Foxtons contends that such terms with landlords are not unfair.

NOTES

1. The OFT is seeking an enforcement order against Foxtons Limited under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). For further information see press release 28/08.

2. The OFT issued High Court proceedings against Foxtons in February 2008. The OFT appealed the judgment of Mr Justice Morgan of 17 July 2008.

3. The Court of Appeal panel comprised Lord Justice Waller, Lady Justice Arden and Lord Justice Moore-Bick.

4. The UTCCRs apply to standard contract terms with consumers. The UTCCRs protect consumers against unfair standard terms in contracts they make with traders. The OFT, and certain other qualifying bodies (such as local authority trading standards, national regulatory bodies, and Which?) can take legal action to prevent the use of potentially unfair terms. A term is likely to be considered unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. The regulations say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Ultimately, only a court can decide whether a term is unfair.

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