OFFICE OF FAIR
TRADING News Release (38/09) issued by COI News Distribution Service
on 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 http://www.oft.gov.uk/news/press/2008/28-08
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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