CPD a better tool

Consumer law

first_imgAgency – Commission – Estate agents – Fariness – Landlords Office of Fair Trading v Foxtons Ltd: Ch D (Mann J): 10 July 2009 Nicholas Green QC, Helen Davies QC (instructed by in-house solicitor) for the claimant; Michael Kent QC, Andrew Davis (instructed by Mishcon de Reya) for the defendant.center_img The claimant (OFT) sought declaratory relief in respect of the operation of alleged unfair terms in contracts between the defendant letting agent (F) and various landlords (L). For the purposes of the Unfair Terms in Consumer Contracts Regulations 1999, F was the supplier and L were the consumers. L had all opted for a letting-only service to help them find a tenant, rather than a full property-management service. F’s contracting terms provided for a commission payment for the introduction of a tenant. The terms also stipulated, in essence, that commission would continue to be payable where tenants renewed or extended their tenancy or where a new tenant took over who was connected in some way with the previous tenant. Furthermore, the terms stated that commission would be payable where tenants subsequently purchased the property from L (sales commission) and where L assigned their rights to a third party (third-party renewal commission). After L made complaints that the commission terms were unfair and involved the OFT, F amended its terms to some degree. However, the question of fairness of the old terms and of some of the new terms still remained. OFT submitted that (1) F’s terms and conditions used language that was not ‘plain and intelligible’ as required by article 4(2) of the Council Directive 93/13 and regulation 6(2) and 7 of the 1999 regulations; (2) the provisions relating to renewal commission were not part of the main subject matter of the contract for the purposes of regulation 6(2) and could not escape an assessment of fairness on that basis; (3) the provisions relating to sales commission and third-party renewal commission were unfair. Held: (1) In order to determine whether F’s terms and conditions of business were expressed in plain and intelligible language, it was necessary to define the typical consumer. It was not in dispute that ‘professional’ or ‘commercial’ landlords doing business with F were not consumers for the purposes of the regulations. However, the issues raised in the instant case were significant for many consumer landlords who had acquired one or two properties as an alternative to pensions and savings. The typical consumer was to be defined on an analogous footing to that on which the court approached the attributes of the reasonable man and the description in Office of Fair Trading v Abbey National Plc [2009] EWCA Civ 116, [2009] 2 WLR 1286 was to be adopted, Abbey National applied. F’s attempts at re-wording the clause had introduced a fresh lack of clarity. (2) Regulation 6(2) could not be approached purely as a matter of common law construction of the contract. Although the written terms of the contract were the starting point, it was necessary to establish on a wider level what the substance of the agreement was, rather than focus on the precise written terms. It was also necessary to consider how the matter would be perceived by the typical consumer and the supplier, Abbey National applied. Therefore if the renewal commission was to be treated as part of the core bargain, the typical consumer would have to consider it so as well as the supplier. On the facts, the obligation to pay renewal commission had not been part of the core bargain between the parties, since a typical consumer would have approached F for help in finding a tenant for an initial term of engagement and the prospect of a renewal would have been a subsidiary matter receiving little focus at that time. Furthermore, the provision for renewal commission was hidden away in the document and played no part in the activities under focus, namely those of finding a tenant. A re-wording of the clause to expressly make the renewals commission part of the overall contract price or core bargain did not alter the real position. It was not to say that renewal commission was always unfair to landlords per se; it might be possible to engineer a situation where the renewal commission element became part of the core bargain if there was real negotiation between the parties from the outset and clear disclosure, if not active flagging-up, of the term, but that had not happened in the instant case. On the facts, parts of the clause providing for renewal commission were too vague to be classed as ‘plain and intelligible’. Severance of the clause was neither necessary nor appropriate, Abbey National applied. Therefore, even if the renewal commission was found to have been part of the core bargain between the parties, it did not escape a fairness inquiry. (3) A fairness inquiry revealed that all the relevant provisions were unfair for the purposes of the regulations, Director General of Fair Trading v First National Bank Plc [2001] UKHL 52, [2002] 1 AC 481 applied. The relief to be granted was to be determined at a further hearing. Judgment for claimant.last_img read more

Pots and kettles

The spy who sued me

first_imgIn this age of the long lens, BBC executives and MI5 heads cannot be too careful about what documents they leave sticking out of their briefcases. But it turns out that they are not the only ones who need to exercise ultra-caution when it comes to sensitive documents. In its September newsletter, Liverpool law firm and risk management specialist Legal Risk reveals that it is advising a firm currently in hot water over a complaint ‘that files were visible through an office window’. The Solicitors Regulation Authority is apparently investigating whether the firm has breached rule four, on confidentiality. Any solicitors suddenly feeling a tad nervous had better pop outside sharpish and check precisely what a passing peeping Tom might be able to spy through their own windows.last_img

Courtesy call

Has the once weak SRA morphed into the Incredible Hulk?

first_imgAre we seeing some sort of metamorphosis over at the SRA? This week saw the kind of rhetoric that will put the frighteners on any law firm veering dangerously close to the red. The language used on a report into outstanding premiums may have seemed like the usual corporate speak, but there were some sinister undertones lurking beneath. It talks of firms now being ‘actively pursued’, almost as though the authority is knocking on high street solicitor’s doors with a crow bar and knuckle-dusters. Capita, as manager of the Assigned Risks Pool, is holding the weapons, standing alongside the regulator like Oddjob guarding Goldfinger. The enforcement company has the green light to ‘pursue individuals to bankruptcy’ if they fail to keep up repayments on their default premiums. Of course, there will be plenty of you reading this that scoff at the idea of a rigid regulator terrifying firms into compliance. The words ‘SRA and enforcement’ have in the past seemed paradoxical. But now the authority wants you to believe it has transformed into some David Banner figure, ripping off its shirt and screaming ‘you wouldn’t like me when I’m angry’. To an extent, the rhetoric has started to morph into action. Almost £1m has been sliced from the outstanding premium bill since the end of March, with many firms heeding the warnings from their regulator. There have even been 138 firms closed down in the last two years, 119 of them in what the SRA calls an ‘orderly fashion’ – a euphemism for essentially handing a firm a revolver and telling it to take a long walk into the woods. Cynics will argue they’ve had years to put the system right and have allowed the ARP to become clogged up with uninsurable and desperate firms. Even now the authority waits to scrap the ARP, sitting on its hands whilst well-managed firms feel the wrath of the insurance industry in the form of hiked premiums. Indeed, there will be plenty of solicitors relishing this new, tough-talking SRA. Debt has chased weak firms like a lion hunting the lame wildebeest, and the rest of the herd is in no mood to turn back to help. But with every closed firm, with every debt collection and with every ‘pursuit to bankruptcy’, we’d do well to remember there are tragic human stories behind many. There will be few tears shed for firms that have bent the rules and come unstuck, but we should mourn those that were simply swallowed up by financial trouble and failed to recover. The SRA may be reveling in its newly adopted role as a third Mitchell brother, but there’s always room for compassion amidst the muscle-flexing.last_img read more

US giant sets up English law practice

Mediation, unreasonable behaviour and costs

first_img Masood Ahmed, Birmingham City University Rolf illustrates two significant points. The first and most obvious is that the courts will expect litigants to seriously consider and engage in mediation or other forms of alternative dispute resolution. The second point is that the courts now consider small building disputes as suitable for settlement rather than continuing to trial. Thus, a party (especially one who is party to a small construction dispute) who succeeds in his claim or defence but who has failed to engage in mediation without a legitimate excuse will be found to have behaved unreasonably by a court and is, as a consequence, likely to have an adverse costs order made against him. Mediation as an effective dispute resolution method for civil disputes is well established. Therefore it was not surprising that Lord Justice Jackson reinforced the important role of mediation in chapter 36 of his Review of Civil Litigation Costs Final Report: ‘The most important form of ADR… is mediation. The reason for the emphasis upon mediation is twofold. First, properly conducted mediation enables many (but certainly not all) civil disputes to be resolved at less cost and greater satisfaction to the parties than litigation. Second, many disputing parties are not aware of the full benefits to be gained from mediation and may, therefore, dismiss this option too readily.’ The Court of Appeal in Rolf v De Guerin [2011] EWCA Civ 78 considered various issues including the defendant’s refusal to mediate. The claimant entered into an agreement with the defendant for the construction of an extension to the claimant’s house. The day-to-day control of the building works was left in the hands of the claimant’s husband. The claimant’s failure to make payments to the defendant and, as the trial judge found, the claimant’s husband’s aggressive and interfering role, led to the defendant ceasing work and treating the contract as repudiated. The claimant issued ­proceedings against the defendant. Before and after issuing proceedings the claimant made various invitations to the defendant to enter settlement ­discussions and, later, mediation which the defendant rejected. The defendant won at trial. However, the claimant appealed on a number of grounds including the costs order which the trial judge had made in favour of the defendant. The claimant argued, inter alia, that the defendant’s refusal to take part in mediation amounted to unreasonable behaviour for the purposes of Civil Procedure Rule 44 and therefore the defendant should not be awarded his costs. On appeal, when asked by the court why he had been unwilling to mediate, the defendant stated that if he had participated in mediation he would have had to accept ‘his guilt’ and that he would not have been able to demonstrate to a mediator what the claimant’s husband was like, which could only be done at trial. In any event, he wanted his ‘day in court’. Rix LJ did not hesitate in dismissing these reasons and found that the defendant’s refusal to mediate was unreasonable behaviour for the purposes of CPR 44(5) and, as a consequence, the court was entitled to exercise its discretion and make no order as to costs. Rix LJ held: ‘As for wanting his day in court, that of course is a reason why the courts have been unwilling to compel parties to mediate rather than litigate: but it does not seem to me to be an adequate response to a proper judicial concern that parties should respond reasonably to offers to mediate or settle and that their conduct in this respect can be taken into account in awarding costs.’ Rix LJ drew heavily upon the judgments given in Dunnett v Railtrack Ltd [2002] 1 WLR 2434, Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 and related cases in arguing that a party’s refusal to engage in mediation would be a relevant factor when assessing costs. Rix LJ also observed that particular cases, such as small building disputes, should use the courts only as a last resort and would, therefore, benefit from mediation: ‘In particular, as I will develop below, the nature of the case, namely a small building dispute between a householder and a small builder, is well recognised as one in which trial should be regarded as a solution of last resort, and one which is likely to give an unsatisfactory outcome to the parties at disproportionate cost, to which should be added the cost of disproportionate anxiety.’ Despite acknowledging that mediation may not have produced a solution in this matter, Rix LJ was of the opinion that it was suitable for mediation nonetheless: ‘It is possible of course that settlement discussions, or even mediation, would not have produced a solution; or would have produced one satisfactory enough to the parties to have enabled them to reach agreement but which Mr Guerin might now, with his hindsight of the judge’s judgment, have been able to say did him less than justice. Nevertheless, in my judgment, the facts of this case disclose that negotiation and/or mediation would have had reasonable prospects of success. The spurned offers to enter into settlement negotiations or mediation were unreasonable and ought to bear materially on the outcome of the court’s discretion, particularly in this class of case.’last_img read more

HSBC accused of blocking panel appeal

Balancing act