Consumer contracts and cancellation rights: Allpropertyclaims v Tang

What does the decision in Allpropertyclaims v Tang (29 June 2015, unreported) mean for the enforceability of consumer contracts?

Below are extracts of our recent interview with Russell Kelsall, partner in the litigation and financial services practice group at Squire Patton Boggs (UK) LLP, who comments on the judgment and the issue of cancellation rights in consumer contracts, particularly under the Cancellation of Contracts made in a Consumer’s Home or Place of Work, etc Regulations 2008 (CCCH Regulations)*.

The case shows how vital it is to get the technical side of things right when contracting with consumers.

What is background to this case?

Allpropertyclaims Limited (APC) is an insurance claims management business. Mr Tang suffered water damage at his home and wanted to make an insurance claim. APC visited Mr Tang at his home. APC contracted with Mr Tang to deal with his insurance claim for him. Mr Tang’s insurers dragged their heels and were not co-operative with APC. In the end, Mr Tang got frustrated with APC and dealt with the resolution of his insurance claim on his own without any further involvement from APC.

The terms of the contract between APC and Mr Tang were that he agreed to pay APC £140 per hour for their services if he ended the contract. After Mr Tang terminated the contract, APC sued Mr Tang for what it claimed was due under the contract. APC calculated that this sum was £5,000. Mr Tang refused to pay APC anything. Mr Tang said APC had not complied in full with all the technical requirements of the CCCH Regulations and, correspondingly, that he had a complete defence to APC’s claim.

What do the CCCH Regulations say?

The CCCH Regulations implemented the Doorstep Selling Directive 85/577/EEC which is designed to protect consumers in respect of contracts negotiated away from business premises. The Doorstep Selling Directive provides cancellation rights for contracts made in similar circumstances during an unsolicited visit by a trader.

In particular, the CCCH Regulations, reg 7(2) deals with a consumer’s right to cancel. It provides that a trader must ‘give’ the consumer a written notice of his right to cancel the contract and such notice must be ‘given’ at the time the contract is made.

What were the key issues in this case?

There are two key issues in this case:

• was emailing the cancellation rights to the consumer sufficient to amount to ‘giving’ the consumer notice of his rights?
• where the cancellation rights notice was provided on the next day, was this enough to be within the ‘time the contract is made’?

It should be noted that the consumer was not prejudiced and could have cancelled the contract within the 14-day cancellation period if he had wanted to do so.

What did HHJ Waksman QC in the Mercantile Court decide?

Neither litigant appeared to find much favour with Judge Waksman. Both litigants represented themselves.

In his judgment, the defence is castigated as being ‘wholly unmeritorious and technical’. Nevertheless, it succeeded.

APC had not ‘given’ the written notice at the same time within the meaning of the CCCH Regulations, reg 7(2). APC’s genuine mistake and subsequent e-mail could not cure the defect. APC’s agreement was irremediably unenforceable. There was no power to order enforcement.

As to waiver or estoppel by the consumer, he would need to have had knowledge that APC’s contract would be unenforceable, which he did not.

An unjust enrichment argument would also go against the scheme of the CCCH Regulations.

APC’s written terms were perfectly clear and an average consumer would be able to understand them. Even if these terms were intelligible, there was no ‘significant imbalance’ between APC and Mr Tang meaning the Unfair Terms in Consumer Contracts Regulations 1999 would render APC’s standard form contract unfair.

Will there be an appeal?

This is unclear at the moment. There is a 21-day period to appeal which will run out on 19 July 2015. This is a judgment by a judge of equivalent rank to a High Court judge and so any appeal lies to the Court of Appeal. Only the Court of Appeal can grant permission to appeal.

What are the implications for those advising on consumer contracts?

Allpropertyclaims provides a clear illustration of the importance of being able to prove compliance with detailed regulation. This needs good record keeping.

This case demonstrates that the requirements of the CCCH Regulations are strict. Even where a customer has not suffered prejudice, that is irrelevant (unlike the position, for example, where there is non-compliance with prescribed information on the form and content of regulated credit and consumer hire agreements).

Judge Waksman notes that there is no power to order enforcement to cure a technical defect. He was bound to follow an earlier decision of the Court of Appeal in Salat v Barutis. Moore-Bick LJ (on a second appeal) ruled that there was no power under the Doorstep Selling Directive to order enforcement where there was a technical breach of its terms—so even where a customer has not suffered prejudice or loss (or was a professional person with experience in insurance), that is irrelevant.

Is there a 'read across' for cancellation rights in other areas?

We see cancellation rights in a number of other consumer areas. The precise wording of the regulations differs and most are underpinned by EU Directives. This includes:

• distance marketing of consumer financial services
• distance selling
• e-commerce
• general and life insurance
• consumer credit

What should lawyers do next?

In some ways it is disappointing that this decision did not appear a few months ago. If it had, then perhaps the Department for Business, Innovation & Skills could have been persuaded to amend what is now the Consumer Rights Act 2015 to provide for a general power to cure defects in any consumer contracts (in the same way as applies to many consumer credit ones) where there is technical non-compliance with regulations such as CCCH Regulations.

It is time for all businesses to review their documents to ensure they comply with the relevant regulations.

This will not be enough on its own, because businesses must review their procedures to ensure documents are sent or given at the proper time, and in the proper manner.

Where there is a challenge on this, businesses must be able to prove actual compliance. Mere reliance on standard processes may not be enough.

Where compliance cannot be proved, then the results can be harsh—APC were unable to recover any money from their customer.

* The CCCH Regulations have now been revoked, for contracts entered into on or after 13 June 2014. They were replaced by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

Interviewed by David Bowden. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor. For the full interview, subscribers to Lexis®PSL Commercial service can access it by clicking here.