Consumer or not a Consumer

Consumer or not a consumer

In the RTA situation, much argument has been made on whether customers are “Consumers”. If they are, then they are covered by number of important protections, including:

  1. a right to cancel,

  2. a criminal sanction in that RTA’s contracts and business practices do not include provision of information on this right to cancel, and this failure to provide such information is a criminal offence

The law

The Consumer Rights Act 2015 (“CRA 2015”) came into force on 1st October 2015 (or more correctly, the relevant parts for this question did). The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“CCR 2013”) came into force on 13th June 2014. The commencement dates are relevant for contracts entered into on or after these dates.

Both the CRA 2015 and CCR 2013 contain the definition of “consumer” as follows

CCR 2013 section 4 states “consumer” means an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession;

CRA 2015 section 2 states “Consumer” means an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.

It is unclear as to the reason for the use of the word “which” in one definition, and “that” in the other, but it is not considered material

There are a lot of rights that the consumer acquires by virtue of CRA 2015 and CCR 2013, but only two are discussed in detail here, as these seem to be the ones of most benefit to RTA customers. Needless to say, as one would expect with consumer rights, these cannot be curtailed by contract. So if, as is the case with RTA contracts, the customer signs a document waiving these rights, that waiver is null and void, and the consumer still has those rights and can still enforce those rights through the courts.

CRA 2015 Section 50 provides that anything said by the trader before entering into the contract is to be treated as included as a term of the contract. So if, as is common in RTAs case, the sales representative claimed that this was just a free valuation and that no charge would be made, then that is what it is, regardless of the written words on the contract documentation that included liability for thousands of pounds. Indeed, all the promises made by the sales person would need to be adhered to, although of course what promises were made then becomes a question of fact to be determined by the court, and questions of fact often turn on the confidence and manner of witnesses in the court room rather than on the true course of events. However, if the customer is indeed a consumer, then it is a very useful weapon to hold, that the misrepresentations of the RTA sales person can be enforced in this way.

CCR 2013 Section 29 gives the consumer a cancellation right with a set period, and sections 30 to 31 provide that this period is 14 days after signature, except in the case where the supplier does not provide information on the cancellation right, in which case the period is extended up to 12 months. However if the supplier at a later point provides the required cancellation information, then the 14 day rule then applies from the day the supplier actually provides the information.

The relevant case law

RTA would (and apparently) do, argue that the customer is not a consumer, and is therefore devoid of the protections that a consumer would accrue through the operation of CCR 2013 and CRA 2015. Yet how is the customer supposed to know their status? There is no wording in RTA's contract that states it is a business-to-business (B2B) contract yet that should surely be given prominence rather than telling the customer later. The CEBTA website, and the RTA complaints blog, list a number of cases in the lower courts where the court has found that the customer was a consumer, and RTA have lost the case as a result. These include

RTA (Business Consultants) Limited v Gill Draper [2009]

RTA (Business Consultants) Limited v David Williams [2007]

RTA (Business Consultants) Limited v others [Bodmin County Court]] 2006 to 2008

RTA (Business Consultants) Limited v Neil Couzens [2011 Claim No 0NR10865]

RTA (Business Consultants) Limited v Tom Alexander [2011 Claim No WW00582]

RTA (Business Consultants) Limited v Clive Brown [2011 Claim No 1GL0125]

RTA (Business Consultants) Limited v Anneliese Highton [2011 Claim No 1IQ57649]

I’ve not had access to the transcripts of these cases, and have taken the statements that they were successful on the CEBTA site at face value.

In addition there was a case, RTA v Guy Davies, where the judgment was that Mr Davies was not a consumer. The Judge was under the impression that RTA's contract was "for the sale of immovable property" but in actuality it was just a contract to advertise the business.  It is further suggested that Davies choose not to appeal this judgment at High Court level due to lack of funds. I have not been able to obtain a transcript of any of the judgments in this case, but have taken at face value the statements on the rta-complaints blog.

What I have had the benefit of is the transcript of the judgment in the case of RTA (Business Consultants) Limited v Bracewell [2015] EWHC 630 (QB). This is the most recent case I have been able to find. It was heard on 24 to 26 February 2015, and was based on a contract entered into on 22nd February 2010. It did concern a business in Scotland, although for technical reasons the case was decided under English Law. Since it was in the High Court it does at first sight seem to be binding precedent on the lower courts. However I will discuss why I believe it not to be binding precedent later.

The judge in the Bracewell case found against RTA, the reason being that RTA had not registered as an Estate Agent at the time the contact was entered into, thus making the contract illegal and therefore unenforceable. However the Judge went on to consider, in some depth, what would have been his judgment in the event that the Estate Agency argument had not made the contract unenforceable, and it is this part of the judgement (in paragraphs 46 to 60) that interests us here. In this judgment he discusses at length the definition of “consumer” and why he felt that Mr Bracewell (the Defendant in this case) was not a consumer

The relevant points are

  1. the judge is considering the law as it stood prior to the commencement of CRA 2015 and CCR 2013

  2. the judge goes on a wide journey through various laws, English, German, French, and various EU directives and ECJ judgments, in order to arrive at the correct definition of “consumer” for these purposes and concludes that this is "a natural person who in making a contract to which these Regulations apply is acting for purposes which can be regarded as outside his trade or profession."

  3. The key part of the judgment is in paragraph 51 where the judge states that - “The important thing was whether he was "acting for purposes which can be regarded as outside his trade or profession". Seeking to exploit his trade by selling his business to realise a capital asset is, in my judgment, not acting for purposes outside his trade, but seeking to achieve one of the purposes of having a trade, namely to realise, at an appropriate time, its capital value. A step preliminary to selling a business, such as advertising it for sale, or engaging an agent to seek purchasers, is equally, in my judgment, not outside the relevant trade or profession.”

  4. The judge, in discussing the issue of whether Bracewell was a consumer or not, does not mention any prior case law concerning RTA and whether its customers were consumers or not. One would have thought, that if there had of been clear binding precedent on this matter, perhaps the RTA v Davies case from January 2012, this would have been mentioned by Counsel and thus recorded in the judgement. There is none.

At first sight therefore it seems to me that, based on Bracewell, RTA customers are not consumers. However two further questions arise from this

  1. Is Bracewell binding precedent

  2. Is Bracewell still valid

Dealing with the question of is (or was) Bracewell binding precedent. The answer to me seems to be 'No'. The reason for the Bracewell decision (i.e. the Ratio Decidendi) was the non-registration as an Estate Agency argument. It seems to me that the comments regarding the definition of “consumer” and whether Mr Bracewell was or wasn’t one were not deciding factors, they were just comments to give guidance on how the decision would have turned out if facts had been different (in legal terms the Obiter Dictum). As such these are of persuasive, but not binding, precedent. In addition it just to me seems plain wrong. It draws no distinction between a prolific serial entrepreneur, who will have taken many ideas, turned them into companies, and then sold them and moved onto the next idea, and someone who has run a single business their whole life, with no employees, no track record of selling business, and indeed had given no thought to selling a business until RTA came along and promised them the Earth.

One the question of whether Bracewell (or indeed RTA v Davies) is still valid, both these cases are based on the pre CRA 2015 and CCR 2013 law. A new Act of Parliament has been introduced and this has changed the law. The wording that defines a consumer has changed and now includes the words “wholly or mainly outside” rather than just “outside” and also includes the words “individual’s trade, business, craft or profession” rather than just “his trade or profession”. All the legal commentary makes the point that the definition of “consumer” has significantly widened as a result of the new legislation and now, for example, includes those acting for a mixture of personal and business reasons. I am unaware of any test cases with the new legislation, so I think it likely that the county courts will apply their own judgment, and that we will see a return to them finding that RTA customers are in fact consumers as they did in the 7 cases mentioned earlier.

Author: Nigel.