Non-Compliance with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 and the impact on the Retainer.
The case of 4VVV LTD v Spence & Others [2024] EWHC 3035 raised the issue of whether Claimant’s were liable for costs under their retainer agreements with their Solicitors when there had been non-compliance with the Consumer Contracts Regulations 2013.
The case involved a significant, long complex fraud group action claim on which Judgment was handed down by the Honourable Mr Justice Foxton on 27th September 2024.
It was raised during the hearing by the Defendants that the Claimants would not be entitled to cost orders or an interim payment on account on the grounds they were not subject to any enforceable liability to pay costs to their Solicitors on the basis of alleged failure to comply with Regulation 13 of the Consumer Contracts (Information, Cancellation & Additional Charges) Regulations 2013.
The Court was required to consider the implications of non-compliance with Regulation 13 and whether the Claimants were liable for costs under their retainer agreement with their Solicitors if there had been non-compliance with the Consumer Contract Regulations.
Regulation 13 relates to information to be provided before making a distant contract.
- 13(1) Before the consumer is bound by a distance contract, the trader
- must give or make available to the consumer the information listed in Schedule 2 in a clear and comprehensible manner, and in a way appropriate to the means of distance communication used, and
- if a right to cancel exists, must give or make available to the consumer a cancellation form as set out in Part B of Schedule 3.
The Claimants contended the breach of Regulation 13 did not make the contract of retainer between each Claimant and Solicitor unenforceable.
Mr Justice Foxton therefore considered the point, reviewing the Regulations as a whole and identifying that the issue to consider was whether the word “Before the consumer is bound by a distance contract” in Regulation 13(1) had the effect that compliance with Regulation 13(1) was a pre-condition to the conclusion of a binding contract or whether it defined the time for performance of the traders obligations with consequences of non-compliance being addressed in other ways.
Mr Justice Foxton found the following key factors rejecting the Defendant argument and found that non-compliance with Regulation 13 did not invalidate the contract retainer.
- Regulation 13(5). The effects of non-compliance with particular parts of Regulation 13 will be that the consumer is not liable for particular costs arising under the contract. Such a provision would not be necessary if the effect of non-compliance with regulation 13(1) was that there was no binding contract.
- Regulation 14(2). This deals with a sub-set of contracts addressed by Regulation 13(1) – distance contracts concluded by electronic means and this regulation contains an obligation to comply with some paragraphs in 13(1) with further obligations under 14(3) and 14(4). However, Regulation 14(5) states if 14(3) and (4) are not complied with the consumer is not bound by contract or order. There is no similar term or wording for breaches of Regulation 14(2) or Regulation 13 save for specific provision in Regulation 13(5) which was not applicable to this case.
- Regulation 18 states “every contract to which this part applies is to be treated as including a term that the trader has complied with the provisions of – (a) regulations 9 to 14”. The Claimant’s representative argued this regulation only made sense if a failure to comply with the requirements of Regulation 13 and 14 did not preclude a binding contract coming into existence.
- Regulation 31(1). This deals with what happens if the trader does not provide the consumer with the information on the right to cancel required by paragraph (1) of Schedule 2, in accordance with Part 2. This is the information required to be provided “Before the consumer is bound by a distance contract”. Regulation 31 provides that if the information is provided in the period of 12 months beginning with the first 14 days of Regulation 30 (2) to (16) i.e. 14 days after the contract is entered into then the cancellation period will be 14 days after the information is provided. Regulation 31 intends that a contract will be binding even if Schedule 2(1) information is not provided to the consumer before it is entered into or if it is never provided.
In Summary, Mr Justice Foxton found that non-compliance with Regulation 13 did not invalidate the contract retainer. Challenges to the retainer on the basis of non-compliance with Regulation 13 are common when disputing costs, in particular the failure to provide notice of the right to cancellation. From this case, it can be seen that such failure to comply may not automatically render the retainer unenforceable, however a party entering into any retainer contract should ensure they comply with the rules to ensure no challenges to the retainer and the recoverability of costs can be made.
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Catherine Singleton, Costs Lawyer
19.12.2024