The Office of Fair Trading v Ashbourne Management Services Ltd & Ors [2011] EWHC 1237 (Ch)

[2011] EWHC 1237 (Ch)Case No 0BM30244
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue BIRMINGHAM DISTRICT REGISTRY, Royal Courts of Justice, Strand, London, WC2A 2LLDate 27/05/2011
Before
THE HONOURABLE MR. JUSTICE KITCHIN
Between
THE OFFICE OF FAIR TRADINGClaimantASHBOURNE MANAGEMENT SERVICES LTDDefendantsJOHN CLAYTON-WRIGHTDefendantDAWNE CLAYTON-WRIGHTDefendant
Ms Julia Smith (instructed by The Office of Fair Trading) for ClaimantMr Jeremy Cousins QC and Mr John Brennan (instructed by Williamson & Soden) for DefendantsHearing Hearing dates: 9, 10, 11 March 2011
Judgment

Introduction

[1]In this action the claimant (the “OFT”) alleges that the defendants have engaged in practices which contravene the Consumer Credit Act 1974 (the “CCA”), the Unfair Terms in Consumer Contracts Regulations 1999 (the “UTCCR”) and the Consumer Protection from Unfair Trading Regulations 2008 (the “CPR”).[2]The first defendant (“Ashbourne”) carries on the business of recruiting members for gym and health and fitness clubs (collectively “gym clubs”), providing standard form agreements for their use and collecting payments from members under those agreements. The second and third defendants (respectively, Mr and Mrs Clayton-Wright) are the directors of Ashbourne and they run its business and have engaged together to perform the activities of which the OFT complains.[3]The defendants’ activities first came to the attention of the OFT in the spring of 2000 following a series of complaints from consumers. Since that time the OFT and the defendants have engaged in a dialogue as a result of which the defendants have made a series of amendments and revisions to the terms of Ashbourne’s standard form agreements. This process has been so extensive that I now have before me no fewer than 13 versions of those agreements. Despite the offer of an undertaking by the defendants that henceforth they will only use the final version, it seems that each of the earlier versions may still be in use and so I am required to consider them all.[4]The practices of which the OFT complains may be summarised as follows:(i) recommending that gym clubs enter into membership agreements which are regulated consumer credit agreements, as defined in section 8 of the CCA, on standard form agreements that do not meet the form and content requirements of section 61(1)(a) of the CCA;(ii) recommending that gym clubs enter into membership agreements on standard terms which are unfair within the meaning of the UTCCR;(iii) adopting unfair commercial practices contrary to the CPR.

Background

[5]The claim is supported by three witness statements by Mr Jason Freeman, a projects director within the OFT’s Consumer Markets Group. He explains that the OFT decided to investigate Ashbourne because it has received numerous complaints from consumers; the company operates nationally; it has apparently entered into some 300,000 agreements on behalf of around 700 gym clubs; it has shown a reluctance to amend its agreements in line with the OFT’s recommendations and there is evidence to suggest that it has persisted in certain practices notwithstanding assurances that they would cease.[6]Ashbourne’s business has been advertised on a website which reveals details of its business model. A section headed “Gym Membership Management Recruitment & Retention” describes its general nature:
“Ashbourne provides gym membership management, recruitment and retention services for hundreds of gyms and health & fitness clubs. We manage your monthly membership payments. By dealing directly with defaulters on your behalf, we ensure you maintain positive customer relations with your members in the club. Members making enquiries in the gym regarding payments or contracts can be referred to us and you are able to contact us with any special instructions regarding your members. The advantages of using Ashbourne Membership Management: • Improve and simplify your membership management by receiving regular monthly payments • Give your customers access to a secure online payment system, making it easy for members to sign up and pay online • Minimise bad debts through the use of Default Registration as a sanction. Obtain active help for those with debt problems through our alliance with Debt Dr • Improve your membership retention and loyalty through automatic renewal and our excellent customer service • Recruit new members using our membership recruitment service • Utilise our experienced, professional customer service team to handle queries, freeing up your time to develop your business” • Improve and simplify your membership management by receiving regular monthly payments • Give your customers access to a secure online payment system, making it easy for members to sign up and pay online • Minimise bad debts through the use of Default Registration as a sanction. Obtain active help for those with debt problems through our alliance with Debt Dr • Improve your membership retention and loyalty through automatic renewal and our excellent customer service • Recruit new members using our membership recruitment service • Utilise our experienced, professional customer service team to handle queries, freeing up your time to develop your business”
[7]An important feature of the model appears from another section entitled “Freedom to tailor your fees and your contract terms” which reads:
“Ashbourne can advise on the best membership contract strategy. We can help you decide on the fee structure of the membership contract and on the inclusion of any special terms. We then tailor an agreement to suit your needs. For example, if your gym or health club is a ‘high end’ facility that rivals the national chains, it is likely that a contract similar to theirs, commonly a 90-day rolling contract, will be most suitable. However, if your club has a low monthly subscription, it is better to adopt a longer minimum term contract of 12, 24 or 36 months.”
[8]Ashbourne does not deal with clubs at what it describes as the “high end” of the market but rather with clubs with a “low monthly subscription”; and it advises them to adopt agreements with minimum membership periods of 12, 24 or 36 months. This is a matter which has caused the OFT particular concern.[9]Another aspect of the business model which has caused the OFT great concern is the approach Ashbourne adopts to those members who have fallen behind with their payments or who wish to terminate their agreements before the end of the minimum membership period. The website describes such members as defaulters and they are dealt with by registration of their defaults with a credit reference agency, as the following passage reveals:
“The Power of Default Registration Taking defaulters through the court process is adversarial, costly and provides no guarantee of success. Our approach is different; we register defaults with Experian and other Credit Agencies. Default registration is more effective than a County Court Judgment as it seriously affects an individual’s credit status, prevents the opening of a new bank account or credit card, and any existing borrowing is subject to review. People’s credit record is being scrutinised by financial institutions more than ever before, so this is a powerful sanction. A default registration remains on a member’s file for six years. Benefits • Default registration removes the adversarial nature and cost of a legal process. …” • Default registration removes the adversarial nature and cost of a legal process. …”
[10]A little later the website continues by way of amplification:
“Prompt Payment Resolution For a minority of members, keeping up with payments can become a problem. Our approach is to identify issues as quickly as possible and provide a path for payment to resume. Our ‘firm but fair’ approach produces a 98% payment collection rate while minimising confrontation. In all correspondence we emphasise the health and lifestyle benefits of gym membership. Step-by-step approach From the first day of non-payment onwards, regular letters are sent, giving members current details of their arrears and ways in which payment can be brought back up to date. This usually prompts a phone call, which then allows us to enter into a dialogue to reconcile the situation and retain the member. If membership payment resumes, this is forwarded to you on the next remittance date. In the case of persistent defaulters, after a series of letters has been sent providing clear membership payment options, we register a bad debt with a credit reference agency as a Default Registration for the total outstanding balance on the membership. ”

Step-by-step approach

[11]Ashbourne emphasises the success of this strategy with the following observation:
“Just the threat of Default Registration brings the vast majority of defaulters back on track.”

Agreement 1

[12]In April 2000, Kingston Upon Thames Trading Standards Department forwarded to the OFT Ashbourne’s first standard form agreement (“Agreement 1”). It provides:
“Terms and Conditions 1. Operation of Facilities A: We the club shall, through our duly authorised representative(s), manage and operate the facilities of the Club and deal with all matters relating thereto. B: All monies paid by you to us (including, without limitation, entrance fees, subscriptions and other receipts) shall be our property and in no circumstances shall any distribution of monies be made to you whether on termination of your membership of the club or otherwise. 2. Membership A: You will remain a member of the club for the minimum period of one year after which your membership of the club will continue for further consecutive one year periods unless your membership is cancelled by you giving to the club secretary not less than one months notice in writing to expire on or before the end of any such one year period in which it is given provided that at the time of cancellation all monies owing by you to us have been paid. 3. Payment A: The initial subscription fee specified overleaf must be paid in full on the date specified overleaf and is non-refundable at the discretion of the club. B: The monthly membership charge is payable prior to the beginning of the monthto which it relates as specified overleaf at which time if you have made use of the facilities not included within the membership type specified overleaf which have not then been paid for you will also be billed for such use. C: If your membership of the club is terminated for any reason you shall pay us forthwith all sums then due and outstanding by you to us.”
A: We the club shall, through our duly authorised representative(s), manage and operate the facilities of the Club and deal with all matters relating thereto. B: All monies paid by you to us (including, without limitation, entrance fees, subscriptions and other receipts) shall be our property and in no circumstances shall any distribution of monies be made to you whether on termination of your membership of the club or otherwise. A: You will remain a member of the club for the minimum period of one year after which your membership of the club will continue for further consecutive one year periods unless your membership is cancelled by you giving to the club secretary not less than one months notice in writing to expire on or before the end of any such one year period in which it is given provided that at the time of cancellation all monies owing by you to us have been paid. A: The initial subscription fee specified overleaf must be paid in full on the date specified overleaf and is non-refundable at the discretion of the club. B: The monthly membership charge is payable prior to the beginning of the monthto which it relates as specified overleaf at which time if you have made use of the facilities not included within the membership type specified overleaf which have not then been paid for you will also be billed for such use. C: If your membership of the club is terminated for any reason you shall pay us forthwith all sums then due and outstanding by you to us.”[13]Importantly, clause 2 provides for a minimum membership period (in this version, of one year) and, by clause 3, if the membership is terminated for any reason the member becomes liable for “all sums then due and outstanding”. As will be seen, Ashbourne has interpreted this phrase as including the monthly fees payable for the remainder of the minimum one year period.

Agreements 2 and 3

[14]Under cover of a letter dated 12 September 2001, Ashbourne’s solicitors produced Ashbourne’s second standard form agreement (“Agreement 2”). It raises no separate issues.[15]On 20 October 2004, Ashbourne produced its third standard form agreement (“Agreement 3”). This is identical to Agreement 2, save that, in this version, the minimum membership period is for three years. Accordingly, clause 2A provides:
“You will remain a member of the club for the minimum period of 3 years…”
[16]Clauses 3B and 3C are in the same terms as those in Agreement 1.

Agreement 4

[17]On a precise date unknown to the OFT but, in all likelihood, in the course of 2005, Ashbourne began to use the fourth standard form agreement (“Agreement 4”). This was forwarded to the OFT under cover of a letter from a consumer dated 9 October 2006. Clause 2 deals with the minimum membership period and for payment due upon termination:
“2. Membership A: You agree to remain a member of the club for a minimum period of three years after which your membership will continue for further consecutive one year periods unless you cancel your membership by giving to the club secretary not less than one month’s notice in writing to expire on or before the end of any such one year period in which it is given provided that at the time of cancellation all monies owing by you to us have been paid. B: If your membership is terminated for whatever reason, all sums due at that point remain payable and the whole of the remaining monthly payments due to the end of the membership period had the membership not been terminated will become due forthwith. C: In the event that we take action in order to obtain any sums due and owing to us by you, we reserve the right to recoup all costs and expenses directly or indirectly incurred in taking such action, to include, without limitation, all legal costs and expenses.”
[18]Clause 3 provides for payment in these terms:
“3. Payment: A: The initial subscription fee specified overleaf must be paid in full on the date specified overleaf. All subsequent monthly membership subscriptions are payable prior to the beginning of the month to which they relate as specified overleaf. If you use the club’s facilities which are not specified overleaf, you will be liable to pay additional charges for such use over and above the monthly subscriptions. B: All monies paid by you to us (including without limitation, entrance fees, subscriptions and other receipts) are not refundable in any circumstances whether your membership is terminated, there has been a breach of contract or negligent act or otherwise. This does not affect your legal rights.”
[19]Clause 4 is headed “Data Protection” and anticipates sending details of any default to credit reference agencies. It provides, so far as relevant:
“4. Data Protection: A: Your personal details will not be disclosed to outside organisations and/or individuals without your written consent save in the event that you default in making any payments due to us, in which case we may pass information on about you to financial and other organisations. By signing this form you are giving your consent that we may do this. If we take such action, it may affect your ability to obtain credit in the future.”

Agreement 5

[20]The fifth standard form agreement (“Agreement 5”) was sent to the OFT under cover of a letter from Ashbourne’s solicitors dated 1 March 2006.[21]Clause 2 deals with membership and now emphasises the minimum membership period:
“2. You agree to remain a member of the club for at least one year (“the minimum membership period”). Your membership will automatically be extended thereafter for consecutive one month periods until you cancel your membership.”
[22]Clause 3 does the same in respect of cancellation:
“3. You cannot cancel your membership until the minimum membership period has come to an end. You may cancel your membership at any time thereafter by providing the club secretary with at least one months prior notice of your intention to do so.”
[23]Clause 4 addresses payment in these terms:
“4. Payment The initial payment specified overleaf must be paid in full upon entering into this agreement. All subsequent membership subscriptions are payable at the beginning of the month to which they relate. Please note that additional charges may be required for certain services …”
[24]Clause 5 is new. It includes an express right to terminate and provides for its consequences:
“5. Termination We may terminate your membership if you breach this agreement or the club rules and the breach is (a) serious (b) has not been remedied within 7 days of a written warning or (c) is repeated within 6 months of receipt of a written warning. In that event, all sums due will become payable immediately including the balance of the minimum membership period, if any. In the event that we take action in order to obtain any sums due and owing to us by you, we reserve the right to recoup in addition all reasonable costs and expenses incurred up to a maximum sum equivalent to 2 months’ membership fees.”
[25]Clause 7 deals with data protection and reads:
“7. Data Protection If you do not pay us everything that you owe or make any such payments late we may pass on information about you to financial and other organisations. This may affect your credit rating. Subject to that exception, your personal data will not be disclosed to outside organisations and/or individuals without your written consent. ”
Agreement 6[26]The sixth standard form agreement (“Agreement 6”) was sent to the OFT under cover of a letter from Ashbourne’s solicitors dated 29 September 2006.[27]Clause 1 now reads:
“1. Membership If you sign this agreement, you agree to become a member of the club referred to overleaf. Your relationship with the club is governed by these terms and the club’s rules. In so far as the club’s rules differ, these terms will apply.”
[28]Clause 2 and 4, dealing with the minimum membership period and payment respectively, are in substantially the same terms as the equivalent clauses in Agreement 5.[29]Clause 3 deals with cancellation and now requires the member to give notice to Ashbourne:
“3. Cancellation You cannot cancel your membership until you have been a member for at least one year. You may cancel your membership at any time thereafter by providing Ashbourne Management Services Ltd with at least one month’s prior written notice of your intention to do so. In this connection, nothing you say or write to the club and nothing the club says or writes to you will bind Ashbourne Management Services Ltd.”
[30]Clause 5 dealing with termination is, so far as relevant, in substantially the same terms as the equivalent clause in Agreement 5 save that a discount of 1% is given on the balance due in respect of the minimum membership period.[31]Finally, clause 6 dealing with data protection is in substantially the same terms as the equivalent clause in Agreement 5.

Agreement 7

[32]The seventh standard form agreement (“Agreement 7”) was supplied to the OFT under cover of a letter from Ashbourne’s solicitors dated 4 January 2007. This is in substantially the same terms as Agreement 6 save that clause 3, dealing with cancellation, provides that notice may be given to Ashbourne or the club. It reads:
“3. Cancellation You cannot cancel your membership until you have been a member for at least one year. You may cancel your membership at any time thereafter by providing Ashbourne Management Services Ltd or the club with at least one month’s prior written notice of your intention to do so.”

Agreement 8

[33]The eighth standard form agreement (“Agreement 8”) was received by the OFT in December 2007 from a consumer advisor at Bristol City Council Trading Standards Service. It seems that he had received it from a consumer.[34]The terms and conditions of this agreement are in substantially the same form as those of Agreements 5, 6 and 7, save for clauses 2 and 3.[35]Clause 2 deals with membership period and reads:
“2. Membership Period. You agree to remain a member of the club for at least the “Minimum Term” agreed by yourself overleaf. Your membership will automatically be extended thereafter for consecutive one month periods until you cancel you membership.”
[36]Clause 3 deals with cancellation and reverts to the notice requirement of Agreement 6. It reads:
“3. Cancellation. You cannot cancel your membership until you have been a member for at least the “Minimum Term” agreed by yourself overleaf. You may cancel your membership at any time thereafter by providing Ashbourne Management Services Ltd with at least one month’s prior written notice of your intention to do so. In this connection, nothing you say or write to the club and nothing the club says or writes to you will bind Ashbourne Management Services Ltd.”
Agreement 9[37]The ninth standard form agreement (“Agreement 9”) was provided to the OFT under cover of a letter from Ashbourne’s solicitors dated 18 September 2008.[38]Clause 2 reads:
“2. Membership Period You agree to remain a member for the “Minimum Membership Period” that you have chosen You have chosen the “Minimum Membership Period” referred to overleaf. Your membership will automatically be extended once the minimum membership period has ended for consecutive one month periods unless (a) this agreement has already been terminated or (b) either party has given one month’s prior written notice of its intention to cancel it.”

You agree to remain a member for the “Minimum Membership Period” that you have chosen

[39]Clause 3 deals with cancellation and retains the notice requirement of Agreement 6. It reads:
“3. Cancellation Either party may cancel your membership by (a) giving one month’s prior written notice one month before the end of the minimum membership period or (b) by giving one month’s prior written notice at any time thereafter. You must provide such notice to Ashbourne Management Services Ltd at the address shown overleaf. We must provide such notice to you at either the address overleaf or such other address as you may provide in writing to Ashbourne Management Services Ltd.”
[40]Clause 4, the payment obligation, is reformulated and reads:
“4. Payment The initial payment specified overleaf and all subsequent membership subscriptions must be paid in full, as and when they fall due, to Ashbourne Management Services Ltd. All subsequent membership subscriptions are payable by the due date shown overleaf. Please note that additional charges may be required for certain services (e.g. sauna, massages, physiotherapy etc.). If you fail to make payment as and when a monthly subscription falls due, Ashbourne Management Services Ltd is authorised to act on our behalf in all respects relating to the debt and may recover the same in its own name.”
[41]Clause 5, dealing with termination introduces an express, albeit limited, right of the member to terminate in the event of a failure by the gym club to provide adequate facilities. It also contains a reformulation of the gym club’s right to terminate:
“5. Termination This agreement may be terminated at any time by either party if a condition of the agreement is breached as set out below. You may terminate this agreement at any time if we do not provide facilities or the services you may reasonably expect and (a) we have fallen well below that standard. We may terminate this agreement at any time if you treat our members of staff without the consideration we may reasonably expect and (a) you have fallen well below that standard or (b) if you have been asked to remedy your conduct, you fail to do so within 7 days of the receipt of a written warning or (c) you do the same thing again within 6 months of the receipt of a written warning. In the event that this agreement is terminated before the minimum membership period has ended, all sums due to us plus the balance of the monthly subscriptions that would otherwise have fallen due will become payable immediately less 5%.”
[42]Clause 8, dealing with data protection, is in substantially the same terms as the equivalent clause in earlier agreements.

Agreement 10

[43]The tenth standard form agreement (“Agreement 10”) was in use immediately before the commencement of proceedings. It was sent to the OFT under cover of a letter from Ashbourne’s solicitors dated 22 May 2009.[44]Clause 1 now reads:
“1. Membership If you sign you will become a member of the club that is referred to overleaf. This agreement sets out the terms that will govern the relationship between us, the club that is referred to overleaf, and you, a member of our club.”
[45]Clause 2 deals with the minimum membership period. It introduces a series of conditions, any of which, if satisfied, permit the member to suspend or terminate. It is to be noted that the obligation to pay subscriptions continues during a period of suspension. It reads:
“2. The Minimum Membership Period YOU ARE LIABLE TO PAY THE AGREED MONTHLY MEMBERSHIP SUBSCRIPTIONS FOR THE “MINIMUM MEMBERSHIP PERIOD”
AND MAY BE OBLIGED TO DO SO EVEN IF YOU WOULD PREFER TO CANCEL YOUR MEMBERSHIP. You have chosen the “Minimum Membership Period” referred to overleaf. Your membership will automatically be extended once the minimum membership period has ended for consecutive one month periods unless (a) this agreement has already been terminated or (b) either party has given one month’s prior written notice of its intention to cancel it. What happens if I change my mind within the minimum membership period? We will transfer your membership to another person at your request if (a) he or she agrees to become a member for the balance of your minimum membership period; (b) he or she agrees to pay an induction fee of £25 and (c) he or she is introduced to us by you. What happens if I lose my job, get injured, move to a new place of work or move out of the area during the minimum membership period? We will suspend your membership at your request if (a) you provide written confirmation that you have lost your livelihood and are in receipt of income support or (b) you provide a letter from your GP to prove that you have been advised not to use the gym due to injury or illness for that period. If so, we will review your circumstances after 2 months. If your circumstances have not changed when we review them, we will suspend your membership for a further 2 months until your membership is cancelled at your request. We will terminate your membership at your request without further obligation on your part if (a) you provide written confirmation to prove your principal place of work has changed or (b) you provide 2 utility bills to prove that your home address has changed and your new home is more than 15 miles away from your old one. What happens if I no longer want to be a member after the minimum membership period? You are free to cancel your membership without further obligation on your part provided you give us 1 month’s prior written notice of your intention to do so.”

What happens if I change my mind within the minimum membership period?

[46]Clauses 3, 4 and 5 deal with cancellation, payment and termination respectively and are in substantially the same terms as the equivalent clauses in Agreement 9. Agreement 11[47]The eleventh standard form agreement (“Agreement 11”) was provided to the OFT by way of an exhibit to Mr Clayton-Wright’s witness statement dated 1 April 2010. It is in substantially the same form as Agreement 13, to which I refer below, save for clause 5. This is in the same terms as Contracts 9 and 10, save that, curiously, the last sentence appears to have been omitted. There is therefore no provision for payment on termination. Agreements 12 and 13[48]The twelfth and thirteenth standard form agreements were supplied to the OFT by Ashbourne’s solicitors under cover of letters dated 3 September 2010 and 26 October 2010 respectively. The OFT does not seek to draw a distinction between them and so I need only refer to the final version (“Agreement 13”).[49]Clause 1 explains the relationship between the member, the gym club and Ashbourne:
“1. Nature of the Agreement If you sign this agreement, you will become a member of the club that is referred to overleaf. This agreement sets out the terms that will govern the relationship between us, the owners of the club that is referred to overleaf, and you, a member of the club. We have appointed Ashbourne Management Services Ltd to administer this agreement on our behalf. It is authorised to act on our behalf in all respects both before and after the termination of this agreement including, in particular, in all respects relating to the recovery of any sums that may be due from you to us and may recover the same in its own name. It is also authorised to accept service on our behalf.”
[50]Clause 2 addresses the minimum membership period. It sets out the member’s right to terminate without liability, suspend or transfer his membership. These are substantially extended, as I shall explain. Moreover, during a period of suspension the member is relieved of the obligation to pay subscriptions. It reads:
“2. The Minimum Membership Period You have chosen the “Minimum Membership Period” referred to overleaf. YOU MUST PAY THE MONTHLY MEMBERSHIP SUBSCRIPTION FOR THE MINIMUM MEMBERSHIP PERIOD UNLESS YOUR MEMBERSHIP IS TERMINATED WITHOUT LIABILITY, SUSPENDED OR TRANSFERRED AS SET OUT BELOW Your right to terminate this agreement without liability. Your right to terminate this agreement without liability is set out in clause 5. In particular, you may terminate this agreement at any time if the facilities or the services we provide fall well below the standard that you reasonably expect us to provide. Your right to suspend this agreement. We will suspend your membership during the minimum membership period if and when you provide written confirmation that (a) you, your spouse or your partner has begun to claim income support or (b) you provide a letter from your GP to prove that you (i) have been advised not to use the gym for a medical reason (ii) are pregnant or (iii) gave birth in the last 3 months. We will review your circumstances every 2 months. If your circumstances have not changed, we will suspend your membership for a further 2 months, unless you tell us that you would prefer to cancel your membership which you may do without any further obligation on your part. Whilst your membership is suspended, you will be relieved of your obligation to pay your monthly membership subscription and we will be relieved of our obligation to allow you to use the facilities at the club. Suspension will not affect the date when the minimum membership period ends. Your right to cancel this agreement. We will cancel your membership during the minimum membership period without any further obligation on your part if: (a) you provide a letter from your GP to prove that you have been advised not to use the gym for the foreseeable future for a medical reason; (b) you provide written confirmation (e.g. a letter from your employer) to prove that the location of your main place of work has changed; or (c) you provide written confirmation (e.g. a utility bill) to prove that you have moved more than 15 miles from your old address. Your right to transfer this agreement. We will transfer your membership to another person (Provided they do not have an existing relationship with the gym) during the minimum membership period if (a) he or she agrees to become a member for the remainder of the minimum membership period; (b) he or she agrees to pay an induction fee of £35 and; (c) he or she is introduced to us by you.”
[51]Clause 5, dealing with termination, is substantially reformulated. It now makes detailed provision for termination in the event of failure to pay and for its consequences:
“5. Termination This agreement may be terminated (a) in the circumstances set out below or (b) by either party at any time in response to any other serious breach of the other party’s obligations under this agreement. You may terminate this agreement at any time if the facilities or the services we provide fall well below the standard that you reasonably expect us to provide. If any payment due from you remains unpaid for a period of three months or longer, we may serve a final warning in respect of any outstanding sums due. If after the expiry of a period of one month from the date of service of that final warning upon you, any sum which the final warning required you to pay has not been paid, then this will be treated as a repudiation of your obligations under this agreement and we may terminate the agreement. We may terminate this agreement at any time if (a) your treatment of another club member or a member of the club’s staff falls well below the standard of consideration that we reasonably expect and (b) having been asked to remedy your conduct you fail to do so within 7 days of the receipt of a written warning; or having been asked to remedy your conduct you do the same thing again within 6 months of the receipt of a written warning. If we terminate this agreement during the minimum membership period, you will become immediately liable to pay (i) the arrears, if any, plus (ii) the monthly membership subscriptions, if any, that would otherwise have fallen due before the end of the minimum membership period less credit for accelerated receipt in respect of payments falling due after the actual date of termination. (This credit shall be calculated at 4% above the Official Bank Rate published by the Bank of England at the date of termination per annum, from the mid-point between the date of termination and the date when the final monthly membership subscription would otherwise have fallen due. For example if we terminate the agreement on 31st December 2010, and the final monthly membership payment would otherwise have fallen due on 31st December 2011, the mid-point between those dates is 30th June 2011. The credit which will be allowed for accelerated receipt will be calculated at 4% per annum over the Official Bank Rate on all the payments which would have fallen due after 31st December 2010, from 30th June 2011 to 31st December 2011).”
[52]Finally, I should refer to clause 8 which contains agreement by the member to the passing of information by Ashbourne to credit reference agencies in the event of termination for non payment:
“8. Data Protection If you fail to make payment of sums due in respect of which a notice making time of the essence has been served, and we terminate the agreement under clause 5 above, you agree that Ashbourne Management Services Ltd may register the sum due upon termination and calculated under clause 5 with a credit reference agency and pass on that information to other financial organisations. Subject to that exception, your personal details will not be disclosed to outside organisations and/or individuals without your written consent. You are entitled to see what has been registered about you and to insist that inaccurate information is corrected.”
Legislative framework The OFT

Legislative framework

[53]The OFT was established under the Enterprise Act 2002 (the “EA 2002”). Under sections 215 and 217 of the EA 2002, the OFT may apply for an enforcement order in respect of any domestic or Community infringement.[54]The definition of domestic infringement in section 211 of the EA 2002 includes any act or omission which is done or made by a person in the course of a business, harms the collective interests of consumers in the UK, is of a description specified by the Secretary of State by order and is:(i) an act or omission made by a person supplying or seeking to supply goods or services as a result of which an agreement relating to the supply is void or unenforceable to any extent (section 211(2)(e)), or(ii) an act or omission by which a person supplying or seeking to supply goods or services purports to or attempts to exercise a right or remedy relating to the supply in circumstances where the exercise of the right or remedy is restricted or excluded under any enactment (section 211(2)((f)).[55]In the Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2003, the Secretary of State has specified for the purposes of section 211 of the EA 2002 acts or omissions in respect of the CCA.[56]The definition of a Community infringement in section 212 of the EA 2002 includes an act or omission which harms the collective interests of consumers and contravenes a listed Directive as given effect by the laws, regulations and administrative provisions of the UK.[57]Council Directive 93/12/EEC of 5 April 1993 on unfair terms in consumer contracts (“the Unfair Terms Directive”) and Directive 2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices (“the Unfair Business Practices Directive”) are listed Directives for the purposes of the Community infringement provisions of the EA 2002 and have been given effect in the UK by the UTCCR and the CPR respectively.

Consumer Credit Act 1974 – the CCA

[58]A consumer credit agreement is defined in section 8 of the CCA in these terms:
“(1) A consumer credit agreement is an agreement between an individual (“the debtor”) and any other person (“the creditor”) by which the creditor provides the debtor with credit of any amount. … (3) A consumer credit agreement is a regulated agreement within the meaning of this Act if it is not an agreement (an “exempt agreement”) specified in or under section 16, 16A, 16B or 16C.”
[59]Section 9 gives the meaning of credit:
“(1) In this Act “credit” includes a cash loan and any other form of financial accommodation.”
[60]It is agreed that agreements between gym clubs and consumers based upon Ashbourne’s standard form agreements are regulated agreements within the meaning of the CCA if credit is provided.[61]Section 60 provides for the making by the Secretary of State of regulations as to the form and content of documents embodying regulated agreements and, by virtue of section 61(1)(a), any such agreement is not properly executed if it does not comply with any such regulations.[62]Under section 65, an improperly executed regulated agreement is enforceable against the debtor only upon an order of the court.

The Unfair Terms in Consumer Contracts Regulations 1999 – the UTCCR

[63]The UTCCR implement the Unfair Terms Directive and apply to unfair terms in contracts concluded between a seller or supplier and a consumer.[64]Regulation 5 addresses which terms are to be regarded as unfair and provides, so far as relevant:
“(1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. (2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term. … (5) Schedule 2 to these Regulations contains an indicative and non exhaustive list of the terms which may be regarded as unfair.”
[65]Regulation 6 is concerned with the assessment of unfairness and reads:
“(1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract … (2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate- (a) to the definition of the main subject matter of the contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.”
[66]Regulation 7 makes specific provision for written terms:
“(1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language. (2) If there is doubt about the meaning of a written term, the interpretation that is most favourable to the consumer shall prevail but this shall not apply to proceedings brought under regulation 12.”
[67]Regulation 8(1) provides:
“An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.”
[68]Regulation 12 provides for what have been referred to in the authorities as pre-emptive, collective or general challenges, as opposed to challenges made by individual consumers:
“(1) The Director … may apply for an injunction … against any person appearing to the Director … to be using, or recommending use of, an unfair term drawn up for general use in contracts concluded with consumers … …. (3) The court on an application under this regulation may grant an injunction on such terms as it thinks fit. (4) An injunction may relate not only to use of a particular contract term drawn up for general use but to any similar term, or a term having like effect, used or recommended for use by any person.”
[69]For the purposes of an application under regulation 12, the fairness of a term is to be assessed without applying the rule that, where its meaning is doubtful, the interpretation most favourable to the consumer shall prevail.

The Consumer Protection from Unfair Trading Regulations 2008 – the CPR

[70]The CPR implement the Unfair Business Practices Directive. Regulation 3(1) prohibits unfair commercial practices.[71]Regulation 3(3) provides that a commercial practice is unfair if it(a) contravenes the requirements of professional diligence; and(b) it materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product.[72]In this connection, regulation 2 provides that:(i) “professional diligence” means the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers which is commensurate with either honest market practice or the general principle of good faith in the trader’s field of activity; and(ii) “materially distort economic behaviour” means in relation to an average consumer, appreciably to impair his ability to make an informed decision thereby causing him to take a transactional decision that he would not have taken otherwise.[73]Regulation 3(4) provides that a commercial practice is unfair if:(a) it is a misleading action under regulation 5;(b) it is a misleading omission under regulation 6;(c) it is aggressive under regulation 7; or(d) it is listed in Schedule 1.[74]A commercial practice is a misleading action within regulation 3(4)(a) and regulation 5 if, among other things, it:(i) contains false information or if its overall presentation in any way deceives or is likely to deceive the average consumer in relation to the rights of the trader or the consumer’s rights or the risks he may face; and(ii) causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise.[75]A commercial practice is a misleading omission within regulation 3(4)(b) and regulation 6 if, among other things:(i) it omits or hides material information or provides material information in a manner which is unclear, unintelligible, ambiguous or untimely; and(ii) as a result it causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise.[76]A commercial practice is aggressive within regulation 3(4)(c) and regulation 7 if it:(i) significantly impairs or is likely significantly to impair the average consumer’s freedom of choice or conduct in relation to the product concerned through the use of harassment, coercion or undue influence; and(ii) thereby causes or is likely to cause him to take a transactional decision he would not have taken otherwise.[77]Finally, under regulation 3(4)(d) and paragraph 26 of Schedule 1, it is a prohibited unfair commercial practice to make persistent and unwanted solicitations by any remote media except in circumstances and to the extent justified to enforce a contractual obligation. Credit agreements[78]The OFT contends that agreements between gym clubs and consumers in the form of each of Ashbourne’s standard form agreements are regulated agreements within the meaning of section 8 of the CCA; that these agreements are not properly executed within the meaning of section 61(1)(a) of the CCA; and that by virtue of section 65 of the CCA such improperly executed regulated agreements are only enforceable upon an order of the court.[79]The OFT further contends that the activities of the defendants in using and recommending standard form agreements which, when entered into, are not properly executed regulated agreements amount to a domestic infringement within section 211(2)(e) of the EA 2002, and that demanding early repayment under such agreements constitutes enforcement and amounts to a further domestic infringement under section 211(2)(f) of the EA 2002.[80]The OFT also contends that the defendants’ activities are unfair commercial practices contrary to the CPR and amount to Community infringements within section 212 of the EA 2002 in that:(i) demanding early repayment of sums that would otherwise fall due over the remaining months of the minimum term when the club is not entitled to early payment without a court order does not meet the standard of honest market practice or good faith that may reasonably be expected; is likely to deceive the average consumer in relation to the gym club’s rights or the consumer’s rights or the risks he may face; and is likely to cause the average consumer to take the transactional decision to make a payment (contrary to regulations 3(3), 3(4)(a) and 5 of the CPR);(ii) the standard form agreements omit information they are required to contain for compliance with the CCA, including, in particular, the total amount payable for the minimum period; this omission is likely to cause the average consumer to make the transactional decision to enter into the agreement; and this information is needed by the consumer in order to make an informed decision as to whether to enter into the agreement (contrary to regulations 3(3), 3(4)(b) and 6 of the CPR).[81]The defendants dispute that agreements between gym clubs and consumers in the form of any of Ashbourne’s standard form agreements are consumer credit agreements within the meaning of section 8 of the CCA, but accept that, if they are, then they are regulated agreements which have not been properly executed. They further accept that they have enforced or purported to enforce them by demanding early payment without first obtaining an order of the court.[82]It follows that the crucial question I have to determine is whether each of Ashbourne’s standard form agreements is a consumer credit agreement. But before addressing this issue, I must refer to further aspects of the evidence upon which the OFT relies.[83]The OFT contends that prospective members have historically been offered and are now often, if not always, offered the choice of making a single up front payment for the minimum membership period or paying monthly by instalments. If they opt for the former payment method then they are offered a discount. The evidence in support of this contention is derived from members, gym clubs and the defendants’ own promotional materials.[84]As for members, a complaint questionnaire competed by a Mr Woodward reveals that in February 2009 he was told he could enter into a three year membership agreement with Finbows Fitness Centre of Nottingham for which he could pay either monthly or for the whole term at the outset and, if he opted for the latter payment method, he would receive a discount.[85]As for gym clubs, responses received by the OFT in the course of 2009 to notices requiring provision of information pursuant to section 224 of the EA 2002 reveal a diverse picture with many clubs offering a variety of membership options including payment per visit, payment per month and payment at the outset or by month for minimum terms of 6, 12 or 36 months. So, for example, Body Tone Gym of Weston Super Mare offered options including a price per visit of £4; membership for 12 months for a fee of £280 payable at the outset; and membership for 36 months for a monthly fee of £15.99. Chasens Health Club of Llanelli offered membership on the terms of the defendants’ standard form agreements but allowed members to cancel on 30 days’ written notice. The Bodylimits gym club of St Albans offered options including a price per visit of £7, membership for 6 months for £200 payable at the outset or £34.99 per month, and membership for one year for £350 payable at the outset or £34.99 per month. The Feelgoodfitness gym club of Grantham offered options including a price per visit of £6, membership for one month for £40 payable at the outset, and membership for 12 or 36 months for £32.50 and £21 per month respectively. Newport Fitness Centre of Newport offered options including a price per visit of £3.50, membership for 6 months for £125 payable at the outset, and membership for one year for £199 payable at the outset or £24 per month. Finally, Enterprise Health Club of Glasgow offered options including a price per visit of £4.50, membership for one month for £35, and membership for 12, 24 and 36 months for £29, £24 and £16 per month respectively.[86]As for the defendants, they have promoted their business to gym clubs by explaining that they make effective use of direct debits to control payments and promote retention of members who can budget more easily for payment by instalments, and by the distribution to gym clubs of posters which invite members to pay monthly by instalments and so “make smaller payments”.[87]The OFT also relies upon the defendants’ practice of reporting gym club members who have persistently failed to make their monthly payments under fixed term contracts to credit reference agencies and, in doing so, of registering the outstanding balance for the whole minimum term as a bad debt. In this regard it points to the defendants’ own website and, by way of illustration, to two complaints from members.[88]The first was a complaint from Ms Sally Mooney of Woodford Green who, in June 2005, entered into a membership agreement with her local gym club called Physical Health & Fitness for a minimum term of 24 months for £25 per month. Ms Mooney did not appreciate the duration of the fixed term when she signed the contract and, after a few months, sought to terminate it. In the course of the ensuing correspondence, Ashbourne informed Ms Mooney that she was unable to terminate the contract until the end of the minimum term. By April 2006, Ms Mooney’s monthly arrears stood at £75 and the total sum in respect of the balance of the minimum term, including arrears, at £425. Then, by letter dated 5 April 2006, Ashbourne wrote to Ms Mooney in the following terms:
“….. As previously advised we handle the monthly collections for [Physical Health & Fitness], and according our records the total amount outstanding by you is £425.00 plus bad debt registration fee of £50.00 making a total bad debt of £475.00 If you forward the sum of £75.00 [the monthly arrears] and confirm reinstatement of your Standing Order, you may deduct the Bad Debt Registration Fee from the total due. If you do not, we will withdraw your facility to pay your membership monthly, and register a bad debt with a credit reference agency. This will affect your credit status in that it will show any lender that you are a poor credit risk. …”
[89]The letter was signed by someone purportedly within Ashbourne’s “Litigation Department” which, as the defendants now accept, has never existed.[90]The second was a complaint from Ms Karin Hughes of Macclesfield who, in November 2008, entered into a membership agreement with the Lady Zone gym club for a minimum period of 36 months for £16 per month having been told that she could cancel at any time. After about seven months, Ms Hughes decided to terminate her membership. Ashbourne then pursued her in correspondence for what it described as outstanding arrears and, by letter dated 1 September 2009, informed her that if she did not pay those arrears promptly it would withdraw her facility to pay monthly and that it would instigate a default registration of the total sum payable in respect of the remainder of the minimum membership period as a bad debt. Once again, this letter purported to come from Ashbourne’s “Litigation Department”.[91]As has been seen, credit is defined in section 9 of the CCA as including any form of financial accommodation. The meaning of this phrase was considered by the Court of Appeal and subsequently by the House of Lords in Dimond v Lovell [2000] 1 QB 216 (CA); [2002] 1 AC 384. In that case Mrs Dimond had a car accident as a result of Mr Lovell’s negligence and sought to recover from him the cost of the hire of a replacement vehicle while her car was being repaired. Under clause 5 of the hire agreement the hire company had the conduct of any claim necessary to recover damages, and the payment of the hire charge was postponed until after its conclusion. Mr Lovell’s insurance company refused to pay the cost of the replacement vehicle on the basis that the agreement under which Mrs Diamond had hired it was a regulated agreement within the meaning of the CCA and did not contain the particulars that the Act required. Consequently the agreement was unenforceable, and Mrs Dimond could not be required to pay for the hired vehicle and had therefore suffered no loss. Resolution of this issue turned on whether the hire company had provided Mrs Dimond with credit.[92]The Court of Appeal concluded that the hire company had indeed provided Mrs Dimond with credit because payment for the hire was deferred for a period after the hire had come to an end. Sir Richard Scott V-C (with whom Thorpe and Judge LJJ agreed) said at [53]-[56]: “53. So I return to the critical question, namely, whether a hire agreement under which payment for the hire is deferred for a period after the hire has come to an end is a personal credit agreement as defined in section 8 of the Act.54. The judge held that it was not. He noted that under condition 5 of the agreement payment was not due "until such time as a claim for damages has been concluded" and held that, because the hirer had no contractual obligation to pay until that time, credit was not being given. This reasoning cannot, in my judgment, be accepted. If payment for goods or services or land is deferred after the time when, if nothing about time of payment had been agreed, the payment would be due, the payer is being given credit. Such authority as there is supports this view.55. In Reg. v. Miller (Simon) [1977] 1 W.L.R. 1129, a case in which an undischarged bankrupt was charged with obtaining credit while a bankrupt, Roskill L.J., giving the judgment of the court, said, at p. 1134: "The obtaining of credit, in our view, means obtaining some benefit from another, without immediately giving the consideration in return for which that benefit is confirmed." On this view the plaintiff obtained credit from 1st Automotive.56. Goode, Consumer Credit Legislation, looseleaf ed., vol. 1, para. 437 contains a discussion of "The ingredients of credit." Credit involves, in the view of the editor, Professor Goode: "(a) the supply of a benefit; (b) attracting a contractual duty of payment; (c) in money; (d) the duty to pay being contractually deferred; (e) for a significant period of time after payment has been earned; (f) such deferment being granted by way of financial accommodation." Each of these elements is present under the agreement between the plaintiff and 1st Automotive. In paragraph 443 the following general principle is expressed: "debt is deferred, and credit extended, whenever the contract provides for the debtor to pay, or gives him the option to pay, later than the time at which payment would otherwise have been earned under the express or implied terms of the contract."57. This principle, in my judgment, correctly expresses the test for identifying "credit" for the purposes of the Act of 1974.” "debt is deferred, and credit extended, whenever the contract provides for the debtor to pay, or gives him the option to pay, later than the time at which payment would otherwise have been earned under the express or implied terms of the contract."[93]An appeal by Mrs Dimond to the House of Lords was dismissed. After referring to the approval by the Court of Appeal of Professor Goode’s definition of credit, Lord Hoffmann said at page 395:
“In my opinion there was no misuse of language when the contract described clause 5(i) as a credit facility. The only obligation of 1st Automotive [the hire company] under the agreement was to provide the vehicle. In the absence of credit, it would have been entitled to payment during or at the end of the hire. All the provisions about the pursuit of the claim were express or implied conditions that deferred the right to recover the hire and therefore constituted a granting of credit. In addition, of course, the pursuit of the claim by 1st Automotive on behalf of Mrs Dimond may have given rise to further obligations to her, such as the obligation to indemnify her against a liability for costs which Lord Mustill mentions in Giles v Thompson [1994] 1 AC 142, 163 .”
[94]The key question, therefore, is whether the standard form agreements used by the defendants provide for members to pay, or give them the option to pay, later than the time at which payment would otherwise have been earned under the express or implied terms of those agreements.[95]The answer to this question may be relatively straightforward in cases which involve the sale or supply of goods but it becomes much harder in cases such as those the subject of this claim which involve access to facilities over a fixed term. Here I believe a distinction must be drawn between the following two classes of case: the first comprises cases in which a liability or obligation to pay is incurred or, but for the payment terms, would have been incurred at the outset, and is discharged in instalments; the second comprises cases in which payment falls due in stages as the contract is performed. In the first class of case credit is provided but in the second it is not.[96]I turn then to consider the application of these principles to Ashbourne’s standard form agreements and begin with some of the general submissions advanced by the OFT. First, it points to the defendants’ standard practice in response to the failure by a member to pay his or her monthly subscriptions during the course of the minimum membership period. It says that demanding early payment of the total sum payable in respect of the remainder of the minimum term as a debt and reporting the failure to pay as a default to a credit reference agency confirms that the agreements all involve the provision of credit and the defendants have always so understood.[97]I would say at the outset that these activities of the defendants have caused me great concern and this is a matter to which I must return in considering the allegation that the defendants have engaged in unfair practices. However, I do not believe that they are of any real assistance in determining whether Ashbourne’s standard form agreements involve the provision of credit. This is an issue which must depend upon the proper interpretation of the agreements irrespective of how the defendants have behaved.[98]Second, the OFT contends that, in the absence of any express stipulation in Ashbourne’s standard form agreements as to the time for payment, custom and general usage would give rise to an implied term that payment for a 12, 24 or 36 month gym club membership would fall due at the beginning of that period.[99]I accept that an invariable, certain and general usage of a trade may give rise to an implied term in conformity with that usage, provided that there is no inconsistency between that usage and the express terms of the contract. But the usage must be very well known, certain and reasonable, and more than a mere trade practice. Indeed, it must be such that the parties, if asked, would have unhesitatingly agreed that it was part of their bargain.[100]In the context of this case, I believe the OFT’s submission faces the difficulty that these agreements are not made between traders but between traders and consumers, many of whom are no doubt joining a gym club for the first time. This seems to me a very unpromising basis upon which to found an invariable, certain and general usage of a trade.[101]Moreover, the evidence before me is very limited. I only have the tariffs operated by a handful of gym clubs and there is considerable variation between them, as I have explained. The OFT says I may nevertheless infer the existence of such a usage from the fact that numerous clubs are licensed to carry on consumer credit businesses and that Ashbourne is itself licensed to carry on the business of debt collection and debt administration. I am prepared to accept that many clubs are licensed to carry on consumer credit businesses but that may well be because they work closely with finance companies or their membership agreements clearly involve the deferment of a payment obligation. I have an illustration of the former in the evidence before me. The Bodylimits gym of St Albans works with Ashburn Financial Services Ltd which enters into fixed term loan agreements with members to pay their annual subscriptions to the gym club. As for Ashbourne, I have no evidence as to why it has taken a licence. Taken together, these matters are, in my judgment, wholly insufficient to establishes the existence of an invariable trade usage of the kind for which the OFT contends.[102]A further difficulty arises from the express terms of the later versions of Ashbourne’s standard form agreements. As I shall explain, these all contain terms which make it tolerably clear that the payment obligation does not arise when the agreements are entered into but rather as they are performed.[103]Third, the OFT relies upon the fact that many gym clubs offer prospective members seeking to join for a fixed term the option of paying the whole fee up front and thereby receiving a discount or of paying by way of monthly subscription. In these cases, says the OFT, members who pay by way of monthly subscription have entered into credit agreements.[104]In my judgment, this submission by the OFT confuses two quite different cases. In the first, a prospective member enters into an agreement under which, upon its proper interpretation, an obligation to pay for the whole membership period is incurred at the outset but which provides an option to pay later, perhaps at an increased overall price. In this case the agreement does involve the provision of credit. In the second, a prospective member is offered the choice between two different agreements in respect of the same membership period; one requires payment by instalments; the other requires payment for the whole membership period at the outset; and the prospective member chooses the former. In this case the agreement may or may not involve the provision of credit. It all depends upon whether, on the proper interpretation of the agreement, a payment obligation in respect of the whole period is incurred at the outset.[105]The Newport Fitness Centre to which I referred in paragraph [85] of this judgment provides a convenient illustration. It offered a number of different membership options. One was to join for one year at a fee of £199 payable at the outset. Members who joined on this basis were not provided with credit and did not enter into credit agreements. Another was to join for one year at a monthly membership subscription of £24. Whether or not members who joined on this basis entered into credit agreements depends upon whether, on the proper interpretation of those agreements, a payment obligation in respect of the whole period was incurred at the outset and was deferred. In my judgment the fact the club offered a different agreement under the terms of which payment was required at the outset is not determinative.[106]I must therefore consider the terms of Ashbourne’s standard form agreements. To my mind there are two important features of all the agreements. The first is that the member agrees to join the gym club for the minimum period. The second is that the member agrees to pay a monthly membership charge prior to the beginning of the month to which that charge relates. At the end of the month the member must also pay for the use of any facilities which he has used but which are not included in his category of membership.[107]The OFT contends that, from the moment the consumer enters into the agreement, he is under a contractual obligation to pay the full price for the whole of the minimum membership period and that this obligation is discharged in instalments. I disagree. Upon entering into the agreement the consumer does commit himself to making monthly payments for the whole of the minimum period. But these payments are made each month for continuing access to the club’s facilities. As the agreements expressly provide, each payment relates to a particular month during which those facilities will be made available. These are not agreements under which a debt is deferred and credit provided but rather agreements under which the member makes monthly payments in return for the provision of gym facilities which he is entitled to use.[108]In reaching this conclusion I have also had careful regard to the clauses of each agreement which provide for the consequences of termination. I deal with these in detail later in this judgment in considering the issues which arise under the UTCCR. At this stage it is, I think, sufficient to make the following observations.[109]In the case of Agreements 1-3, clause 3C simply provides that upon termination the member must pay all sums then due and outstanding. But it does not say what such sums may comprise.[110]Agreement 4 involves a certain amount of re-ordering and re-wording of the relevant clauses but provides that if the membership is terminated for whatever reason then all monthly payments due to the end of the membership periodwill become due forthwith (clause 2B).[111]Agreement 5 sees yet further re-ordering and re-wording. On termination for breach by the member all sums due will become payable immediately including the balance of the minimum membership period (clause 5(i) and (ii)). Agreements 6, 7 and 8 follow essentially the same format but with a discount for accelerated payment.[112]Agreement 9 adopts a different formula. It provides that in the event of termination all sums due are payable immediately together with the balance of subscriptions that would otherwise have fallen due less a discount for accelerated payment (clause 5). Essentially this same wording is included in all later agreements save for Agreement 11 which, as I have explained, contains no provision for payment upon termination at all.[113]The OFT recognises that its submission gains no assistance from the termination provisions of Agreements 9-13 but contends the position is different in relation to the earlier agreements.[114]I am unable to accept this submission. I see nothing in the wording of clause 3C of Agreements 1-3 which suggests that the member has the benefit of a contractual deferment of the payment obligation. There is perhaps a faint suggestion to this effect in clause 2B of Agreement 4 and clause 5 of Agreements 5-8 but, seen in context, I think their meaning is tolerably clear and consistent with that of the later agreements. In the event of termination the member must pay all sums that would otherwise have fallen due during the balance of the minimum membership period, less any specified discount for accelerated payment.[115]I conclude that none of Ashbourne’s standard form agreements is a credit agreement.

Unfair terms – general

[116]The OFT contends that various terms in Ashbourne’s standard form agreements are unfair within the meaning of regulation 5 of the UTCCR. In particular it relies on those terms which:(i) impose minimum membership periods of 12, 24 or 36 months;(ii) make prompt payment by the member of each monthly subscription a condition of the agreement;(iii) provide that in the event of termination before the end of the minimum period, the member is to become liable to pay the full amount payable in respect of the whole minimum period, or the full amount with a discount for accelerated payment;(iv) purport to exclude the consumer’s right to terminate for the gym club’s breach; alternatively, purport to impose an obligation on the consumer to make payments in respect of the period after termination when the consumer has terminated for the gym club’s breach;(v) require notice of cancellation to be given to Ashbourne rather than the gym club;(vi) fail to state in plain intelligible language the responsibility of a clearly identified supplier to provide gym facilities.[117]The OFT therefore invites me to make orders under regulation 12 of the UTCCR restraining Ashbourne from using any of its standard form agreements or any similar agreements which contravene the UTCCR and from relying on any unfair terms in existing agreements.[118]The OFT further submits that Ashbourne’s activities are also unfair practices contrary to the CPR and amount to Community infringements within section 212 of the EA 2002 for at least the following reasons :(i) Ashbourne’s use or recommendation of the terms is contrary to regulation 3(3) of the CPR in that it does not meet the standard of honest market practice or good faith that may reasonably be expected;(ii) Ashbourne’s presentation of the terms is contrary to regulations 3(4)(a) and 5 of the CPR in that it is likely to deceive the average consumer in relation to the rights of the gym club or the consumer’s own rights or the risks he may face;(iii) and in either case Ashbourne’s activities are likely to cause the average consumer to take the transactional decision of entering into the agreement or making a payment which he is not obliged to make;(iv) Ashbourne’s reliance on the terms in chasing payment is contrary to regulation 3(3) or regulations 3(4)(c) and 7 of the CPR in that it does not meet the standard of honest market practice or good faith that may reasonably be expected; is likely significantly to impair the average consumer’s freedom of choice through harassment, coercion or undue influence; and is likely to cause the average consumer to take the transactional decision of making a payment that he would not otherwise take.[119]The approach to be taken in assessing fairness is set forth in regulation 5(1) of the UTCCR. A term which has not been individually negotiated is to be regarded as 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 the consumer.[120]Moreover, under regulation 6(1) of the UTCCR, the unfairness is to be assessed taking into account the nature of the goods or services and by referring, at the time of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract.[121]The notions of good faith and significant imbalance are interrelated as recital 16 of the Unfair Terms Directive explains:
“Whereas the assessment, according to the general criteria chosen, of the unfair character of the terms, in particular in sale or supply activities of a public nature providing collective services which take account of solidarity among users, must be supplemented by a means of making an overall evaluation of the different interests involved; whereas this constitutes the requirement of good faith, particular regard shall be had to the strength of the bargaining position of the parties, whether the consumer had an inducement to agree to the term and whether the goods or services were sold or supplied to the special order of the consumer; whereas the requirement of good faith may be satisfied by the seller or the buyer where he deals fairly and equitably with the other party whose legitimate interests he has to take into account. ”
[122]The nature of this interrelationship was also considered by the House of Lords in Director General of Fair Trading v First National Bank plc [2001] UKHL 52; [2002] 1 AC 481. The Unfair Terms Directive was at that time implemented by the Unfair Terms in Consumer Contracts Regulations 1994 (“the 1994 Regulations”). Lord Bingham observed at [17]:
“A term falling within the scope of the Regulations is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith.”
[123]Unfairness therefore requires three key elements:(i) a significant imbalance in the parties’ rights and obligations(ii) to the detriment of the consumer and(iii) in manner or to an extent which is contrary to good faith.[124]As for the requirement of significant imbalance, Lord Bingham continued:
“The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the Regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties' rights and obligations under the contract. This involves looking at the contract as a whole. But the imbalance must be to the detriment of the consumer; a significant imbalance to the detriment of the supplier, assumed to be the stronger party, is not a mischief which the Regulations seek to address.”
[125]Lord Bingham then turned to good faith, and in so doing, emphasised the need for fair and open dealing:
“The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the Regulations are designed to promote.”
[126]Lord Millett also provided this guidance at [54]:
“It is obviously useful to assess the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it. But the inquiry cannot stop there. It may also be necessary to consider the effect of the inclusion of the term on the substance or core of the transaction; whether if it were drawn to his attention the consumer would be likely to be surprised by it; whether the term is a standard term, not merely in non-negotiable consumer contracts, but in commercial contracts freely negotiated between parties acting on level terms and at arms' length; and whether, in such cases, the party adversely affected by the inclusion of the term or his lawyer might reasonably be expected to object to its inclusion and press for its deletion.”
[127]Schedule 2 to the UTCCR sets out an indicative and non-exhaustive list of terms which may be regarded as unfair, in just the same way as did Schedule 2 of the 1994 Regulations.

(b) , (e) and (o):

“1. Terms which have the effect of – … (b) inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations, including the option of offsetting a debt owed to the seller or supplier against any claim which the consumer may have against him; … (e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation; … (o) obliging the consumer to fulfil all his obligations where the seller or supplier does not perform his;”
[128]Where, as in this case, the court is considering a collective challenge to the fairness of the terms in a consumer contract, it is necessary to consider the position of typical parties and the effects of typical relationships between them, as the House of Lords explained in the First National Bank case (per Lord Bingham at [20] and Lord Steyn at [33]). The concept of a typical or average consumer is a familiar one in European consumer law extending also into the law of registered trade marks. Such a person is generally assumed to be reasonably well informed and reasonably observant and circumspect, and to read the relevant documents and to seek to understand what is being read. The standard is a variable one and must, I believe, take colour from the context. For example, consumers who are financially sophisticated may be expected to bring to bear a greater understanding of the meaning and implications of the terms of a contract than consumers who are vulnerable as a result of their naivety or credulity. As will be seen, this typical consumer is relevant not only to the assessment of fairness but also the consideration of whether a particular term is expressed in clear intelligible language.

Unfair terms - minimum term

[129]Clause 2 of each of Ashbourne’s standard form agreements sets a minimum membership period of 12, 24 or 36 months. Agreement 9 introduces, in clause 5, the qualification that the member may terminate in the event that the facilities and services provided by the gym club fall well below the standard the member might reasonably expect it to provide. This qualification is retained in all later versions of the agreements.[130]Agreement 10 spells out in capitals, in clause 2, that the member is liable to pay the monthly membership subscription for the minimum membership period and may be obliged to do so even if the member would prefer to cancel the agreement. As a result of observations made by the OFT, it also introduces provision for transfer, suspension and termination.[131]A member may transfer his membership to another person if that person agrees to become a member for the balance of the minimum period. He may suspend his membership in the event of loss of livelihood or medical advice not to use the gym due to injury or illness. The position will be reviewed after two months and, if the circumstances have not changed, the membership may be cancelled after a further two months. In the meantime, the obligation to pay monthly subscriptions continues. The agreement may also be cancelled in the event of change of principal place of work; or a move to a new home which is more than 15 miles away.[132]Agreements 11 to 13 confer upon the member additional rights to suspend or terminate. As I have mentioned, the OFT does not suggest there is any material difference between them in this respect so I need only refer to Agreement 13. This again spells out in capitals the obligation upon the member to pay the monthly membership subscription for the minimum membership period unless the membership is “terminated without liability, suspended or transferred”. Each of these is then explained, together with the right to cancel. These extend the rights of the member to suspend or bring the agreement to an end so as to include loss of livelihood by the member or the member’s spouse or partner; and an inability to use the gym for any medical reason including pregnancy or because the member has recently given birth. In the event of suspension, the member is now relieved of the obligation to pay monthly subscriptions.[133]The OFT is concerned about these terms because it has received many complaints which demonstrate that consumers tend to overestimate the use they will make of their gym club memberships, that unforeseen circumstances often make it impractical for members to use the gym facilities, and that often a monthly payment that may have been affordable at the beginning of the agreement ceases to be affordable before the end of the minimum membership period. Mr Jason Freeman has exhibited to his witness statements many such complaints. They also reveal that consumers often do not appreciate that they have entered into an agreement which requires them to remain a member for a minimum period until they seek to bring it to an end. Indeed statements have sometimes been made to them which have positively misled them into believing that they have a right to terminate under their agreements when in truth they do not.[134]Mr Clayton-Wright acknowledges his witness statement that the OFT has a legitimate concern that consumers tend to overestimate how often they will use a gym once they become members and that unforeseen circumstances may make such use impractical. Indeed, the defendants’ solicitors said in a letter dated 22 May 2009 “it is a notorious fact that many people join gyms having resolved to exercise regularly but fail to attend at all after two or three months. Any member of a gym can attest to the fact that they tend to be busiest in the first two or three months after January”.[135]The OFT also points to that part of Ashbourne’s website to which I have referred at paragraph [7] above. Here it advises gym clubs which have what it refers to as “high end” facilities that a 90 day rolling contract similar to that of the national chains will be the best option. But if a gym club has a “low monthly subscription” then, Ashbourne advises, it is better to adopt a longer minimum term contract of 12, 24 or 36 months. It is therefore apparent that the standard form agreements the subject of these proceedings are directed at the lower end of the market. Moreover, says the OFT, this confirms there is no justification for imposing a minimum membership period of 12 months or more. To the contrary, it is evident Ashbourne is exploiting consumers who join gym clubs which offer poorer facilities and charge lower subscriptions.[136]The defendants have offered some explanation of their strategy in correspondence and in the evidence. As for claiming the balance of the subscriptions for the remainder of the minimum membership period in the event of early termination, the defendants’ solicitors said in a letter dated 18 September 2008 that the variable costs associated with an additional member attending the gym are generally minimal (at paragraph 37) and that in practice gym clubs are never so full as to prevent them from recruiting additional members (paragraph 42). In a further letter dated 22 May 2009 they explained that the minimum membership periods enable gym clubs to offer membership rates significantly below those they would otherwise be obliged to set.[137]Mr Clayton-Wright elaborates upon the position in his witness statement. At the outset, and having acknowledged the OFT’s concerns as legitimate in the manner I have described, he says those concerns are adequately addressed by the terms of Agreement 10. He then turns to the more general attack on agreements with terms imposing minimum membership periods and says that an assessment of the fairness of such terms must depend, in part, on an assessment of the value of the inducement the club offers to the consumer to enter into the agreement in question. As to this, he says that clubs with which Ashbourne does business always set their own price structures. Further, they always offer the consumer a choice between paying per visit, paying per month on a rolling basis or paying per month with a minimum membership period. The only clubs which do not offer a choice are, he says, the ones at the top end of the market and these only offer rolling monthly membership agreements. This evidence is not wholly consistent with Ashbourne’s website or the evidence as to gym club tariffs that I have summarised at paragraph [85] above. Nevertheless, I accept that the gym clubs with which Ashbourne does business set their own price structures and often do offer a variety of membership options which include some or all of the following, namely payment per visit, payment per month and payment at the outset or by month for minimum periods of 6, 12 or 36 months.[138]Mr Clayton-Wright continues that although there are some consumers for whom agreements with minimum membership periods are a burden, there are others for whom they are a benefit because the monthly membership subscriptions for such agreements are invariably lower than those for rolling monthly membership agreements or, as I understand him, the aggregate of payments per visit each day for one month. I am sure this is correct. He also says there are many consumers who consider the lower monthly subscriptions a sufficient inducement to enter into Ashbourne’s agreements. This again I accept. Indeed, it is evident from the fact that some 300,000 such consumers have done so.[139]In light of all this evidence, the OFT maintains that the terms providing for a minimum membership period in all Ashbourne’s standard form agreements are not clear and are unfair. The defendants contend they are both clear and fair and, moreover, that the OFT is inviting the court to make an assessment which relates to the definition of the main subject matter of the agreements and is therefore prohibited by regulation 6(2)(a).[140]The parties have identified three issues to which these contentions give rise: first, whether the term imposing a minimum membership period falls within the scope of regulation 6(2)(a); second, whether the term is in plain intelligible language; and third, whether the term is fair. I will address them in turn. Does the term imposing a minimum membership period fall within the scope of regulation 6(2)(a) UTCCR?[141]There are two aspects to the prohibition of the assessment of the fairness of a term under regulation 6(2): first, the term must be in plain intelligible language; second, the assessment of the fairness of the term must relate to the definition of the main subject matter of the contract, or to the adequacy of the price or remuneration as against the goods or services supplied in exchange.[142]The OFT contends that the term in each of Ashbourne’s standard form agreements which requires the customer to remain a member for a minimum period does not fall within regulation 6(2)(a) because the main subject matter of each agreement is membership of the gym club and the right to use the club which is conferred by that membership. The period of time for which that right is conferred is an ancillary or subsidiary provision. The OFT also contends that even if the minimum period term is part of the main subject matter of the agreement it may still be assessed for fairness by reference to the consequences of earlier termination.[143]The defendants respond that there is nothing incidental, ancillary or subsidiary about a term which defines the period during which the benefits are to be conferred. It is quite literally a defining feature of the obligation assumed by the gym club.[144]I have set out the text of regulation 6(2) at paragraph [65] above. It accurately implements Article 4(2) of the Unfair Terms Directive. The 19th recital to that Directive gives some idea of its purpose:
“Whereas, for the purposes of this Directive, assessment of unfair character shall not be made of terms which describe the main subject matter of the contract nor the quality/price ratio of the goods or services supplied; whereas the main subject matter of the contract and the price quality ratio may nevertheless be taken into account in assessing the fairness of other terms; whereas it follows, inter alia, that in insurance contracts, the terms which clearly define or circumscribe the insured risk and the insurer’s liability shall not be subject to such assessment since these restrictions are taken into account in calculating the premium paid by the consumer;”
[145]In the First National Bank case, the House of Lords explained that the regulation must be given a restrictive interpretation such that it only applies to terms that fall squarely within it. Lord Bingham said at [12]:
“…. there is an important "distinction between the term or terms which express the substance of the bargain and 'incidental' (if important) terms which surround them": Chitty on Contracts, 28th ed (1999), vol 1, ch 15 "Unfair Terms in Consumer Contracts", p 747, para 15-025. The object of the Regulations and the Directive is to protect consumers against the inclusion of unfair and prejudicial terms in standard-form contracts into which they enter, and that object would plainly be frustrated if regulation 3(2)(b) were so broadly interpreted as to cover any terms other than those falling squarely within it. In my opinion the term, as part of a provision prescribing the consequences of default, plainly does not fall within it.”
[146]Lord Steyn observed at [31] that the Unfair Terms Directive treats consumers as presumptively weaker parties and therefore fit for protection from abuses by stronger contracting parties and that this is an objective which must throughout guide the interpretation of the Directive as well as the implementing regulations. He continued at [34]:
“Clause 8 of the contract, the only provision in dispute is a default provision. It describes remedies which only become available to the lender upon the default of the consumer. For this reason the escape route of regulation 3(2) is not available to the bank. So far as the description of terms covered by regulation 3(2) as core terms is helpful at all, I would say that clause 8 of the contract is a subsidiary term. In any event, regulation 3(2) must be given a restrictive interpretation. Unless that is done regulation 3(2)(a) will enable the main purpose of the scheme to be frustrated by endless formalistic arguments as to whether a provision is a definitional or an exclusionary provision. Similarly, regulation 3(2)(b) dealing with "the adequacy of the price or remuneration" must be given a restrictive interpretation. After all, in a broad sense all terms of the contract are in some way related to the price or remuneration. That is not what is intended.”
[147]Further guidance as to the correct approach to the scope and application of this regulation has been given by the Supreme Court in Office of Fair Trading v Abbey National plc and others [2009] UKSC 6, [2010] 1 AC 696. The issue before the court was whether as a matter of law the bank charges levied on personal current account customers in respect of unauthorised overdrafts constituted “price or remuneration” as against the supply of services in exchange within the meaning of regulation 6(2). In allowing an appeal from the Court of Appeal, the Supreme Court held that they did. It followed that that any challenge to the fairness of the terms by which the customers agreed to pay the charges based upon a contention that they were excessive by comparison with the services supplied was precluded by regulation 6(2)(b).[148]Although the Abbey National case was concerned with the scope of the exclusion under paragraph (b) of regulation 6(2), Lord Walker JSC explained at [31] that the two paragraphs are not unconnected:
“31. I have to say that I do not find it particularly helpful to consider whether paragraphs (a) and (b) should be read conjunctively or disjunctively. The court is not faced with a text (such as “charitable or benevolent” in the will of Caleb Diplock: Chichester Diocesan Fund and Board of Finance (Inc) v Simpson [1944] AC 341, 349, 369) where the two approaches are stark alternatives. In my view the two paragraphs must be given their natural meaning, and read in that way they set out tests which are separate but not unconnected. They reflect (but in slightly different ways) the two sides (or quid pro quo) of any consumer contract, that is (a) what it is that the trader is to sell or supply and (b) what it is that the consumer is to pay for what he gets. The definition of the former is not to be reviewed in point of fairness, nor is the “adequacy” (appropriateness) of the latter. ”
[149]Further, the court made clear (per Lord Walker JSC at [29]; Lord Phillips PSC at [57]-[61] and [78]-[80]; Lord Mance JSC at [95] and [101]) that although the assessment of the fairness of the terms could not relate to the adequacy of the price or remuneration as against the services supplied, the terms would still be open to potential attack on the basis that they were unfair upon some other ground.[150]Lord Phillips PSC put it this way at [57]-[61]:
“57. The agreed statement of facts and issue describes the issue raised by this appeal as follows: “Whether an assessment of the fairness of the relevant terms (pursuant to which the relevant charges are levied) would relate to the adequacy of the price and remuneration, as against the services supplied in exchange, within the meaning of regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations 1999.”
This does not accurately describe the issue raised by this appeal, which is very much more narrow. That issue is whether the relevant charges constitute “the price or remuneration, as against the services supplied in exchange” within the meaning of the regulation. If they do not, the attack on the fairness of the terms that is open to the OFT will not be circumscribed by regulation 6(2)(b) . If they do, they will still be open to attack by the OFT on the ground that they are “unfair” as defined by regulation 5(1), but that attack cannot be founded on an allegation that the relevant charges are excessive by comparison with the services which they purchase, for that is forbidden by regulation 6(2)(b) . 58. That this was indeed the issue was made clear by counsel on either side in their oral submissions. Towards the close of his reply, Mr Sumption QC said:
“All that I can ask the courts to declare, and all that my clients have ever asked the courts to declare, is that the insufficient funds charges are included in the price within the meaning of the word ‘price’ in [regulation] 6 and that no assessment of the fairness of the terms imposing the IFCs may relate to their adequacy as against the service supplied.” 59. Mr Crow QC for his part submitted on behalf of the OFT that even if article 4(2) of the Directive did apply, the relevant terms were still subject to assessment for fairness. In that event, while it would not be open to the OFT to assess the fairness of the price by reference to the adequacy of the goods or services supplied in exchange, it would be open to it to assess the fairness of the price according to other criteria. 60. This agreement between the parties reflects acceptance by the banks in the Court of Appeal of a finding by Andrew Smith J that was contrary to one of their submissions. The banks had submitted that a term of a contract that provided the “price or remuneration” for “goods or services supplied” was absolutely exempt from assessment for fairness by reason of regulation 6(2). This was described as the “excluded term” construction of the Regulation. Andrew Smith J held that this was not correct. Regulation 6(2) precluded assessing a price term for fairness by reference to its adequacy as payment for the goods or services provided in exchange. It did not, however, preclude assessing a price term for fairness according to other criteria. This has been described as the “excluded assessment” construction of the regulation. 61. Mr Sumption submitted that the difference between the “excluded term” and the “excluded assessment” constructions was “a distraction from the real issues”
. It is certainly a distraction from the narrow issue that the parties are now agreed is before the court. But it is only because the “excluded assessment” construction has prevailed that the issue has been narrowed from that in the agreed statement of facts and issue. Had the “excluded term” construction prevailed, a finding in favour of the banks that the relevant terms were included within the meaning of the word “price” in regulation 6(2) would have precluded any challenge to those terms on the ground of fairness. As it is, if the banks succeed on the narrow issue, this will not close the door on the OFT's investigations and may well not resolve the myriad cases that are currently stayed in which customers have challenged relevant charges.” “Whether an assessment of the fairness of the relevant terms (pursuant to which the relevant charges are levied) would relate to the adequacy of the price and remuneration, as against the services supplied in exchange, within the meaning of regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations 1999.” “All that I can ask the courts to declare, and all that my clients have ever asked the courts to declare, is that the insufficient funds charges are included in the price within the meaning of the word ‘price’ in [regulation] 6 and that no assessment of the fairness of the terms imposing the IFCs may relate to their adequacy as against the service supplied.”[151]The further reasoning of Lord Phillips PSC at [79] to [80] is also very helpful:
“79. The Court of Appeal accepted the following argument advanced by the OFT. The object of regulation 6(2) is to exclude from assessment for fairness that part of the bargain that will be the focus of a customer's attention when entering into a contract, that is to say the goods or services that he wishes to acquire and the price he will have to pay for doing so. Market forces could and should be relied upon to control the fairness of this part of the bargain. Contingencies that the customer does not expect to involve him will not be of concern to him. He will not focus on these when entering into the bargain. The relevant charges fall into this category. Free-if-in-credit current accounts are opened by customers who expect to be in credit. Customers who go into debit without making a prior agreement for an overdraft normally do so because of an unforeseen contingency. Customers do not have regard to the consequences of such a contingency when opening a current account. Accordingly, the relevant charges that are then levied do not fall within regulation 6(2). 80. It seems to me that this reasoning is relevant not to the question of whether the relevant charges form part of the price or remuneration for the package of services provided but to whether the method of pricing is fair. It may be open to question whether it is fair to subsidise some customers by levies on others who experience contingencies that they did not foresee when entering into their contracts. If it is not it may then be open to question whether the relevant terms fall within regulation 5(1). These questions do not, however, bear on the question of whether the relevant charges form part of the price or remuneration that is paid in exchange for the services provided to the holder of a current account. In agreement with Lord Walker JSC, and for the additional reasons that he gives, I am not persuaded by the Court of Appeal's reasons for excluding the relevant charges from the “price or remuneration” in regulation 6(2).”
[152]Turning now to the application of these principles in the context of this case, I believe that the main subject matter of each of Ashbourne’s standard form agreements involves, on the one hand, the agreement by the gym club that a consumer may become a member of the club and use and access its facilities for the minimum period and, on other hand, the payment by the member of a monthly subscription of a certain sum, again for that minimum period. I do not accept that a term providing for the minimum period is not a “core term” but is merely a “subsidiary provision”, as the OFT urged upon me. There is a danger in using these expressions as shorthand for the words of regulation 6(2) as the Supreme Court explained in the Abbey National case. However, in so far as it is helpful to use them, I believe that clause 2 of each of the agreements is a core term rather than a subsidiary provision because it defines the period during which the member is entitled to use the facilities of the gym club and, in return, must pay a particular monthly subscription. Nor do I believe the OFT gains any assistance from paragraphs 1(b), (e) or (o) of the indicative list of terms. These all concern terms dealing in one way or another with default or non-performance. I therefore believe that clause 2 of each of the agreements does fall within the scope of regulation 6(2).[153]That is not the end of the analysis, however, because the question then arises as to whether regulation 6(2)(a) precludes any assessment of the fairness of clause 2 of each of the agreements or whether the regulation only precludes an assessment relating to the definition of the main subject matter of the contract, that is to say its meaning, description and clarity. In the Abbey National case the Supreme Court was, of course, only concerned with the scope of paragraph (b) of regulation 6(2). Nevertheless, it seems to me that there is no basis for drawing a distinction between the two paragraphs in this regard. If regulation 6(2)(b) only precludes the assessment of the fairness of a term by reference to the adequacy of the price or remuneration as against the goods or services supplied then, in my judgment, it follows that regulation 6(2)(a) only precludes the assessment of the fairness of a term by reference to the definition of the main subject matter of the contract. This is not only the natural meaning of the words used in regulation 6(2) but also gives effect to the purpose of its two paragraphs as explained by Lord Walker JSC. Moreover, as the House of Lords explained in the First National Bank case, this regulation should be given no wider an interpretation than necessary. This is a matter to which I must return in addressing the third issue, namely fairness.

Is the term expressed in plain intelligible language?

[154]The OFT contends clause 2 of each of Ashbourne’s standard form agreements is not expressed in plain intelligible language. This contention has been expressed in a number of different ways. Mr Freeman says in his first witness statement that in the earlier agreements it is not stated plainly that the member has no right to end the agreement during the minimum period; in the more recent agreements it is not stated plainly that the member will have to make payments for the whole of the minimum period subject to the limited rights of termination provided by clause 5; and, again in the more recent agreements, the expression “minimum membership period” which is used in clause 2 is not defined and does not correspond to the “minimum term” wording used on the front page of the agreements. In his second witness statement, Mr Freeman elaborates that the OFT is particularly concerned about this last point and highlights a series of differences between the terminology used on the front page of each of the agreements and that which is used in the body of the terms and conditions on the reverse. Then, in its submissions to me, the OFT argued that clause 2 of each of the agreements is not expressed in plain intelligible language because there is no statement of the overall liability which is being incurred, that is to say the overall cost of the minimum term; and further, there is no plain and intelligible statement that the consequence of termination before the end of the minimum term may be an immediate liability for payments that would otherwise have been payable over the balance of the minimum term or for damages for loss of the bargain.[155]The question whether a particular term is expressed in plain intelligible language must be considered from the perspective of an average consumer. Here such a consumer is a member of the public interested in using a gym club which is not a high end facility and who may be attracted by the relatively low monthly subscriptions.[156]There is certainly a difference in the terminology used on the front of many of the agreements and that used in the body of the terms and conditions on the reverse. On the front of the earlier agreements, under the space left for the consumer’s signature, appear the words “I have read the terms and conditions overleaf and understand that I am signing for a minimum of …”. In later agreements this wording has been modified to read “I have been advised that I should read the terms and conditions overleaf and that I am signing for a minimum term of …. Months”. In the case of Agreement 13, the wording reads: MEMBERSHIP DETAILS & LENGTH OF MINIMUM MEMBERSHIP PERIOD and then, a little further down the page: “YOU MUST PAY THE MONTHLY MEMBERSHIP SUBSCRIPTION FOR THE NEXT … MONTHS (“THE MINIMUM MEMBERSHIP PERIOD”) UNLESS YOUR MEMBERSHIP IS TERMINATED WITHOUT LIBAILITY, SUSPENDED OR TRANSFERRED AS SET OUT OVERLEAF”.[157]On the reverse of the earlier agreements, clause 2 provides that the consumer will remain a member for “the minimum period of … year …” and, in the case of the later agreements, for a “membership period” or “minimum membership period”. In the case of Agreement 13 the position is spelt out in the manner I have detailed in paragraph [50] of this judgment.[158]It is plainly desirable that there is consistency in the terminology used in any agreement and, in this case, on the front of each of the agreements and in the terms and conditions on the reverse. As I have said, in the case of many of the agreements that consistency is lacking. However the language used is, in my judgment, plain and intelligible. I believe that the average consumer reading each of the agreements reasonably carefully would have been left in no doubt that he was signing up for a minimum period. In the case of Agreement 13, the language is wholly consistent because the minimum membership period is defined.[159]As for Mr Freeman’s other concerns, I accept that in the earlier agreements it is not stated in terms that the member has no right to end the agreement during the minimum period but this, it seems to me, is self evident to the average consumer from the clearly expressed obligation to remain a member for the minimum period. Further, I reject the contention that the later agreements do not state plainly that the member will have to make monthly payments for the whole of the minimum period subject to the right of termination contained in clause 5. To the contrary, I consider this is clearly spelt out.[160]Finally, as for the OFT’s other submission advanced at the hearing, it is correct that there is no statement in clause 2 of the overall liability which is being incurred. But, in my judgment, this does not prevent the clause being clear or intelligible. I also accept that there is no statement in clause 2 that the consequence of termination before the end of the minimum term may be an immediate liability for payments that would otherwise have been payable over the balance of the minimum term or for damages for loss of the bargain. But this, it seems to me, is more a criticism of the fairness of the clause than its clarity or intelligibility. Moreover, the consequences of termination are matters dealt with in other clauses which I address later in this judgment.[161]I therefore reject the contention that clause 2 of each of Ashbourne’s standard form agreements is not expressed in plain intelligible language.

Fairness

[162]I must now turn to the issue of fairness and consider whether the terms in Ashbourne’s standard form agreements which provide for a minimum membership period are so weighted as to cause a significant imbalance in the parties’ rights and obligations to the detriment of the consumer in a manner or to an extent which is contrary to good faith. As has been seen, Ashbourne recommends minimum periods of 12, 24 or 36 months for each of them. In assessing their fairness, it is, I think, important to have firmly in mind the average consumer to whom these agreements are targeted.[163]At the outset I recognise that the gym clubs set their own price structures but, as Mr Clayton-Wright says, the subscriptions they charge for agreements with minimum membership periods are invariably lower than those for rolling monthly membership agreements. Moreover, it is this lower charge which induces the average consumer to enter into such an agreement rather than taking one of the other tariff options or, perhaps, not joining the gym club at all.[164]This average consumer tends to overestimate how often he will use the gym once he has become a member and further, unforeseen circumstances may make continued use of its facilities impractical or unaffordable. Indeed, it is, as the defendants say, a notorious fact that many people join such gym clubs having resolved to exercise regularly but fail to attend at all after two or three months. Yet, having entered into the agreement, they are locked into paying monthly subscriptions for the full minimum period.[165]The defendants recognise the potential for unfairness the clauses providing for minimum membership periods have in circumstances such as these but say it is addressed by the qualifications introduced into Agreement 10 which expressly provide for termination in the event of a repudiatory breach by the gym club; permit the transfer of a membership; and provide for suspension or termination in the event of loss of livelihood, injury or illness, change of principal place of work or a move to a new home.[166]Mr Freeman explained why these qualifications are inadequate in his second witness statement and, as a result, the defendants have produced Agreement 13 which confers upon the member additional rights to suspend or terminate in the circumstances I have described. This agreement also relieves the member of the obligation to pay monthly subscriptions during the period of any permitted suspension.[167]I accept that these amendments go some way to reduce the burden on members but they do not remove it because it is not possible to anticipate all events which may render continued use of a gym impractical or unaffordable and they provide fertile ground for dispute as to their proper interpretation, as the letters of complaint show. Further, and most importantly, they do not begin to address the tendency of the average consumer to overestimate the use he will make of the gym facilities and, indeed, that he is likely not to attend at all after two or three months.[168]It is of course true that members have the benefit of a relatively low monthly subscription. But an analysis of the tariffs of three sample gym clubs conducted by Dr Mathew Bennett, the Director of Economics within the OFT, shows that a member wishing to terminate an annual agreement after three months would face a termination charge which is significantly higher than the discount he has received. The same applies after six months. The termination charge only equals the discount the member has received if he terminates after 10 or 11 months.[169]So far as the gym clubs are concerned, the terms providing for a minimum membership period are highly advantageous because clubs of this kind are rarely so oversubscribed that they cannot take on new members, particularly members who have overestimated the use they are going to make of the gym facilities.[170]I must also consider whether this imbalance in the parties’ rights and obligations arises in a manner or to an extent which is contrary to good faith.[171]In this regard, the defendants know that the average consumer overestimates the use he will make of the gym and that frequently unforeseen circumstances make its continued use impossible or his continued membership unaffordable. They are also well aware that the average consumer is induced to enter into one of their agreements because of the relatively low monthly subscriptions associated with them but that if he ceases to use the gym after between three and six months he would be better off joining on a pay per month basis. Yet the defendants take no steps to have these matters brought to the attention of consumers. Nor do the defendants ensure that consumers are made clearly aware of their overall liability at the outset which might alert them to the risks associated with early termination and the likely benefits of entering into an agreement for a shorter term.[172]Moreover, I do not believe the defendants have ever offered a satisfactory explanation for the different advice they give on their website to what they describe as “high end” gym clubs. For these, they say, a contract similar to those of the national chains, commonly a 90 day rolling contract, will be most suitable.[173]In all these circumstances I believe that the defendants’ business model is designed and calculated to take advantage of the naivety and inexperience of the average consumer using gym clubs at the lower end of the market. As the many complaints received by the OFT show, the defendants’ standard form agreements contain a trap into which the average consumer is likely to fall.[174]I must of course give weight to the requirement that there must be a significant imbalance. Taking this and all the other matters to which I have referred into account I have reached the conclusion that the terms of Agreements 1-10 setting minimum membership periods of 12, 24 or 36 months are so weighted as to cause a significant imbalance in the parties’ rights and obligations in a manner and to an extent which is contrary to good faith. The position in relation to Agreements 11-13 is, I believe, different because they do extend the circumstances in which members may terminate before the end of the minimum period. In the case of these agreements I have come to the conclusion that the threshold is higher and that a significant imbalance in the parties’ rights and obligations in a manner or to an extent which is contrary to good faith only arises in those cases in which the minimum term exceeds 12 months, that is to say those which provide for a minimum membership period of 24 or 36 months. My conclusion in relation to these later agreements might well have been different had they permitted the member to terminate after 12 months on, say, 30 days notice, perhaps with a provision requiring the member to pay the difference between the agreed subscription and that for a rolling monthly membership for the period prior to the date of termination.[175]This brings me to the final part of the analysis, namely whether this assessment of fairness relates to the definitionof the main subject matter of the agreements. In my judgment it does not. The assessment does not relate to the meaning or description of the length of the minimum period, the facilities to which the member gains access or the monthly subscription which he has to pay; nor does it relate to the adequacy of the price as against the facilities provided. Instead it relates to the obligation upon members to pay monthly subscriptions for the minimum period when they have overestimated the use they will make of their memberships and failed to appreciate that unforeseen circumstances may make their continued use of a gym impractical or their memberships unaffordable. Put another way, it relates to the consequences to members of early termination in light of the minimum membership period. Accordingly I believe the assessment is not precluded by regulation 6(2).

Unfair terms – prompt payment, termination for consumer’s breach

[176]I am asked to decide in relation to each of Ashbourne’s standard form agreements a series of issues concerning prompt payment and the liability of the consumer in the event that he or she is in breach.[177]The issues, which have been formulated by the parties, are these: Prompt payment: (i). Is prompt payment a condition? (ii). If so is the term expressed in plain intelligible language? (iii). Is the term unfair? (iv). Would the term be unfair if it was expressed in plain intelligible language and given sufficient prominence to bring it to the attention of the consumer before the agreement was made? Consumer’s liability on termination for the consumer’s breach: (v). Is each of Ashbourne’s contracts which provides for the consumer to pay the balance of the monthly payments for the minimum membership period, or that balance less a specified discount, in the event of termination, expressed in plain intelligible language? (vi). Is each of those terms unfair? (vii). Is each of those terms a penalty? (viii). Would each of those terms be unfair if it was expressed in plain intelligible language and given sufficient prominence to bring it to the attention of the consumer before the agreement was made?[178]The agreements fall into various groups and it is convenient to address all the issues that arise in relation to each of these groups in turn.

Agreements 1 - 3

[179]Clause 3B provides that payment of the monthly subscription must be made prior to the beginning of the month to which it relates. This does not, however, make prompt payment a condition such that any late payment of a single subscription would entitle the club to treat the agreement as having been repudiated and claim damages for loss of the whole transaction. It follows that issues (ii) to (iv) do not arise.[180]Clause 3C provides that if membership is terminated for any reason the member must pay forthwith all sums then due and outstanding. This is not a clause which confers a right to terminate but one which deals with the consequences of termination. What then does it mean? There can be no doubt the defendants have interpreted it as entitling them to claim the balance payable in respect of the minimum membership period. But in my judgment they were wrong to do so and this is a matter to which I must return in considering whether the defendants have engaged in unfair business practices. In the event the member has committed a repudiatory breach which entitles to the gym club to terminate then clause 3C imposes on the member an obligation to pay forthwith all sums which are that point due and outstanding. The sums due and outstanding are those subscriptions which up to that point have become due and payable. In addition, the club may claim damages to compensate it for any loss it has suffered as a result of the breach. But this is not something for which clause 3C provides. Accordingly, issues (v) to (viii) do not arise.

Agreement 4

[181]Clause 3B of Agreement 4 is in the same terms as for Agreements 1-3 and it raises no new issues. Prompt payment is not a condition and issues (ii) to (iv) do not arise.[182]Agreement 4 sees a change in the deletion of clause 3C and the insertion of clause 2B which provides that in the event of termination for any reason all sums due at that point remain payable and the whole of the remaining monthly payments due to the end of the membership period had the membership period not been terminated will become due forthwith.[183]Again, this is not a provision which entitles the club to terminate but one which provides for the consequences of termination. Accordingly, as in the case of Agreements 1-3, the club only has a right to terminate in the event of a repudiatory breach. But now, in contrast to those earlier agreements, in the event of termination there is a clearly expressed right to claim all subscriptions for the balance of the minimum membership period and without any discount.[184]The question I must now consider is whether this clause is unfair or a penalty. Such a clause will be enforceable if it does not exceed a genuine attempt to estimate in advance the loss which the gym club would be likely to suffer from a breach of the obligation. Here I must have regard to the fact that gym clubs of the kind in issue are rarely fully subscribed and the costs associated with an additional member are minimal. So it may be said that, in the event of repudiatory breach by the member, the gym club is entitled to the balance of the monthly subscriptions to reflect the club’s loss of opportunity to receive performance of the member’s outstanding obligations. Nevertheless, I believe the clause is unfair and a penalty because it makes absolutely no allowance for accelerated payment. The member is required to pay in full the entire balance of the monthly subscriptions irrespective of when the repudiatory breach takes place.

Agreements 5 - 8

[185]Clause 4 provides that payment of each monthly subscription must be made prior to the beginning of the month to which it relates. As in the case of Agreements 1-4, this does not, however, make prompt payment a condition such that any late payment of a single subscription would entitle the club to treat the agreement as having been repudiated and claim damages for loss of the whole transaction. Therefore, issues (ii) to (iv) do not arise.[186]Clause 5 now introduces a contractual right to terminate in the event of a breach by the member which is “(a) serious (b) has not been remedied within 7 days of a written warning or (c) is repeated within 6 months of a written warning”. It appears to contemplate the right arising on any one of the three events specified in paragraphs (a), (b) and (c). They are expressed to be alternatives.[187]The clause goes on to specify the consequences of such termination in this way:
“In that event, all sums due will become payable immediately, including the balance of the minimum membership period less 1%”
. Again, in contrast to the position under Agreements 1-3, the contract expressly provides that the gym club may recover any sums that would have fallen due over the balance of the minimum membership had the agreement not been terminated. Albeit somewhat clumsy, the clause is plain and intelligible.[188]In accordance with well established principle, if a clause of a membership agreement permits a gym club to terminate in the event of a non repudiatory breach by a member then, upon termination pursuant to that provision, it is entitled to claim sums due and damages for losses suffered up to the date of termination but not beyond. A clause which provides for the payment of a larger sum will be void as a penalty: see, for example, Financings Ltd v Baldock [1963] 2 QB 104.[189]In my judgment clause 5 is not limited to cases of repudiatory breach. It would apply, for example, where a member is one or two days late in paying his subscription, is promptly chased by letter but fails to pay the subscription within 7 days thereafter, having in the meantime given a very good reason for his delay. Such conduct would not evince an intention on the part of the member no longer to be bound by the agreement. Nor, in my judgment, would the letter constitute notice requiring the subscription to be paid within a reasonable time so as to make time for payment of the essence of the agreement. As the Court of Appeal explained in Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361, even repeated late payment of sums due may not go to the root of an agreement where there is no evidence that prompt payment is of vital importance to the receiving party or its confidence in the other party’s ability to pay has not been shattered.[190]It follows that clause 5 is a penalty and not fair. It purports to require the member, regardless of whether his breach is repudiatory, to pay the subscriptions that would have fallen due over the balance of the minimum membership period. Further, the defendants have relied upon this clause as entitling them, upon termination, to claim all these subscriptions. They were wrong to do so and this is a matter to which I must return in considering whether the defendants have engaged in unfair commercial practices.

Agreements 9 and 10

[191]These are in substantially the same terms as Agreements 5 – 8 save in two respects material to this aspect of the case. First, clause 4 of each of these agreements provides:
“The initial payment specified overleaf and all subsequent membership subscriptions must be paid in full, as and when they fall due, to Ashbourne…”
The OFT contends that this makes time of the essence. I disagree. It specifies in what manner and to whom the subscriptions must be paid. But it does not stipulate that time for payment must be exactly complied with and would not be so understood by the average consumer. Therefore, issues (ii) to (iv) do not arise.[192]Second, clause 5 has taken a rather different form. In the case of Agreement 9, clause 5 reads, so far as relevant:
“We may terminate this agreement at any time if you treat our members or staff without the consideration we may reasonably expect and (a) you have fallen well below that standard or (b) if you have been asked to remedy your conduct, you fail to do so within 7 days of the receipt of a written warning or (c) you do the same thing within 6 months of the receipt of a written warning”
. The clause is therefore concerned with the treatment of members of members of staff and is of limited effect. Further, the clause is not restricted to cases of repudiatory breach. Moreover, it does not confer any right to terminate for late payment of subscriptions. For that, the gym club must fall back on general principles of repudiatory breach.[193]Clause 5 of Agreement 9 continues: In that event, all sums due will become payable including the balance of the minimum membership period less 1% . Just as in the case of clause 5 of Agreements 5-8, this clause purports to require the member, regardless of whether his breach is repudiatory, to pay the subscriptions that would have fallen due over the balance of the minimum membership period less 1%. It follows this clause is unfair and a penalty.[194]In the case of Agreement 10, clause 5 reads, so far as relevant:
“We may terminate this agreement at any time if (a) your treatment of our members or staff falls well [below] the consideration we may reasonably expect or (b) having been asked to remedy your conduct, you fail to do so within 7 days of the receipt of a written warning or (c) having been asked to remedy your conduct you do the same thing again within 6 months of the receipt of a written warning”
. It seems to me that in this amended form, paragraph (b) applies to all conduct, including late payment of subscriptions, but again, in the case of a single late payment, seven days is not sufficient notice to make time for compliance of the essence of the agreement.[195]In the case of Agreement 10, clause 5 then continues:
“In the event that this agreement is terminated before the minimum period has ended, all sums due to us plus the balance of the monthly subscriptions that would otherwise have fallen due will become payable immediately less 5%.”
This term is plain and intelligible. It permits the gym club to claim the balance of the monthly subscriptions less 5% in the event of a non repudiatory breach. It is therefore unfair and a penalty.[196]The defendants have again interpreted these agreements as entitling them to claim on behalf of the gym clubs the balance payable in respect of the minimum membership period following non repudiatory breach concerning late payment. As in the case of the earlier agreements, I believe they were wrong to do so and so, once again, this is a matter to which I must return in considering whether the defendants have engaged in unfair business practices.

Agreement 11

[197]This agreement provides, by clause 4, that the initial payment and all subsequent subscriptions must be paid in full to Ashbourne. It does not make prompt payment a condition and therefore issues (ii) to (iv) do not arise.[198]As I have mentioned, there is no term in this agreement providing for the member to pay the balance of the monthly subscriptions in the event of termination. Accordingly issues (v) to (viii) do not arise either.

Agreements 12 and 13

[199]There is, as I have said, no material difference between these two agreements and so I need only refer to Agreement 13.[200]Clause 4 is in the same terms as for Agreement 11. It does not make prompt payment a condition and therefore issues (ii) to (iv) do not arise.[201]Clause 5 deals with termination. It provides:
“This agreement may be terminated (a) in the circumstances set out below or (b) by either party at any time in response to a serious breach of the other party’s obligations under this agreement.”
[202]So far as (b) is concerned, this is a statement of the common law that a party may terminate if the other party is in repudiatory breach.[203]So far as (a) is concerned, the clause continues:
“If any payment due from you remains unpaid for a period of three months or longer, we may serve a final warning in respect of any outstanding sums due. If after the expiry of a period of one month from the date of service of that final warning upon you, any sum which the final warning required you to pay has not been paid, then this will be treated as a repudiation of your obligations under this agreement and we may terminate the agreement.”
[204]In my judgment, a delay of three months in paying a subscription is undue and accordingly the gym club may properly given notice (in the form of a final warning) requiring payment to be made in a reasonable time. One further month is, I believe, entirely reasonable for that purpose. If the member still fails to pay then I consider the gym club may properly treat this as evidence that the member has repudiated the agreement.[205]Turning now to the member’s liability for breach, clause 5 continues:
“If we terminate this agreement during the minimum membership period, you will become immediately liable to pay (i) the arrears, if any, plus (ii) the monthly membership subscriptions, if any, that would otherwise have fallen due before the end of the minimum membership period less credit for accelerated receipt in respect of payments falling due after the actual date of termination.”
[206]Credit is provided for early payment according the following formula:
“This credit shall be calculated at 4% above the Official Bank Rate published by the Bank of England at the date of termination per annum, from the mid-point between the date of termination and the date when the final monthly membership subscription would otherwise have fallen due.”
An illustration is then provided.[207]In my judgment this provision is expressed in plain and intelligible language. So I must go on to consider whether it is fair or a penalty. In addressing these issues, it is I think, important to have in mind that I am not concerned with the fairness of the length of the minimum membership period. That is a matter I have considered earlier in this judgment. I am only concerned with the member’s liability on termination. In the context of clause 5 of these agreements, the provision requires the member to pay subscriptions that would have fallen due before the end of the minimum period subject to a discount for accelerated payment. Concerned as it now is with termination following a repudiatory breach by the member, that is what the gym club would be entitled to in accordance with well established principles as explained in, for example, Lombard North central v Butterworth [1987] QB 527; Photo Production Ltd v Securicor Transport Ltd [1980] AC 827. I detected no real criticism of the level of discount for early payment and in my judgment it is reasonable. Accordingly, I conclude the provisions in these agreements dealing with the member’s liability on termination for breach are neither unfair nor a penalty.

Unfair terms – consumer’s liability on termination for club’s repudiatory breach

[208]The OFT has raised issues in relation Agreements 5-8 and 9 and 10.[209]As for Agreements 5-8, the OFT draws attention to the following words in clause 3:
“You cannot cancel your membership until the minimum membership period has come to an end.”
It says these purport to exclude the member’s right to bring the agreement to an end in response to the club’s repudiatory breach.[210]I disagree. These words mean that the member cannot cancel the agreement without cause, and I think that is how they would be understood by the average consumer. None of the agreements exclude the right of the member faced with a repudiatory breach by the gym club to accept the breach and bring the agreement to an end.[211]As for Agreements 9 and 10, the OFT draws attention to the final sentence of clause 5 which begins: “In the event that this agreement is terminated before the end of the minimum membership period …” and suggests that this purports to impose a liability on the consumer to pay all subscriptions for the balance of the minimum term after termination in response to the club’s repudiatory breach.[212]It is well established that, unless the contract clearly provides to the contrary, it will be presumed that it was not the intention of the parties that either of them should be entitled to rely on his own breach of duty to avoid the contract or bring it to an end or to obtain a benefit under it: Alghussein Establishment v Eton College [1988] 1 WLR 587. In my judgment the last sentence of clause 5 does not clearly provide to the contrary. It does not impose on the member an obligation to continue paying monthly subscriptions in the face of a repudiatory breach by the club and I do not think the average consumer would believe otherwise.

Unfair terms – notice

[213]Agreements 6, 8, 9 and 10 each provide, by clause 3, that notice of cancellation must be given to Ashbourne. This, says the OFT, is contrary to the average consumer’s expectations and is unfair. The average consumer who wishes to cancel is likely to give notice to the gym club, with the result that the cancellation is ineffective and the consumer remains liable for the monthly subscriptions.[214]I agree and do not believe this is seriously disputed by the defendants. Indeed, the matter having been drawn to the attention of the defendants, Agreement 7 provided for notice to be given either to Ashbourne or the club. But the later agreements to which I have referred reverted to the form objected to.

Unfair terms – supplier’s responsibility

[215]The OFT contends that each of Ashbourne’s standard form agreements fails to state in plain, intelligible language the responsibility of an identified supplier to provide the gym facilities.[216]The defendants accept that the use or recommendation of a standard form agreement which does not state in plain, intelligible language the responsibility of a clearly identified supplier to provide the gym facilities would be unfair. However, they say that Agreement 13 makes clear that the consumer is entering into an agreement with the gym club. So far as the earlier agreements are concerned, they acknowledge these are less clear.[217]In the case of Agreements 1-12, Ashbourne’s name and address appears prominently across the top of the front page. Underneath Ashbourne’s name, the words “Club Name” and “Club Postcode” appear, followed in each case by a space into which the name and postcode may be written. In the case of Agreement 13, the positioning is reversed, with Ashbourne’s name appearing below that of the club and preceded by the words “Administered on behalf of the owner”.[218]On the second page, clause 1 of Agreements 1-5 states, on occasion with minor modification, “We the club shall, through our duly authorised representative(s), manage and operate the facilities of the Club and deal with all matters relating thereto”. Clause 1 of Agreements 6-8 uses the words: “If you sign this agreement you will become a member of the club that is referred to overleaf”.[219]In my judgment it is not at all clear who the contracting parties are in the case of these early agreements. Moreover, that lack of clarity has been compounded by the frequent practice of entering “Creative Fitness Marketing” or its acronym “CFM” into the space provided for the club’s name and failing to enter to enter the full name and address of the club. Creative Fitness Marketing is the name of another business conducted by the defendants. Moreover, it is apparent from a letter from the defendants’ solicitors dated 4 January 2007 in connection with Agreement 7 and an associated “Facilities Agreement” that at that time they believed that members were contracting with Ashbourne.[220]Agreement 9 introduces, in clause 4, the sentence:
“If you fail to make payment as and when a monthly subscription falls due, Ashbourne is authorised to act on our behalf in all respects relating to the debt and may recover the same in its own name”
. This serves to make the true position clearer. Further clarification is provided by the following additional words in clause 1 of Agreements 10 and 11:
“This agreement sets out the terms that will govern the relationship between us, the club that is referred to overleaf and you, a member of our club”
. Clause 1 of Agreement 13 then goes on to explain that “we have appointed [Ashbourne] to administer this agreement on our behalf”.[221]Of all of these later agreements, Agreement 13 is the clearest. The position would, I think, be further improved by giving Ashbourne and the name of the gym club equal prominence on the front page. I also believe it to be desirable that there be a clearer and bolder statement that the agreement is administered on behalf of the club by Ashbourne. Nevertheless, and assuming the name and address of the club are entered in full and no reference is made to Creative Fitness Marketing, I do not feel able to say Agreements 9-12 are so lacking in plainness and intelligibility as to be unfair.

Unfair terms - demands for sums payable

[222]There is no dispute that, in an appropriate case, the court has jurisdiction under regulation 12 to grant relief by way of injunction to prevent enforcement of unfair terms in existing contracts. What, if any, injunction it is appropriate to grant must depend upon the findings of the court and all other relevant circumstances: Office of Fair Trading v Foxtons [2010] 1 WLR 663. At the suggestion of the parties, this is a matter which I have deferred until after judgment and upon which I will, if necessary, hear further argument.

Unfair commercial practices

[223]The OFT contends Ashbourne has engaged in four categories of behaviour which amount to unfair commercial practices. I will deal with them in turn. In so doing it should be understood that I am only concerned with activities since the CPR came into force on 26 May 2008. I should also note that the OFT’s case developed as the hearing progressed. Recommending and enforcing

Credit agreements

[224]The OFT submits the activities of the defendants in using, recommending and demanding payment under credit agreements are unfair commercial practices contrary to the CPR and amount to Community infringements within section 212 of the EA 2002 for the reasons set forth at paragraph [80] above.[225]This submission turns on whether Ashbourne’s standard form agreements are credit agreements. For the reasons I have given, I do not believe that they are.

Unfair terms

[226]The OFT also submits that the activities of the defendants in recommending and using Ashbourne’s standard form agreements which contain terms which contravene the UTCCR constitute unfair business practices contrary to the CPR and amount to Community infringements within section 212 of the EA 2002 for the reasons set forth in paragraph [118] above.[227]This submission turns on the various allegations of unfairness I have considered in paragraphs [129] to [221] of this judgment. I have found that Ashbourne’s standard form agreements or their particular terms are unfair in various respects. A trader may reasonably be expected not to include unfair terms in standard form agreements which he recommends; not to present standard terms in such agreements which are likely to deceive the consumer in relation to the rights of the gym club or his rights as consumer or the risks he may face; not to omit material information or provide information which is unclear; and not to demand payments which the consumer is not bound to pay. In recommending the use of these agreements which are unfair or contain unfair terms and in seeking payment of subscriptions under them which members are not bound to pay, the defendants have done all of the foregoing and have not acted in accordance with the standard commensurate with honest market practice and have caused consumers to take transactional decisions they would not otherwise have taken, namely to enter into such agreements and to make payments under them. In so far as the defendants have carried out such activities since 26 May 2008 they have therefore engaged in unfair commercial practices which have harmed the collective interests of consumers.

Credit reference agency reporting

[228]The complaint about the defendants’ activities in reporting information about members to credit reference agencies has a number of aspects.[229]First, the OFT submits that reporting or threatening to report inaccurate information is an unfair commercial practice contrary to regulations 3(3), 3(4)(a), 3(4)(c), 5 and 7. The OFT further says the information will be inaccurate if the agreement is a regulated credit agreement and the sum claimed is an amount that was originally payable at a later time under the terms of the agreement but in respect of which there has been a demand for early payment contrary to section 65(1) of the CCA. I accept this is so, and so do the defendants. But, for the reasons I have given, the agreements are not credit agreements.[230]Second, the OFT contends that reporting or threatening to report to credit reference agencies the fact that an individual is in arrears under a regulated credit agreement when the club has not complied with the requirements of the CCA, the individual was not told the agreement was a credit agreement or the purpose of reporting is to put pressure on the individual to make payment is an unfair commercial practice contrary to regulations 3(3), 3(4)(c) and 7. This may well be so but it again depends upon the agreement being a credit agreement which is not the case for any of the agreements in issue.[231]Third, the OFT says that if the agreements are not regulated credit agreements, the information the defendants are reporting or threatening to report to credit reference agencies will nonetheless be inaccurate if it is claimed under a term which is unfair or if it is nothing more than an amount that the defendants consider the gym club is entitled to in damages. I agree and I do not understand the defendants to suggest otherwise.[232]Fourth, the OFT contends that reporting or threatening to report to credit reference agencies the fact that an individual owes a debt which is, in reality, no more than a claim for unliquidated damages, or which, for any other reason, including the proper construction of the agreement in question, is not owed is an unfair commercial practice contrary to regulations 3(3), 3(4)(a), 3(4)(c), 5 and 7. This, it seems to me, overlaps with the OFT’s third point, and is, in principle, another valid complaint. Once again, I do not understand this to be disputed by the defendants.[233]Fifth, the OFT says that demanding payment of a sum when the liability to pay that sum is disputed by reference to representations made by the defendants or by the gym club or by reference to express contract terms, whether made orally or in writing, is an unfair commercial practice contrary to regulations 3(3), 3(4)(a), 3(4)(c), 5 and 7. If made good on the facts, this too is a sound complaint.[234]In my judgment, the third, fourth and fifth contentions of the OFT are well founded and are justified on the facts of this case. In large measure they follow from my findings in relation to unfair terms. So far as the OFT’s fifth point is concerned and notwithstanding assurances by the defendants as to their future conduct, which assurances were reiterated by Mr Clayton-Wright in his witness statement, Mr Freeman has provided instances of continued misuse of credit reference agency reporting by the defendants in his third witness statement.[235]Mrs Dorothy Francis entered into gym club membership agreements for herself and her daughter, aged 14, on 26 March 2010. She says was told by the sales representative that she could cancel at any time. She rapidly found that the gym was unsuitable for her and that her daughter was unable to use most of the equipment because of her age. So she tried to cancel the agreements. She then received from Ashbourne a series of letters refusing to let her cancel, demanding payment and threatening to instigate default registration with a credit reference agency. Eventually Mrs Francis succumbed to Ashbourne’s threats because she did not want her credit rating to be affected.[236]Mrs Bernadette Rogers entered into a gym club membership agreement on 19 July 2010 for a minimum period of 36 months. She says that she suffers from rheumatoid arthritis and she joined in order to attend a particular weekly class which she was told would be free. She was unable to use any of the other facilities at the gym due to her condition. Upon attempting to join her chosen class she was told she would have to pay an additional charge to do so. She therefore tried to cancel the agreement. She was subsequently sent a series of letters refusing to let her cancel and stating that if she did not pay her arrears Ashbourne would register a credit default against her and the subscriptions for the whole of the minimum period would become payable.[237]Mrs Nicola Edwards entered into a gym club membership agreement on 1 April 2010 for a minimum period of 36 months. She attempted to cancel the agreement on 1 July 2010 because she found the club was providing an unsatisfactory service. On 6 September 2010 she received a letter from Ashbourne’s “Litigation Department” stating that it had instigated default registration with a credit reference agency and that this would affect “every aspect of her life”. However, if she paid the balance of the monthly subscriptions for the whole minimum period the default registration would be erased. If she did not, it would be confirmed. Following a complaint by Mrs Edwards the gym club in issue offered to settle the dispute by accepting a payment of a sum being the difference between the sum she would have paid for monthly membership and the sum she contracted to pay per month under the agreement, for the three months for which she used the gym facilities. This, the OFT recognises, was a fair approach for the gym club to have adopted.[238]In all these circumstances I am satisfied that, in so far as the defendants have carried out these activities since 26 May 2008, they have engaged in unfair commercial practices which have harmed the collective interests of consumers.

Unwanted letters and aggressive tactics

[239]The OFT has drawn attention in its evidence to further activities of Ashbourne which, it says, constitute misleading and aggressive commercial practices contrary to regulations 3(4)(a), (b) and (c), 5, 6 and 7. These have been addressed by the offer by Ashbourne to give undertakings in terms sought by the OFT not to do any of the following acts, namely: exaggerate the significance and consequences of the reporting of information to a credit reference agency; threaten to inform and/or inform any credit reference agency that individuals have failed to make payments without informing the individuals of their right to access records kept about them by credit reference agencies and to have incorrect entries corrected; and send letters which purport to be from a “litigation department” which does not exist, or otherwise threaten legal proceedings when it has no intention to issue such proceedings.

Conclusion

[240]I have found that various aspects of Ashbourne’s standard form agreements are unfair contrary to the UTCCR and that the defendants have recommended the use of these agreements; that the defendants have engaged in unfair commercial practices contrary to the CPR; and that the defendants have engaged in activities which constitute Community infringements under the EA 2002. The OFT is entitled to declarations and injunctions to reflect my findings. I will hear further argument as to the precise form of order if it cannot be agreed.

Cited in 7 later judgments