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Judgment

Mr Justice Kitchin:
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 ”
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. …”
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. ”
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 month to 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.”
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.”
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
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.”
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.

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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 period will 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.