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Consumers’ cancellation rights are unaffected by failure to give notice

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15/10/2014

Background
In the recent case of Robertson v Swift [1] Dr Robertson (R) engaged Mr Swift (S) to provide him with a removal service for the sum of £5,750. After some negotiation and a previous visit to R’s home to inspect items for removal, S visited R’s home for a second time, during which R signed the contract and paid a deposit of £1,000. Two days later, R telephoned S to cancel the contract and initially agreed to pay a 50 per cent cancellation charge. R also wrote to S confirming his decision to cancel. Upon reflection, however, R decided he had no liability for the cancellation charge and refused to pay. S issued proceedings and R counterclaimed for the return of his deposit, arguing that he had been entitled to cancel by virtue of regulation 7(1) of the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008 (the 2008 Regulations), which gives a consumer the right to cancel a contract within the cancellation period of seven days. A Deputy District Judge and the County Court both held that the 2008 Regulations did not apply because the contract had not been concluded during a single visit to R’s home. R appealed.

Court of Appeal
The appeal was allowed in part. It was held that the 2008 Regulations applied if the contract was concluded in the consumer’s home (as in this case), irrespective of whether there had been earlier negotiations between the parties. However, it also held that, although by virtue of regulation 7(6) the contract was unenforceable as against R (because notice of the right of cancellation was not given), the deposit could not be recovered. The reason given for this was that as S had not given R notice of his right to cancel the contract as required by regulation 7(2) of the 2008 Regulations, R was not entitled to cancel under regulation 7(1). R appealed to the Supreme Court.

The Supreme Court
In its judgment of 9 September 2014, the Supreme Court found that the Court of Appeal’s approach to interpreting regulation 7(2) had been incorrect. The basis of the decision was that a national court must interpret domestic legislation, so far as possible, in the light of the wording and purpose of the Directive which it seeks to implement, in this case Council Directive (85/577/EEC) (the Directive). Upholding the overarching principle of consumer protection, the Supreme Court held that the requirement to give notice of the right to cancel should not been seen as a prerequisite to the exercise of the right, but as a means of ensuring the consumer is aware of his right to cancel the contract after a period of reflection. To hold otherwise would counteract the purpose of the Directive in ensuring that a consumer has the opportunity to withdraw from a contract without suffering significant adverse consequences. The Court felt that if the right to cancel could be effectively nullified by a failure or refusal by a trader to give written notice of the right to the consumer, this would create a considerable gap in the protection that the Directive sought to provide. Parliament’s purpose was clearly that all consumers should have the ‘safety net’ of a cooling off period and the efficiency of that safety net would be significantly compromised if a deposit paid was not recoverable because the trader had not given written notice of a right to cancel.

The 2008 Regulations should therefore operate to ensure that S bore the consequences of his failure to give written notice of the right to cancel, and that R was entitled to have his deposit returned. Having considered two possible interpretations of the wording of the 2008 Regulations which fulfilled the Directive’s objective on a purposive construction, the Court opted for the simple reading of the actual wording: “within” where it appears in regulation 7(1) and 8(1) as meaning “any time prior to the expiration of”. This has the effect that a consumer has the right to cancel at any time before the end of the cancellation period (seven days after the consumer received notice of right to cancel), or, if no such notice is served, does not expire such that the consumer is able to cancel at any time.

The Court held that R was therefore entitled to cancel the contract and, having done so, could recover his deposit of £1,000. The appeal was allowed.

WM comments
As a trader, if you fail to give written notice of the right to cancel your customers will still have the statutory right to cancel.

The 2008 Regulations have now been superseded by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the 2013 Regulations) which came into force on 13 June 2014. A contract concluded between a trader and a consumer away from the trader’s business premises is defined as an “off-premises contract” for the purpose of the 2013 Regulations. So where you contract with your customers in their home or place of work, they have the right to cancel within 14 days. You are obliged to provide them with written notice of their cancellation rights; if you fail to do so they still have the right to cancel. However this is not open-ended. The 2013 Regulations have provided for the circumstances considered in Robertson v Swift, and now provide that if the requisite cancellation information is not provided, the cancellation period ends 12 months after the day on which it would have ended if notice had been given (unless the information is provided within 12 months, in which case the cancellation period ends at the end of 14 days after the consumer receives the information).

Therefore under the 2013 Regulations, the right to cancel will not apply indefinitely, but could apply for up to one year if a trader fails to give notice of the right. For that reason, traders should ensure they give consumers notice of the right to cancel in accordance with the 2013 Regulations.
[1] [2014] UKSC 50

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