Spreadex Limited v Colin Cochrane [2012] EWHC 1290 (Comm)
Mr Cochrane opened an online account with Spreadex, a spread betting bookmaker. At the end of the signing up process, the website instructed him to click to view the customer agreement and 3 other documents. There was then the usual provision stating: "Once read and understood, please click on "Agree" to signify your agreement to the terms". Mr Cochrane was successful and built up a credit balance of more than £60,000. One morning he went online with his girlfriend's son watching. He then went away for a couple of days, with no access to the internet. When he came back, he found that his account was down £50,000, due to (according to his account) numerous trades undertaken in his absence by the son. Spreadex was not sympathetic and claimed for immediate payment. It sought summary judgment contending that there was no arguable defence. In doing so, it conceded that the court should accept Mr Cochrane's account and that the trades were made by a person not actually or sensibly authorised by him. The key wording in the terms on which Spreadex relied was clause 10.3 which stated that: "Your password must be declared, together with your account number, when you wish to access your account. You will be deemed to have authorised all trading under your account number...".
The High Court (David Donaldson QC) found in favour of Mr Cochrane. First, the wording of cl 10.3 could only be binding on Mr Cochrane if it was part of a contract. That necessitated the identification of the contract. In large part, the terms did no more than set out the terms which would form the part of each individual contract created later if and when the customer made an offer for a particular trade which Spreadex accepted. Therefore, there had to be some binding contract which pre-existed the individual trades. Spreadex was unable to point to any promise or commitment by it which might form the part of a contract and provide the consideration necessary to make it legally binding. Spreadex had the absolute right to refuse to accept any bet, the right to reduce or remove altogether its online service and the right to close or suspend an account at any time. It was submitted that the necessary consideration could be found in the grant of access to the platform, but the judge disagreed; the provision of an online interactive platform was in effect the more modern equivalent of being ready to enter into contracts by telephone. Thus, Spreadex failed to establish the existence of any legal contract.
The other issue was the application of the Unfair Terms in Consumer Contract Regulations 1998 which make unenforceable terms which are unfair, being terms which are contrary to the requirement of good faith and cause a significant imbalance in the party's rights and obligations, to the detriment of the consumer. Under the suggested pre-trade contract, Spreadex would have no obligations and the customer would have no rights. In contrast, the customer would be made liable to any trade on his account not made or authorised by him. This was a significant imbalance. It was also contrary to good faith. A "more appealing case might have been made" if clause 10.3 had only applied to unauthorised trades facilitated by the negligence of the customer, but the judge did not express a view on whether it would have been fair.
The judge also took into account as a compounding factor the fact that there were four documents which could be viewed by clicking the link. He suspected that most would have passed up the invitation and proceed directly to click "agree", even though it was suggested that they should do so only when they had read and understood the documents. Even if Mr Cochrane had chosen to look at the documents, he would have been faced with a customer agreement which alone had 49 pages containing the same number of closely printed and complex paragraphs. "It would have come close to a miracle if he had read the second sentence of clause 10(3), let alone appreciated its purport or implications". This was an entirely inadequate way to seek to make the customer liable for any potential trades which he did not authorise and was a further factor rending the clause unfair.
Comment
Not too much should be read into this decision, not least because Mr Cochrane represented himself and the judgment is short. But it does show that caution should be exercised. In particular:
- when drafting website terms for individual transactions, it is important to have the right structure to impose overarching terms that apply whether or not individual transactions are carried out. Here, for instance, Spreadex failed to incorporate specific, binding terms applicable on the opening of the account, whether or not the customer undertook any trades.
- making all the terms one sided, making the terms long and making them accessible by link only runs the risk of the terms being unfair and thus unenforceable under the UTCCR. One suspects that there will be more rulings of this nature by the courts, as consumers wake up to the requirement that they have to be given notice of terms in "plain, intelligible language". Apparently, the PayPal terms have more words than Hamlet and iTunes more than Macbeth.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.