On 8 September 2022 Mr Duncan Humber collected a used Tesla X from our clients, for the price of £81,975.
In the days before collection he had engineered a scenario whereby the payment for the vehicle was made the day before collection, and the sales invoice was signed by both parties over email, thereby remotely and not on site. One of his emails said “If it’s okay with you I always prefer to do the paperwork and get all the money sent before I arrive. I much prefer just having a collection only experience. Takes the stress out of it for me.”
There was no further contact until 29 June 2023, when Mr Humber emailed our clients and requested a full refund of the price of the vehicle on the basis that it was a ‘Distance Sale’ under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the ‘CCR’).
This request was made on the basis that the Distance Sale notice was not provided to him advising that he has 14 days in which he can return the vehicle, and therefore as no notice was given, he has 1 year and 14 days to return the goods under the CCR and obtain a full refund.
Understandably our clients were extremely concerned about the thought of having to hand over almost £82k for a vehicle that they estimated was worth approximately £55k now and therefore they came to Lawgistics for advice.
Mr Humber was known to us at Lawgistics, as he had purchased 2 Teslas sometime in 2021 and we had had to advise our clients in that case that he was entitled to a full refund as that company had breached the CCR.
However, this case was significantly different.
Under section 5 of the CCR the definition of a ‘distance contract’ is
…a contract concluded between a trader and a consumer under an organised distance sales or service-provision scheme…
It is the definition of an organised distance sales scheme (‘organised scheme’) that is crucial here. Our clients did not run such a scheme. There was no mention of deliveries or distance sales on their website, no mentions in their literature, and the staff did not advocate such a scheme. Their business model was based upon the customer visiting the site to view and test drive the vehicles.
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A fee was taken from customers if they wished to have the vehicle they were interested in taken off sale until they were able to visit the site, but this was not a contract to purchase the vehicle, and the deposit was to be refunded if the customer arrived on site, viewed the vehicle, and decided it wasn’t for them, for whatever reason.
We therefore reviewed the case and advised that we did not consider he was not operating an organised scheme under the CCR and had no obligation to provide a full refund to Mr Humber.
However, given the value of the vehicle we recommended that a second opinion be obtained from a barrister that we regularly instruct, Mr Iain Bain of Fenners Chambers https://fennerschambers.com/
He agreed with our assessment of the claim and so a full denial of liability was issued to Mr Humber on the basis that the CCR did not apply. Mr Humber subsequently issued proceedings, but not for a return of the value of the vehicle which would have incurred a court fee of £4,100, but for a declaration from the court that the CCR did apply, at a cost of just £332.
The Hearing for this case was heard in the County Court in Bromley on 9 August 2024, and due to the length of time taken, the judgment was reserved, and handed down on 30 August.
A number of points arose at the Hearing.
Mr Humber, who has a law degree, but is not a solicitor as has been reported in previous articles, admitted that this was the fourth such instance where he had purchased a vehicle and then attempted to return them for a full refund under the CCR. He had done this with a Range Rover in around 2016, and with 2 Teslas in 2021.
It was his submission that the payment of the deposit constituted a contract to purchase the vehicle and that therefore as the clients had a system whereby they took deposits on lots of purchases, to take the vehicle off sale, this was an organised scheme.
It was our submission that the deposit did not form a contract, the contract was formed when the sales invoice was signed by both parties.
The evidence showed that our clients did not, at any point, ask Mr Humber to pay the balance on the vehicle ahead of the sale, simply that there were cleared funds before they could take the vehicle away, nor, more importantly, did they ask him to sign the sales invoice prior to collection, and in fact advised him when he asked for the sales invoice so he could get it signed that “No worries we can do paperwork when you’re here.”
Regardless, Mr Humber asked 4 times for the sales invoice to be signed by our clients, and a different member of staff who took over the sale the day before did so the day before collection.
It is accepted that the sales invoice was signed remotely, and therefore the Court had to consider 2 issues.
- When was the contract formed? Was it when the holding deposit was paid, or when the sales invoice was signed?
- Were the Defendants running an ‘Organised Distance Selling Scheme’?
The Court found that an exchange of emails regarding the holding deposit did not constitute a binding contract, the Judgment stating:
For a contract to be formed the parties must have intended to create legal relations. The email exchanges do not indicate that she (sales person) was intending to or believed a contract was being created. I am not satisfied that the Defendant intended to create a legal relationship with the Claimant.
Therefore, the payment of the holding deposit did not form a contract.
The second question was assisted by an Opinion of Advocate General Sharpston in the European Court of Justice (ECJ) and delivered on 12 March 2020 in KH v Sparkasse Südholstein
In a helpful Judgment a definition for what constitutes an organised scheme is had 4 limbs to it:
- First, it must be ‘organised’. That means that the supplier must be prepared, in terms of its commercial structure, including staffing and resources, to conclude contracts without the simultaneous physical presence of the supplier and the consumer.
- Second, it must be ‘run by’ the supplier.
- Third, its use must be ‘exclusive’ for the purpose of the contract in question ‘up to and including the time at which the contract is concluded’.
- Fourth, it must not be ‘strictly occasional’.
The Court concluded that the Defendants did not have a commercial structure in place to conclude contracts remotely, that it was Mr Humber who instigated the situation, and that therefore our clients did not run an Organised Distance Sales Scheme
The Judge stated in his Judgment:
Although it is not suggested that the Claimant acted illegally, or indeed immorally, it is clear from his previous endeavours where he had successfully relied on the CCR in relation to at least two if not three vehicles, that he was doing his utmost to secure a remote purchase. In my judgment when he informed (the sales person) that he wished to have a collection only experience this was at best misleading and at worst untruthful as his true intention was to secure a remote transaction to ensure he could rely on the CCR and reject the car when he chose to. He knew exactly what he was seeking to achieve. Whilst there may be some truth to wanting a collection only experience, I find that he was being disingenuous as it is clear from his evidence that his true intention was that he wanted the ability to reject the car at a time of his choosing.
This is an important Judgment for those traders that do not wish to undertake Distance Sales, and are concerned that they may get caught in the regulations through no fault of their own. It has been the view of us here at Lawgistics, ever since the Consumer Contract Regulations 2013 came into force and particularly so when Distance Sales became such a huge deal in Covid lockdowns, that dealers make clear that a holding deposit is just that, a sum to take the vehicle off sale for viewing and so not really a deposit on the vehicle at all.
Our recommendation is to lose the word deposit altogether and just call it a reservation fee to avoid the need for a judge to dedicate hours to looking into the reason the deposit was taken. In this case, the judge decided the deposit was not the deciding factor, but still ruled the contract was concluded at a distance because of the further email exchanges before viewing. Mr Humber was rather hoping that this judge would agree with the judge in a previous distance sale case which he won against a dealer represented by a different motor trade legal firm in 2017, where that judge said:
“In my judgment, the contract was made on 11 September 2017, when the £500 deposit was sent.”
Incidentally, we only knew about that judgment in 2017 as Mr Humber sent us the transcript himself, we assume in the hope we would back down as he clearly thought the circumstances were the same.
However, no two cases are ever the same and the smallest fact can make a big difference.
We knew when this case came in, that the facts worked. We accepted it was likely that the judge would rule that the contract was concluded remotely, and that is why we focused on the ‘organised distance sales scheme’ argument on which our dealer ultimately won.
In conclusion, set up your business and website so it is clear you do not operate an organised distance sale scheme, or accept you do and have the paperwork in place to protect you.
If you do not cover yourself, Mr Humber may be contacting your showroom .
The vehicle in question was sold for £81,975, but is now worth approximately £35,000, a substantial hit for any organisation to take if their paperwork, and processes, are not correct.
We at Lawgistics are here to advise our members on such subjects, to ensure that they are fully armed with the facts beforehand, but also to provide a strong defence in cases where we consider the trader is in the right and should defend the claim.
In addition to having his case dismissed in favour of our client, costs of £23,400 were awarded against Mr Humber. This means that upon payment by Mr Humber our client has recovered virtually all of their expenses.
