[2025] EWHC 2107 (Comm)

Fecha: 08-Ago-2025

Is clause 40.2.2 an unfair term under the Consumer Rights Act 2015 ?

(3)

Is clause 40.2.2 an unfair term under the Consumer Rights Act 2015?

91.

By section 61(1), Part 2 of the Consumer Rights Act 2015 applies to a contract between a trader and a consumer (as defined in section 2 of the Consumer Rights Act 2015).

92.

The First and Second Defendants are consumers and the Claimant is a trader within the meaning of the Consumer Rights Act 2015 (Ms Ho’s second witness statement, para. 80). I did not understand this to be in dispute. Mr Atrill KC on behalf of the Claimant was prepared to accept that the First Defendant was a consumer for the purposes of this application.

93.

Section 62(1) of the Consumer Rights Act 2015 provides that “An unfair term of a consumer contract is not binding on the consumer”. Sections 62(4)-(5) provide that:

“(4)
A term is 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.
(5)
Whether a term is fair is to be determined -
(a)
taking into account the nature of the subject matter of the contract, and
(b)
by reference to all the circumstances existing when the term was agreed and to all of the other terms of the contract or of any other contract on which it depends.”

94.

The First and Second Defendants contend that they had no power of veto over the appointment of Law Debenture and that the Facility Agreement contained no requirement for the Claimant to inform the First and Second Defendants, or the Borrower, of the appointment under clause 40.2.2 of the Facility Agreement; if that is correct, clause 40.2.2 is an unfair contract term for the purposes of Part 2, Consumer Rights Act 2015, as it creates a significant imbalance between the rights of the parties and is unfair, and is therefore unenforceable.

95.

The Claimant contends that in making an assessment of any unfairness, the Court must take into account the nature of the subject matter of the contract, all the circumstances existing when the term was agreed, and the other terms of the contract (or a contract on which it depends) (section 62(5)); clause 40.2 is not an unfair term; Schedule 2 of the Consumer Rights Act 2015 provides a list of terms which may be regarded as unfair and service of process clauses do not fall within the scope of any of the terms at Schedule 2. Further, it is argued, clauses appointing agents for service are standard provisions and are commonly enforced and have not been treated as unfair (DVB Bank SE v Isim Amin Ltd [2014] EWHC 2156 (Comm), para. 5-6; Bank of New York Mellon, London Branch v Essar Steel India Ltd [2018] EWHC 3177 (Ch), para. 16; Banco San Juan Internacional Inc v Petroleos de Venezuela SA [2020] EWHC 2145 (Comm)). Without this provision, the Claimant would have had to serve the claim form on the First and Second Defendants out of the jurisdiction, which is a far less speedy and certain method of service. Clause 40.2 is not unfair because it imposed a process which ensures that service can be effected in a straightforward manner within the jurisdiction even if the original agent is unable to perform its role and the Borrower refuses to appoint a replacement, and which ensures that the party to be served cannot frustrate that purpose.

96.

I confess that I have considerable concerns about the fairness of clause 40.2.2 of the Facility Agreement in the context of a consumer contract, even if the Court has in the past considered such service of process provisions to be fair in the context of a contract between commercial parties. My concerns are as follows:

(1)

Clause 40.2 regulates the service of process upon the Obligor, meaning the Borrower and the guarantors, and not upon the Claimant as lender.

(2)

Although the guarantors - the First and Second Defendants - are or should have been aware by reason of the terms of the Facility Agreement - that Areval was appointed as their service of process agent, the mechanism for the appointment of a replacement agent could operate without any notice being given to the guarantors.

(3)

If, as in this case, Areval was no longer able to carry out its functions as a service of process agent, the power of appointing a replacement was limited to the Borrower and, failing any appointment by the Borrower, the Claimant; the contractual mechanism did not require the guarantors to be involved in the process, even by way of receiving notifications of the appointment. Accordingly, a replacement agent could have been appointed without the guarantors being made aware of such appointment. Of course, if steps were taken to inform the guarantors of the appointment of a replacement agent, the unfairness of the term might be mitigated or circumvented, but that does not mean that the term itself was not unfair. It is the potential for unfairness which is the governing consideration (Chitty on Contracts (35th ed., 2025), para. 41-314).

(4)

Circumstances could therefore arise where proceedings could be served on a replacement agent, in this case Law Debenture, on behalf of the First and Second Defendants, without the First and Second Defendants ever being made aware of such an appointment. This could lead to the entry of default judgments against the guarantors without the guarantors being aware of the service of process in the first place. Of course, such default judgments could be set aside, but I do not consider that is an answer to the unfairness of the term.

(5)

Absent clause 40.2.2, on the facts of this case where the appointed service of process agent, Areval, was no longer able to accept service, legal proceedings would have to be served on the First and Second Defendants directly so that they would become aware of such proceedings (Chitty on Contracts (35th ed., 2025), para. 41-312).

(6)

The fact that the Claimant as lender, a company resident in Luxembourg, is not exposed to the same risks as regards the service of process as the guarantors indicates to me that clause 40.2.2 creates an imbalance in the parties’ legal rights and obligations.

(7)

The significance of the imbalance resides in the fact that proceedings might otherwise be validly served on the guarantors, with the risk of entry of default judgments against those guarantors. The Claimant faced no such risk.

97.

Therefore, having regard to the nature of the Facility Agreement, and the guarantors’ obligations thereunder, and all of the circumstances of the case, I consider that the First and Second Defendants are correct in their submissions on this ground.

98.

Section 63(1) provides that “Part 1 of Schedule 2 contains an indicative and non-exhaustive list of terms of consumer contracts that may be regarded as unfair for the purposes of this Part” (emphasis added). I do not consider that the fact that a service of process term is not included within the list of terms in Schedule 2 of the 2015 Act which might be unfair means that the term cannot be unfair.

99.

I read CPR rule 6.11 as applying where there is a relevant contractual provision as to service which is binding on the defendant. Accordingly, as clause 40.2.2 is not binding on the First and Second Defendants pursuant to the Consumer Rights Act 2015, the clause cannot be relied on to validate service of the proceedings on them.

100.

I should make it clear that this conclusion does not mean that clause 40.1 and clause 40.2.1 of the Facility Agreement are unfair and are not binding on the First and Second Defendants insofar as they were parties to the Facility Agreement.