England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY

		Manchester Civil Justice Centre 1 Bridge Street West Manchester M60 9DJ
		11/06/2014

Mr Justice Phillips :

Introduction

1. The claimant ("the Council"), a local weights and measures authority, applies for a final injunction to restrain the first defendant ("WMSL"), a company engaged in telesales on a national basis, from continuing to use certain misleading advertising in selling to other traders in breach of regulation 3(1) of the Business Protection from Misleading Marketing Regulations 2008 ("the Regulations"). An injunction is also sought against the second defendant ("Mr Kay"), the sole director and shareholder of WMSL.
2. The defendants no longer dispute that WMSL has been acting in breach of the Regulations and accept that they could not resist the grant of an injunction (in more restricted form than that sought by the Council) if applied for by an appropriate enforcement authority. The sole defence advanced on their behalf at the trial was the contention that the Council is not such an authority. They rely on the fact that, about a year before these proceedings commenced, WMSL had moved its place of business from Oldham to Manchester, out of the Council's area. They assert that the Council ceased to have power to pursue the matter given that WMSL had left the Oldham area for a significant period.
3. Pursuant to regulation 13(2), the duty (and therefore the implied power) of the Council is to enforce the Regulations "within the authority's area". Given that the Council accepts that WMSL had ceased to trade in its area some considerable time prior to the commencement of proceedings, and given that the Council has not obtained any delegated authority from any other authority pursuant to section 101 of the Local Government Act 1972 ("the 1972 Act"), the Council's power to seek an injunction can only arise, if at all, from section 222(1) of the 1972 Act, which provides as follows:

"(1) Where a local authority consider it expedient for the promotion or protection of the interests of the inhabitants of their area –

(a) they may prosecute or defend or appear in any legal proceedings, and in the case of civil proceedings, may institute them in their own name, and …"

4. Ms Sumnall, Counsel for the defendants, argued that, as WMSL had ceased to trade from premises in Oldham in 2012, the Council could not properly consider it to be expedient for the promotion or protection of the interests of the inhabitants of its area to pursue injunctive relief against the defendants, with the effect that the Council did not have power to do so.
5. Mr Fenhalls, appearing for the Council, relied on what has been recognised to be the "extremely wide" wording of section 222(1) (see R v. Jarrett and Steward (1997) 161 JPN 816). He contended that, given the advanced state of the Council's investigations when WMSL relocated, the Council considered (and properly so considered) that it was in the interests of the inhabitants of its area to bring these proceedings.

The background facts

6. WMSL is a telesales company, selling its services to small businesses throughout the United Kingdom. The services in question are the "enhancement" of the customer's profile on the internet, in particular the position a business' website will achieve in the list which results when certain keywords are entered into the Google search engine.
7. Since about June 2010 the Council has been aware of many complaints that WMSL, through it sales representatives, has been engaged in misleading advertising, falsely representing to potential customers one or more of the following: (i) that the representatives were calling on behalf of Google; (ii) that they were affiliated with Google; (iii) that they could guarantee first page allocation on Google; (iv) that customers could cancel the monthly fees without notice; and (v) that the monthly fee equated to a full month's worth of advertising.
8. The Council, as a local weights and measures authority, investigated these complaints as potential breaches of the Regulations, taking responsibility for so doing because, although sales were on a national basis, WMSL had its registered office and place of business at the Meridian Business Centre, Kings Street, Oldham, within the Council's area. For good measure, Mr Kay also lived in Oldham.
9. On 26 October 2010 Mr Kay, on his own behalf and on behalf of WMSL, executed a written undertaking to the Council (which had express power to accept such an undertaking pursuant to regulation 16), agreeing that neither defendant would engage in advertising prohibited by the Regulations. The undertaking continued as follows:

"In particular, without prejudice the generality of the above, on behalf of the company and on behalf of myself I agree that neither I nor the company will use advertising that is misleading concerning:

a) the characteristics of the company's services

b) the price or manner in which the price is calculated in relation to the company's services;

c) availability of the company's services;

d) nature of the company's services;

e) quantity of the company's services in the sense of their duration;

f) specification of the company's services; or

g) results to be expected from use of the company's services "

10. Notwithstanding that undertaking and a contractual undertaking given by WMLS to Google Inc. on 21 October 2010, complaints continued to be made against WMSL in respect of its advertising and selling practices. On 13 December 2011 Mr Kay again signed a document, addressed to Google Inc., acknowledging that he and WMLS had breached their previous undertaking to Google and giving a further undertaking to immediately cease making false representations about WMLS' association with Google.
11. On 22 February 2012 the Council executed a warrant to enter and search WMSL's premises at the Meridian Business Centre and took away various documents and one laptop.

The proceedings

12. On 18 April 2013 the Council commenced these proceedings under CPR Part 8, seeking an injunction pursuant to regulations 15 and 18 of the Regulations to prevent the defendants from continuing the unlawful advertising referred to above, seeking to extend that injunction to anywhere within the European Economic Area. A substantial volume of evidence was served in support of the allegations, there were significant arguments about the admissibility of certain written statements, and witnesses attended on the first day of the trial to prove the breaches alleged.
13. Mr Kay had served a detailed witness statement dated 16 October 2013 on his own behalf and on behalf of WMSL in which he denied the alleged breaches of the Regulations.
14. Notwithstanding the above, at the start of the trial Ms Sumnall stated that the defendants would not contest the injunction proceedings on the merits, but would rely solely upon the preliminary point as to the Council's power to bring the proceedings.
15. Although Ms Sumnall had apparently warned Mr Fenhalls that she would be taking this argument in a telephone conversation in February 2014, it was first formally advanced in her skeleton argument for this trial, served less than a week before it commenced. Mr Kay had not referred in his witness statement to WMSL having relocated, let alone taken any point on the Council's powers. Even in the Case Summary, although it is stated that WMSL traded in Manchester, no reference was made to the issue of authority. Notwithstanding the late appearance of the point and the lack of material to support it in the existing evidence, Mr Fenhalls did not contend that the defendants should be prevented from taking the point.

The evidence adduced on the issue of the Council's authority

16. The evidence served by the Council included documents from Companies House showing that on 10 July 2012 WMSL had changed its registered office from the Meridian Business Centre, Kings Street, Oldham to Barlow House 4^th Floor Minshull Street, Manchester (which addresses are about seven miles apart). However, a change of registered office does not entail that a company has changed its place of business. In a second witness statement served on the first day of the trial, Mr Kay provided evidence that WMSL had moved premises from Oldham to Manchester in March 2012, although its registered office was not formally changed until July that year. In other words, WMSL moved out of its premises only a matter of days after the Council executed its search warrant at the Oldham premises.
17. In response the Council served a written statement from Daniel Moore, the responsible officer in the Council's Trading Standards Department, explaining that the Council became aware that WMSL was utilising an address in Manchester in approximately September 2012. At the time of issuing these proceedings in April 2013 it was not known whether the business had retained a base in Oldham. Further, the Council was continuing to receive complaints about WMSL, indicating that it continued to operate from its Oldham address as recently as March 2013. Mr Moore continued:

"…..as we had managed and dealt with the case since 2010 it was considered appropriate for Oldham Trading Standards to continue with this matter. If the matter was passed to Manchester Trading Standards due to different priorities and resources there was no guarantee that they would progress this case. As Danny Kay is also a resident of Oldham with links to business premises within the Borough there was also a possibility that he may return to Oldham."

18. Mr Moore also referred to the fact that the complaints received in relation to WMSL included at least four received from businesses operating in Oldham. Print-outs from the Council's system and the national database of complaints showed that the four complaints in question were made on 17.2.10, 17.1.11, 29.7.11 and 16.1.13. Ms Sumnall stressed that none of the complaints were substantiated instances of misleading advertising. She further pointed out that the first complaint pre-dated the undertaking given to the Council, the second and third pre-dated WMSL's relocation to Manchester and the fourth complaint related to representations allegedly made by WMSL in relation to services connected with Facebook, whereas the injunction sought related to Google.

Whether the Council was empowered under s. 222(1) to seek an injunction

19. Ms Sumnall accepted that it was not necessary for unlawful trading practices to be practised upon or otherwise directly affect inhabitants of a local authority's area in order for that authority to have power to bring proceedings by virtue of s. 222(1): the subsection entitles the local authority to take a far broader view of the interests of the inhabitants of its area. For example, in London Borough of Barking and Dagenham v Jones [1999] All ER (D) 923 a trader based in Barking and Dagenham made false assertions to customers as to the longevity of printer cartridges he had to offer, but none of the customers who complained were inhabitants of that London Borough. Brook LJ stated:

"In my judgment there was ample evidence to justify the council using its powers under s222 if it saw fit to do so. All this unremitting criminal activity was being conducted from premises within the council's area. It was the council alone which had the power under the Trade Descriptions Act to enter, seize and search. The council was entitled to consider that it was in the interests of the inhabitants of its area that these criminal activities, which could well be giving the area a bad name, should be brought to an end, particularly as all businesses in its area could be at risk of Mr Jones' frauds. The council was also entitled to take financial considerations into account, and to consider that it was in the interests of the inhabitants of its area that it should be able to divert more of its skilled recourses away from policing the criminal activities of one man towards other public protection duties in enforcing trading standards laws more effectively in its area. "

20. Ms Sumnall submitted that the position was different where, as in this case, the trader in question no longer carried on business within the area of the local authority in question, rendering inapplicable the factors listed by Brooke LJ in the Barking & Dagenham case. She relied upon the decision of the divisional court in Brighton and Hove City Council v Woolworths plc [2002] EWHC 2565 (Admin), where the question arose as to whether a local authority could issue a suspension notice (pursuant to s.14 of the Consumer Protection Act 1987) outside its area and, if it could, whether it was able to prosecute for breaches of the suspension notice that took place outside its area. The Divisional Court held that, on a proper construction of s.14, a nationwide suspension notice could be issued, but the prosecution for breach of that suspension notice could not take place outside the area of each local authority. Field J, giving the leading judgment, said at paragraph 33:

"… [the local authority] had no power to prosecute in its own right breaches of the suspension notice which occurred outside its area because such a prosecution could not ex hypothesi be expedient for the promotion or protection of the interests of the inhabitants of its area as required by Section 222(1) of the 1972 act."

21. The Brighton and Hove case was distinguished in R (on the application of Donnachie) v Cardiff Magistrates Court [2009] EWHC 489 (Admin). Cardiff City Council prosecuted the company secretary of a licensed cab company operating in Cardiff in respect of the "clocking" of its vehicles (reducing their odometers by at least 56,000 miles) alleging that those offences had taken place in Gloucester and Newport, outside the area of the prosecuting council. Sweeney J, giving the first judgment of the Divisional Court, stated as follows:

"As to whether Section 222(1) actually provided authority to prosecute for the offences in Gloucester and Newport in this case, Mr Yeo relies on the Brighton & Hove case (above) where (on his analysis) despite the risk that the dangerous toys bought in Filton, Rye, Hastings and Enfield could have ended up in Brighton and Hove, the court nevertheless ruled that, ex hypothesi, Section 222(1) was of no application. However, in that case, the level of risk, and hence the need for protection from it, was negligible. In those circumstances, in my view, it is hardly surprising that the court concluded that Section 222 was of no application. The facts in this care are very different.

It must be remembered that, as Rose LJ said in Richards (above) [an intended reference to Jarrett (above)] the words of Section 222(1) are extremely wide, there is no warrant for limiting them in any way, the local authority may prosecute any legal proceedings, and what is of significance is whether the authority consider it expedient to do so for the promotion or protection of the interests of the inhabitants in the area. Given the nature of Supatax's business, and the closeness of its connection with Cardiff and its inhabitants, on the facts of this case it was, in my view, self-evidently in the interests on the inhabitants of Cardiff for the Claimant to be prosecuted in respect of Supatax's alleged offences in Gloucester and Newport.

In the circumstances, in my view the Council clearly had authority to lay the information in respect of [the vehicles]."

22. Ms Sumnall emphasised that the reason why Brighton and Hove was distinguished in the Donnachie case, namely, that the business in question was operating within the area of the relevant local authority and as such the inhabitants of that local authority were being put at risk, is not present in the instant case. She submits that Brighton and Hove cannot be similarly distinguished in the present case since the business of WMSL was no longer being carried on in the Council's area and was of no material threat to the inhabitants of the Council's area. Ms Sumnall further pointed to the fact that the current terms of the Consumer Rights Bill contains a provision permitting local weights and measures authorities to exercise their powers outside the authority's area, demonstrating (as such provision would otherwise be unnecessary) that such power does not presently exist.
23. Ms Sumnall accepted, however, that a trader could not avoid imminent proceedings by an appropriate local authority by relocating its business a few miles outside the relevant area. But she submitted that this was not such a case because, at the time proceedings commenced, WMSL had long-since ceased to trade in the Council's area, something the Council should have ascertained by reason of its duty to investigate before taking proceedings. If the Council was determined to pursue the matter after such an interval it could and should have obtained delegated authority from the relevant authority in Manchester. Ms Sumnall also suggested that there was no evidence that the requirements of s. 222(1) had ever been considered by the Council in relation to these proceedings.
24. Notwithstanding the above contentions, in my judgment the Council was fully entitled to conclude that bringing these proceedings was expedient in the interests of the inhabitants of Oldham. There were both broad policy reasons and specific aspects of this case which, individually, and certainly if considered cumulatively, justified such a conclusion.
25. First, the inhabitants of an area have a clear and obvious interest in the local authority taking reasonable steps to procure that undertakings it has extracted from traders (such as that given by the defendants in this case) are enforced through proceedings where breached. If such steps are not taken, and undertakings are seen to be breached with impunity, the force and utility of such undertakings will be undermined, lessening their effect and usefulness and consequently leading to greater expense in taking proceedings instead of or in addition to accepting undertakings. It follows that a local authority can properly take the view that it is in the interests of the inhabitants of its area to bring (and to be seen to be bringing) proceedings against a trader who has given but then breached an undertaking, even if the trader has subsequently left the authority's area.
26. Second, given the timing of WMSL's re-location (shortly after the search warrant was executed at its Oldham premises), the short distance the business moved and Mr Kay's continued connections with the Oldham area, the Council was entitled to perceive a real risk that WMSL would return to its Oldham area in the foreseeable future.
27. Third, the Council was entitled to take into account the likelihood (if not inevitability) that WMSL's future sale business, whilst conducted nationally, would include sales calls to businesses based in Oldham. Whatever the content and merits of the four complaints which had been received from Oldham based businesses, their existence demonstrate that businesses in Oldham are by no means excluded from the scope of WMSL's sales calls. If the Council were considering the matter afresh and in isolation, there might be a question as to whether the risk to local businesses justified taking proceedings. But where the Council had already investigated sales practices in question, obtained undertakings and executed a search warrant to establish ongoing breaches, it could readily conclude that the final step of obtaining an injunction was justified to protect the interests of its inhabitants.
28. As has been emphasised in the authorities referred to above, s.222(1) is widely worded, imposing no express restriction on what a local authority may properly consider to be expedient to promote or protect the interests of its inhabitants. Contrary to Ms Sumnall's submissions, there is no basis for limiting the matters the local authority may consider to activities taking place within the relevant area or directly affecting its inhabitants. In the Donnachie case the fact that the taxi business was operating in Cardiff was regarded as self-evidently sufficient to satisfy s. 222(1), but it was not suggested that such local activity was necessary. On the contrary, the Divisional Court emphasised the width of the section and of the power it confers. In my judgment, a local authority can properly take into account broader considerations of how to promote or protect the interests of its inhabitants, not limited to situations where unlawful activity is continuing or contemplated within its area. Indeed, Ms Sumnall's acceptance that proceedings can properly be brought against a trader who left the area shortly before their commencement itself demonstrates that wider considerations might apply where unlawful practices no longer directly affect the inhabitants of an area. The fact that future legislation may permit a local authority to act outside its area without express restriction does not mean that such an authority cannot currently do so where it considers it expedient to do so in the interests of its inhabitants, as permitted by s. 222(1).
29. The defendants' contention that the Council has not adduced evidence that it had considered s. 222(1) when commencing proceedings is unattractive in circumstances where they themselves only raised the argument late in the day and only adduced evidence that they had left the Council's area after the trial had started. But in any event, Mr Moore's statement referred to above sufficiently demonstrates that the Council did indeed consider that it was expedient for the promotion or protection of the interests of the inhabitants of the area to commence proceedings and, further (as in Donnachie – see paragraph 45) it is self-evident that the criteria of s. 222(1) were met.
30. I therefore reject the defendants' preliminary objection to the Council bringing these proceedings and find that the Council is entitled to injunctive relief against both WMSL and Mr Kay.

The scope of the injunction

31. Ms Sumnall contended that any injunction granted to the Council should be worded so as to restrict the manner in which WMSL conducts business within the Oldham area.
32. However, regulation 18 provides that the Court, on an application by an enforcement authority, may grant an injunction on such terms as it may think fit to secure compliance with the regulations 3, 4, or 5. In my judgment, given that WMSL is trading nationally and has breached the terms of undertaking which is not restricted in its geographical extent, it is entirely appropriate that an injunction should be granted which extends to the entirety of England and Wales.
33. The draft injunction proposed by the Council seeks to extend its operation to the entirely of the European Economic Area, but Mr Fenhalls did not in the event seek to persuade me to take the unusual course of granting an injunction which would restrain activities of the defendants outside the jurisdiction.

Conclusion

34. I will accordingly grant an injunction against both defendants in the terms indicated above. I invite counsel to seek to agree the terms of the order to be made and to submit a draft, with a written note as to any points of disagreement. If necessary I will hear further argument as to those points, as well as in relation to any other consequential matters arising.