Breach – Causation – Claimant seeking to sell house by means of competition
Overy v PayPal (Europe) Ltd: Queen's Bench Division, Manchester District Registry (Mercantile Court): 2 March 2012
The claimant, who was a photographer by trade, wished to retire and move house. Instead of selling his home in the conventional way, in April 2007, he offered it as the prize in a competition and charged an entry fee to each contestant. He used the defendant company's (PayPal's) electronic payment services to set up an account through which entries to the competition could be received.
In setting up the account, he stated that the nature of his business was photography, and provided business emails relating to both the competition to win the house and the email address of his photography business. Part way through the process of receiving applications, PayPal suspended the service on the grounds, inter alia, that it had become concerned that the claimant had provided misleading information about the nature of his business, and that there had been unusual activity on his account. The claimant brought proceedings, claiming that the suspension and termination of the service was a breach of contract and that he had suffered serious loss and damage as a result.
PayPal's principal defence was that it was entitled to suspend or terminate the service as a result of the express provisions of the agreement between itself and the claimant. In May 2009, the court granted an application for summary judgment made by PayPal. The court directed that there should be a separate trial of issues as to the effect of the Unfair Contract Terms Act 1977 (the 1977 act) or the Unfair Terms in Consumer Contracts Regulations 1999 SI 2083/1999 (the 1999 Regulations) on the enforceability of any terms and conditions relied upon by PayPal.
The claimant submitted that he was entitled to the protection afforded to a consumer by the 1999 Regulations. PayPal submitted that the competition had not been a purpose that was outside the claimant's trade, business or profession, and that it ought to be categorised as a business venture even though it was limited to the disposal of a single asset by means of a single transaction or linked series of transactions. The claimant contended that he was a photographer by profession and not an estate agent, and so his competition could not properly be regarded as an activity which fell within the activities of his trade, business or profession (the 1999 Regulations issue).
With regard to the 1977 act, the claimant submitted that the limitation on liability set out in clause 2.5 of Paypal's user agreement contravened sections 2(2) and 3(2)(a) of the 1977 act. Both of those sections referred to 'business liability', in that they referred to liability for breaches of obligations or duties arising from things done or to be done by a person in the course of a business. It was clear that any liability on the party of PayPal under the user agreement had to constitute a 'business liability'. The issue arose as to whether the claimant had been acting for purposes that were outside his trade, business or profession when he had entered the contract with PayPal.
The court ruled: (1) In considering the issue of the Regulations, it was not possible to solve the issue by categorising the claimant's normal business activities and then asking whether the venture in question fell within the scope of such activities (see  of the judgment). On the evidence, it could not be said that the competition to win the house had been an adventure in the name of trade. It was, in principle, little different from a disposal of the same asset by public auction, which itself differed from a private sale through an estate agent only in the means chosen to achieve the sale.
Further, in opening the PayPal account, the claimant had intended to facilitate the receipt of payments for goods and services which he provided in connection with his photography and videography business. To that extent, when he entered into the contract with PayPal, he had not been acting for purposes that were outside his trade, business or profession. The business purpose could not reasonably be regarded as one which was insignificant or negligible (see  of the judgment). The claimant was not entitled to the protection of the 1999 Regulations (see  of the judgment).
(2) On the true construction of the 1977 act, PayPal was entitled to rely upon the exclusion of liability for loss of profits, goodwill, business, contracts, revenue or anticipated savings under clause 2.5 of the user agreement, and on the exclusion of liability for any indirect or consequential loss or damage. However, it was not entitled to rely upon the limitation of the amount of any damages in respect of any liability that was not wholly excluded.
Further, PayPal's power of summary termination without cause and without notice did not come within the relevant provisions of the 1977 act (see  of the judgment). The claimant would be entitled to the protection of the 1977 act (see  of the judgment).
The claimant appeared in person; David Drage (instructed by Boote Edgar Esterkin) for PayPal.