PLT Anti-Marketing cold-call blocking: not a ‘scam’ after all?

An attempt to close down a company accused by the UK Government of a cold-call blocking “scam” has hit something of a stalemate in the Court of Appeal. PLT Anti-Marketing Ltd charges £40 a year for a cold-calling and junk mail blocking service already available free from official providers. The court has quashed a judge’s finding that PLT breached regulations and Lord Justice Briggs has produced strong arguments in favour of the company despite an attempt by the Department of Business (BIS) to close it down.

Nevertheless PLT remains barred from pursuing its business as it wishes until a full trial – when judgment could turn against it. The litigation has so far been going on for more than a year and a half – during which time PLT has been able to continue charging current customers but not to take on new ones without telling them about the free service. The whole affair raises the issue of whether current legislation is adequate for dealing with alleged consumer scams of this sort.

The free cold-calling and direct mail blocking services are available from Telephone Preference Service (TPS – provided by Ofcom; see: Regulation 26 of the Electronic Communications (EC Directive) Regulations 2003) and the Mail Preference Service (MPS – offered by the Direct Marketing Association in co-operation with the Post Office). PLT takes the names of its paying customers and adds them to the free lists. It maintains a service for its customers to complain about any continued unwanted calls and mail, but that also links into the free official services. Customers continue to pay on a monthly or annual basis. 

The Department of Business (BIS) started investigating PLT in 2012. In April 2013 it issued a “public interest winding up petition” under Companies Act 1985 S.124A – and the matter has been bogged down in court hearings ever since.

The court cases
In May 2013 Judge Hodge QC at the Manchester Registry rejected the BIS petition – but only as long as PLT undertook that it “would not sell its services to new customers before the final hearing of the petition, without informing customers that the services of TPS and MPS were available free of charge”. Hodge at a later hearing said: “I accept, the company’s reluctance to tell customers that the two preference services can be obtained for free can only be explained on the basis that the company fears that to do so would have a detrimental effect upon its business.” PLT gave the undertaking but complains it was offered a Hobson’s choice since the alternative was winding up. 

Its current customers, those already signed up, were left in something of a limbo by this compromise. The company undertook not to change their contracts (by charging more, for example) but customers continue to pay for the service (though they can withdraw if they realise/decide they are getting a bad deal). 

Rather than go for a full trial, PLT returned to Manchester in October 2013 to see if Hodge would allow its undertaking to be varied. PLT was willing to tell new customers that its service involved putting them on the TPS and MPS lists, but not that this service was available free. Hodge refused. He was then urged to rule, as a preliminary issue, on whether PLT had been actually in breach of regulations by its practices. The procedural reason for this was that if Hodge made a ruling at this stage, any trial of the issues would be shorter and cheaper. In fact it looks as if the opposite is the case. He ruled that there had indeed been a breach – but that ruling simply generated another branch of litigation as PLT sought to appeal against his preliminary finding – an appeal that was not heard until more than a year later by the Court of Appeal in January 2015.

PLT’s alleged breach
The issue at the heart of the case is whether PLT, in not telling customers about the free service, was withholding “material” information that customers would need to make their minds up about whether to pay for the service. PLT is alleged to be in breach of Regulation 6 of the Consumer Protection from Unfair Trading Regulations (CPUTR) on misleading omissions which says (inter alia): 

“(1) A commercial practice is a misleading omission if, in its factual context, taking account of the matters in paragraph (2) – 
(a) The commercial practice omits material information


and as a result it causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise…
(2) The matters referred to in paragraph (1) are –

(a) All the features and circumstances of the commercial practice.

(3) In paragraph (1) “material information” means –

(b) The information which the average consumer needs, according to the context, to take an informed transactional decision

…” .

The winding up petition says: “PLT trades in breach of Regulation 6 of the [regulations] by failing to inform members of the public prior to entering into a contract with those individuals and requiring payment that those individuals can obtain a service similar to the service offered by the Company free of charge through registration with the TPS and MPS.”  

The regulations are intended to implement the European Council Council Directive 2005/29 known as the Unfair Commercial Practices Directive (UCPD). This bans misleading practices. Regulation 6 of CPUTR suggests material information might be

“(a) the main characteristics of the product,
(b) the address and identity of the trader,
(c) the price and any associated charges,
(d) arrangements for payment, delivery, performance and complaint-handling and
(e) any rights of withdrawal or cancellation.”

Characteristics of an average consumer are elsewhere said to include “his being reasonably well-informed, reasonably observant and circumspect”.  An earlier case (OFT v Purely Creative & ors [2011] EWHC 106 (Ch)) had decided that the words of the Regulation and Directive could not be interpreted as requiring “utmost good faith” on the part of a trader. Common sense suggests that a normal trader would not be obliged to offer advice about why the service offered was a bad deal, for example. “The question is not whether the omitted information would assist, or be relevant, but whether its provision is necessary to enable the average consumer to take an informed transactional decision. [emphasis added].”  Hodge noted that Mr Justice Briggs (now, as it happens, Briggs LJ in the Court of Appeal case) in Purely Creative made clear that:

“‘The requirement to assume that the consumer is reasonably well informed, observant and circumspect reflects the common sense proposition that the Unfair Commercial Practices Directive exists to protect from being misled consumers who take reasonable care of themselves, rather than the ignorant, the careless or the over-hasty consumer.” Purely Creative para 62

Hodge, looking at PLT’s new compromise script, said: “I have no difficulty in arriving at the conclusion that the fact that consumers can obtain a similar service to that provided by the company for free elsewhere is indeed material information for the purposes of the Regulations” – the information about the free services was necessary (as per Briggs) not merely “information that would assist or be relevant to the consumer”. He said: “I agree that there is, in general, no obligation on a supplier to identify its particular mark-up. However, in my judgment it is an obligation on a supplier of a service to say that the service for which it is proposing to charge can be obtained for free from an alternative supplier” (para 42). On the question of whether the information is material in the sense of being likely to cause the average consumer to make a different transactional decision he said:

“I have to ask myself: why does the company not want to have to notify consumers that they can register with TPS and MPS themselves for free? The only answer that I can supply, and that is consistent with the answer given by Mr Mohyuddin [BIS barrister], is that the company is concerned that if that information were to be provided, an appreciable number of customers would decline the service that is being offered by the company” (para 43).

So Hodge decided even the new script would be in breach of Regulation 6 – a view not shared altogether by Lord Justice Briggs when the matter of the undertaking came to his attention more than a year later in the January 2015 Court of Appeal case. 

The Court of Appeal case
Lord Justice Briggs noted that a main reason for the winding up petition was that, “in the Secretary of State’s view, a business which seeks to charge customers for obtaining for the customer that which the customer could obtain free of charge is a form of scam which ought, if possible, to be prevented in the public interest”.    

The case raises issues about how far consumers should be protected from businesses that might be offering a poor deal and how far the principle of caveat emptor applies – “let the buyer beware” – ie consumers should ensure for themselves that they get a satisfactory deal. Legislation can, of course, intervene to modify that bare Common Law principle, and the consumer protection regulations ban “misleading” omissions from information traders offer to consumers. PLT’s defence in effect is that it should not be required, any more than any company, to point out where a potentially better deal might be on offer or how it makes its profit. Failing to do so is not “misleading”, it argues. Alternatively, the customer should be treated as “likely already to know that information anyway”.   

Lord Justice Briggs commented: “Regulations did not impose any general requirement upon a trader to inform a consumer about the availability, nature, qualities and price of alternative goods or services, alternative that is to those which the trader was inviting the consumer to acquire, even if it might be said that such information was needed to enable the average consumer to make an informed transactional decision.”  Briggs said:

“In my judgment, the critical question, particularly in the context of information about alternative products, is whether the average consumer can be said to need to obtain that information from the trader in question, rather than obtain it (for example) by shopping around, and finding out for himself whether something better, or cheaper, is on offer.”

Briggs LJ argued that PLT was offering a distinct service perhaps with some value to customers: “PLT was offering to do on behalf of its customers what the customers could have done for themselves, namely apply for and obtain registration on TPS’s and MPS’s registers. That was not a service provided, free or otherwise, by TPS or MPS.” TPS and MPS offered the registers that customers could place themselves on; PLT offered to place them on those registers – a different service which (Briggs implied) might be worth paying for. “The real alternative was for the customer to do it himself, at no cost other than his own time and effort.”    

Briggs’ analysis, therefore is quite different from Hodges’. Nevertheless he was unwilling to lift the undertaking. The issue about whether the availability of free registration was “material information” needed to be “subjected to the intense forensic analysis only achievable at trial”. So the case has been thrown back into the courts system.     

The advantage of the S.124A public interest winding up is supposed to be that the Government can step in when there is no case worth fighting for any individual (£40 a year is really not worth going to law for). Criminality does not have to be proved so the criminal standard of proof is not applied. Instead the winding up should be allowed “if the court thinks it just and equitable for it to be so (S.124A(1))”.

In the case of PLT, assuming a breach of regulation 6 was found, winding up would open the way for customers to register as creditors and to make civil claims for the money they had paid out from the assets of the company (if sufficient). But this highlights the anomalous position of a company like PLT. It may not be insolvent unless its income is suddenly declared illegitimate – in which case it should in justice be returned to customers. But that is of little comfort to customers since most of their money will have been lost already – in wages and running costs, never mind profits.

In addition, the practice of the insolvency service and the judiciary does not necessarily align with the requirements of BIS with its consumer protection hat on. The judge might give greater weight to the company’s or its shareholders’ interests than to the customers – who are not creditors in the traditional sense until the company is closed down.

Given the company isn’t actually insolvent (it merely would be if its income stream – past and present – were suddenly deemed illegitimate) a judge might wish to keep the company on foot. His loyalty does not lie particularly with customers as opposed to shareholders. The result may well be a compromise of the sort crafted by Hodge – keep the company going but with new terms of operation.

It might also happen that a company would act in advance and change its practices before its case came to court to evade the winding-up. A judge might be robust in a situation like this. For example in Re Walter L. Jacob & Co. Ltd a company had stopped its illegitimate trading of securities just before the winding up petition was presented. But Nicholls LJ said that it would “offend ordinary notions of what is just and equitable that, by ceasing to trade on becoming aware that the net is closing around it, a company which has misconducted itself on the securities market can thereby enable itself to remain in being despite its previous history”. He gave the order.

In the PLT case Hodge didn’t give the order and extracted the undertaking instead. But this created, hydra-like, a new cause of action for PLT to pursue – getting the undertaking varied – while continuing to trade to the extent of taking monies from existing current customers. In effect Hodge’s action generated three contentious legal issues, each in abeyance unless pursued by the parties: the winding up – where he refused to appoint a provisional liquidator; the undertaking – which PLT was not happy with but which (from BIS’s point of view) stymied PLT’s continuing business; and the question of whether PLT’s practices were in breach of regulations – deemed a preliminary issue but in fact one in which the ruling would be unlikely to satisfy either party if it went against them – hence the Court of Appeal judgment. 

Customers were left in a strange legal limbo. They may be aware now that they have been dealt with in breach of regulations but all they can do is end their contract. They cannot practically make a claim for past payments since they would have to prove the section 6 breach in a court of law and at vast, pointless expense.

It is difficult to see who would push for a full public interest winding up trial, as Briggs has recommended, while the undertaking remains in force. PLT is losing money on what might turn out to be a legitimate business – but would presumably fear pursuing a trial in case it loses and is wound up. If Nicholls LJ’s principle is adhered to, PLT couldn’t even save itself by conceding the point in advance of a trial and issuing yet another script telling customers that they can get the service free. Meanwhile the Government has no great incentive to push for a trial since it has in effect halted the operation of the practices it objects to.

One could argue quite strongly that something close to “absolute good faith” should be applied to cold callers such as PLT. They are asking people to sign up to something pretty much on the spot, often a service they had not thought about previously. There may be a cooling off period (which PLT did offer) but that involves un-making a decision already made. Inertia plays to the advantage of the cold caller, so arguably the standard of information should be higher than when choosing bananas in a marketplace.

The procedural issues (stated during the October 2013 hearing)
The BIS barrister’s view
: “Mr [David] Mohyuddin submits that the proper procedural approach for the company was to have pursued its request for a speedy trial. That is because the question of breach of Regulation 6 should be determined in the proceedings on the petition rather than in the context of the provisional liquidator application, which is necessarily an interim, and not a final, determination. He submits that, as far as the provisional liquidator application is concerned, the issue was dealt with on 13th May 2013, when the court indicated its view without making a final determination. That, he submits, was entirely the correct approach because it left the question for determination at the trial of the petition. Therefore, he submits that the court should not entertain the variation application [regarding the undertaking by PLT], but should rather give directions for a speedy trial to take place, as had been canvassed on 13th May. If, however, the court were minded to entertain the variation application, he says that the procedural basis for it must be identified. Regrettably, that basis, he says, is wholly unclear. He acknowledges that the court has the power to direct a separate trial of an issue. Most obviously, that power is used to direct the trial of preliminary issues … Mr Mohyuddin submits that the issue the company seeks to have determined is not a preliminary issue and that great care was taken at the hearing before the district judge not to describe it as such. He says that it is, rather, a hypothetical issue [ie whether or not the new script would breach regulations if it were used] … Mr Mohyuddin submits that this is an attempt to engineer a change of circumstances, justifying reconsideration of the undertakings that were offered to, and accepted by, the court on 13th May. There is no proper procedural basis for that.”         

The PLT barrister’s position: “For the company, Mr [Simon] Popplewell submits that in the interests of justice the point should be decided now. First, he says it is part of the petitioner’s case that failure to inform customers that the Mail and Telephone Preference Services are available for free is a breach of the Regulations; and the issue would, therefore, have to be decided sooner or later. Secondly, he says that it will save time at trial, even though it may not dispose of the petition altogether, if the issue is decided in the company’s favour. If the issue is decided against the company there will, equally, be a saving of time at the hearing. Thirdly, he says that it is only fair to the company, which wishes to trade, for the court to decide definitively whether it is able to trade lawfully. If the company is right about that, but only establishes that it is right at trial, it will have lost considerable revenue in the meantime, and will not be compensated because the Secretary of State, as petitioner, has not given a cross-undertaking in damages.”                  

For BIS in reply: “Mr Mohyuddin submits that the court is being invited to make a declaration on an uncertain procedural basis, and on a hypothetical set of facts. The answer to the point about the company’s inability to trade pending the hearing of the petition is that the company opted for a speedy trial, and gave undertakings in the meantime. The only reason for pursuing the variation application now is to seek to establish a material change of circumstances, entitling the company to apply for a variation of the undertaking. The court should, therefore, decline to entertain the application, and should list the matter for as expeditious a trial as the court can accommodate. In answer to a question from the court about the absence of a cross-undertaking in damages, Mr Mohyuddin reiterated that the answer was for the company to seek a speedy trial. It has chosen not to follow that course, and now cannot complain that there is a delay. All of that is of the company’s own making.”            

Hodge’s decision: Despite the “undesirability” of the circumstances, Hodge decided to deal with the issue before him (whether to vary the undertaking and hence the matter of breach or not of Regulation 6) as a preliminary issue, saying: “I am also conscious of the overriding objective of enabling the court to deal with cases justly, and, since 1st April this year [2013], at proportionate cost. I have the duty actively to manage cases, and that includes identifying issues at an early stage, deciding promptly which issues need full investigation and trial and accordingly disposing summarily of the others, and dealing with as many aspects   

The case PLT Marketing
Legislation Companies Act 1985 S.124A
Journal article: Insolvency Lawyer 2002 Public interest liquidation: PIL or placebo? Vanessa Finch Insolv. L. 157  


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