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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Overy v Paypal (Europe) Ltd [2012] EWHC 2659 (QB) (02 March 2012) URL: http://www.bailii.org/ew/cases/EWHC/QB/2012/2659.html Cite as: [2013] Bus LR D1, [2012] EWHC 2659 (QB)

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

		Manchester Civil Justice Centre 1, Bridge Street West Manchester M60 9DJ
		2nd March 2012

CONTENTS

PART I
Introduction	1
PART II
Background	10
PART III
The Present Proceedings	30
The Amended Defence	31
Summary Judgment	64
The Order for Directions	70
The Points of Claim	76
Subsequent Pleadings	82
The Issues	83
PART IV
The Unfair Terms in Consumer Contracts Regulations 1999	88
PART V
Was Mr Overy Acting as a Consumer?	97
PART VI
Unfairness and Unenforceability	182
Preliminary Observations	184
Material Circumstances	187
Individual Terms : Category 1	201
Individual Terms : Category 2	214
Individual Terms : Category 3	234
Individual Terms : Category 4	255
PART VII
The Unfair Contract Terms Act 1977	261
PART VIII
Conclusions	272

PART I
Introduction

1. In this action, which was commenced by a claim form issued out of the Leeds District Registry on 11^th July 2008, the Claimant, Mr Alfred Overy, claims damages of a little over £1m against the Defendant, Paypal (Europe) Limited ("Paypal") for its alleged breaches of a contract made on or about 22^nd January 2007 by which Paypal agreed to provide electronic payment services to Mr Overy. Though the claim was initially started in the Leeds Mercantile Court, it was subsequently transferred to the Manchester Mercantile Court and has come before me on a number of previous occasions.
2. The circumstances which have given rise to the claim are of a somewhat unusual nature. Mr Overy had carried on business for some time as a professional photographer specialising in wedding photography and DVDs. But in 2006 or thereabouts, he was contemplating retiring and moving from the substantial residential property owned by himself and his wife and known as "The Old Parsonage", Reedness, Goole, East Yorkshire ("the property") into somewhat more modest accommodation. At some stage, the idea came to him that he might be able to raise a substantial amount of money by offering the property as the prize in a competition rather than by attempting to sell it in a more conventional manner. He calculated that he would make a substantial profit from the entry fees charged to competitors, even after taking account the value of the property, the costs of the competition and a donation of a proportion of the proceeds to charity. In order to avoid any possible contravention of United Kingdom gambling laws, he designed the competition so as to introduce an element of skill, along the lines of the "spot the ball" competitions which are or were frequently to be found in popular newspapers. His variant on this theme was to invite contestants to identify precisely where a shadow cast by a telegraph pole shown in a photograph of the property would fall at a certain time and date. An entry fee of £60 would be charged to each contestant and the competition would close in July 2007, or earlier once 25,000 entries had been received.
3. Paypal provides electronic payment services both to businessmen or merchants and to private individuals. On 22^nd January 2007, Mr Overy entered into an agreement with Paypal for the provision to him of electronic payment services. The competition was launched in the latter part of April 2007 and over the next few days a significant number of entries was received and the entry fees were electronically processed through the Paypal facilities in accordance with the agreement. But on 30^th April 2007, Paypal suspended the service and it seems eventually to have been terminated. It took some time for Mr Overy to set up alternative payment arrangements; and it is his case that this hiatus, and the bad publicity which accompanied it, meant that his competition was far less successful than it would otherwise have been. He contends that the suspension and termination of the facility by Paypal was a breach of contract on its part and that, in consequence, he has suffered substantial loss and damage. That is the basis upon which the present proceedings were commenced.
4. Paypal has defended the proceedings on various grounds. But its principal substantive defence is that it was entitled to suspend or terminate the facility by virtue of the express provisions of the agreement between itself and Mr Overy. This led to an application on its part for summary judgment on a number of issues which, if resolved in its favour, would, at least in its estimation, have provided it with a defence to the claim without the need for an expensive and time-consuming trial of all the issues.
5. On 15^th May 2009, I gave judgment on this application, granting summary judgment on no less than 14 issues, as set out in the Schedule to my order of that date. I also gave various directions for the future conduct of the proceedings. There was no appeal from my order granting summary judgment. But Mr Overy has repeatedly expressed dissatisfaction about the fact that no comprehensive disclosure has ever been given by or ordered against Paypal and has expressed scepticism as to whether the terms and conditions governing his agreement with Paypal were, in fact, those which were relied upon by Paypal at the hearing of the summary judgment application.
6. In this court, of course, my judgment on that application is conclusive. But Mr Overy has acted in person since the first day of the hearing of that application, though, for a time, it seems he had some assistance from a firm of solicitors. Accordingly, at the outset of the present hearing, in order to ensure that no possible injustice had been done, I heard what Mr Overy had to say on this point and looked with some care at the documentation which was put before me. After considering these matters, I was quite satisfied that there was nothing in the point; and I delivered an extempore oral judgment dealing with the issue. So far as I could tell, Mr Overy appeared to accept the conclusions which I arrived at.
7. My order of 15^th May 2009 resolved most of the issues as to the incorporation of Paypal's standard terms and conditions into its agreement with Mr Overy and as to their effect in the particular circumstances of the case. I shall have to return to the detailed provisions of in this order in due course. What is of particular importance for present purposes, however, is that it did not determine any issue as to the effect of the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999 on the enforceability of any of the terms and conditions relied upon by Paypal. On the contrary, I directed that there should be a separate trial of any such issues. Those are the issues which are now before me and which are the subject-matter of this judgment.
8. It took some considerable time, however, for this trial to come on for hearing. On 19^th October 2009, I gave further directions for the purposes of the intended trial. But these directions themselves gave rise to further disputes which had to be resolved by way of supplemental orders made by myself and David Richards J; and Paypal then sought to short-circuit any further proceedings by making a second application for summary judgment which was essentially based upon the proposition that Mr Overy could not, in any event, establish that he had suffered any or any significant loss as a result of any breach of contract on the part of Paypal. I dismissed that application in a written judgment which was formally handed down on 31^st March 2011; and thereafter, on 4^th May 2011, I gave further directions for the purposes of the trial of the present issues.
9. At the trial of those issues, Mr Overy appeared in person; and Paypal was represented by Mr David Drake of counsel. Points of Claim, Points of Defence and Points of Reply had been exchanged between the parties; and witness evidence had been served by both sides. I heard evidence on behalf of Paypal from a Mr Spiros Theodossiou who was, at the material time, a product manager involved in the management of Paypal's website, and from Mr Robert Caplehorn, the Vice President of Legal and Compliance for Paypal (Europe) S.a.r.l. et Cie S.C.A. (which now carries on the European business of Paypal), and who was, until 30^th April 2007, legal director of Paypal, the Defendant in these proceedings. Mr Overy also gave evidence on his own behalf.
PART II
Background

10. Much of the background is either uncontentious or was resolved by the order which I made on 15^th May 2009 on Paypal's application for summary judgment. Mr Overy, as I have previously observed, had been in business as a professional photographer for many years. He told me that he had latterly specialised in creating DVDs of weddings. He had an arrangement with a concern known Colab, which provided him with a page on its website and processed payments on his behalf. But, at some stage, he decided to set up his own website under the trading name Kalf Studios, under which name it seems that Mr Overy had been trading since November 1990.
11. The application process which led to the opening of his Paypal account was carried out by Mr Overy entirely on line via the Paypal website on 22^nd January 2007. The process was described in some detail by Mr Theodossiou in his witness statement and was not challenged. It appears that Mr Overy wished to sign up to Paypal's "Website Payments Pro" product which allowed the merchant to accept credit and debit card payments from customers directly via his own website, rather than diverting them to the Paypal website. But, in order to operate this particular facility, the merchant must also hold a Business Account with Paypal. If he does not already hold a Business Account, such an account must be opened during the course of the application process for the Website Payments Pro facility.
12. Once he had embarked on the process Mr Overy would have been directed to a series of web-pages, some of which required him to provide certain specified information. It would have been possible for him to navigate from page to page only after filling in the required fields, ticking any necessary boxes and clicking on the appropriate button in order to continue to the next page. So Mr Overy could not have completed the process without entering certain required information and without ticking certain boxes. Amongst the boxes which he would have had to tick were ones which confirmed that he had read and accepted certain terms and conditions which could be accessed by clicking on a link next to the box which he was required to tick.
13. In this way, Mr Overy was able to complete the application process on line and succeeded in opening a Business Account. But, though the Business Account was opened on 22^nd January 2007, he was unable to sign up for the Website Payments Pro facility; and his application for that purpose was subsequently declined on 16th February 2007. According to Mr Theodossiou, this was because the website which Mr Overy proposed to use for this purpose was not available for vetting by Paypal. But it should be noted that Mr Theodossiou did not, in fact, have any direct personal knowledge of the reasons why Mr Overy's application for this facility had been declined; and he relied upon what he had been told by a member of the merchant credit vetting team who did not himself make a statement for the purposes of the present trial.
14. For the most part, there is no dispute between the parties as to the nature of the information which Mr Overy provided during the sign up process. He gave his business name as "Kalfstudios" and identified the nature of his business as coming within the category "Cameras and Photography" and the sub-category "Film". The average transaction price was stated to be in the range between £50 and £100; and the average monthly trading volume was said to be between £25,000 and £100,000.
15. But, as he sought to emphasise, he also provided a website address, which was either www.winthishome.org.uk, or possibly www.winahome.org.uk, and he gave the following service e-mail address: [email protected]. He also stated that the name to be recorded on his customers' credit card statements was to be "winahome". But it appears that he also provided a business e-mail address in the form [email protected].
16. There is, however, some uncertainty about the website information. At paragraph 3 of my written judgment of 31^st March 2011, I recorded that the winthishome website only became fully operational on 5^th March 2007. That website undoubtedly provided some detailed information about his competition; and I had to consider the effect of some of the provisions published on the website for the purposes of that judgment. But, in his statements of case and in his oral evidence at the present trial, Mr Overy referred to a different website apparently created for his Kalf Studios business and identified by the name www.kalfstudios.co.uk.
17. According to his Points of Reply, however, this website was not yet in operation at the time when he entered into the agreement with Paypal; but he produced what he described as a "dummy" version of the website in order to comply with Paypal's requirements. Hard copies of some of the pages from this Kalf Studios website were incorporated in the trial bundles, but it remained unclear to me whether these predated or post-dated the agreement with Paypal. Though his Points of Reply stated that Paypal insisted on seeing a website before it was prepared to open an account on his behalf, he stated in his oral evidence, that he was uncertain whether he provided the "dummy" version before or after the account was opened. I will have a little more to say about these matters though I doubt if it is likely to be material to the issues to be determined at this trial.
18. But it seems quite clear that, in order to complete the signing up process, Mr Overy must have confirmed that he had read and accepted certain of Paypal's standard terms and conditions. Most importantly, he ticked the box confirming the following statement:

"I have read and agreed the terms of the PayPal User Agreement (including the policies incorporated). For more information on the main characteristics of the PayPal service please read our service description document."

19. He also similarly confirmed that he had read and accepted the terms of the Paypal Website Payments Pro Agreement and of its privacy policy. But nothing, I think, turns upon either of those documents.
20. The User Agreement specifically provided that a number of identified "policies" were incorporated into the Agreement which set out additional terms and conditions relating to the services offered by Paypal. For the avoidance of doubt, therefore, the applicant for a Paypal account was advised to review each of those policies. All of these were identified by name on the face of the agreement; and each of them could be accessed by clicking upon a link. They included, in particular, Paypal's Acceptable Use Policy as last updated on 11^th January 2007. The Acceptable Use Policy in its turn similarly referred to a number of further policies or guidelines which were similarly identified and accessible, one of which was its Gambling and Lottery Policy.
21. As I have previously mentioned, Mr Overy was reluctant to accept that the versions of these various documents which were produced by Paypal for the purposes of both the earlier summary judgment application and the present hearing were identical to those which were posted on the website at the time of his application for a Business Account and the Website Payments Pro facility. But, even if it were permissible for me to reopen these matters in the light of my order of 15^th May 2009, nothing that he had to say at the present hearing led me in any way to doubt that the versions of the User Agreement and the Acceptable Use Policy relied upon by Paypal were true copies of those in force on 22^nd January 2007. I refer, once again, to the extempore oral judgment which I gave at the outset of the present hearing. There might be slightly more room for some doubt in relation to the Gambling and Lottery Policy, since the copy produced by Paypal is not specifically dated; but the incorporation of the relevant terms into the User Agreement was one of the issues resolved by my order of 15^th May 2009 which cannot now be reopened in this court.
22. By that order, I granted summary judgment on a number of issues relating to the information provided by Mr Overy at the time when he opened his Paypal account and to the terms and conditions which were incorporated into the User Agreement governing the account. I also dealt with a number of specific issues arising out of the express terms contained in the Acceptable Use Policy in relation to gambling activities. In the light of my findings on those issues, I concluded that Paypal was entitled, at all material times, to suspend its services to Mr Overy for violation of the gambling activities provisions of its Acceptable Use Policy and that it was not in breach of contract in doing so. Accordingly any loss suffered by Mr Overy as a result of the suspension of those services was not caused by any breach of contract on Paypal's part.
23. My determination in relation to each of these issues was, however, expressly stated to be subject to any question as to the impact of the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999. But before I consider the relevant terms and conditions in detail and the potential impact of the Act and Regulations upon them, I shall briefly deal with certain further aspects of the application process and its aftermath.
24. It may be of some importance to appreciate that the whole of the signing- on process would normally be effected by electronic means and would be fully automated. In the ordinary course of events, there would be no human intervention whatever when an application was made and approved in this way, though it seems that there would have been some manual vetting of the customer's web-site on an application for the web-site Payments Pro facility. But, according to Mr Theodossiou, in Mr Overy's case his web-site was not available for vetting at the time of his application. Paypal would also, on occasions, negotiate directly with major customers. This was a point which was heavily relied upon by Mr Overy, who forcefully submitted that "due diligence" should be carried out by Paypal before an account is opened, rather than by suspending or closing the account if suspicious circumstances come to its attention at a later stage which could and should have been resolved at the outset. It should also perhaps be noted that an applicant could at any time save, exit and return to the web-site so as to enable him to consider at his leisure any particular matter or problem arising during the course of the application.
25. For a time, Mr Overy's Paypal account appeared to operate satisfactorily and efficiently. It is Mr Overy's case that some 1,490 entry fees were paid into the account over a short period, mostly on 23^rd and 24^th April 2007; and some of these monies were withdrawn by Mr Overy. On each occasion when a payment was made into the account, a confirmatory email was sent to Mr Overy by Paypal. Mr Overy produced what he said was the very first e-mail of this kind dated 30^th March 2007. It is addressed to the kalfstudio e-mail address which he had provided during the course of the signing on process; and it identifies the item or product name as being a "Payment for Win This Home". The source of this label or description is unclear, though Mr Caplehorn surmised that it would have come from the website set up by Mr Overy for the purposes of the competition. It is not the same as the name "winahome", which was the reference which Mr Overy appears to have provided for his customers' own records at the time when he opened the account.
26. However, on 30^th April 2007, Paypal unilaterally suspended the operation of the account so as to prevent any payments being made into it or any monies being withdrawn. In the terminology adopted by Mr Caplehorn, this amounted to a "hard" restriction, rather than a "soft" restriction which would still have permitted monies to be paid into the account. Subsequently, on 10^th May 2007, the restriction was modified to some extent. The precise nature and extent of this modification was not in issue at this stage of the proceedings. But I note that it is Mr Overy's pleaded case that the service was purportedly reinstated on that date but that further problems were encountered thereafter; whereas it is Paypal's case that the purpose of the modification was simply to permit Mr Overy to withdraw funds. I also note, however, that in an e-mail from Paypal to Mr Overy dated 10^th May 2007, which was produced by Mr Overy and referred to in his skeleton argument, he was simply notified that his account had been "restored", without any qualification.
27. The precise reasons why Paypal took the decision to suspend Mr Overy's account in this way are not strictly in issue, at least at this stage of the proceedings. Nor was there any issue for present purposes as to what contractual provisions, if any, Paypal actually relied upon at the time to justify its decision. Accordingly, though Mr Overy clearly felt a great sense of frustration on the point, no disclosure has been ordered or given of any internal documents evidencing the way in which the decision to suspend his account had been made or any enquiries which may have led to it. But, for reasons which I shall enlarge upon in due course, it seems that the primary justification advanced on behalf of Paypal for the suspension of its services are those referred to at paragraphs 25, 26 and 28 of its Amended Defence, which allege breaches of contract by Mr Overy by providing misleading information as to the nature of his business at the time of his application for an account and failing to obtain Paypal's prior approval or authorisation before seeking to engage its services in relation to a "game of skill" as required by its Acceptable Use Policy. Reliance is also placed on a number of other matters, including what was said to have been "the acute and substantial increase" in the volume of transactions passing through the account at the end of April 2007 and on various alleged disputes with customers.
28. Mr Overy himself produced several e-mails relating to the suspension of his account which he had received from Paypal between 8^th and 10^th May 2007; and in his skeleton argument he referred to an explanation which he had been given to the effect that there had been "unusual activity" on his account, though I cannot find any express reference to this in any of the emails in question. But the earliest of the e-mails to which he referred in his skeleton argument was clearly not the first in the series of communications arising out the action taken by Paypal, since it refers to steps which Mr Overy had already taken, at Paypal's request, in order to provide additional verification as a result of an automatic alert which had been flagged by Paypal's security system.
29. It seems quite likely that this alert was, in fact, initially triggered by what was referred to as "unusual activity" on the account, which appears to have been the "acute and substantial increase" in the volume of transactions pleaded at paragraph 26.3 of the Amended Defence. This was no doubt why some attention was paid in the course of the evidence to the implications of any "spike" in activity of this kind. But, given the nature of the issues which I have to resolve at this stage, it does not seem to me to be necessary for me to make any finding as to whether there was, in fact, any sudden apparent increase in activity or whether this led to the suspension of Mr Overy's account. The point may, however, be material for a proper understanding of the way in which the Paypal system operated at the time and may, therefore, have some indirect bearing on the issues which I have to resolve at this stage.
PART III
The Present Proceedings

30. In order to elucidate those issues, I think it is necessary to look a little more closely at the pleadings and the order of 15^th June 2009 before focusing more specifically on the matters raised by the Points of Claim, Points of Defence and Points of Reply which have been served and filed for the purposes of the present hearing.
The Amended Defence

31. I have already referred to certain features of the way in which Paypal's case was pleaded in its Amended Defence. This pleading sets out the facts and matters relied upon by way of defence in a meticulous and detailed manner. It admits and avers that the relationship between Paypal and Mr Overy was governed by a contract which came into being on the successful completion of the application process; and it avers that this agreement incorporated Paypal's standard terms and conditions as they then stood and as more particularly set out in, amongst other documents, its User Agreement, its Acceptable Use Policy, its Premier and Business Account Policy (properly, I think, entitled and described as an "Additional User Agreement for Premier and Business Accounts") and its Closing Accounts and Limiting Account Access Policy. Furthermore, the Acceptable Use Policy referred to and was alleged to incorporate certain further provisions set out in its Gambling and Lottery Policy.
32. The terms and conditions upon which reliance is placed are set out at paragraphs 9 to 17 of the Amended Defence. Paragraph 9 deals with the nature of the User Agreement and the incorporation of the terms and conditions set out in the policies referred to. At paragraph 10 of the pleading, it is alleged that Paypal's fees for the provision of its services under the Agreement were chargeable on a transaction by transaction basis by reference to the volume of payments received (and, inferentially, that no other charges were payable).
33. Paragraph 11 of the Amended Defence raises what might seem to be an important issue. It avers that the rights and obligations of the parties under the Agreement were terminable by either party at will. So far as the user was concerned, this was achieved by clause 10 of the User Agreement which permitted the closure of the account at any time by clicking on the appropriate link on the Paypal website. From Paypal's standpoint, the relevant provision was to be found in the final words of clause 1 of the User Agreement which were in the following terms:

"We may refuse to provide our Service, change the qualifications for your use of the Service and/or terminate this Agreement with you at any time on giving you notice by email, such notice to take immediate effect."

34. At first sight, one might have expected that this provision would have been expressly relied upon to justify the action taken by Paypal and as demonstrating that it had not acted in breach of contract. But there is no explicit reliance upon this clause for that purpose in the Amended Defence. This may well be for the very simple reason that what Paypal actually did was to suspend the account, rather than terminate the Agreement, thereby "freezing" it in respect of both payments and withdrawals and preventing Mr Overy withdrawing any monies as he would presumably have been entitled to do in the event of a termination under clause 1.
35. Paragraph 12 of the Amended Defence sets out various provisions which are generally described as imposing obligations upon Mr Overy with regard to his conduct in relation to Paypal and his use of Paypal's services. The first of these was a provision at clauses 7.1 and 7.2 of the User Agreement stipulating that any information provided to Paypal in the course of the registration process or in certain other circumstances should not be "false, inaccurate or misleading". In addition, reference was made to certain provisions of Paypal's Acceptable Use Policy, including, in particular, a statement that, despite Paypal's active enforcement of its policies, it was ultimately the responsibility of the user to ensure that all transactions complied with the Acceptable Use Policy and the guidelines set out therein. If a user was uncertain whether his proposed or existing business violated the Acceptable User Policy, he was advised to raise the matter by e-mail with Paypal's Compliance Department.
36. But the real importance of these general provisions in the Acceptable Use Policy was to be found in their impact on certain specific types of activity which were referred to under the general heading "Gambling" and which could be accessed by clicking on a link in the website pages dedicated to the Acceptable Use Policy, which would take the user to Paypal's Gambling and Lottery Policy. The relevant parts of this policy were set out at paragraph 12.3 of the Amended Defence. The provisions in question seek to identify various types of activity which would or might come within the scope of this policy and state that a user was not permitted to use Paypal for such gambling activities unless he had received prior approval from Paypal and was located in a jurisdiction in which gambling activities were legal. It reserved the right to authorise or deny authorisation at its sole discretion. It was stated that if the operator or his business required approval, he should send contact information and a brief summary of the business by e-mail to the address provided.
37. Specific reference was then made to certain jurisdictions in which gambling activities were illegal, most notably the United States of America; and it was stated that operators who wished to become approved would need to demonstrate to Paypal's satisfaction that they had the ability to block participation in their gambling activities by persons accessing the Paypal service in the United States and any other jurisdiction where such activities were illegal.
38. The relevant provisions then specifically state that, unless the operator had been approved by Paypal, he might not use its services to send or receive payments for any form of gambling activities. This section of the policy continues by setting out various types of activities which were considered to constitute gambling activities for these purposes. These include "participating in lotteries or otherwise carrying on a game of chance or game of skill (except as permitted in the manner set forth below) for money, property or other things of value". This prohibition was expressly stated to include all gambling operations, even if and where such activities did not constitute unlawful conduct.
39. This was followed by a further ancillary provision to the effect that, unless Paypal had approved the particular operator, neither the operator not the user might use Paypal for gambling activities, which included, but were not limited to those thereinafter individually specified. These included the following:

"Lottery tickets, including using Paypal to sell or buy tickets, vouchers or any other "opportunity" to participate in a lottery or any other game of chance, whether privately-run or administered by a public entity. This includes, but is not limited to, raffles, drawings, sweepstakes, pools, or any other form of game/contest involving the distribution of prizes or monetary compensation.

Certain "Games of Skill", where the elements of skill cannot conclusively be established to predominate over those of chance in determining the outcome. Operators of games of skill where the elements of skill are clearly predominant over those of chance may use Paypal to accept entry fees or similar payments only if they have in place a programme to block users from the US and other jurisdictions where it is illegal to operate a paid contest of skill."

40. Unhappily, Mr Overy did not consider that it was necessary for him to read Paypal's Gambling Policy during the registration process and he did not do so. The reason which he gave was that he had taken advice on the question of legality and had been assured that his competition would be entirely lawful under the law applicable at the time, at least within the United Kingdom. But, as will be seen, these provisions were the ones upon which Paypal principally relied for the purposes of its application for summary judgment. It was suggested by Mr Overy that Paypal itself had admitted that the Gambling Policy was inaccessible at the time. This assertion appears to have been based on a passage at paragraph 4 of the witness statement of Christopher Paul Stone dated 27^th March 2009 which was served in connection with Paypal's application for summary judgment. But Mr Overy was referred to this witness statement by Mr Drake in the course of cross-examination and it is quite clear that it says nothing of the sort. The purpose of the witness statement was to provide a full copy of the Gambling Policy which by oversight had not been included in the exhibits to the evidence previously served.
41. Paragraph 13 of the Amended Defence sets out a number of further provisions of the User Agreement and the other policies incorporated therein which are said to spell out the circumstances in which the provision of services by Paypal for the benefit of Mr Overy could be terminated or suspended for cause, including, but not limited to, breaches by Mr Overy of his contractual obligations. At paragraph 13.1, it refers to clause 2.7 of the User Agreement, by virtue of which it was provided that if a user used the Paypal service in a manner which violated the Acceptable Use Policy, the account would be subject to limitation or immediate termination, as stated in the Closing Accounts and Limiting Account Access Policy.
42. Paragraph 13.2 of the pleading also referred to clause 7.3 of the User Agreement which provided that, at Paypal's sole discretion, it might close an account "at any time where expedient to do so" upon notice to the user. This was specifically stated to include, but not to be limited to, cases where there had been a breach of the Agreement. By the same clause, Paypal also reserved the right to limit access to an account and any or all of its functions, though it was provided that such restrictions should only apply "to such portion of your balance as directly relates to your breach or attempted breach of your obligations". But Paypal does not specifically rely upon this provision to justify the suspension or limitation of the account on 30^th April 2007; nor was it invoked in connection with the summary judgment application.
43. Paragraph 13.3 of the Defence refers to clause 11 of the User Agreement which makes further provision for the limitation or suspension of an account. It states that Paypal might limit access to an account and any or all of its functions, or indefinitely suspend or close the account and refuse to provide any services to the user if he was in breach of the User Agreement or the documents it incorporated by reference, or if Paypal was unable to verify or authenticate any information provided to it, or if Paypal believed that the account or the user's activities proposed "a significant credit or fraud risk" to Paypal.
44. Paragraph 13.4 of the Amended Defence pleads various provisions of the Premier and Business Account Policy. By clause 4 it was provided as follows:-

"If Paypal has reason to believe that you may be engaging in or have engaged in fraudulent, unlawful, or improper activity, including without limitation any violation of any terms and conditions relating to the premier/business service, the website or any related services, your access to the Service may be suspended or terminated. You will cooperate fully with Paypal....to investigate any suspected unlawful, fraudulent or improper activity."

45. Paragraph 13.4 also refers to clause 6(a) and (e) the Premier and Business Account Policy which stated that Paypal might take "reasonable actions" to protect itself against "credit or fraud risk" which might result from the use of the Paypal service and that the user must promptly provide to it, upon request, information about his "finances and operations". A further reference to the Acceptable Use Policy is made at paragraph 13.5 of the Amended Defence which quotes a passage to the effect that violating the Acceptable Use Policy might result in "temporary or permanent limitation" of a customer's account, including "the inability to send and/or receive payments". Similar, though not identical, provisions were of course to be found in clause 2.7.
46. Finally, paragraph 13.6 of the pleading referred to clause 2 of the Closing Accounts and Limiting Account Access Policy, which, amongst other things provided that any of certain specified events might lead to the account being limited. These included complaints received regarding the non-delivery of services, excessive levels of disputes, a refusal to cooperate in any investigation and breaches of the User Agreement.
47. Paragraph 14 of the Amended Defence seeks to summarise what were described as certain "fundamental characteristics" of the contractual relationship created by the User Agreement in accordance with the provisions previously referred to. It seems to me to be a fair summary of those terms, so it is convenient to set it out in full at this point:

"14.1 the parties' relationship was terminable at will by either party;

14.2 services were provided and paid for on a rolling basis, rather than (for example) on the basis of an annual fee payable in advance;

14.3 the Claimants' explicit contractual obligations included:

14.3.1 not providing the Defendant with false or misleading information;

14.3.2 seeking prior authorisation from the Defendant (which authorisation the Defendant reserved its right to deny at its sole discretion) before engaging the Defendants services in relation to any "game of skill" open to internet users without geographic restriction (whether or not the element of skill could be conclusively established to predominate over chance in determining the outcome);

14.3.3 co-operating fully with the Defendant in relation to any investigation by the Defendant into the Claimant's activities;

14.4 the Defendant was given express powers to suspend or limit the provision of services to the Defendant in the event of:

14.4.2 breach by the Claimant of his contractual obligations;

14.4.3 the Defendant being unable to verify or authenticate any information provided to it by the Claimant;

14.4.4 the Defendant having reason to believe that the Claimant may be engaging in or have engaged in fraudulent, unlawful or improper activity;

14.4.5 the Claimant's activities being the subject of complaints received from third parties regarding non-delivery of services, or excessive levels of dispute with third parties."

48. At paragraph 15 of the Amended Defence, a contention is raised to the effect that the services to be provided by Paypal under the User Agreement "derived their characteristics, scope, extent and limits" from the terms set out in that Agreement as identified and summarised in the previous paragraphs.
49. At paragraph 16, it is admitted that, as alleged, an obligation of reasonable care and skill was to be implied into the User Agreement in relation to the provision of services by Paypal, in accordance with section 13 of the Supply of Goods and Services Act 1982. But it is denied that there were any further implied terms, reliance being placed on clause 2.3 of the User Agreement which provided that, subject to any statutory rights, the services were to be provided without any warranty or condition, express or implied.
50. Paragraph 17 of the pleading refers to one further specific provision of the User Agreement, namely clause 2.5, which limits the extent of any liability which Paypal might incur in relation to the Agreement. The relevant provisions are in these terms:

"In no event shall we.be liable for any of the following types of loss or damage arising under or in relation to this Agreement:

Any loss of profits, goodwill, business, contracts, revenue, or anticipated savings; or

Any indirect or consequential loss or damages whatsoever.

Our liability....to you....in any circumstances is limited to the greater of (a) the amount of fees you pay to us in the 12 months prior to the action giving rise to liability or (b) the value of the transaction or stored value giving rise to the dispute."

51. Paragraph 19 of the Defence sets out a considerable number of allegations as to the nature of the competition promoted by Mr Overy and his use of his Paypal account for the receipt of entry payments. It is unnecessary to examine these allegations in any detail. For present purposes their relevance is to be found in the allegations at paragraphs 20 and 21.
52. At paragraph 20 it is alleged that the competition was a "game of skill" for the purposes of Paypal's Acceptable Use Policy, but one where the element of skill could not conclusively be established to predominate over those of chance in determining the outcome. Paragraph 21 goes on to aver that the website through which Mr Overy conducted the competition and the competition itself were open and accessible to internet users and potential competitors without geographical limitation, not only in the United Kingdom but also overseas, including the United States of America. As will be seen, these allegations were central to Paypal's application for summary judgment and are indirectly, therefore, material to the issues which I have to determine at this stage.
53. Paragraphs 25 and 26 of the Amended Defence are also of some importance for the purposes of Paypal's case. Paragraph 25 alleges that Mr Overy was in breach of his obligations to Paypal under the User Agreement and the policies incorporated therein. In fact, however, only two allegations are pleaded. The first of these is that Mr Overy provided Paypal with untrue or misleading information during the application process by specifying that the sector occupied by the business which was or was proposed to be carried on via his website was "cameras and photography". It does not go further by seeking to identify precisely the nature of the falsity or inaccuracy involved; but the obvious implicit contention is that he actually intended to use his Paypal account for the purposes of the competition by which he hoped to dispose of the property.
54. The other specific breach identified in this paragraph of the Amended Defence was that Mr Overy failed to obtain prior approval or authorisation from Paypal before seeking to engage its services in relation to what was described as a "game of skill". Specific reference was made to the allegations at paragraphs 20 and 21 which, it will be recalled, averred that the competition was a game of skill for the purposes of Paypal's Acceptable Use policy, albeit one where the element of skill could not conclusively be established to predominate over those of chance in determining the outcome, and that it was open and accessible to users without geographical limitation.
55. Paragraph 26 of the Amended Defence sets out a list of what were described as "objective risk factors" which gave Paypal reason to believe that Mr Overy might be engaging in or have engaged in "fraudulent, unlawful or improper activity". Paragraphs 26.1 and 26.2 refer back to the breaches of contract alleged at paragraph 25. But paragraph 26.3 pleads a quite different factor of this kind, namely "the acute and substantial increase in the volume" of the transactions on Mr Overy's account at the end of April 2007. This is followed by an allegation at paragraph 26.4 that a number of disputes with customers had been notified to Paypal prior to the end of April 2007, with one further such dispute being notified on 7^th May 2007 but dismissed on the same day.
56. Next, it is pleaded that the competition website appeared to be promoting the disposal of a high value asset in return for entry fees which were individually significant and were cumulatively of substantial value; and it is further alleged were that the competition was being promoted on the basis that substantial funds were to be donated to charity. Finally, it is said that, during the course of Paypal's investigations into Mr Overy's activities, Mr Overy sent an e-mail, stating that he had had the competition "checked by a firm of solicitors", thus showing that he himself had appreciated that the legality of the competition was something which might require professional advice.
57. At paragraph 27 of the Amended Defence, it is admitted and averred that Paypal suspended the facility by which Mr Overy's Paypal account could receive payments made or funded by credit or debit cards as well as his own ability to withdraw funds, though it is said that this latter restriction was lifted on 10^th May 2007.
58. What is of central importance is the allegation which is then set out at paragraph 28 which is in these terms:

"In the premises set out above, the Defendant was amply entitled to suspend any or all of the services associated with the Claimant's account by virtue of the factors identified in paragraphs 25 and 26 above".

59. So Paypal firmly nails its colours to the mast in clear and unambiguous terms. It seeks to justify its suspension of the facility on two grounds only: firstly because of alleged breaches of contract on Mr Overy's part in providing untrue or misleading information to Paypal as to the nature of his business and failing to obtain its prior approval or authorisation before using the facility for the purposes of his competition; and secondly because of the various risk factors which are said to have given Paypal reason to believe that he might have been engaged in "fraudulent, unlawful or improper activity". Paragraph 28 does not, however, go on to identify specifically the contractual provisions by virtue of which Paypal is alleged to have been entitled to suspend the operation of the account in any of those circumstances. But the only provisions specifically pleaded under which services could be terminated or suspended are those set out at paragraph 13 of the Amended Defence, whose effect is summarised for these purposes at paragraph 14.4.
60. So, though it has to be teased out of the pleading, the only provisions upon which Paypal appears to rely to justify the suspension of the facilities on Mr Overy's Paypal account are clauses 2.7, 7.3 and 11 of the User Agreement, clauses 4 and 6 of the Premier and Business Account Policy, clause 2 of the Closing Accounts and Limiting Account Access Policy and the provisions of the Acceptable Use Policy set out at paragraph 13.5 of the Amended Defence.
61. It should be noted, however, that, despite the express allegation at paragraph 11 of the Amended Defence that the rights and obligations of the parties under the User Agreement were terminable at will by virtue of clause 1 of the Agreement, no reliance is placed upon these provisions for the purposes of justifying the suspension of services by Paypal. It is nonetheless a factor upon which Paypal relies for the purposes of establishing the reasonableness of certain other terms and conditions, insofar as it is incumbent upon it to do so. Furthermore, it may also be material to any question as to the causation or quantum of damages. Indeed, at paragraph 32 of the Amended Defence, it is specifically pleaded that Paypal relies on the fact that "it was at all material times contractually entitled to suspend and/or terminate the provision of its services" to Mr Overy.
62. Various challenges are thereinafter made to Mr Overy's pleaded case as to causation and loss. I need not, however, deal with the other points raised in the Amended Defence upon these issues save, of course, for Paypal's reliance on the exclusion or limitation of liability for any breach of contract on its part as set out at clause 2.5 of the User Agreement. This is expressly prayed in aid at paragraph 34 of the Amended Defence; and it is averred that these provisions would appear to exclude the entirety of Mr Overy's claim, insofar as it constitutes a claim for a loss of profits, business, contracts or revenue, or a claim for indirect or consequential loss or damage. In this connection, there is a general denial at paragraph 35 of the Amended Defence that any of these exclusions or limitations are unfair or unreasonable as alleged in the Particulars of Claim.
63. On the issues of liability, therefore, the defence advanced by Paypal is that it was entitled to suspend its services under various identified contractual provisions by reason of the breaches of contract on Mr Overy's part set out at paragraph 25 of the Amended Defence and by reason of the various risk factors referred to at paragraph 26 which are said to have given it reason to believe that he might be engaging in fraudulent, unlawful or improper activity. As to causation and loss, Paypal explicitly invokes the limitation of liability provisions of clause 2.5 of the User Agreement; and it also appears to rely on the provisions of the User Agreement entitling it to terminate the Agreement at any time with immediate effect by the service of notice upon the user by e-mail.
Summary Judgment

64. When Paypal subsequently applied for summary judgment, only certain issues were chosen for that purpose. But they appear to have been clearly and carefully selected in order to chart a path which would ultimately lead to a dismissal of the claim, subject only to any issue as to the enforceability of the terms and conditions specifically relied upon. By my order of 15^th May 2009, I gave summary judgment on 14 separate issues in the terms set out in Schedule 1 to that order.
65. The first six issues dealt with the nature of the account opened by Mr Overy, the information which he provided at the time and the terms which were incorporated into the Agreement between the parties. I held that the account in question was a "Business Account", and that when the contract was formed, the information provided by Mr Overy to Paypal as to the purpose of his website was limited to an indication that he traded in the "cameras and photography sector" and that the name of the website which he had provided (whether it was www.winahome.org.uk or www.winthishome.org.uk) was one which was not then functional. I also held that the express terms of the contract between Mr Overy and Paypal were those set out in Paypal's standard User Agreement and the terms and policies incorporated into it by reference, including the Acceptable Use Policy.
66. The next seven issues resolved by the summary judgment application focused specifically upon the Gambling and Lottery Policy which was, itself, incorporated within and referred to by the Acceptable Use Policy. I held that, as a matter of construction of the relevant terms, Mr Overy was not entitled to engage Paypal's services in relation to any game of chance, or any game of skill open to internet users without geographic restriction (and therefore accessible to users in the United States of America), without having obtained the prior authorisation of Paypal and that Paypal reserved its right to deny such authorisation at its sole discretion. Furthermore, it was entitled to suspend its services to Mr Overy in the event of any violation of the terms of the Acceptable Use Policy.
67. Certain relevant factual issues were also determined by my order. I held that the competition was open to internet users without geographic restriction and, in particular, was accessible to users in the United States of America. Furthermore, it was a game of skill, if not a game of chance, for the purposes of the "gambling activities" provisions of Paypal's Acceptable Use Policy. However, Mr Overy had failed to obtain prior authorisation from Paypal before seeking to engage its services in relation to the competition. Accordingly, Paypal was at all material times entitled under the terms of the User Agreement to suspend its services to him for violation of those provisions and was not in breach of contract by doing so.
68. In the light of the resolution of these various issues, it was finally determined by the summary judgment order that any alleged breach of contract on Paypal's part was not the effective cause of any loss suffered by Mr Overy as a result of the suspension of Paypal's services. However, at each stage where any reference was made in the order to the express terms of the User Agreement or any of the policies incorporated within it, there was an express saving to the effect that the findings set out in the order were subject to any question as to the impact of the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999.
69. It will be seen, therefore, that the summary judgment application and the consequent order sought to cut a very narrow path through the tangle of issues raised on the face of the pleadings. It sought to establish a sufficient legal and factual basis upon which the suspension of Mr Overy's account could be justified essentially because of his failure to obtain prior authorisation before engaging its services in relation to a game of skill or a game of chance which was open to internet users without geographical restriction and, in particular, was accessible to user in the United States of America. But Paypal's right to suspend its services on these grounds was subject to any question as to the impact of the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999; and directions were to be given in due course for the trial of any further issues in relation to those matters.
The Order for Directions

70. Directions were subsequently given by order dated 19^th October 2009 on the basis of written submissions from the parties. By paragraph 2 of that order, I directed the filing and service of Points of Claim by Mr Overy in order to identify which of the various provisions of Paypal's terms and conditions, as set out in the following sub-paragraphs of the order, were alleged to fall foul of the 1977 Act or the 1999 Regulations, and to identify the relevant sections or regulations which were alleged to be applicable. The first six sub-paragraphs of paragraph 2 of the order referred specifically to clauses 2.5, 2.7 and 11 of the User Agreement, to the provisions of the Acceptable Use Policy stating that any violation might result in the temporary or permanent limitation of the customer's account, and to the provisions of the Gambling Policy defining gambling activities and requiring prior approval or authorisation by Paypal and the use of a programme capable of blocking access by users from the United States and other jurisdictions where it was illegal to operate a paid contest of skill.
71. Most of these provisions were ones which had been specifically taken into account at the time of my order of 15^th May 2009, granting summary judgment on Paypal's application. But the provisions of clause 2.5 of the User Agreement, limiting the extent of any liability on Paypal's part, had not been the subject of any explicit determination though it was, of course, specifically relied upon by Paypal in its Amended Defence; and it inevitably followed from my general finding as to the incorporation of Paypal's terms and conditions that it formed part of the contractual agreement between the parties.
72. Somewhat curiously, perhaps, the provisions of the gambling policy requiring a blocking programme in certain cases was not specifically raised in the list of issues on which summary judgment was granted, though the relevant provisions were expressly pleaded at paragraph 12.3 of the Defence. Nor was there any specific allegation in the Amended Defence that, as a matter of fact, Mr Overy did not have any blocking programme in place to prevent access by competitors based in the United States of America. It was, however, alleged that the website and competition were open and accessible to internet users and potential competitors without geographical restriction, including those based in the United States; and summary judgment was granted to that effect. So the point appears to have been resolved by necessary implication. As a matter of fact, I rather doubt if Mr Overy had any such programme in place, but if it were to be suggested at any later stage that this might be a material issue, I would be prepared to hear argument as to whether Mr Overy is precluded from raising or pursuing it in the light of the pleadings and the order for summary judgment.
73. But paragraph 2(7) of my directions order of 19^th October 2009 provided that Mr Overy's Points of Claim should identify any other relevant provisions of Paypal's written standard terms of business which he wished to challenge under the 1977 Act or the 1999 Regulations and which related either to the limitation of Paypal's liability in damages or to the order for summary judgment given in its favour on 15^th May 2009.
74. It is obvious that this sub-paragraph was not intended to give free reign to Mr Overy to challenge any other provision whatever of the User Agreement or the documents incorporated within it, whether or not the effect of the provision in question was in issue on the face of the pleadings. But, for better or for worse, the direction imposed a further restriction on the terms which could be the subject of any further challenge, since it permitted such a challenge to be made only where the term in question related either to the limitation of liability or to the order made on Paypal's summary judgment application.
75. Though all this may seem rather technical, the point may be an important one. It would obviously be quite inappropriate to consider the enforceability of any of Paypal's terms and conditions which were not specifically relied upon by Paypal in its Amended Defence, at least in the absence of any application by Paypal to make any further relevant amendments. But the wording adopted at paragraph 2(7) of my directions order of 19^th October 2009 imposed further limitations on the terms which Mr Overy was entitled to challenge at this stage of the proceedings. I was not asked to vary, amend or extend the limitations imposed by that paragraph. But, if and insofar as any of the terms identified by Mr Overy in his Points of Claim fall outside the scope of the directions, I will have to consider whether he should be permitted to raise any such challenge, having regard to the overriding objective set out in Part 1 of the Civil Procedure Rules 1998.
The Points of Claim

76. I can now turn to the Points of Claim themselves. At the time that they were prepared and served, Mr Overy was represented by solicitors, Lee & Priestley LLP of Leeds; and the document appears to have been professionally drafted. Each of the specific provisions referred to in the first six sub-paragraphs of paragraph 2 of my order of 19^th October 2009 are challenged under regulation 5(1) of the Unfair Terms in Consumer Contracts Regulations 1999 on the grounds that they caused a "significant imbalance" in the parties' rights and obligations arising under the contract, to the detriment of the consumer; and clause 2.5 of the User Agreement is also challenged under sections 2(2) and 3(2)(a) of the Unfair Contract Terms Act 1979 in that it seeks unreasonably to exclude or restrict liability for negligence and to exclude or restrict liability in respect of a breach of a contract term.
77. But, in addition, at paragraphs 5, 6, 7, 8 and 9 of the Points of Claim, Mr Overy seeks to challenge various other provisions of Paypal's terms and conditions, namely clauses 1 and 7.3 and certain further provisions of clause 11 of the User Agreement, clause 2 of the Closing Accounts and Limiting Account Access Policy and certain provisions of the Premier and Business Account Policy. Once again, the primary basis of his case in relation to each of these provisions is said to be regulation 5(1) of the 1999 Regulations, though clause 1 of the User Agreement is also alleged to fall foul of section 3(2)(a) of the 1977 Act.
78. All of these further provisions of the User Agreement and the policies incorporated within it are, in fact, expressly pleaded at paragraph 11 or paragraph 13 of the Amended Defence. Furthermore, they all, in various ways, permit Paypal to terminate, limit or suspend the operation of a user's account in various specified circumstances. Clauses 1 and 7.3 of the User Agreement allow termination on notice with immediate effect; and clause 7.3 also reserves the right to limit access to an account and all or any of its functions, but seemingly only in relation to any breach or attempted breach of the user's obligations. Clause 11 of the User Agreement provides that Paypal might limit access to an account and any or all of its functions or indefinitely suspend or close the account and refuse to provide any services to the user, not only if the user is in breach of the Agreement or the documents incorporated into it by reference (which was the extent of provision specifically referred to at paragraph 2(3) of my order of 19^th October 2009), but also if Paypal was unable to verify or authenticate any information provided to it by the user or if it believed that the user's account or activities posed "a significant credit or fraud risk" to Paypal.
79. Likewise, the Premier and Business Account Policy provided that access to the service might be suspended or terminated if Paypal had reason to believe that the user might be engaging in "fraudulent, unlawful or improper activity", including any violation of any terms and conditions relating to the premier or business service. Finally, clause 2 of the Closing Accounts and Limiting Account Access Policy stated that any of a number of events might lead to the account being limited, including complaints received regarding non-delivery of services, excessive levels of dispute, refusal to co-operate in any investigation and any breach of the User Agreement.
80. Clause 1 of the User Agreement is clearly not relied upon by Paypal in its Amended Defence to justify the suspension of the account, no doubt because it provides for termination with immediate effect on notice. The same would seem to apply to the termination provisions of clause 7.3 of the User Agreement. But both clauses might well be material on the issues of causation and quantum, even though not expressly pleaded in that context at paragraphs 30 to 34 of the Amended Defence, save for the general assertion at paragraph 32 that Paypal was at all material times contractually entitled to suspend or terminate its services.
81. On the other hand, it would appear that the power to limit access to the account under clause 7.3 of the User Agreement is relied upon in order to justify limiting access to the account and its functions, though the qualification on the exercise of such a power is expressed in fairly obscure terms and is not subject to any further allegation in the pleading itself. But clause 11 of the User Agreement, the provisions of the Premier and Business Account Policy and clause 2 of the Closing Accounts and Limiting Account Access Policy would all, on their face, justify a suspension or limitation of the account in the circumstances alleged at paragraphs 25 and 26 of the Amended Defence, even though they were not the subject of any determination on Paypal's application for summary judgment and were not individually picked out at paragraphs 2(1) to 2(6) of my directions order of 19^th October 2009.
Subsequent Pleadings

82. By my order of 19^th October 2009, I also gave directions for the service of Points of Defence and Points of Reply. The Points of Defence were required to set out the basis upon which Paypal disputed the challenges made in the Points of Claim and the facts upon which it relied. The Points of Reply similarly were required to state which of the factual legal and issues raised by the Points of Defence were admitted by Mr Overy and to set out any additional facts on which he intended to rely. Insofar as it is necessary to refer to these statements of case, I will do so at the appropriate point in my discussion of the issues. Directions were also given for disclosure, limited to the issues raised by these statements of case, and for the exchange of witness statements.
The Issues

83. No express objection was taken in the Points of Defence to any of the issues raised by Mr Overy on the grounds that they did not fall within the scope of my order of 19^th October 2009. On the contrary, so far as I can tell, Paypal pleaded fully to each of the contentions advanced on Mr Overy's behalf in relation to each of the provisions challenged in the Points of Claim. A certain ambivalence was, however, detectable in Mr Drake's skeleton argument on behalf of Paypal. At paragraph 2(5), he referred to the terms of the directions order of 19^th October 2009; and at paragraph 38, it was submitted that the starting point of any analysis would be to focus specifically on those clauses on which Paypal relied in its Amended Defence and on the basis of which it secured summary judgment. But he did not challenge the Points of Claim on the footing that they fell outside the scope of the directions given at paragraph 2 of my order of 19^th October 2009.
84. In his oral submissions, however, Mr Drake pointed out that some of the provisions which were the subject of attack in the Points of Claim were not directly relevant to the summary judgment which had been obtained by Paypal. If those provisions which were the subject of my summary judgment order were held to be unenforceable, Paypal would not be in a position to obtain final judgment on the basis of that order. But, as Mr Drake accepted in the course of his submissions, it would still be open to Paypal, at least in principle, to rely upon other provisions and other grounds in order to justify the suspension of Mr Overy's account, such as a reasonable suspicion of fraudulent activity. Accordingly, even if any of the powers of suspension or limitation which are challenged by Mr Overy in his Points of Claim are strictly outside the scope of my order of 19^th October 2009, it does not seem to me, as Mr Drake appeared to accept, that it would be consistent with efficient case management to refuse to let him pursue his challenge at this stage.
85. But Mr Drake nonetheless submitted that the challenge to clause 1 of the User Agreement was not within the scope of my directions; and he pointed out that Paypal did not, in fact, rely upon it to justify a suspension of Mr Overy's account. But he accepted that Paypal was prepared to meet any attack on these provisions; and he also accepted that it would be open to the court to resolve any issue as to its enforceability at this stage. In any event, as I have already pointed out, it would seem that any right to terminate at will might well be relevant to the issues of causation and quantum and, at least arguably, within the scope of the directions which I gave on 19^th October 2009. It seems to me, therefore, that I should, if necessary, resolve any issue in relation to clause 1 of the User Agreement at this stage.
86. Accordingly, I see no reason to exclude from consideration any of the terms challenged by Mr Overy in his Points of Claim. At paragraph 12 of his opening written submissions, Mr Drake helpfully and, I think, accurately sought to summarise and classify the terms in question in four broad categories. These were:

(1) Terms which made the relationship terminable at will by either party on notice. These included clauses 1 and 7.3 of the User Agreement, both of which were challenged by Mr Overy. But Mr Drake also pointed out that clause 10, which was not challenged and which permits the customer to terminate at will, may also be relevant to the issues raised at this stage of the proceedings.

(2) Terms which imposed non-onerous positive obligations on the customer. The principal terms of this kind were those arising under the Acceptable Use Policy and the Gambling and Lottery Policy which required customers intending to operate certain games of chance or skill to seek prior authorisation from Paypal. But Mr Drake also placed in this category those provisions of clause 7.2 of the User Agreement which required any information provided by the customer in accordance with clause 7.1 not to be "false, inaccurate or misleading". Clause 7.2 was not, in fact, the subject of any direct challenge by Mr Overy.

(3) Terms which permitted Paypal to suspend or terminate the provision of its services for cause, whether that cause was to be found in a breach of contract on the part of its customer or the existence of risk factors giving Paypal reason to believe that he might be engaging in fraudulent, unlawful or improper activity. The relevant provisions were to be found at clauses 2.7 and 11 of the Acceptable Use Policy, clauses 4 and 6 of the Premier and Business Account Policy and clause 2 of the Closing Accounts and Limiting Account Access Policy.

(4) Terms which sought to limit any liability on Paypal's part. Mr Drake referred specifically to clause 2.5 of the User Agreement; but, as I have pointed out earlier in this judgment, the provisions of clause 1 and, perhaps, clause 7.3, might also have some bearing on the issues of causation and quantum.

87. All of these terms are challenged by Mr Overy under regulation 5(1) of the Unfair Terms in Consumer Contracts Regulations 1999. Clauses 1 and 2.5 of the User Agreement are also challenged under sections 2(2) and 3(2)(a) of the Unfair Contract Terms Act 1977.
PART IV
The Unfair Terms in Consumer Contracts Regulations 1999

88. The Unfair Terms in Consumer Contracts Regulations 1999 replaced the Unfair Terms in Consumer Contracts Regulations 1994 with effect from 1^st October 1999. Both sets of Regulations were intended to implement Council Directive 93/13/EEC; and the alterations made in 1999 were intended to reflect more closely the wording of the Directive.
89. By regulation 4(1), the Regulations apply "in relation to unfair terms in contracts concluded between a seller or a supplier and a consumer". The expression "consumer" is defined at regulation 3(1) as meaning any natural person who, in contracts covered by the Regulations, "is acting for purposes which are outside his trade, business or profession". Whether Mr Overy was so acting in relation to his contract with Paypal is very much an issue between the parties. The expression "seller or supplier" is similarly defined as meaning any natural or legal person who, in relation to such contracts, "is acting for purposes relating to his trade, business or profession...." Unsurprisingly, it is accepted that Paypal was a seller or supplier for these purposes.
90. Regulation 5 seeks to identify the circumstances in which a contractual term in a contract with a consumer is to be regarded as unfair for the purposes of the Regulations. Regulation 5(1), upon which Mr Overy principally relies, is in these terms:

"A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer."

91. In the present case it is, of course, accepted by Paypal that the terms upon which it relies had not been individually negotiated. Accordingly, it is unnecessary to consider the further provisions at paragraphs (2), (3) and (4) of regulation 5 which make various ancillary provisions in relation to those matters. But regulation 5(5) should be noted. It provides that Schedule 2 to the Regulations contains what is stated to be "an indicative and non-exhaustive list of the terms which may be regarded as unfair".
92. Regulation 6 provides as follows:

"(1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.

(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate

(a) to the definition of the main subject matter of the contract, or

(b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange."

93. Regulation 7 deals with written contracts. In its material parts it provides as follows:

"(1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language.

(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail."

94. Regulation 8 sets out the consequences of a finding that a term is unfair. It is in these terms:

"(1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.

(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term."

95. I should perhaps also note regulation 15(3) which provides that the Director General of Fair Trading may arrange for the dissemination of such information and advice concerning the operation of the Regulations as might appear to him to be expedient to give to the public and to all persons likely to be affected by the Regulations. This may well be the legislative warrant for the Guidance issued by the Office of Fair Trading to which Mr Drake drew my attention in the course of submissions.
96. I do not propose to go through the indicative list of terms which may be regarded as unfair and which are set out in Schedule 2 to the Regulations. I will refer to any of them which may be relevant in my discussion of the specific terms which are challenged by Mr Overy.
PART V
Was Mr Overy Acting as a Consumer?

97. The first and fundamental issue between the parties is whether Mr Overy can claim the protection offered to consumers by these Regulations. It is Paypal's case that he did not contract as a consumer with the result that the Regulations do not apply to the contract between him and Paypal. No question of unfairness or unenforceability under the Regulations can therefore arise. It is only if this issue is resolved in Mr Overy's favour that it will be necessary to embark upon the assessment process required by regulations 5(1) and 6 of the 1999 Regulations.
98. The arguments marshalled on behalf of Paypal in support of its contention that the Regulations do not apply to the Agreement between itself and Mr Overy are formidable. First of all, of course, the account for which Mr Overy applied on 22^nd January 2009 was a Business Account with a Website Payments Pro facility. Though his application for the latter facility was declined, he succeeded in opening a Business Account. He could, had he wished to do so, have applied for, and no doubt obtained, a Personal Account. But he chose not to do so. The very name of the account, on its face, indicates that it was opened for business purposes and is difficult to reconcile with any suggestion that Mr Overy was contracting with Paypal as a consumer. I note, however, that, in some documents, it is referred to as a "Merchant Account" which might not, to a layman, be quite so strongly suggestive of an intention to use the account for business purposes.
99. But regardless of the nomenclature adopted by Paypal to describe the account, it is quite clear that a major distinction between a Business Account and a Personal Account was that the former included a facility to receive payments by debit or credit card, though a modest transactional charge was imposed by Paypal on each such receipt.
100. Furthermore, during the course of the application process through which Mr Overy had to navigate in order to open his account, various items of information had to be provided which were plainly of a business nature. In the witness statement which he made for the present hearing, Mr Theodossiou set out the various steps which a potential user in Mr Overy's position would have had to take in order to open a Business Account and produced copies of the various electronic documents which should have been displayed during the process. On the very first page, the applicant would have been told that he needed to provide "general business information" and "primary business contact details" as well as banking information. He would also have been informed that, after he had completed the sign-up process for the Website Payments Pro facility, the applicant could begin configuring and managing his services with Paypal Manager, which was described as the user's "primary on-line business and service management portal".
101. The applicant would then be directed to a further page on which he had to enter an e-mail address and password, together with the answers to certain security questions. On completing this page and clicking the "continue" button, he would be taken to a further page where he would be asked to provide further "business information" and "business owner contact information". Once he had done so, by clicking once again on the "continue" button, he would be taken to a page headed "Internet Merchant Account Application". On entering the requisite further information at this stage, the applicant could either save what he had so far done and exit the process or could, once again, continue with the application. If he saved and exited, he could return to the site at a later stage without having to reenter all the information which he had provided up to that point.
102. But, if and when he chose to continue, he would be directed to a page summarising the information which he had so far provided and asking him to review and, if necessary, edit it. He was also specifically referred to, amongst other things, the Paypal User Agreement and could not proceed without confirming that he had read and agreed to its terms, including the policies incorporated within it. Mr Theodossiou was able to produce what he described as a screen shot taken from Paypal's electronic records which appear to show, amongst other things, that Mr Overy had accepted the User Agreement shortly after 8.37pm on 22^nd January 2007.
103. Mr Theodossiou also produced a screen shot outlining the exact information which Mr Overy had entered when he opened his account. Whilst Mr Overy was critical of the limited disclosure provided by Paypal and was, I think, sceptical of its authenticity or probative value, there does not, in fact, seem to be any serious dispute about the information which he provided. He himself produced an original printout of the information page relating to his account as at 9^th November 2007. So far as I can tell, there is no difference of significance between the information recorded in this printout and that embodied in the screen shot produced by Mr Theodossiou. The only point which I noted was that in the screen shot produced by Mr Theodossiou to show that Mr Overy must have signified his acceptance of the User Agreement and the policies therein referred to, the website address recorded at that time was the one using the expression "winahome", rather than the version with the expression "winthishome" which appears in Mr Overy's printout. So it seems likely that Mr Overy edited the original information at a later date in order to change the name of his website.
104. The information provided by Mr Overy included his business name, which he gave as Kalfstudios. He also used a drop down menu to specify the category into which his business fell, together with the appropriate subcategory. The description which he chose was "cameras and photography", with the sub-category "film". It should perhaps be noted that, according to Mr Theodossiou there was a further category which he could have chosen from the menu entitled simply "other". Mr Overy also stated that the average transaction price was between £50 and £100 and that his average monthly trading volume was between £25,000 and £100,000. His "sales venue" was stated to be his own website; and his estimated percentage of annual revenue from on-line sales was 75% to 100%. He also provided details of a business website and a "customer service" e-mail address incorporating the expression "winahome" or possibly "winthishome", though he also gave a kalfstudios e-mail address.
105. For my part, I find it difficult to see how any objective observer considering these electronic exchanges could reach any conclusion other than that the resulting contract was made between two business entities. Though Mr Overy was plainly acting as a sole trader, the information which he provided seemed to show unequivocally that he wished to make use of the account for the purposes of a business and not as a personal and private account; and the account which he opened had, and was no doubt intended to have, the facility to receive payments by debit and credit cards in relation to transactions of a clearly commercial nature. Indeed, he specifically identified the nature of his business, namely cameras and photography, and a business name, Kalfstudios, which was entirely consistent with the business of that kind.
106. How can it be said, therefore, that Mr Overy was acting for purposes outside his trade business or profession when the contract was concluded between himself and Paypal? Mr Overy's answer to this question was not easy to discern. As he himself acknowledged, he had no legal skills or experience and, I think, found it difficult to engage in legal analysis of the kind which was required in this case. Furthermore, the Points of Claim prepared by his then solicitors for the purposes of the trial of the present issues do not address this particular point.
107. But the issue was clearly raised by Paypal in its Points of Defence. At paragraph 19 it is pleaded that the purpose for which it was contemplated that the services associated with a Business Account would be used was the facilitation of business; and reference is made to the nature of the information which he had provided during the course of signing up for the account. Further or alternatively, at paragraph 20, it is alleged that Mr Overy had behaved in such a way as to give Paypal the "legitimate impression" that he was acting for the purposes of his business and that he was therefore disentitled from relying on the Unfair Terms in Consumer Contracts Regulations 1999.
108. However, at paragraph 21, the Points of Defence address the issue on the footing that it would or might be be Mr Overy's case that the purpose for which he opened the account was to enable him to receive entry fees for his competition. That assumption is explicitly stated to be the basis of the further contentions thereinafter set out. One might have thought that this assumption was well-founded in all the circumstances of the case. But Mr Overy seemed unwilling to adopt it. At pages 2 and 3 of his Points of Reply (which appear to have been drafted without any form of legal assistance), he dealt with some of the allegations made by Paypal at paragraphs 19 and 21 of its Points of Defence. I think I should quote the relevant passage in full. It is in these terms:

"The Claimant had traded as Kalf Studios since November 1990 and had been using Colab's website. They displayed Kalf Studio's photographs, took orders for them, collected the money, printed and posted the photographs then remitted the balance less their commission. It was only when they went into liquidation that the Claimant looked for alternative means to service his business. Paypal insisted on seeing a website before they would open an account so the Claimant produced a dummy Kalf Studios website that was not yet active due to it having to be redesigned to include Paypal's payment system. This was approved by Paypal as was the "Review your information" page. The Claimant's actual purpose in opening his Business Account.......is disputed. The Claimant will produce a hard copy of the Kalf Studios website that was in use until he retired in 2009."

109. In addition, at page 5 of the skeleton argument which he prepared for the trial of the present issues (and which was, once again, it would seem, prepared without any legal assistance), he repeated much the same point in these laconic terms:

"The Claimant's actual purpose in opening his business account

The Claimant was trading from 1997 as Kalf Studios until he retired in 2009."

110. He also referred to five pages of documents which he annexed to his skeleton argument, all of which it was accepted could be considered by the court without prejudice to any arguments as to relevance or weight. The particular documents which Mr Overy wished to rely upon in this context comprised five pages of printouts from the Kalf Studios website which he appears to have printed off on 8^th January 2008.
111. In the course of his oral evidence, under cross-examination, Mr Overy confirmed that he had intended to use his Kalf Studios website for selling professionally produced DVDs. This appears to have been the website to which he referred in his Points of Reply. He added the observation, however, that it was not simply for DVDs though he did not elaborate on the point. He explained that he had previously used the Colab website until that concern became insolvent, which he thought would have been some time in 2006. But when asked as to when he produced the dummy website which he referred to in the same passage in his Points of Reply, he said that he could not now remember whether this was before or after the account was opened. Indeed, he could not recall whether the dummy website was similar to that shown in the printouts annexed to his skeleton argument, adding, however, that the printouts showed it in a much more developed form. Subsequently, in response to a question from the bench, he said that the printouts were from a later, revised version of his website which he had produced when he realised he had to go back to work, presumably as a photographer. He could not recall if the dummy website to which he referred was a rudimentary version of this photographic website or whether it referred to the competition which he was promoting.
112. But, in the course of his closing submissions, Mr Overy made some further observations about these website pages. He said that he had printed them out in January 2008 since he wanted to see what they looked like as he was going to retire. This particular observation was, I think, prompted by the fact that the final page of the printouts referred to various wedding fairs in January and March 2007. But no clear or obvious explanation was given as to why this might have been incorporated in a revised version produced many months later. Nonetheless, he commented that, though he could not recall which website he had shown to Paypal, he did not think that it could have been the Kalf Studios website, as he had not produced it, or at least the version annexed to his skeleton argument, until early 2008.
113. He went on to explain that he had been in business for many years as a professional photographer and videographer before the date on which he had opened the Paypal account. Indeed, in the course of his application for the account, he stated that he had been in business since 1990. But he sought to explain this by saying that he had simply provided the details of his business in order to demonstrate that he was creditworthy. Indeed, he went on to assert that he had never intended to sell photographs or videos via his Paypal account; and he pointed out that he had never been asked, during the course of the application process, what he was intending to use the facility for. He also explained that the title of the website which he provided during the course of his application was one using the expression "winthishome" or, perhaps "winahome". But, as I have already noted, it seems that he also provided a Kalf Studios e-mail address.
114. I should, however, also bear in mind that the evidence appears to suggest that, as a matter of fact, Mr Overy's Paypal account was used solely to receive entry fees for his competition. It will be recalled that, according to Mr Overy, apart from a test payment, the first occasion on which any payment was made into the account was on 30^th March 2007; and this payment was clearly an entry fee for his competition. It seems highly likely that all the monies which were subsequently received into the account before its suspension were of a similar kind.
115. I gained the clear impression that, during cross-examination and, more particularly, in his closing submissions, Mr Overy sought to move away from the really quite unequivocal position which he had adopted in his Points of Reply and in his skeleton argument. Nothing of any relevance appears from the very short witness statement dated 29^th August 2011 which he made for the purposes of the hearing. As a matter of fact, I think it is highly likely that he had developed at least a rudimentary version of his Kalf Studios website much earlier than the beginning of 2008. It would seem that he had lost the Colab facility before the end of 2006; and the printout which he produced referred to events in January and March 2007. That is entirely consistent with what he had pleaded in his Points of Reply, though I note that these do not appear to have been verified by a statement of truth. Notwithstanding this irregularity, any suggestion that he did not have such a website at the time when he opened the account or, at least, when he was asked by Paypal to provide suitable details, is strictly not open to Mr Overy on the face of the pleadings. But, in any event, as I have previously pointed out, the limited evidence which I have received seems to me to be much more consistent with his pleaded case than contrary to it.
116. Likewise, Mr Overy's pleaded case is that his purpose in opening the account was not that which had been assumed by Paypal for the purposes of paragraph 21 of its Points of Defence. On the contrary, in this specific context, his Points of Reply stated that, as a result of the liquidation of Colab, he was looking "for alternative means to service his business", referring once again, to the Kalf Studios website. Yet further, the first occasion of which he specifically asserted that he never intended to sell photographs or videos via Paypal was in his closing submissions.
117. For my part, in the light of the information which he had provided to Paypal during the course of the signing on process, I find it difficult to accept that he had no intention whatever of using the account for the purposes of his existing photography and videography business, once the Colab facility had ceased to be available to him. On the contrary, it seems to me that this must have been at least one of the purposes for which he opened the account. On the other hand, however, I think it is highly probable that, as a matter of fact, a major purpose in opening the account was to receive entry fees for his competition.
118. That is entirely consistent with the name of the website which he provided during the application process, whether that involved the expression "winthishome" or "winahome", with the very great financial expectations which he had in connection with the competition and with the way in which the account was subsequently operated. Furthermore, I would not wish a litigant in person to be prevented from putting forward such a case on what might be regarded as a highly technical procedural point. I bear in mind that Paypal itself was fully prepared to meet such a case, as is apparent from the references which I have made to its Points of Defence. Accordingly, I will proceed to analyse the competing arguments on that factual basis.
119. It was, I think, Mr Overy's argument that his actual trade or profession was that of a photographer and videographer and that his competition was not connected with this business. As he put it in argument, he was not an estate agent or speculator in property. That is no doubt correct. But, at least in English domestic law, issues as to whether a contract has been formed, what are its terms and how those terms are to be construed are normally analysed in objective, rather than subjective terms. It is how the parties have expressed their intentions in communications passing between them which determines such issues and not their unexpressed, subjective intent.
120. In the present case, as Mr Overy strongly emphasised, there was no human intervention on behalf of Paypal during any part of the process which led to the opening of his account. From its standpoint, the process was wholly automated and pre-programmed. But it is not and could not, in my judgment, be contended that this meant that no contract had been concluded on the basis of the information which he provided during the course of the process. Indeed, any such issue would have been effectively determined by the order which I made on Paypal's summary judgment application.
121. So, the position is no different from what would have been the case if the contract had been concluded by an exchange of correspondence in the like terms between Mr Overy and someone duly authorised to conduct such correspondence and to enter into agreements on behalf of Paypal. On the face of that correspondence, the only reasonable inference would have been that Mr Overy was acting in a business capacity in seeking to open a Business Account for the purposes of his photography business. Even if, for example, he had simply intended to use it as if it were a Personal Account, for purposes unconnected with his business, and without making use of the facility to receive debit and card payments, such an unexpressed intention could not affect what seems to me to be the only reasonable interpretation of the relevant exchanges.
122. But, of course, it is necessary to go back to the wording of the Regulations; and, since the Regulations are intended to implement a European Directive, to consider any relevant English or Community authority on the point. It will be recalled that the Regulations apply to unfair terms in "contracts concluded between a seller or supplier and a consumer"; and that the expression "consumer" for these purposes means any natural person who, in contracts covered by the Regulations, is "acting for purposes which are outside his trade, business or profession." These words precisely reflect the relevant provisions of Articles 1 and 2 of the Directive.
123. The fundamental question, as it seems to me, is whether the wording used to define the word "consumer" for these purposes is such as to permit or require a wider enquiry than would be involved simply in scrutinising the exchanges which led to the formation of the contract in question in accordance with the well-established principles of English law to which I have referred.
124. There are two aspects of the wording which might lead to such a conclusion. Firstly, the definition refers to the "purposes" for which the person is acting. The purpose, intention or motive underlying a person's decision to enter into contractual relations does not always appear on the face of the contract itself. So I would accept that the use of the word "purposes" means that the court must not necessarily focus solely on the nature and terms of the contract in deciding whether a party was acting as a consumer.
125. But I would be extremely reluctant, unless constrained by authority, to hold that the relevant purposes could be derived from the subjective intentions of one of the parties where those intentions had never been expressed or communicated to the other party or parties. Any seller or supplier must surely be entitled to know whether the person with whom he is contracting is, or is not, doing so as a consumer, and whether, therefore, the contract is, or is not, subject to the Unfair Terms in Consumer Contracts Regulations 1999. So, subject to any relevant authority or guidance from domestic or Community jurisprudence, I would take the view that the "purposes" for which a party is acting, in this context, must refer to purposes which can fairly and properly be inferred from the oral or written exchanges passing between the parties in connection with the contract in question.
126. The other part of the definition which might require further consideration is that which refers to purposes which are "outside his trade, business or profession." A superficial and literal interpretation of this expression might suggest that it presupposes that a person has only one trade, business or profession. But it is almost unnecessary to observe that, in modern societies, a person may be involved in many overlapping business activities, so that it would be impossible, in many cases, to categorise his calling as, say, a butcher, baker or candlestick-maker in the manner of the nursery rhyme. So, in the absence of any authority to the contrary, I would interpret the definition as applying where an individual is acting for purposes outside the scope of any of his business activities.
127. But these provisions of the Directive and the Regulations are not free of authority. Mr Drake referred me to several English European cases and to the commentary in Chitty on Contracts 30^th edition (2008) at paragraph 15029 and 15-030.
128. So far as I am aware, the European Court of Justice has not had occasion to consider the meaning of the expression "consumer" for the purposes of Council Directive 93/13/EEC of 5^th April 1993, save in Cape Snc v Idealservice Srl [2001] E.C.R. I-09049, which turned on the narrow question as to whether only a natural person could contract as a "consumer" for the purposes of the Directive. But there is more extensive jurisprudence on similar expressions in other European legislation, most particularly the Brussels Convention, now largely re-enacted in the form of Council Regulation (EC) No. 44/2001 ("the Judgment Regulation"). These are, of course, primarily concerned to allocate jurisdiction in civil and commercial matters. The general principle embodied in the Judgment Regulation is that a person is to be sued in the courts of the state in which he is domiciled. There are, however, a limited number of exceptions which derogate from this general principle. One of these is to be found in Section 4 of the Regulation which, by Article 16, allows a "consumer" to bring proceedings against another party in relation to certain types of contract either in the courts of the state in which he is domiciled or those of the state in which the other party is domiciled. On the other hand, where proceedings are brought against a consumer by the other party to the contract, such proceedings may only be brought in the courts of the state in which the consumer is domiciled.
129. The application of these provisions, of course, will depend on whether the party in question can properly be regarded as a "consumer". By Article 15 paragraph 1, it is provided that: "In matters relating to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined by this Section.." It is unnecessary to consider the further jurisdictional criteria which are thereinafter set out.
130. It will be appreciated that the wording adopted by Article 15 of the Judgment Regulation is very similar to that used to define the expression "consumer" in regulation 3(1) of the 1999 Regulations which, it will be recalled, defines the expression as meaning "any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession." For my part, I doubt if any significance is to be placed upon the use of the words "can be regarded as" in Article 15, by comparison with the expression "is acting" in the Regulation. That was certainly the view taken by Longmore J (as he then was) in Standard Bank London Limited v Apostolakis (No. 1) [2002] CLC 933 at 936G.
131. The principal authority upon which Mr Drake sought to rely was a decision on the meaning and application of the provisions of the Brussels Convention which are now to be found in Articles 15 and 16 of the Judgment Regulation. The case in question was Gruber v BayWa AG C- 464-01; [2006] QB 204. The dispute arose out of a contract for the supply of building materials by the defendant to the claimant. The supplier was based in Germany; but the buyer was a farmer domiciled in Austria. The building materials in question were tiles which were intended to be used to re-roof the farmhouse, which was used partly as a private dwelling-house by the claimant and his family and partly for farming purposes. The claimant alleged that the tiles were defective and brought a claim for damages in the Austrian courts. The defendant challenged the jurisdiction of the Austrian courts and the issue was ultimately referred to the Court of Justice. A preliminary ruling was sought on six questions in all; but it is only the first three which are material. These were as follows:

"(1) Where the purposes of a contract are partly private, does the status of 'consumer' for the purposes of article 13 of the Convention depend on which of the private and the trade or professional purposes is predominant, and what criteria are to be applied in determining which of the private and the trade or professional purposes predominates?

(2) Does the determination of the purpose depend on the circumstances which could be objectively ascertained by the other party to the contract with the consumer?

(3) In case of doubt, is a contract which may be attributed both to private and to trade or professional activity to be regarded as a consumer contract?"

132. In his Opinion for the court, Advocate General Jacobs briefly examined the history and derivation of the words in question, pointing out that they ultimately derived from the provisions of Article 5 of the Rome Convention on the Law applicable to Contractual Obligations. At paragraph 24 of his Opinion, he referred to a passage in the Giuliano- Lagarde report which was in these terms:

"The definition of consumer contracts corresponds to that contained in article 13 of the Convention on jurisdiction and enforcement of judgments. It should be interpreted in the light of its purpose which is to protect the weaker party and in accordance with other international instruments for the same purpose such as the Judgments Convention. Thus.. the rule does not apply to contracts made by traders, manufacturers or persons in the exercise of a profession (doctors, for example) who buy equipment or obtain services for that trade or profession. If such a person acts partly within, partly outside his trade or profession the situation only falls within the scope of article 5 if he acts primarily outside his trade or profession. Where the receiver of goods or services or credit in fact acted primarily outside his trade or profession but the other party did not know this and, taking all the circumstances into account should not reasonably have known it, the situation falls outside the scope of article 5. Thus if the receiver of goods or services holds himself out as a professional, eg by ordering goods which might well be used in his trade or profession on his professional paper the good faith of the other party is protected and the case will not be governed by article 5."

133. That passage would suggest a primary purpose test; but it would also provide some support for an objective approach to the question whether the party in question was acting as a consumer.
134. The Advocate General continued, at paragraph 27, to point out that one reason for not interpreting "consumer" too broadly in the jurisdictional context was because what are now Articles 15 and 16 of the Judgment Regulation constitute a derogation from the general principle that a party should be sued in the courts in which he is domiciled. That, he appeared to suggest, was at least one of the reasons why the Court of Justice had taken a fairly narrow view of the words in question in the earlier case of Benincasa v Dentalkit Srl C-269/95; [1997] ECR I-3767. I will have a little more to say about this decision at a later stage.
135. The Advocate General then noted that the general consensus of the submissions of the interested parties was that the nature of any relevant contract was to be determined by its predominant ingredient. But he also identified two possible approaches in the event of any doubt. One was to treat it as a consumer contract because of the concern for consumer protection; whereas the other was that any such contract should be regarded as falling outside the relevant provisions because those provisions involved a derogation from the general principle of jurisdiction.
136. He also recorded differing views as to the circumstances which might be taken into account in order to determine whether the purpose was one which could be regarded as being outside the individual's trade or profession. Some submissions were to the effect that the customer's actual intention should be decisive; whereas others contended that the issue should be resolved by a consideration of the terms of the contract itself or a range of other objective factors, such as the use of business stationery, the nature of the goods or services and their relationship with the customer's business, the quantity of goods ordered or the known socioeconomic context. Some considered that the state of the supplier's knowledge was irrelevant whilst others took the contrary view.
137. The Advocate General then set out his assessment of the relevant issues. At paragraph 34, he emphasised that it was the contract which was to be classified, not the customer. He put it in this way:

"There is no personal status of consumer or non-consumer; what counts is the capacity in which the customer was acting in entering into the particular contract."

138. The essential reasoning and conclusions of the Advocate General are to be found in paragraphs 41 to 51 which are as follows:

"41. In as much as a contract is entered into for the customer's trade or professional purposes, he must be deemed to be on an equal footing with the supplier. And that position of equality - his deemed business and legal experience, and resources vis-a-vis those of the supplier - cannot be undermined by the fact that the contract also serves private purposes. That must remain true whatever the relative importance of the two types of purpose, as long as they are both significant.

42. Consequently, a person who concludes a contract for purposes which are in part within and in part outside his trade or profession cannot be in a position to rely on the exceptional protection afforded by articles 13 et seq of the Brussels Convention unless the trade or professional purpose is insignificant.

43. That conclusion is not only impelled by the policy considerations set out in the Schlosser and Giuliano-Lagarde reports and imposed by the logic underlying the protection inquestion. It also flows from the court's case law to the effect that, as a derogation from the general rule and in particular as a derogation conferring jurisdiction on the courts of the claimant's domicile, those provisions should be interpreted strictly and not extended to persons for whom the protection is not justified.

44. The national court also asks whether the extent to which the contract serves the customer's private and trade or professional purposes, respectively, must be objectively ascertainable by the supplier.

45. In the light of the view I have reached above, the court before which proceedings are brought must determine, in the event of a disagreement, whether the contract served to any significant extent a purpose within the customer's trade or professional sphere.

46. That determination must be made on the basis of the evidence, and I agree with the view put forward in a number of the submissions to this court that the whole context is relevant.

47. If the conclusion from that evidence is that the contract served to a significant extent a purpose within the customer's trade or professional sphere, then articles 13 et seq cannot apply, and it is immaterial whether the purpose in question was objectively ascertainable by the supplier or not.

48. If the conclusion is that there was no significant trade or professional purpose, the contract should be classified as a consumer contract. In that event, difficulty would arise only if, despite that finding, the supplier had nonetheless had reasonable cause to believe from the surrounding circumstances that the contract was for a purpose within the customer's trade or professional sphere.

49. In such a situation, it seems to me that the consumer cannot be denied the protection of articles 13 et seq of the Convention unless he behaved in such a way as to lead to the obvious conclusion that he was acting in his trade or professional capacity and can thus be regarded as having held himself out to be contracting in the course of business.

50. While the consumer contract provisions must not be construed so as to extend the protection they afford to those for whom it is not justified, they must also not be construed so as to deny the protection to those for whom it is intended. That protection is undoubtedly intended for any person who enters into a contract solely or overwhelmingly for purposes which can be regarded as outside his trade or profession. The importance of the aim in question is given further weight by article 153 EC, which pursues the same overall objective of ensuring a high level of consumer protection.

51. If however a consumer holds himself out as acting in his trade or professional capacity - for example, by corresponding on business stationery, having goods delivered to his business address or mentioning the possibility of recovering VAT - and his supplier is in good faith unaware of any grounds for believing otherwise, the consumer may legitimately be regarded as having foregone his right to that protection, as is suggested in the Giuliano-Lagarde report."

139. These paragraphs support the following propositions: Firstly, the court must determine, as a matter of fact, the purpose or purposes for which the customer entered into the contract, and must do so in the light of all the surrounding circumstances; secondly, if one of the purposes of the contract is intended to serve the customer's trade or professional needs to any significant degree, it will not fall within the relevant provisions of the Judgment Regulation; thirdly, if, on the other hand, there is no significant trade or professional purpose, the contract will fall within those provisions even if the supplier had reasonable cause to believe that it was entered into for a trade or professional purpose; fourthly, however, the customer cannot bring himself within the protection afforded by the relevant provisions of the Judgment Regulation if he has acted in such a way as to lead to the obvious conclusion that he was acting in his trade or professional capacity. It should be borne in mind that the views expressed by the Advocate General on these matters were based upon general considerations of the kind set out at paragraph 43 of his Opinion and not solely on the footing that the relevant provisions constituted a derogation from the general principle that a person should normally be sued in the courts of his domicile.
140. The advocate general's overall conclusions on the issues before the court were set out at paragraph 76 of his Opinion. He submitted that the Court should hold as follows: firstly, a person who concludes a contract for purposes which are in part within and in part outside his trade or profession may not rely on the rule of jurisdiction in Articles 13 et seq of the Brussels Convention unless the trade or professional purpose is insignificant; and, secondly, that, in order to determine whether a person had concluded a contract for a purpose which could be regarded as outside his trade or profession within the meaning of those Articles, it was unnecessary to have regard to circumstances which could be objectively ascertained by the other party to the contract unless the consumer held himself out as acting in his trade or professional capacity and the other party was in good faith unaware of any grounds for believing otherwise.
141. In its judgment, the court came to the same conclusions, in substance, as the Advocate General. Its formal ruling is set out at the end of the judgment in these terms:

"(i) a person who concludes a contract relating to goods intended for purposes which are in part within and in part outside his trade or profession may not rely on the special rules of jurisdiction laid down in articles 13-15 of the Convention, unless the trade or professional purpose is so limited as to be negligible in the overall context of the supply, the fact that the private element is predominant being irrelevant in that respect;

(ii) it is for the court seised to decide whether the contract at issue was concluded in order to satisfy, to a non-negligible extent, needs of the business of the person concerned or whether, on the contrary, the trade or professional purpose was negligible;

(iii) to that end, that court must take account of all the relevant factual evidence objectively contained in the file; on the other hand, it must not take account of facts or circumstances of which the other party to the contract may have been aware when the contract was concluded, unless the person who claims the capacity of consumer behaved in such a way as to give the other party to the contract the legitimate impression that he was acting for the purposes of his business."

142. It is helpful, however, to consider some of the paragraphs in which the Court set out its reasoning. At paragraph 31, it emphasised that the concept of "consumer" for the purposes of the Brussels Convention and the Judgments Regulation must be interpreted "independently, by reference principally to the scheme and purpose of the Convention", in order to ensure uniform application in all of the contracting states. At paragraphs 32 and 33 it observed that particular provisions favouring a consumer constituted a derogation from the general jurisdictional rule under the Convention and should, therefore, be strictly interpreted. However, at paragraph 34, it also pointed out that the particular rule favouring a consumer was intended to ensure adequate protection for the party who was regarded to be economically weaker and less experienced in legal matters than the other.
143. Then, at paragraph 36, the Court referred to the judgment in the case of Benincasa which also dealt with the concept of a "consumer" for the purposes of Articles 13 and 14 of the Brussels Convention. I will refer to paragraph 16 to 18 of the judgment in Benincasa a little later in this judgment.
144. But the essence of the Court's analysis is to be found at paragraphs 45 to 53 of its judgment which I set out below:

"45. An interpretation which denies the capacity of consumer, within the meaning of the first paragraph of article 13 of the Brussels Convention, if the link between the purpose for which the goods and services are used and the trade or profession of the person concerned is not negligible, is also that which is most consistent with the requirements of legal certainty and the requirement that a potential defendant should be able to know in advance the court before which he may be sued, which constitute the foundation of that Convention: see in particular Besix, paras 24-26.

46. Having regard to the normal rules on the burden of proof, it is for the person wishing to rely on articles 13-15 to show that in a contract with the dual purpose the business use is only negligible, the opponent being entitled to adduce evidence to the contrary.

47. In the light of the evidence which has thus been submitted to it, it is therefore for the court seised to decide whether the contract was intended, to a non-negligible extent, to meet the needs of the trade or profession of the person concerned or whether, on the contrary, the business use was merely negligible. For that purpose, the national court should take into consideration not only the content, nature and purpose of the contract, but also the objective circumstances in which it was concluded.

48. Finally, as regards the national court's question as to whether it is necessary for the party to the contract other than the supposed consumer to have been aware of the purpose which the contract was concluded and the circumstances in which it was concluded, it must be noted that, in order to facilitate as much as possible both the taking and the evaluation of the evidence, it is necessary for the court seised to base its decision mainly on the evidence which appears, de facto, in the file.

49. If that evidence is sufficient to enable the court to conclude that the contract served to a non-negligible extent the business needs of the person concerned, articles 13-15 of the Convention cannot be applied in any event because of the status of those provisions as exceptions within the scheme introduced by the Convention. There is therefore no need to determine whether the other party to the contract could have been aware of the business purpose.

50. If, on the other hand, the objective evidence in the file is not sufficient to demonstrate that the supply in respect to which a contract with a dual purpose was concluded had a non- negligible business purpose, that contract should, in principle, be regarded as having been concluded by a consumer within the meaning of articles 13-15, in order not to deprive those provisions of their effectiveness.

51. However, having regard to the fact that the protective scheme put in place by articles 13-15 represents a derogation, the court seised must in that case also determine whether the other party to the contract could reasonably have been unaware of the private purpose of the supply because the supposed consumer had in fact, by his own conduct with respect to the other party, given the latter the impression that he was acting for business purposes.

52. That would be the case, for example, where an individual orders, without giving further information, items which could in fact be used for his business, or uses business stationery to do so, or has goods delivered to his business address, or mentions the possibility of recovering value added tax.

53. In such a case, the special rules of jurisdiction for matters relating to consumer contracts enshrined in articles 13-15 are not applicable even if the contract does not as such serve a non- negligible business purpose, and the individual must be regarded, in view of the impression he has given to the other party acting in good faith, as having renounced the protection afforded by those provisions."

145. So it is quite clear from the decision in Gruber v BayWa AG that, at least in the context of the Brussels Convention and the Judgment Regulation, a contract will be treated as having been concluded by a person for a purpose which could be regarded as being outside his trade or profession if and only if any business purpose was insignificant or negligible.
146. What is perhaps be somewhat less clear is how the court considered that this issue must be approached. As I interpret the court's conclusions in the light of its reasoning, it seems that it envisaged a two-stage process. In the first instance, the court seised of the issue must determine, on the basis of all the objective evidence, the actual purpose or purposes for which the contract was being concluded by the person claiming to be acting as a consumer. That will normally be determinative, whether or not the other party knew or could reasonably have known of the purposes in question. In such circumstances, the other party must be regarded as having taken the risk that he may be deemed to have entered into a consumer contract. However, whatever the actual purpose or purposes, the party claiming to have acted as a consumer will be treated as having forfeited any right to claim the protection accorded to a person dealing in that capacity if he has led the other party, by what he has said or done, to believe that he was acting for business purposes.
147. As I have previously mentioned, in Gruber v BayWa AG, the Court of Justice referred to its own earlier decision in Benincasa v Dentalkit Srl [1998] All ER (EC) 135; [1997] ECR I-3767. Though I was not provided with a copy of the report of that case, paragraphs 16 to 18 of the judgment of the Court was cited in two of the cases to which I was referred, namely Standard Bank London Limited v Apostolakis [2002] CLC 933 and Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] 2 All ER (Comm) 287. The relevant passage reads as follows:

"16 .. .in order to determine whether a person has the capacity of a consumer, a concept which must be strictly construed, reference must be made to the position of the person concerned in a particular contract, having regard to the nature and aim of that contract, and not to the subjective situation of the person concerned . the self-same person may be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others.

17. Consequently, only contracts concluded for the purpose of satisfying an individual's own needs in terms of private consumption come under the provisions designed to protect the consumer as the party deemed to be the weaker party economically. The specific protection sought to be afforded by those provisions is unwarranted in the case of contracts for the purpose of trade or professional activity, even if that activity is only planned for the future, since the fact that an activity is in the nature of a future activity does not divest it in any way of its trade or professional character.

18. Accordingly, it is consistent with the wording, the spirit and the aim of the provisions concerned to consider that the specific protective rules enshrined in them apply only to contracts concluded outside and independently of any trade or professional activity or purpose, whether present or future."

148. So the court sought to define the distinction between consumer and business contracts for the purposes of the relevant provisions of the Brussels Convention by asking whether the contract was concluded to satisfy an individual's "own needs in terms of private consumption". It also, of course, emphasised that, in determining this question, it was necessary not only to look at an individual's present activities but also those which he intended to carry on in the future.
149. In the case of France v Di Pinto (C-361/89) [1991] ECR I-1189; [1993] 1 C.M.L.R. 399, the Court of Justice had occasion to consider the analogous provisions of Articles 1 and 2 of the Distance Selling Directive (Directive 85/577) which were intended to protect the consumer in respect of contracts negotiated away from business premises. The case concerned a business practice under which individuals were canvassed, either at their homes or at their places of business, in connection with the possible sale of their business.
150. By Article 1(1) the Directive applies to contracts under which a trader supplies goods or services to a consumer and which are concluded in certain specified circumstances, such as during the course of a visit by a trader to the consumer's home or his place of work. Article 2 defines the expression "consumer" in terms nearly identical to those adopted for the purposes of Directive 93/13, namely that the expression means "a natural person who, in transactions covered by this directive, is acting for purposes which can be regarded as outside his trade or profession."
151. The Court of Justice had to consider two questions, the first of which was whether a trader canvassed at home in connection with the sale of his business was entitled to the protection accorded to consumers by the Directive. It was the view of the Advocate General, that this question ought to be answered in the affirmative. His Opinion appears to have been based primarily upon the distinction which he considered should be drawn between the ordinary day-to-day activities of a trader and those for which he would have no more experience than any other trader. So, in fact, he appears to have adopted the "butcher, baker and candlestick maker" approach to the interpretation of the Regulation, laying particular emphasis on the use of the possessive pronoun "his", and concluding that the sale of the business did not come within the practical skills and experience of the trade or profession in question.
152. But the Court of Justice did not accept the views expressed by the Advocate General. At paragraph 15 of the judgment, it made the following observations as to the ambit or Article 2:

"It follows from that provision that the criterion for the application of protection lies in the connection between the transactions which are the subject of the canvassing and the professional activity of the trader: the latter may claim that the directive is applicable only if the transaction in respect of which he is canvassed lies outside his trade or profession. Article 2, which is drafted in general terms, does not make it possible, with regard to acts performed in the context of such a trade or profession, to draw a distinction between normal acts and those which are exceptional in nature."

153. The court went on to observe at paragraph 16, that acts which were preparatory to the sale of a business were connected with the professional activity of the trader, even though they might bring the operation of the business to an end. They were "managerial acts performed for the purpose of satisfying requirements other than the family or personal requirements of the trader." It therefore rejected the argument that a trader in such a situation was in an "unprepared state" similar to that of an ordinary consumer. On the contrary, there was every reason to believe that a normally well informed trader was aware of the value of his business and of the measures required by its sale. In the circumstances, it answered the first question in the negative.
154. I must now move on to consider the relevant English jurisprudence. I have already referred to two first instance cases in which the question arose as to whether an individual contracted as a consumer for the purposes of Articles 13 and 14 of the Brussels Convention. The earlier of the two was the decision of Longmore J (as he then was) in Standard Bank London Limited v Apostolakis. In fact, in that case, the judge had to consider not only the jurisdictional question but also whether the contract fell within the provisions of the Unfair Terms in Consumer Contracts Regulations 1994 or 1999. It is a somewhat unusual case, in that the defendants, a married couple who were resident in Greece and who were respectively a civil engineer and a lawyer, entered into a foreign exchange agreement with the claimant bank. When the bank closed the account, they issued proceedings in Greece; and the bank then responded by seeking an injunction in the English courts to restrain the Greek proceedings. Preliminary issues were directed as to whether there was an exclusive English jurisdiction clause and whether the defendants acted as consumers for the purposes of the Brussels Convention and the Regulations. It was held that, despite what appears to have been the fairly speculative nature of the transactions which the agreement was intended to facilitate, neither the overall agreement itself or any of the individual exchange transactions involved were to be regarded as business transactions.
155. It seems that the amounts involved were very substantial; and it was contended on behalf of the bank that the defendants were effectively trading in foreign exchange and were not acting solely for the purpose of satisfying their own needs in terms of their private consumption. But the judge observed that it was no part of a person's trade or profession as an engineer or lawyer to enter into foreign exchange contracts and that they were doing so in order to use the money in a way which they hoped would be profitable, rather than trading in the sense that a bank or currency dealer could be said to trade. He did not consider that the terminology used by the Court of Justice in Benincasa, where it referred to a transaction entered into "for the purpose of satisfying an individual's own needs in terms of private consumption" could have been intended as a substitute for the wording adopted in the relevant Directive; but, even if those words were to be applied literally, he considered that the use of their income in this way did in fact fulfil their need in terms of private consumption. I do, however, note that at paragraph 36 of Gruber v BayWa AG, the Court of Justice appeared to approve the formulation set out at paragraphs 16-18 of Benincasa.
156. That was essentially a decision on the facts of the case; and in Maple Leaf Macro Volatility Master Fund v Rouvroy, Andrew Smith J, at paragraphs 208 and 209, expressed some doubt as to whether he would have taken the same view. Indeed, he observed that the Greek courts had apparently reached a different conclusion in the litigation between the parties (though I was told by counsel that the decision may have been reversed on appeal). That case was yet another in which the question arose in a jurisdictional context under the relevant provisions of the Judgment Regulation. Once again, the relevant issue was decided on the particular facts of the case and I do not think that there is any advantage in analysing it further.
157. In Heifer International Inc v Christiansen [2008] Bus LR Digest, His Honour Judge Toulmin QC had to consider, amongst other things, an issue as to whether a contract came within the Unfair Terms in Consumer Contracts Regulations 1999. The question arose in the context of an arbitration agreement, so that the Regulations applied by virtue of section 90 of the Arbitration Act 1996 notwithstanding that the party in question was a body corporate rather than a natural person. I do not know whether any relevant authorities were cited to the judge, but he dealt with the threshold question as to whether the Regulations applied in a brief but helpful way at paragraph 249 which reads as follows:

"The test which I must adopt in relation to regulation 3 is: was Heifer acting for purposes outside its trade, business or profession? This is essentially a question of fact. It is the word "purpose" which is at the core of the dispute between the parties. In my view purpose connotes intention. If a party acts in a way which furthers its intention, ie to further its trade, business or profession, its actions are excluded from the Regulations. If an action is for a different purpose, but which has an incidental result which furthers its trade, business or profession, it does not result in the contract being excluded from the protection of the Regulations."

158. The only case in which these questions appear to have been considered by the Court of Appeal is the unreported judgment in Evans v Cherry Tree Finance Limited (6^th February 2008) [2008] EWCA Civ 331. But it is important to appreciate that the judgment of the Court of Appeal in that case was in large measure based upon a concession and largely turned, once again, on the particular facts of the case. The dispute arose out of matrimonial proceedings between the claimant and his wife. They jointly owned a property which they used in part for residential accommodation for themselves and their family and in part for the purposes of a business which they carried on together in partnership. They borrowed money on the security of the property at or about the time that they separated; and shortly afterwards the wife started divorce proceedings and the partnership was dissolved. However, the husband continued to carry on the business and to live at the property. In the course of ancillary proceedings, an agreement was reached by which he was given the opportunity to raise monies in settlement of his wife's claim in consideration of which she would transfer her interest in the property to him and the existing building society mortgage would be redeemed. The claimant then applied for and obtained a loan of £105,000 from the defendant company. He subsequently defaulted on his obligations under the loan agreement and the property was sold. But the claimant then sought to recover from the defendant the amount of an alleged overpayment. One of the issues raised in the course of the proceedings was whether the agreement between the claimant and the defendant was subject to the 1999 Regulations.
159. At first instance, His Honour Judge Kaye QC briefly referred to Standard Bank London Limited v Apostolakis and the decision of the European court in Benincasa v Dentalkit and held that, in entering into the loan agreement, the claimant had been acting for purposes which were outside his trade, business or profession. He observed that it was not part of his business activities to buy and sell property, though he did, of course, carry on business at the property. He went on to hold that the relevant terms of the loan agreement were opaque and unclear and led to a significant imbalance between the parties. Accordingly, he held that the defendant could not rely upon them.
160. Gruber v BayWa AG [2006] QB 204 does not appear to have been cited to Judge Kaye; nor, somewhat surprisingly, does it seem to have been cited to the Court of Appeal. But, as Tuckey LJ recorded at paragraph 2 of his judgment, the appeal proceeded on a concession by the defendant that if any of the purposes for which the claimant borrowed the money was outside his trade or business he was a consumer as defined by the Regulations. That is, on the face of it, contrary to the approach adopted in Gruber, though one must not lose sight of the fact that Gruber was a decision on the jurisdictional provisions of the Brussels Convention and not on the consumer-protection provisions of Council Directive 93/13/EEC or of the 1994 or 1999 Regulations. But the court was obviously concerned about the concession. At paragraph 23, Sir Anthony Clarke MR added a caveat to the effect that, in view of the concession, it had not been necessary for the court to consider the true construction of the definition of the expression "consumer" in the 1999 Regulations. He observed that any issue as to the correct meaning of the expression would have to await a future case in which it arose. He did, however, emphasise that he did not intend to suggest that the concession had not been properly made.
161. At paragraph 3 of the report, Tuckey LJ went on to observe that the question for the court was what was the purpose or purposes for which the claimant borrowed the money. He noted that it was common ground that the purpose or purposes must be ascertained objectively from the evidence of the parties' dealings with one another up to the time when the loan was made; and he emphasised that this was a question of fact.
162. It was contended on behalf of the defendant that, whilst the claimant required and used the loan at least in part for domestic or private purposes, this was never revealed to the defendant. Looking objectively at what it had been told, the purposes of the borrowing were to refinance the earlier commercial loan and to buy out the claimant's ex-wife's interest in the commercial property from which they had formerly carried on their business in partnership. The defendant was never told that the claimant was living at the property or that he and his wife had ever lived there. So, it was submitted that the judge had failed to distinguish between the claimant's subjective purpose and the objective purpose to be derived from his exchanges with the defendant.
163. But these submissions were rejected by Tuckey LJ, with whom Sir Anthony Clarke MR and Rimer LJ agreed. At paragraph 17 he stated that the simple reason for refusing to accept the argument was that, whilst, looked at objectively, one purpose of the loan was to enable the claimant to earn his livelihood, that was not the only purpose. He briefly examined the evidence in the case, noting that one of the stated purposes on the relevant application form was to remortgage the existing property in order to pay equity to his divorced wife pursuant to a divorce settlement. He did not consider that such a loan could or could only be for business purposes. Accordingly, he held that the judge was entitled to reach the conclusion which he had; and he observed that it would not matter whether this was the predominant or merely a subsidiary purpose, in view of the defendant's concession. Nor, in his judgment, did it matter that there may not have been full disclosure of the purposes for which the loan was being sought, at least so long as there had been no misrepresentation.
164. Finally, I should note the comparatively recent case of Turner & Co (GB) Limited v Abi [2010] EWHC 2078(QB); [2011] 1 CMLR 17, in which the court had to consider whether, amongst other things, the terms under which the claimant was entitled to commission on the sale or transfer of a business were unfair and not binding upon the defendant by reason of the provisions of the Unfair Terms in Consumer Contracts Regulations 1999. In order to resolve this question, the deputy judge had to determine whether the defendant had been acting as a consumer for the purposes of Directive 93/13 and the Regulations when he entered into the contract upon which the claimant sued.
165. In the course of his judgment, the deputy judge considered the decisions of the Court of Justice in France v Di Pinto, Benincasa v Dentalkit SRL and Gruber v BayWa AG. He observed that the concept of "consumer" for the purposes of the Directive was to be given an autonomous interpretation which was not grounded in the law of any particular state but which could be capable of general application within the European Union. At paragraph 33, when referring to the decision of the Court of Justice in France v Di Pinto, he also observed that the definition of "consumer" in both the Distance Selling Directive and the Directive were identical and that both were concerned with the overall community policy of protection of the consumer. He held, therefore, that it was likely that a consistent definition of the expression "consumer" would be adopted in relation to both.
166. I respectfully agree. At least where the expressions used are substantially the same and there is clearly an element of consumer protection, it seems to me to be unlikely and undesirable that any different approach would or should be taken as to the meaning and application of the language used.
167. At paragraph 39 of his judgment, the deputy judge cited paragraph 17 of the judgment of the Court in Benincasa, to which I have already referred. But he also accepted the observations of Longmore J in Apostolakis to the effect that the Court of Justice could not have been taken to have intended to introduce a new and different test of the meaning of the expression "consumer" or to replace the definition of that expression in the Directive. But he clearly accepted that paragraph 17 of the judgment in Benincasa gave important guidance as to the sort of cases in which the person would or would not be contracting as a consumer.
168. The judge also referred to two other English cases in addition to Apostolakis. But he observed that these were essentially decisions on their own facts. In the event, he also found, on the facts of the case before him, that the defendant had not been acting for the purposes which were outside his trade, business or profession when he entered into the contract in question and that he could not, therefore, invoke the protection of the 1999 Regulations. So the question of fairness or unfairness did not arise, though the Deputy Judge indicated that he would unhesitatingly have held that the relevant provision was unfair if it had been open to him to do so.
169. The principles to be derived from this survey of the relevant case law seem to me to be as follows:

1. The expression "consumer" for the purposes of Council Directive 93/13 should be given an autonomous, community- wide, interpretation, rather than one anchored to the particular jurisprudence of any individual Member State.

2. At least where the language adopted in community instruments is substantially the same and they have as their objective, at least in part, the protection of consumers, a similar approach to the construction and application of the expression should be adopted unless the context and purpose of the relevant instrument requires a different approach.

3. It is a question of fact for the court seised of the dispute to decide the purpose or purposes for which a person was acting when entering into a contract of a kind which might be covered by the Directive; and it is similarly a question of fact as to whether he was so acting for purposes outside his trade, business of profession.

4. The court must resolve these factual issues on the basis of all of the objective evidence placed before it by the parties; but that evidence is not confined to facts and matters which were or ought reasonably to have been known to both parties.

5. Though the words of the Directive must ultimately prevail, a party will normally be regarded as acting for purposes outside his trade, business or profession if, and only if, the purpose is to satisfy the individual's own needs in terms of private consumption.

6. Furthermore, where the individual in question is acting for more than one purpose, it is immaterial which is the predominant or primary purpose; and he will be entitled to the protection of the Directive if and only if the business purposes are negligible or insignificant.

7. However, even where the objective purpose or purposes for which the individual was acting were, in fact, wholly outside his trade, business or profession, he may be disentitled from relying upon the protection afforded to him by the Directive if, by his own words or conduct, he has given the other party the impression that he was acting for business purposes so that the other party was and could reasonably have been unaware of the private purpose or purposes.

170. What I have not specifically dealt with in this summary is the question of the burden of proof. At paragraph 46 of its judgment in Gruber v BayWa AG, the Court observed that:

"Having regard to the normal rules on the burden of proof, it is for the person wishing to rely on articles 13 - 15 to show that in a contract with a dual purpose the business use is only negligible, the opponent being entitled to adduce evidence to the contrary."

171. In contrast, however, it seems that, once it is established that any particular contract is one to which the Directive and the Regulations apply, the issue of "fairness" is a matter for the court without the imposition of a burden of proof on either party. See Chitty on Contracts, 30^th edition (2008), paragraphs 15-117 to 15-121. But, it does not seem to me that the preliminary question as to whether Mr Overy can invoke the protection of the Regulations is one which turns upon the allocation of the burden of proof, so it is unnecessary for me to say any more on the point.
172. I turn, therefore, to consider the preliminary question itself as to whether the 1999 Regulations apply to the agreement made on 22^nd January 2007 between Mr Overy and Paypal. As I have previously held, a major purpose, for which he opened the account with Paypal was to facilitate the disposal of the property which was his home by means of the competition which he was in the process of organising. It was submitted by Mr Drake on behalf of Paypal that this was not in itself a purpose which was outside his trade, business or profession. He contended that it should 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. It was intended, he submitted, to obtain for Mr Overy what would, in effect, be a trading profit over and above the price that he could have expected to receive on a sale in the open market by conventional means. Mr Overy, on the other hand, contended that he was a photographer by profession, and not an estate agent, so that his competition could not properly be regarded as an activity which fell within the activities of his trade, business or profession.
173. For reasons which I have already stated, I do not consider that this question can be answered simply by seeking to categorise Mr Overy's normal business activities and then asking whether this particular venture fell within the scope of such activities. An individual may be involved in more than one, perhaps many different, trading activities at the same time, some or all of which may overlap. Furthermore, I can see no reason why a single business venture cannot be taken into account in determining whether a particular contract is one to which the 1999 Regulations apply. So it is no answer, certainly no definitive answer, for Mr Overy simply to assert that he was a photographer and not an estate agent.
174. In the end, the question is a matter of fact and degree which has to be resolved by an application of the wording adopted by the 1999 Regulations and of the underlying Directive, assisted by the gloss placed upon that test by the European court in the case of Benincasa. I have come to the conclusion that the competition was not an adventure in the nature of trade. It involved the sale or realisation of a property which he and his wife occupied as their personal residence, albeit by wholly unorthodox means which he designed in order to maximise the amount which he was likely to realise on the disposal of the property. In principle, it seems to me to be little different from a disposal of the same asset by public auction, which itself differs from a private sale through an estate agent only in the means chosen to achieve the sale. I take the view, therefore, that, if this had been the sole purpose for which Mr Overy had opened the Paypal account, it would have been a purpose outside any trade, business or profession in which he was involved.
175. But, as I have previously found, that was not the only purpose for which Mr Overy opened his Paypal account. I am satisfied that it was also 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, therefore, when he entered into the contract with Paypal on 22^nd January 2007, he was not acting for purposes which were outside his trade, business or profession. Furthermore, in my judgment, that purpose could not reasonably be regarded as one which was insignificant or negligible. Accordingly, in view of the principles which I have attempted to summarise earlier in this judgment, he was not entitled to the protection of the 1999 Regulations.
176. But, even if I were wrong in the foregoing conclusion, I am quite satisfied that this is a case in which he would be disentitled from relying upon the 1999 Regulations, even if his purpose had in fact been wholly outside his trade, business or profession. In my judgment, by the nature of the application which he made to Paypal online and the information which he provided in so doing, he clearly conducted himself in such a way as to lead to the obvious conclusion that he was acting in his trade or professional capacity.
177. I do not believe it matters that the whole process was conducted online in a fully automated manner without, it would seem, any human intervention at any stage. But even if that might have some bearing on the question, it seems quite plain to me that he chose to apply for a Business Account, rather than a personal one, and that by doing so he was led down a pathway which required him to provide information as to his trade or profession. If he had not done so, he would not have been able to open such an account. By providing the required information, he had in my judgment, clearly conducted himself in such a way as to give the impression that he was acting for the purposes of a business.
178. If he had not done so, it does not seem to me that he would have been able to navigate his way through the process and succeed in opening his account. The way in which he conducted himself, therefore, was consistent only with an intention to open the account for business purposes. Furthermore, even if he had been communicating in this way with an employee of Paypal, rather than following an entirely automated process, I am not persuaded that there was anything which ought reasonably to have led the hypothetical employee to conclude that he was not or might not have been intending to use the account for business purposes.
179. Mr Overy laid particular emphasis upon the website name which he provided in the course of his application for a Paypal account which, it will be recalled, included the expression "winthishome" or "winahome". He also, of course, vigorously contended that Paypal should have made proper enquiries of him at the outset, rather than adopting a fully automated process and seeking further information only if and when it detected what it regarded as suspicious activity on the account.
180. Now, if he had provided this information in the course of an interview with an employee of Paypal, I think it is quite possible that he might have been asked why he had chosen such a name for his website. That might have led him to provide an explanation of his proposed competition. But I really cannot see how the mere use of such a name, amongst a variety of other information of a business nature, could or should have alerted Paypal to the fact that one of the purposes, still less the sole or even predominant purpose, for which he was applying for a Paypal account was one which was outside his stated trade, business or profession. On the contrary, I am quite satisfied that the totality of the information which he provided was such as would have reasonably led Paypal to believe that he was seeking to open the account solely for business purposes.
181. Accordingly, I have come to the clear conclusion that Mr Overy cannot invoke the protection afforded to a consumer by the Unfair Terms in Consumer Contracts Regulations 1999.
PART VI
Unfairness and Unenforceability

182. In those circumstances, the question as to whether any or all of the contractual terms challenged by Mr Overy are unfair and unenforceable by virtue of those Regulations does not arise. Strictly, therefore, I need not try to resolve any of the issues as to the effect of the Regulations on any of the terms in question, though there remain some rather more limited issues arising under the Unfair Contract Terms Act 1977.
183. Furthermore, I have some reservations as to whether the present litigation is a suitable vehicle for attempting to resolve any of the substantive issues under the Regulations, given Mr Overy's modest resources and limited acquaintance with the law and the consequent imbalance in fire-power between the parties. But, in case the matter were to go further, I think I should briefly summarise any relevant arguments and evidence and express my provisional views in relation to each of the terms which were the subject of challenge.
Preliminary Observations

184. I start with some general observations. Firstly, as previously noted, the issue in each case is whether the term in question is unfair, as defined at regulation 5(1), namely whether it is a term which "contrary to the requirement of good faith causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer." By regulation 6(1) the assessment of the unfairness of a term is to be carried out by taking into account the nature of the goods or services for which the contract was concluded and by referring, as at the time of the conclusion of the contract, to all the circumstances attending the conclusion of the contract. But, by regulation 6(2)(a) no assessment is to be made of the fairness of any term which defines "the main subject matter of the contract". But this is subject to the proviso that it applies only in so far as the term in question is expressed in plain intelligible language". Furthermore, by regulation 7, there is a similar requirement that the written terms of any contract to which the Regulations apply should be expressed in "plain, intelligible language"; and it is provided that, if there is any doubt about the meaning of a term, the interpretation most favourable to the consumer should prevail.
185. Mr Drake referred me to three English authorities which have sought to elucidate the nature of the test to be adopted under the similar wording of the 1994 Regulations. I need, I think, refer only to Director General of Fair Trading v First National Bank Plc [2002] 1 AC 481. The facts of the case are immaterial. But it is helpful to refer to two passages in the speeches of Lord Bingham and Lord Millett. At paragraph 17, Lord Bingham analysed the test in this way:

"The test laid down by regulation 4(1), deriving as it does from article 3(1) of the Directive, has understandably attracted much discussion in academic and professional circles and helpful submissions were made to the House on it. It is plain from the recitals to the Directive that one of its objectives was partially to harmonise the law in this important field among all member states of the European Union. The member states have no common concept of fairness or good faith, and the Directive does not purport to state the law of any single member state. It lays down a test to be applied, whatever their pre-existing law, by all member states. If the meaning of the test were doubtful, or vulnerable to the possibility of differing interpretations in differing member states, it might be desirable or necessary to seek a ruling from the European Court of Justice on its interpretation. But the language used in expressing the test, so far as applicable in this case, is in my opinion clear and not reasonably capable of differing interpretations. A term falling within the scope of the Regulations is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith. The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the Regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties' rights and obligations under the contract. This involves looking at the contract as a whole. But the imbalance must be to the detriment of the consumer; a significant imbalance to the detriment of the supplier, assumed to be the stronger party, is not a mischief which the Regulations seek to address. The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations. Good faith in this context is not an artificial or technical concept; nor since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the Regulations are designed to promote."

186. I was also referred to the observations of Lord Millett at paragraph 54 of the judgment, where he said this:

"A contractual term in a consumer contract is unfair if "contrary to the requirement of a good faith [it] causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer". There can be no one single test of this. It is obviously useful to assess the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it. But the inquiry cannot stop there. It may also be necessary to consider the effect of the inclusion of the term on the substance or core of the transaction; whether if it were drawn to his attention the consumer would be likely to be surprised by it; whether the term is a standard term, not merely in similar non-negotiable consumer contracts, but in commercial contracts freely negotiated between parties acting on level terms and at arms' length; and whether, in such cases, the party adversely affected by the inclusion of the term or his lawyer might reasonably be expected to object to its inclusion and press for its deletion. The list is not necessarily exhaustive; other approaches may sometimes be more appropriate."

Material Circumstances

187. The process of assessment which the court is required to undertake in accordance with regulation 6 of the 1999 Regulations must take into account the nature of the services for which the contract was concluded and all the circumstances attending the conclusion of the contract. Mr Overy himself relied principally upon the obvious importance of the unimpeded operation of the account for the success of his competition and the serious adverse consequences which would inevitably follow if the operation of the account were suspended. He also drew my attention to what appeared to be the very large volume of complaints about Paypal's business methods as evidenced by various printouts from the internet. He suggested, in particular, that Paypal's readiness to suspend the operation of an account was motivated by a desire to earn interest on any monies held in a frozen account, which it was under no obligation to pay over to any of the parties involved. But when this was put to Mr Caplehorn in crossexamination, he stated that any interest earned on suspended accounts was much outweighed by the costs involved in investigating the position. Mr Overy also contended that it was normal business practice to do a thorough credit and status check before opening any account of this kind and to give 30 days' written notice to terminate any such agreement.
188. Paypal, for its part, relied primarily upon the various facts and matters set out by Mr Caplehorn in his witness statement. There was little challenge to any of this evidence, though Mr Overy put a number of other matters to both Mr Caplehorn and Mr Theodossiou in the course of cross-examination. I do not think that I need to deal with this evidence in detail; and I will simply pick out what appear to me to be the salient points.
189. As is apparent from the User Agreement and the various documents incorporated within it, the fees chargeable by Paypal for the provision of its services were calculated by reference to the number of transactions, so that there was no annual or monthly charge or other form of fee payable in advance. Furthermore, Paypal operates on low margins and, so far as possible, makes use of appropriate software in order to minimise the necessity for any direct involvement by its employees or other human agency either at the time when an account is opened or in the subsequent operation of the account. Hence, of course, the wholly automated process by which Mr Overy opened his account.
190. In general, therefore, only very limited checks are carried out by Paypal when an account is initially opened. There are, however, procedures in place to ensure that the applicant is not based in certain territories and is not someone whose name appears in various databases, for example as a suspected terrorist. But, in some circumstances, as will be seen, more detailed investigations are carried out before an account can be opened. According to Mr Caplehorn, however, the nature of Paypal's business is such that there is no regulatory requirement upon it to carry out money laundering checks before an account can be opened.
191. But the nature of the services provided by Paypal and the economic and regulatory environment in which it operates means that it must address certain types of risk. At the material time, it was subject to regulation by the FSA as an electronic money issuer and was therefore required to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. Paypal's services are designed to facilitate transactions between third parties. Any such transactions may involve criminal or other activities which may expose Paypal itself to criminal charges or civil claims. Perhaps the most obvious risk of this kind is that its services might be used to facilitate transactions involving money laundering or terrorist financing.
192. But there are many other types of transaction which are or may be illegal in different jurisdictions and others which are particularly susceptible to fraud by one or other of the parties. Gambling and the sale of drugs, weapons or what is politely termed "adult" material are instances of activities which are or may be illegal in all or some jurisdictions. Furthermore, certain types of transaction appear to pose a relatively high risk of fraud, as appears to be the case with gambling, adult material and the sale of new, branded, high value goods.
193. Involvement in transactions of this kind might well expose Paypal to criminal sanctions, civil claims or reputational damage, particularly bearing in mind the global nature of its business. In particular, gambling activities are broadly defined within the United States of America and if Paypal were to facilitate transactions which fell foul of the anti-gambling legislation in North America, it could be exposed to very serious sanctions. Thus, in 2003, Paypal's corporate vehicle in the United States of America had to pay a $10 million fine on the basis that it had aided illegal offshore and online gambling. Another company operating in a similar line of business, Neteller, more recently, in 2007, agreed to pay a fine of some $136 million and return some $94 million of sums held on behalf of US customers after admitting violating US laws on internet gambling. So the risks are very serious indeed.
194. The scale of Paypal's business activities and the low margins upon which it operates has led it to address risks of this kind primarily by means of appropriate software systems. These are designed to alert Paypal's operatives to certain types of activity which may be indicative of illegality or fraud. One such indicator is where there is a sudden "spike" of activity on an account which would not seem to be justified by the nature of the business or its previous history. This appears to be what happened in Mr Overy's case, though the actual circumstances which gave rise to the decision to suspend the account was not something which was in issue before me at this stage.
195. But, given the very severe nature of the potential sanctions to which it might be exposed in relation to gambling, Paypal has taken a somewhat more proactive approach to such activities as is apparent from its Gambling and Lottery Policy. In particular, where an account is to be used for purposes which may contravene the gambling laws of the United States of America, it requires information to be provided at the outset so as to enable it to decide for itself whether it is willing to take the risk involved.
196. I was also briefly referred to some material illustrating the terms upon which other institutions offering similar services were prepared to contract. I was not taken through them in detail either by Mr Drake or by Mr Overy; and I do not propose to embark upon any detailed analysis of this material or seek to draw any comparison with the basis upon which Paypal was willing to provide its services. But there does not seem to be any clear and uniform practice. Some operators appear to claim that an account could be opened with immediate effect, whereas others refer to no more than the possibility of trading within 48 hours of an application being submitted; and some require initial or annual fees, whereas others do not.
197. I note, for example, that ChronoPay required an applicant to open a merchant account with one of its bank partners; and for that purpose the applicant was required to provide documentary proof of identity and so forth. It also accepted applicants operating in "high risk" areas such as pharmacy and gaming, though proof of a valid licence to operate might be required, particularly in relating to gaming applications. The applicant was asked to contact ChronoPay directly to find out what information would be required. I do not know, however, how closely ChronoPay's business followed the same model as Paypal's. Mr Caplehorn distinguished between gateway services, which were provided by a number of its competitors, and the issue of electronic money, as was undertaken by Paypal itself and Moneybookers. But he did not specifically state which category ChronoPay fell in.
198. Mr Drake also referred me to certain sections of the Guidance for the Unfair Terms in Consumer Contracts Regulations 1999 issued by the Office of Fair Trading in September 2008. After the hearing, he provided both me and Mr Overy with electronic copies of the Guidance published in February 2001 which would, of course, have been the version which was in place at the time when Mr Overy opened his Paypal account. There appears to be little material difference between the two versions. The precise status of this Guidance was never clarified; but Mr Drake was clearly entitled to incorporate any relevant passage in his submissions. In fact, he referred me only to the commentary on paragraphs 1(a) and (b) of Schedule 2 to the Regulations which deal with exclusion and limitation clauses. But I have also looked at the commentary on paragraphs 1(f) and (g) of Schedule 2 of the Regulations, which deal with rights of cancellation, and on regulation 7, which deals with the requirement for terms to be expressed in plain, intelligible language.
199. I should also record that Mr Overy referred me to various documents published on the internet which were strongly critical of the way in which Paypal conducted its business operations. One of the documents which he had downloaded was the pleaded complaint in a class action proceeding in the United States District Court for the Northern District of California. The allegations are directed at what is alleged to have been the "systematic and arbitrary manner" in which Paypal limited or suspended those accounts and the lack of information provided to customers affected by such action. At paragraphs 70 to 72 of the declaration in the action. it is alleged that Paypal breached the express terms of its contracts with the plaintiffs by closing, suspending or limiting access to their accounts without reason to believe that they were engaged in restricted activities and without providing notification of the reasons for taking the action, and that they were also in breach of contract by holding funds for up to 180 days and retaining interest generated on the balance during that period. But, whilst this is no doubt evidence that complaints have been made about actions of this kind, the facts and matters set out in the pleading are no more than allegations; and I do not know how Paypal has responded to them or whether the case has ever gone to trial or judgment.
200. Mr Overy also directed my attention to the terms on which HSBC offered business banking facilities. He pointed out, in particular, that the terms and conditions governing the rental of electronic terminals in connection with HSBC's card services allowed either party, without giving any reason, to terminate the agreement at any time by giving 30 days' written notice to the other party and returning the terminals. For my part, I do not see how this has any bearing upon any of the questions which I have to resolve at this stage of the present litigation. But I also note that, in what appear to be the general terms and conditions governing its business banking services, there are provisions which allow the bank to delay or decline to process any particular transaction in connection with investigations into fraud, money laundering, terrorist activity and the like, and which also seek to exclude liability for any direct loss of profits and for any indirect or consequential loss or damage, however arising.
Individual Terms : Category 1

201. Against that background, I can now turn to the individual terms which were challenged under the 1999 Regulations. I adopt the classification proposed by Mr Drake in his written opening submissions which I have already referred to in this judgment.
202. The first of Mr Drake's categories comprised those terms which made the relationship terminable at will. These were to be found at clauses 1 and 7.3 of the User Agreement, though Mr Drake also referred to clause 10, which allowed the customer himself to terminate at any time. Neither of clauses 1 or 7.3 are, in fact, directly material to the issues determined on Paypal's application for summary judgment, but, for reasons which I have already set out, I think it is appropriate for me to deal with them.
203. The last sentence of clause 1 of the User Agreement is in these terms:

"We may refuse to provide our Service, change the qualifications for your use of the Service and/or terminate this Agreement with you at any time on giving you notice by e-mail, such notice to take immediate effect."

Clause 7.3 is rather more elaborate. It provides as follows:

"Closing Accounts and Limitation of Account Access. At our sole discretion we may close an account at any time where expedient to do so, (including but not limited to where there has been a breach by you of this Agreement) upon notice to you and make payment to you of any invested funds held in your account. We also reserve the right to limit access to an account and any or all of the account's functions, including but not limited to your ability to send e-money or your ability to withdraw from the account. Such restrictions shall only apply to such portion of your balance as directly relates to your breach or attempted breach of your obligations."

204. On the face of it, the power reserved by Paypal to terminate the agreement with immediate effect, albeit on notification to the customer, falls foul of paragraph 1(g) of the indicative list of terms contained in Schedule 2 to the 1999 Regulations. Paragraph 1(g) refers to terms which have the object or effect of:

"enabling the seller or supplier to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so."

205. But Mr Drake relied upon the provisions of paragraph 2(a) which qualified the scope of paragraph 1(g) in these terms:

"(a) Paragraph 1(g) is without hindrance to terms by which a supplier of financial services reserves the right to terminate unilaterally a contract of indeterminate duration without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof immediately."

206. But that qualification does not address the question as to whether a term allowing unilateral termination without any cause whatever is likely to be regarded as unfair for the purposes of the Regulations. So Mr Drake relied primarily upon the provisions of regulation 6(2) of the 1999 Regulations which, it will be recalled, excludes from the assessment of fairness a term which relates to "the definition of the main subject matter of the contract", provided that it was in "plain intelligible language".
207. I am prepared to accept that the relevant passage in clause 1 of the User Agreement and all but the last sentence of clause 7.3 are couched in plain, intelligible language. I also accept that there is, on the face of it, mutuality in the sense that, by virtue of clause 10, the user was also entitled to terminate at any time. But I do not accept the proposition that these clauses relating to termination can be regarded as defining the "main subject matter" of the contract. On the contrary, in my judgment, the principal subject matter of the contract is to provide an e-money payment service, as stated at clause 2.1 of the User Agreement. The circumstances in which an agreement for those purposes can be terminated is secondary to the purposes in question. Indeed, it is difficult to see why paragraph 1(g) and 2(a) would be included within Schedule 2 to the Regulations if terms of this kind would normally be regarded as defining the main subject matter of the contract.
208. But there remains the fundamental question as to whether there is nonetheless a "significant imbalance" in the rights and obligations of the parties to the customer's detriment. Quite apart from the indication given by the provisions of Schedule 2, I would have been prepared to hold, on the evidence presently before me, that there was such an imbalance. Whilst I appreciate that, for the purposes of the present hypothetical exercise, I must suppose (contrary to my findings) that Mr Overy was acting as a consumer, nonetheless, the instantaneous termination of electronic payments services of this kind may well have a serious impact on the account holder, who may have no alternative means in place for receiving or making payments.
209. Mr Drake sought to counter this contention by suggesting that any prudent user in Mr Overy's position would ensure that he had such alternative means available to him, given that his Paypal account could be terminated at any time, and that, in any event, he could readily have opened an account with one of Paypal's competitors in a matter of minutes. I cannot accept the first of these propositions; and I am not persuaded that alternative facilities could be set up quite as speedily as is suggested. Certainly, some of the documentation produced by Paypal itself suggests that, in many cases, 48 hours might be the minimum realistic time involved; and Mr Overy himself claimed that in practice, it was likely to take longer.
210. I am fully aware of the potential importance of the various risks which Paypal was likely to face when an account was being misused for any reason. But those problems, as it seems to me, could properly be addressed by the reservation of a right to terminate for cause. In those circumstances, I simply do not see why any more general rights of termination should not be subject to a comparatively short period of notice to the customer.
211. I am also conscious of the requirement of regulation 5(1) that a term is to be regarded as unfair if it causes a "significant inbalance" in the parties' rights and obligations under the contract. As Mr Drake pointed out, there is at least a formal equivalence between these rights of termination on the part of Paypal and the customer's right to do so under clause 10 of the User Agreement. Furthermore, as Mr Drake also emphasised, there would be no further financial obligations on the part of the customer towards Paypal once the contract had been terminated by either party under any of these provisions. But this formal equivalence and financial neutrality does not, in my judgment, reflect an economic symmetry between the parties, given the potential dependence and reliance on such a facility by the customer. It seems to me, therefore, that an unrestricted power of immediate termination by Paypal without cause is likely to result in a significant imbalance in the parties' rights and obligations to the disadvantage of the customer.
212. Accordingly, had the question not been an academic one, I would have held that the provisions of clauses 1 and 7.3 of the User Agreement which allow Paypal to terminate at any time would be unfair under the 1999 Regulations.
213. Clause 7.3, of course, also reserves a right to limit access to an account or any of its functions. There is no express limitation or qualification upon the rights so reserved. However, despite the breadth of the wording used in the first sentence of the clause, the final sentence appears to suggest that it would nonetheless apply only in the event of a breach or attempted breach of the customer's own obligations. In the light of regulation 7 of the 1999 Regulations, therefore, I would be inclined to hold that this confers only a right exercisable in the event of such a breach. But, if it is properly to be regarded as conferring an unqualified right to limit access, I would have taken the view that this provision was also unfair for the purposes of the Regulations.
Individual Terms : Category 2

214. It is convenient, at this point, to turn to the next category of terms (which was, in fact, Mr Drake's third category), namely those permitting Paypal to suspend or terminate the provision of services for cause. The relevant provisions are to be found at clauses 2.7 and 11 of the User Agreement, certain provisions of the Acceptable Use Policy which allow for the "temporary or permanent limitation" of an account, clause 4 of the Premier and Business Account Policy and clause 2 of the Closing Accounts and Limiting Account Access Policy.
215. The provisions of clause 2.7 of the User Agreement which are singled out for attack in Mr Overy's Point of Claim are the following:

"If you use the Paypal service in a manner that violates the Acceptable Use Policy including but not limited to the two categories described above, your account will be subject to limitation or immediate termination, as stated in the Closing Accounts and Limiting Account Access Policy".

The two specific types of violation referred to in this passage are those involving the use of the service to receive payments for obscene material or for narcotics or other types of drugs. It should also be noted that there is a hyperlink to each of the other two policies referred to in this passage.

216. The relevant provisions of clause 11 of the User Agreement are the following:

"Without limiting other remedies, we may... place a hold on funds in your account, limit funding sources and payments, limit access to an account and any or all of the account's functions (including but not limited to the ability to send money or making withdrawals from an account), limit withdrawals, indefinitely suspend or close your account and refuse to provide our Services to you if: (a) you breach this Agreement or the documents it incorporates by reference; (b) we are unable to verify or authenticate any information you provide to us; (c) we believe that your account or activities pose a significant credit or fraud risk to us."

217. The Acceptable Use Policy also deals with violations of the policy. The relevant passage reads as follows:

"Violation of the Acceptable Use Policy

Violating Paypal's Acceptable Use Policy may result in temporary or permanent limitation of a customer's account. This includes the inability to send and/or receive payments, to remove financial information from an account, and for users to close their accounts as a way of evading the policy."

218. The provisions of the Premier and Business Account Policy which are challenged by Mr Overy are to be found at clause 4 which includes the following:

"You will not use the Business Service, the website or any of the services offered therein for any unlawful, fraudulent, or improper activity. If Paypal has reason to believe that you may be engaging in or have engaged in any fraudulent, unlawful or improper activity, including without limitation any violation of any terms and conditions relating to the Premier/Business Service, the website or any related services, your access to the Service may be suspended or terminated."

219. The last of the terms in this category which are the subject of challenge by Mr Overy are set out at clauses 1 and 2 of the Closing Accounts and Limiting Account Access Policy. Clause 1 of this Policy provides that Paypal "at its sole discretion" reserves the right "to limit access to sending money or making withdrawals from an account" in certain events. Clause 2 sets out the various events which may lead to the account being limited in this way and makes various ancillary provisions which, amongst other things, stipulate that, if account access is limited, the account holder will be notified by e-mail and requested to provide information relevant to the account.
220. The particular provisions of clause 2 which are relied on by Paypal in its Amended Defence and which are the subject of attack by Mr Overy in his Points of Claim are the following:

"Any of the following events may lead to your account being limited:.

vi. Complaints received regarding. non-delivery of services

ix. Excessive levels of disputes.

x. Refusal to co-operate in any investigation.

xv. Breach of this User Agreement."

221. In summary, therefore, all of these terms allow Paypal to limit, suspend or terminate the account in certain specified circumstances. The relevant circumstances, for present purposes are, firstly, any breach by the customer of his obligations under the User Agreement, any violation of the Acceptable Use Policy, the inability on Paypal's part to verify or authenticate any information provided to it by the customer, a belief on its part that the account or the customer's activities pose a significant credit or fraud risk, any reason on its part to believe that the customer might be engaging in fraudulent, unlawful or improper activity, complaints regarding non-delivery of services, excessive levels of dispute and refusal to co-operate in any investigation.
222. In principle, it does not seem to me that the reservation of a right by a party in the position of Paypal to suspend or terminate an agreement of this kind in certain specified circumstances is one which necessarily offends the requirements of regulation 5(1) of the 1999 Regulations. The fundamental question in relation to any such term is likely to be whether the circumstances in which the power is exercisable are so widely drawn as to cause a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer. There may also be a subordinate issue as to whether any such right can fairly be exercised without any form of notice or notification to the consumer.
223. Considerations of this kind are reflected in the guidelines set out in Schedule 2 to the 1999 Regulations. These do not specifically deal with terms allowing for a temporary suspension or limitation of the services to be provided to the consumer; but, as I have previously noted, paragraph 1(g) indicates that a term may be unfair if it has the object or effect of enabling the supplier to terminate a contract of indeterminate duration without reasonable notice "except where there are serious grounds for doing so". It seems to me that a power of suspension may well have much the same effect as a right to determine the contract in its entirety. So, in my judgment, an unrestricted right to suspend or limit the services provided to the customer should be approached in much the same way as a right to terminate the contract once and for all.
224. But, in line with my earlier observations, paragraph 1(g) of Schedule 2 anticipates that a power of termination (or suspension) may not be unfair so long as there are "serious grounds" for its exercise. Furthermore, paragraph 1(g) does not refer to any requirement of notification in the event of the exercise of such power.
225. But paragraph 2(a) of Schedule 2 to the 1999 Regulations provides a further gloss on the earlier provisions of the Schedule in relation to contracts for the provision of financial services. A term in such contract may not be regarded as unfair if it reserves the right to terminate unilaterally without notice where there is a "valid reason". That contrasts with the expression "serious grounds" in paragraph 1(g) of the Schedule. On the other hand, there is a proviso, in those circumstances, that the supplier must inform the consumer "immediately" on the exercise of the right.
226. The "valid reason" test adopted by paragraph 2(a) of Schedule 2 to the 1999 Regulations is manifestly less stringent than the phrase "serious grounds" used in paragraph 1(g) itself. In either case, there must obviously be a reason for the exercise of such a power; and it seems to me that the reason or reasons must, in some way, be material to the operation of the contract and must not be arbitrary or capricious. For my part, I would take the view that the provision of inaccurate or misleading information by the consumer prior to the formation of the contract and any breach by the consumer of his obligations under the contract would normally constitute "valid reasons" for the purposes of paragraph 2(a) of Schedule 2, even though, depending upon the particular circumstances of the case, they might not constitute "serious grounds" under paragraph 1(g). So, whilst a blanket power to suspend or terminate for the provision of inaccurate information or for any breach of contract, without distinguishing between those which were serious and those which were comparatively venial, might well be unfair in most consumer contracts, the same would not seem to apply in relation to contracts for the provision of financial services.
227. But one must not, of course, lose sight of the substantive provisions of regulation 5(1) themselves. It remains necessary to consider whether such a right of termination (or suspension), even in a contract for the provision of financial services, might nonetheless be unfair if it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer. That might occur, for example, if the requirements for the provision of information or the obligations of the customer under the contract are so extensive, burdensome or oppressive as to tilt the scales too heavily against the consumer. That is a matter to which I shall return when I consider the terms which fall into the next category into which Mr Drake classified the terms which were the subject of challenge by Mr Overy.
228. Accordingly, I have come to the conclusion that the provisions of clauses 2.7 and clause 11 of the User Agreement and the relevant provisions of the Acceptable Use Policy which permit Paypal to limit, suspend or close an account if the customer is in breach of the User Agreement or violates the requirements of the Acceptable Use Policy are not necessarily or intrinsically unfair. The same would, in my judgment, apply to the provisions of clause 11 of the User Agreement which allow for limitation suspension or closure if Paypal is unable to verify or authenticate any information provided to it by the customer. Whether they can nonetheless operate unfairly having regard to the circumstances in which they could be invoked is a question I shall address in the next section of my judgment.
229. But terms which allow for the termination or suspension of services in the event of fraud or criminal activity are, in my judgment, highly unlikely to be held to be unfair. If the contract is being used as a vehicle for fraud or crime, whether or not the contracting consumer is himself a party to such activities, the service provider must, as it seems to me, have the power to suspend or terminate forthwith. Furthermore, the same must surely apply where there is a suspicion that the contractual services are being used as the medium for activities of this kind, at least where there are reasonable grounds for such suspicion. Fraud or criminal activities would, in my judgment, normally constitute "serious grounds" for the exercise of such power for the purposes of paragraph 1(g) of Schedule 2 to the 1999 Regulations.
230. It might nonetheless be contended, I suppose, that a mere suspicion of activities of this kind, even on reasonable grounds, would not amount to "serious grounds" for these purposes. But, for my part, I would disagree with any contention of this kind. I have already referred to the regulatory background within which Paypal operates; and the services which it provides can very easily be used to move the proceeds of such activities out of reach of any aggrieved parties or law enforcement agencies. Vigilance and speed of response are, in my judgment, of paramount importance in cases of this kind; and it is essential that any persons engaging in those activities should not be alerted to the fact that they are under scrutiny. For my part, therefore, I have little doubt that a power to suspend or terminate in the event of reasonable suspicion of fraud or criminal activity should not be regarded as unfair for the purposes of regulation 5(1). I have rather more difficulty with provisions which might allow such a power to be exercised where Paypal merely holds a "belief" that the account is being used for such activities. But it seems to me that wording of this kind necessarily supposes that the belief is actually and honestly held; and it would be difficult for Paypal to establish this unless there were at least some grounds for holding the belief in question. In the light of the considerations to which I have referred, I am persuaded that an actual and honest belief of this kind would suffice.
231. The terms which are challenged use a variety of different expressions. Thus, clause 11 of the User Agreement reserves such a power if "we believe that your account or activities pose a significant credit or fraud risk to us"; and clause 4 of the Premier and Business Account Policy embodies a similar power "if Paypal has reason to believe that you may be engaging in or have engaged in fraudulent, unlawful, or improper activity." It was not suggested to me that anything turns on these differences in wording, though clause 11 appears to require only a "belief" on the part of Paypal, whereas the Premier and Business Account Policy requires "reason to believe". But, against the background to which I have previously referred, I can see no reason why these provisions should be struck down under regulation 5(1) of the 1999 Regulations.
232. I am somewhat less confident of the provisions of clause 2 of the Closing Accounts and Limiting Account Access Policy which allows Paypal to limit the services provided on various grounds. It will be recalled that, in addition to breach of the User Agreement, these grounds include the receipt of complaints about the non-delivery of services by the consumer, excessive levels of dispute and a refusal to co-operate with any investigation. But they seem to me, in principle, to represent "valid reasons" for the purposes of paragraph 2(a) of Schedule 2; and, on balance, I would be prepared to hold that they also represented "serious grounds", as that expression is used in paragraph 1(g). The potential importance of the distinction is that, on the face of it, notification must be given to the consumer in the former case but not in the latter. But it seems to me that the complaints for non-delivery of services, excessive levels of dispute and refusal to co-operate in any investigation may, in themselves, be indicative of fraud or crime and that the party providing the services must, therefore, be able to suspend or terminate without immediately alerting the other party to what it has done.
233. I have given some brief consideration to the way in which these contractual provisions are set out in the various documents incorporated in the contract between Paypal and Mr Overy. The potential concern is whether they are readily comprehensible by a lay person so as not to contravene the general requirement that the relevant terms should be expressed in plain, intelligible language. But, save perhaps in relation to the Gambling and Lottery Policy, this was not an issue which was raised on the face of the pleadings or in the course of argument. Accordingly, I do not think it is appropriate to embark upon any analysis of this kind.
Individual Terms : Category 3

234. I must now turn to the next set of terms which are relevant to Mr Overy's case and which Mr Drake placed in his own second category. These are the ones which Mr Drake described as imposing "non-onerous positive obligations" on the customer. The relevant provisions are those set out at clauses 7.1 and 7.2 of the User Agreement, which deal with information provided by the customer during the registration or payment process, and those set out in the Acceptable Use Policy and the Gambling and Lottery Policy which require any customer intending to operate games of skill accessible to internet users in the United States of America to seek prior authorisation from Paypal.
235. I can deal comparative briefly with clauses 7.1 and 7.2 of the User Agreement. The first of these defines the expression "Your Information" as meaning "any information you provide to us or other users in the registration, payment process, Paypal Shops, or other features of our Service". Whilst this is couched in very wide terms, it must be borne in mind that the automated registration process requires the applicant for a Paypal account to provide only certain specific and limited categories of information. Clause 7.2, however, lays down a requirement that any information so provided should not, amongst other things, be "false, inaccurate or misleading".
236. Now these provisions are not directly challenged by Mr Overy in his Points of Claim. As it seems to me, therefore, they only become relevant indirectly insofar as Paypal reserves the right to suspend or terminate the services for breach by the customer of his obligations under the User Agreement or in the event that it was unable to verify or authenticate any information provided. For reasons which I have already given, a right to terminate for breach is not, in itself, likely to operate unfairly for purposes of regulation 5 of the 1999 Regulations, though it may do so if the customer's obligations are framed in such a way as to allow termination or suspension for minor or immaterial breaches of the customer's contractual obligations, so as to cause a significant imbalance in the rights and obligations of the parties.
237. I can see that it is at least arguable that a somewhat more measured and proportionate approach could have been adopted by the draftsman of these provisions, so as to confer a right of suspension or termination only where the information provided was false, inaccurate or misleading in a serious or material respect. But the information required from the applicant is limited in its scope; and, given the automated nature of the process, it seems to me that the applicant can properly be expected to be meticulous in the details which he provides. In the end, therefore, I do not consider that a right to suspend or terminate for breach of the obligation to provide true, accurate and non-misleading information is one which causes a significant imbalance in the parties' rights and obligations under the User Agreement to the detriment of the customer. Likewise, given the regulatory background and the risks to which Paypal is exposed, I do not consider that a right to suspend or terminate if Paypal is unable to verify or authenticate the information provided by the customer is to be regarded as unfair.
238. I now turn to consider the provisions of the Acceptable Use Policy and the Gambling and Lottery Policy upon which Paypal has relied in order to justify the termination, suspension or limitation of the services which it was contractually obliged to provide for Mr Overy. It will be recalled that the User Agreement itself expressly incorporated Paypal's Acceptable Use Policy, which was one of a number of policies specifically identified on the first page of the User Agreement and which the customer was expressly advised to review. The Acceptable Use Policy in its turn refers to a number of other electronic documents which, in effect, form part of the Policy itself and which can readily be opened up by clicking on the title. One of these is referred to as the Gambling Policy which is, of course the Gambling and Lottery Policy to give it its full title.
239. I have not previously quoted the introductory words of the Acceptable Use Policy, but I think it may be helpful to do so, since they appear to me to be both clear and intelligible. The relevant passage is in these terms:

"Paypal does not allow its service to be used for illegal activities. Paypal reserves the right to take preventative or corrective actions to protect itself and its users. Thus, Paypal has developed an Acceptable Use Policy ("AUP") as part of the User Agreement to which each customer agrees at the time of initiation of service. This policy helps customers identify activities that are illegal or may be illegal under certain circumstances, and to identify certain types of activities for which Paypal has decided not to process payments, even if the activities may be legal. Paypal reserves the right to revise or make exceptions to the AUP, in order to reflect changing customer and business needs. Notice of revisions to the AUP will be posted in the policy update section on Paypal's website..

Despite Paypal's active enforcement of its Policies, ultimately it is the responsibility of the user to ensure that all transactions comply with the Acceptable Use Policy and the guidelines below."

240. I have omitted from this quotation the reference to Paypal's website where the current Acceptable Use Policy was said to be available. There follows a section headed "Violations of the Acceptable Use Policy". I have already referred to these provisions which read as follows:

"Violating Paypal's Acceptable Use Policy may result in temporary or permanent limitation of a customer's account. This includes the inability to send and/or receive payments, to remove financial information from an account, and for users to close their accounts as a way of evading the policy. Additionally, users whose accounts are permanently limited for violating the Acceptable Use Policy are barred from future use of Paypal and its services, and such users are not permitted to open new or additional Paypal accounts.

241. The introduction to the Gambling and Lottery Policy points out that the laws and regulations governing gambling, lotteries, the use of gambling machines and related activities (all of which are referred to as "Gambling Activities") differ in degree and penalty depending on the jurisdiction in which users and operators of such activities are located. It states that the types of activities which it considers come within the scope of Gambling Activities for these purposes are those set out below, together with Paypal's Policy for using the services in connection with such activities.
242. Under the general heading "Policy" it goes on to say in clear terms that:

"You may not use Paypal for Gambling Activities unless the operator has received prior approval from Paypal and you are located in a jurisdiction in which Gambling Activities are legal. Paypal reserves the right to authorise or deny authorisation of an operator or user at its sole discretion.

Paypal requires operators to be approved to ensure the safety of all Paypal users and compliance with the laws and regulatory requirements that apply to this industry. How an operator may apply for approval is set forth at the end of this Policy.

243. This is followed by a specific note in bold type to this effect:

"Paypal prohibits the use of Paypal for gambling activities by any person (whether as user, operator or in any other capacity) if such a person is located in the United States ("U.S.") or any other jurisdiction in which gambling activities are illegal. Operators who wish to become approved by Paypal will need to demonstrate to Paypal's satisfaction that they have the ability to block the participation of their Gambling Activities by persons accessing the Paypal service in the U.S. and any other jurisdiction where the operator's Gambling Activities are illegal. Further, as no-one under the age of 18 is permitted to use the Paypal service, regardless of the jurisdiction, under no circumstances shall the use of Paypal be permitted by persons under the age of 18 for Gambling Activities."

244. These provisions are clearly framed so as to alert any user of Paypal's services to the need to obtain prior approval before engaging in any form of "Gambling Activities", coupled with an explicit warning that, if Paypal's facilities are to be used for such activities within the United States of America, the operator must show to Paypal's satisfaction that he has the ability to block participation by persons accessing the service in the United States of America in order to obtain the necessary approval from Paypal. The need for prior approval is emphasised yet again in the opening words of the general definition of "Gambling Activities" which immediately follows upon the warning in bold type. The relevant paragraph reads as follows:

"Unless the operator has been approved by Paypal, you may not use Paypal to send or receive payments for any form of Gambling Activities, including but not limited to payment for wagers, gambling debts or gambling winnings, whether conducted online, in person or through any other means of communication. Gambling includes placing, accepting, recording, or registering bets, participating in lotteries or otherwise carrying on a game of chance or game of skill (except as permitted in the manner set forth below) for money, property, or other things of value. This prohibition includes all gambling operations, even if and where such activities do not constitute unlawful conduct."

245. What is obviously of importance for the purposes of the present litigation is the inclusion within this definition of the words: "participating in lotteries or otherwise carrying on a game of chance or game of skill...for money, property or other things of value." Whilst there may be room for debate as to whether Mr Overy's competition was a lottery and as to the relative importance of chance or skill in identifying the appropriate point on the photograph, it nonetheless clearly falls within this part of the definition. On the face of it, therefore, Mr Overy required prior authorisation from Paypal in order to use this account for the purposes of his competition, even if it was entirely lawful within the United Kingdom and was not accessible to participants located within the United States of America.
246. But the definition expressly allows for an exception where the activity is permitted "in the manner set forth below". In fact, however, the following sections of the Gambling and Lottery Policy yet again state that, unless Paypal has approved the particular operator, neither operator nor user may use Paypal's services for a number of specific gambling activities which are then listed. These include the buying and selling of lottery tickets or any other opportunity to participate in a lottery or other game of chance. But they also include certain "games of skill". These are ones "where the elements of skill cannot conclusively be established to predominate over those of chance in determining the outcome".
247. I am bound to say that I have substantial reservations as to whether Mr Overy's competition could be said to be one where the elements of skill can conclusively be established to predominate over those of chance in determining the outcome. The relative importance of these elements has not been determined in this litigation so far and is not in issue for the purposes of the present judgment. But it should be noted that by paragraph 11 of Schedule 1 to my order of 15^th May 2009 on Paypal's application for summary judgment, I declared amongst other things that the competition was "a game of skill (if not a game of chance)" for the purposes of these provisions of the Gambling Policy.
248. But, even assuming that skill clearly predominated over chance, there is a further exception within the exception, since the policy goes on to provide as follows:

"Operators of games of skill where the elements of skill are clearly predominant over those of chance may use Paypal to accept entry fees or similar payments only if they have in place a program to block users from the U.S, and other jurisdictions where it is illegal to operate a paid contest of skill."

249. So, even if the element of skill clearly predominated, Mr Overy could not accept entry fees from persons located in the United States of America unless he had such a programme in place. But I have already held, at paragraph 10 of Schedule 1 to my order of 15^th May 2009 that the competition was open to internet users without geographic restriction and was, in particular, accessible to users in the United States of America.
250. What may be regarded as somewhat less clear, however, is whether he would still require prior approval from Paypal if his competition was one where the elements of skill were clearly predominant over those of chance, given its accessibility to users based in the United States of America. But, by paragraph 7 of Schedule 1 of my order of 15^th May 2009, I have already determined, as a matter of construction, that he was not entitled, without having obtained Paypal's prior authorisation, to engage Paypal's services in relation to any game of chance or to any game of skill open to internet users without geographic restriction. As I also held, at paragraph 12 of Schedule 1 to my order, he did not obtain any such prior authorisation.
251. In his Points of Claim in the present phase of the proceedings, however these provisions are directly challenged on the grounds that they cause a significant imbalance in the parties' rights and obligations to the detriment of the consumer and therefore fall foul or regulation 5(1) of the Unfair Terms in Consumer Contract Regulations 1999. But the requirement for prior authorisation is not one of the terms picked out for attention in Schedule 2 to the 1999 Regulations; and Mr Overy's case is not articulated in any further detail in his Points of Claim.
252. Given the risks faced by Paypal in relation to activities which are or may be held to be unlawful in different jurisdictions, I cannot readily see how, in principle, a requirement of prior authorisation can be regarded as unfair unless it is so widely drawn as to cover a range of activities which could not sensibly be regarded as exposing it to any risks of this kind. In the present case, however, I do not think that such a requirement can be criticised on those grounds. Furthermore, given the nature of the risks involved, it seems to me that provisions allowing for the suspension or termination of its services in the event of any breach of the relevant provisions of its Gambling and Lottery Policy cannot be regarded as falling foul of the requirements of regulation 5(1), even if the power is exercisable without notice.
253. The only real question, as it seems to me, in relation to these particular provisions is whether they may be regarded as unfair on the grounds that they are not expressed in clear and intelligible language. That was not, in fact, a point which was raised on the face of the pleadings; nor was it addressed either by Mr Overy or Mr Drake in the course of submissions. So, even though the court may be under a duty to consider questions of unfairness of its own motion, I would be reluctant to make any finding adverse to Paypal on those grounds.
254. But it does not seem to me that any of these provisions should be held to be unfair on the basis of unintelligibility. It is true that it may not be immediately obvious on the face of the Gambling and Lottery Policy that, even in relation to a game or competition in which the elements of skill are clearly preponderant, prior authorisation from Paypal may be required, at least where the facilities are accessible by users located in the United States of America. But the extensive range of activities which are covered by the policy is apparent on its face; and the general requirement for prior authorisation and the specific warning about operations accessible from the United States of America are clearly set out in bold type on the first page of the Policy. Furthermore, in case of doubt, a specific e-mail address was set out at the end of the Policy to which any inquiries could be directed.
Individual Terms : Category 4

255. The only other question which arises under the Unfair Terms in Consumer Contracts Regulations 1999 is whether the limitation on liability set out in clause 2.5 of the User Agreement is one which falls foul of regulation 5(1). These provisions are also attacked on the grounds that they do not meet the test of reasonableness set out at section 11(1) of the Unfair Contract Terms Act 1977 which, unlike the 1999 Regulations, undoubtedly applies to the contract between Paypal and Mr Overy.
256. Clause 2.5 of the User Agreement starts by stating that Paypal would only be liable to the other party for loss or damage caused directly by Paypal's negligence or breach of the User Agreement. It then goes on to provide that, even in those circumstances, any liability would be limited to the extent set out in the rest of the clause. The provisions limiting liability are in these terms:

"We shall not be liable to you for any loss or damage which you may suffer as a result of using the Service including, without limitation, losses resulting from your access to websites other than ours. In no event shall we, our affiliates, subsidiaries, agents, suppliers and/or subcontractors be liable for any of the following types of loss or damage arising under or in relation to this Agreement:

Any loss of profits, goodwill, business, contracts, revenue, or anticipated savings; or

Any loss or corruption of data; or

Any indirect or consequential loss or damage whatsoever..

Our liability and the liability of our affiliates, subsidiaries, agents, suppliers and sub-contractors to you and any third parties in any circumstances is limited to the greater of (a) the amount of fees you pay to us in the 12 months prior to the action giving rise to liability, or (b) the value of the transaction or stored value giving rise to the dispute."

257. Though I have cited these provisions in full, save for omitting a saving in respect of death or personal injury, the only parts which are the subject of challenge in the present litigation are those excluding liability for loss of profits, for any indirect or consequential loss and the like and the limitation of liability by reference to fees paid or the value of the transaction giving rise to a dispute.
258. I will briefly consider the application of the Unfair Terms in Consumer Contracts Regulations 1999 to these provisions, in case I am wrong in my conclusion that Mr Overy did not contract as a consumer and is not, therefore, entitled to the protection of the Regulations. As Mr Drake, on behalf of Paypal, recognised, such exclusions or limitations of a consumer's rights under an agreement of this kind may well come within the scope of paragraph 1(b) of Schedule 2 to the 1999 Regulations. This, it will be recalled, included amongst the indicative list of terms which might be regarded as unfair those which had the object or effect of:

". inappropriately excluding or limiting the legal rights of the consumer vis-a-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations."

259. For my part, I would not have thought that, in principle, an exclusion of liability for any loss of profits and the like would be "inappropriate" in an agreement which, ex hypothesi, is to be regarded as a consumer, rather than a business contract. Such an exclusion can hardly cause a significant imbalance in the parties' rights and obligations to the detriment of the consumer.
260. The same would, however, be less obviously true in relation to an exclusion of indirect or consequential loss in a consumer contract. Furthermore, the Guidance issued by the Office of Fair Trading in relation to provisions of this kind points out that the technical meaning of such an expression is likely to be unknown to most consumers and could, in any event, cause hardship if the facts which might give rise to the loss in question had, in fact, been disclosed to the supplier at or before the time the contract was made. In the circumstances, if I had held that Mr Overy was entitled to the protection of the 1999 Regulations, I would have been inclined to hold that the exclusion of liability for indirect or consequential loss was unenforceable. Furthermore, in view of what I have to say later in this judgment when considering the application of the Unfair Contract Terms Act 1977, I would similarly have held that the limitation sought to be imposed by Paypal on the amount recoverable in respect of any other head of liability would also be unenforceable.
PART VII
The Unfair Contract Terms Act 1977

261. Mr Overy's pleaded case is that the limitation on liability set out at clause 2.5 of the User Agreement contravenes sections 2(2) and 3(2)(a) of the 1977 Act. By section 1(3), both of these sections apply only to "business liability", that is to say 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 is quite clear that any liability on the part of Paypal under the terms of the User Agreement must constitute a "business liability" for these purposes. Section 2(1) goes on to provide that a person cannot, whether by reference to any contract term or to a notice, exclude or restrict liability for death or personal injury resulting from negligence. That is manifestly irrelevant in the circumstances of the present case. But section 2(2) continues as follows:

"In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness."

262. Section 3 of the Act applies where, as in the present case, one of two contracting parties deals on other party's written standard terms of business. It also applies where one of them deals as a consumer; but, for reasons which I have already given, I do not consider that Mr Overy can be regarded as having dealt with Paypal in that capacity. The relevant provisions are then set out at section 3(2)(a) which reads as follows:

"As against that party, the other cannot by reference to any contract term....when himself in breach of contract, exclude or restrict any liability of his in respect of the breach......except in so far as......the contract term satisfies the requirement of reasonableness."

263. The requirement of reasonableness is the subject of specific further provision at section 11(1) of the Act. This states that:

"In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act.. ..is that the term should have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made."

264. Section 11(4) deals with the case where, by reference to a contract term or notice, a person seeks to restrict liability to a specified sum of money. Where the question arises as to whether such a term satisfies the requirement of reasonableness, it is specifically provided that regard should be had in particular to the resources which he could expect to be available to him for the purpose of meeting the liability, should it arise, and how far it was open to him to cover himself by insurance. Finally, by section 11(5) it is laid down that it is for the party claiming that a contract term satisfies the requirement of reasonableness to show that it does.
265. The terms in question undoubtedly seek to exclude or restrict liability in the manner contemplated by sections 2(2) and 3(2)(a) of the Unfair Contract Terms Act 1977; so the only question is whether the exclusion or restriction satisfies the requirement of reasonableness, that is to say whether the provisions were fair and reasonable ones to be included in the User Agreement, having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made. Amongst the factors to be taken into account in relation to the limitation on the amount recoverable for any breach are the resources which Paypal could expect to be available to it for the purposes of meeting any such liability and how far it was open to it to cover itself by insurance. Furthermore, the burden of showing that it satisfies the requirement of reasonableness lies upon Paypal.
266. Paypal's case on this issue is set out at paragraph 34 of its Points of Defence. It is alleged that it served about 3% of the merchant services market within the United Kingdom (though Mr Caplehorn suggested in his witness statement that this may have been a considerable underestimate) and that the fees payable were only a "tiny proportion" of the payments which it handled. Furthermore, it had only limited information as to the nature of the business for which its customers sought to use its services, so that it was in no position to anticipate or estimate the likelihood or scale of any loss of profits or the like which might be incurred by any of its customers in the event of the termination, interruption or suspension of its services. Yet further, it was either impossible or at least uneconomic for Paypal to obtain insurance cover in relation to any liability in respect of such losses.
267. These matters were also addressed by Mr Caplehorn at paragraphs 40, 41 and 42 of his witness statement. He stated that, given the nature of its business, Paypal could not possibly expect to have a sufficient appreciation of its merchants' businesses to make any accurate assessment of the risks involved. He also contended that exclusions for consequential losses, including, in some cases, loss of business, goodwill, opportunity and profit, were common within the United Kingdom banking sector; and he referred to the standard business terms of a number of banks. Finally, he stated that it would have been a "practical impossibility" to secure adequate insurance to cover consequential losses across the entirety of its business; and even if such cover were available, the cost would be so high that it would no longer be economic for it to provide the same services at the current level of fees. None of this was challenged by Mr Overy, save for some fairly limited probing of what Mr Caplehorn had to say about insurance cover.
268. For my part, I consider that these matters are sufficient to establish that the exclusion of liability for loss of profits and the like, as set out in clause 2.5 of the User Agreement, fulfil the requirement of reasonableness for the purposes of the Unfair Contract Terms Act 1977. In a business context, I would also hold that the exclusion of any liability for indirect or consequential loss would also fulfil this requirement. It is true that the meaning of the expression "indirect or consequential loss" may not always be immediately apparent to someone unversed in legal technicalities; indeed, the courts have had to grapple with its meaning on a good number of occasions. But the expression has acquired an almost ritual status in exclusion clauses; and in that context will normally be narrowly construed as excluding only losses of a kind which fall within the second limb of the dichotomous approach adopted in Hadley v Baxendale (1854) 9 Ex 341. So the exclusion would seem to be narrow in scope and unlikely to add anything of significance to the exclusion of loss of profits, goodwill, business, contracts, revenue, or anticipated savings.
269. Rather more problematical is the limitation of liability which follows by which any damages are to be limited to the greater of the amount of fees paid by the other party to Paypal in the 12 months prior to the action giving rise to liability or "the value of the transaction or stored value" giving rise to the dispute. None of the evidence before me was specifically directed to the reasonableness of this provision; and I was not addressed upon it either by counsel for Paypal or by Mr Overy. For my part, I am not even sure what is meant by the second of the two alternative measures; and the first seems fairly arbitrary, though it no doubt provides some sort of yardstick by which to assess of the extent to which Paypal's services were used by the party in question. Whilst I can understand the commercial reasons which might have led Paypal to seek to impose a cap on any liability which is not otherwise excluded, I can see no obvious justification for seeking to limit it in this way. In short, I am not persuaded that Paypal has discharged the burden which lies upon it to show that this particular limitation fulfils the requirement of reasonableness for the purposes of the 1977 Act. In my judgment, therefore, Paypal would not be entitled to rely upon this provision as against Mr Overy in order to restrict any liability to him for negligence or breach of contract.
270. Finally, for completeness, I must briefly consider whether the right reserved by Paypal to terminate the Agreement with immediate effect under clause 1 of the User Agreement would fall foul of any of the provisions of the 1977 Act. I have, of course, already expressed my views on the extent to which the provision could be susceptible to a challenge under the 1999 Regulations; and I need not repeat the observations which I made in that context. The challenge under the Act is based upon section 3(2)(b)(i) which provides that where one of the contracting parties deals on the other's written standard terms of business, that other party cannot, by reference to any contract term, claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of him, unless the term in question satisfies the requirement of reasonableness.
271. I confess that I do not find this a particularly easy issue to resolve; and I was not referred to any relevant authority. But, in the end, I am not persuaded that the exercise of such a power would amount to a contractual performance substantially different from that which could reasonably have been expected of Paypal, so the question of reasonableness does not arise.
PART VIII
Conclusions

272. For the reasons which I have set out in considerable detail in the body of this judgment, I have reached the conclusion that Mr Overy is not entitled to the protection of the Unfair Terms in Consumer Contracts Regulations 1999 but that, even if he had, I would not have held that any of the individual contractual provisions in his contract with Paypal which he challenges would be unenforceable under those Regulations, save for the unrestricted power reserved by Paypal to terminate without cause and without notice and some of the provisions limiting or restricting liability for breach of contract. On the other hand, Mr Overy is entitled to the protection of the Unfair Contract Terms Act 1977, though only two of the relevant contractual provisions are challenged on this basis. Under the Act, I have concluded that Paypal is nonetheless entitled to rely upon the exclusion of any liability for loss of profits, goodwill, business, contracts, revenue or anticipated savings under clause 2.5 of the User Agreement, and on the more general exclusion of liability for any indirect or consequential loss or damage. But it is not entitled to rely upon the limitation of the amount of any damages in respect of any liability which is not wholly excluded. I have also come to the conclusion that Paypal's power of summary termination without cause and without notice does not come within the provision of section 3(2)(b)(i) of the Act and that it is therefore unnecessary to consider whether it would or would not fulfil the requirement of reasonableness.