Council wins injunction against telesales company that moved out of its area

Oldham Council has secured an injunction against a national telesales company and its director, with the High Court rejecting the defendants’ contention that the company’s move outside the area left the local authority with no power to take such action.

In Oldham Metropolitan Borough Council v Worldwide Marketing Solutions Ltd & Anor [2014] EWHC Oldham applied for a final injunction to restrain Worldwide Marketing Solutions (WMSL) from continuing to use certain misleading advertising in selling to other traders in breach of regulation 3(1) of the Business Protection from Misleading Marketing Regulations 2008.

The council also sought an injunction against Danny Kay, who was the sole shareholder in the company as well as its director.

The services offered by the company were enhancement of the customer’s profile on the internet, and in particular the position their website would achieve in Google rankings.

The council, from around June 2010, had become aware of many complaints about WMSL’s advertising. Despite an undertaking being given on the company’s and Kay’s behalf to the council and a contractual undertaking being given to Google, the local authority continued to receive complaints.

In April 2013, Oldham commenced proceedings, seeking an injunction pursuant to regulations 15 and 18 of the 2008 Regulations.

The defendants accepted that WMSL had been acting in breach of the 2008 Regulations. They also accepted that they could not resist the grant of an injunction (in more restricted form than that sought by the council) if applied for by an appropriate enforcement authority.

The sole defence advanced on their behalf at the trial was the contention that the council was not such an authority. The defendants based this on the fact that, about a year before the proceedings were commenced, WMSL had moved its place of business from Oldham to Manchester, out of the council's area.

They therefore asserted that the council ceased to have power to pursue the matter given that WMSL had left the Oldham area for a significant period.

Pursuant to regulation 13(2), the duty and therefore implied power of the council is to enforce the 2008 regulations “within the authority’s area”. With WMSL having ceased to trade in Oldham’s area, and the council not having obtained delegated authority from another authority under s. 101 of the Local Government Act 1972, Oldham’s power to seek could only arise, if at all, under s. 222(1) of the 1972 Act.

Counsel for the defendants argued that, with WMSL ceasing to trade in the area in 2012, Oldham could not – as required by s. 222(1) – properly consider it to be expedient for the promotion or protection of the interests of the inhabitants of its area to pursue injunctive relief against the defendants, with the effect that the council did not have power to do so.

Counsel for Oldham meanwhile relied on the "extremely wide" wording of s. 222(1) (see R v. Jarrett and Steward (1997) 161 JPN 816). He contended that, given the advanced state of the council's investigations when WMSL relocated, the council considered (and properly so considered) that it was in the interests of the inhabitants of its area to bring these proceedings.

Mr Justice Phillips rejected the defendants’ arguments, saying the council was fully entitled to conclude that bringing the proceedings was expedient in the interests of the inhabitants of Oldham.

“There were both broad policy reasons and specific aspects of this case which, individually, and certainly if considered cumulatively, justified such a conclusion,” he found.

Mr Justice Phillips said:

1. The inhabitants of an area had a clear and obvious interest in the local authority taking reasonable steps to procure that undertakings it had extracted from traders (such as that given by the defendants in this case) were enforced through proceedings where breached. “If such steps are not taken, and undertakings are seen to be breached with impunity, the force and utility of such undertakings will be undermined, lessening their effect and usefulness and consequently leading to greater expense in taking proceedings instead of or in addition to accepting undertakings. It follows that a local authority can properly take the view that it is in the interests of the inhabitants of its area to bring (and to be seen to be bringing) proceedings against a trader who has given but then breached an undertaking, even if the trader has subsequently left the authority's area.”
2. Given the timing of WMSL's re-location (shortly after the search warrant was executed at its Oldham premises), the short distance the business moved and Kay's continued connections with the Oldham area, the council was “entitled to perceive a real risk that WMSL would return to its Oldham area in the foreseeable future”.
3. Oldham was entitled to take into account the likelihood (if not inevitability) that WMSL's future sale business, whilst conducted nationally, would include sales calls to businesses based in Oldham. “Whatever the content and merits of the four complaints which had been received from Oldham based businesses, their existence demonstrate that businesses in Oldham are by no means excluded from the scope of WMSL's sales calls. If the council were considering the matter afresh and in isolation, there might be a question as to whether the risk to local businesses justified taking proceedings. But where the council had already investigated sales practices in question, obtained undertakings and executed a search warrant to establish ongoing breaches, it could readily conclude that the final step of obtaining an injunction was justified to protect the interests of its inhabitants.”

Mr Justice Phillips added that s.222(1) was widely worded, “imposing no express restriction on what a local authority may properly consider to be expedient to promote or protect the interests of its inhabitants”.

He added that there was “no basis" for limiting the matters the local authority may consider to activities taking place within the relevant area or directly affecting its inhabitants.

“In my judgment, a local authority can properly take into account broader considerations of how to promote or protect the interests of its inhabitants, not limited to situations where unlawful activity is continuing or contemplated within its area,” the judge said.

“Indeed, [counsel for the defendants’] acceptance that proceedings can properly be brought against a trader who left the area shortly before their commencement itself demonstrates that wider considerations might apply where unlawful practices no longer directly affect the inhabitants of an area. The fact that future legislation may permit a local authority to act outside its area without express restriction does not mean that such an authority cannot currently do so where it considers it expedient to do so in the interests of its inhabitants, as permitted by s. 222(1).”

Mr Justice Phillips also rejected the defendants' contention that the council had not adduced evidence that it had considered s. 222(1) when commencing proceedings.

The judge concluded: “Given that WMSL is trading nationally and has breached the terms of undertaking which is not restricted in its geographical extent, it is entirely appropriate that an injunction should be granted which extends to the entirety of England and Wales.”