The Price of a Ticket: English Court of Appeal Provides Useful Guidance to Protect ‘Genuine’ Consumers
The English Court of Appeal has recently provided helpful and powerful guidance to those who seek to engage in the harvesting and touting of tickets to popular sports, music and cultural events.
The case concerned an appeal by Peter Hunter and David Smith who were both convicted at Leeds Crown Court in February 2020 for fraudulent trading contrary to Section 993(1) of the Companies Act 2006 for possession or control of an article for use in fraud contrary to Section 6(1) of the Fraud Act 2006. Hunter was sentenced to a term of imprisonment of four years. Smith was sentenced to a term of imprisonment of two years and six months. Both were disqualified under Section 1 of the Company Directors Disqualification Act 1986 for 10 years.
At the time of their convictions, Hunter and Smith were directors of a company called BZZ Limited (which had originally been incorporated under the name Ticket Wiz Limited). The business of the company was to acquire and then resell tickets for music and other popular cultural sporting events. Smith resigned his directorship in March 2020. Hunter remains an active director of the company. The evidence before the Leeds Crown Court established that from June 2015 to December 2017, the appellants made an outlay of about £4 million acquiring tickets and obtained returns exceeding £10.8 million.
In his judgment, Lord Justice Green said that the appeals raised novel points concerning the legality of what is known as “ticket touting”. This is the practice where individuals or companies acquire tickets (often on a large-scale basis) for popular sporting, music and cultural events and then seek to resell those tickets for profit often in contravention of the terms and conditions imposed by the event organiser preventing resale.
While the appeal concerned the consideration of the criminal laws upon which Hunter and Smith had been convicted in 2020, the Court of Appeal considered and gave judgment on both the “fairness” and enforceability of terms and conditions that seek to impose restrictions on the purchase and resale of tickets, the risk of ticket nullity, and also the status in law of a “ticket”. This article will concentrate on what the Court of Appeal said in relation to these two latter issues.
The enforceability of restrictions on the purchase and resale of tickets
In their appeal, Hunter and Smith said that the lower court judge had erred in saying to the jury that various sets of terms and conditions placed before them were clear, lawful and effective. In so doing, it was submitted that neither Hunter nor Smith had the opportunity to assess the fairness of the ticket resale restrictions that are often imposed by event organisers. Hunter and Smith said that restrictions on ticket resales were unlawful.
The Court of Appeal rejected the appellants’ submissions. In his judgment, Lord Justice Green said that there was no argument for suggesting that there was any systemic unfairness in terms that restricted resales of tickets. The Court agreed with the guidance of the Competition and Markets Authority which had pointed out that restrictive terms designed to curb ticket touting may serve a legitimate objective. The Court acknowledged that the fairness of a particular term or terms will be context and fact sensitive. However, the Court said that the objective of a ticket resale restriction is to protect a consumer by preventing the touting and harvesting of tickets which has a substantial effect on the availability of tickets to genuine consumers. The judge said that harvested tickets are often placed on secondary ticketing websites at inflated prices which benefits the touts to the detriment of genuine consumers. Also, the judge said that if the terms were unfair and unenforceable, then it would create an environment where ticket touts could operate “almost with impunity and ticket vendors could do nothing to prevent the practice”. The judge was clearly mindful of the evidence before the jury at the Leeds Crown Court which established the “significant” practical difficulties confronting event organisers seeking to enforce their contract resale restrictions and that allowing touts to sell tickets at hyper-inflated prices would cause the event organisers reputational harm.
The Court held that ticket resale terms are “intrinsically reasonable and proportionate” because they directly seek to prevent the harvesting and touting of tickets.
The status in law of a “ticket”
Another issue in the appeal concerned a submission by Hunter and Smith that if a ticket was “property” or a “good”, then when it passed hands away from the appellants and into the possession of the consumer, it contained imbedded within it the full bundle of rights but not the burdens. In other words, the appellants said that a ticket sold by them converts into a licence upon entry when presented at the gate of a venue for admittance such that the licence could not be revoked for any breach of the ticket terms and conditions.
Unsurprisingly, the Court of Appeal disagreed with Hunter and Smith and proceeded to dismiss the submission.
In his judgment, Lord Justice Green said that even if a ticket was a “property” right or a “good”, that alone does not sever it from the burdens attaching to the benefits. The judge went on to say that a “property” or a “good” tells you nothing about the attached rights and obligations. He said that in law a ticket is evidence or proof of two things. First, it is a right to enter land as a licensee and not as a trespasser. Second, it is proof of a right to receive a service, namely that to be performed or provided on the land. In essence, a ticket is a chose in action – it is a contractual licence issued on terms. A ticket is not merely a “good”. When it is handed from person to person, it transfers any restrictions upon use.
Conclusion
The Court of Appeal’s judgment is yet another example of what the Court said it would do in Chelsea FC Limited v Corrigan [2019] EWCA 1964, a case in which Armstrong Teasdale acted for Chelsea FC, when Lord Justice Davis (1) endorsed a judicial description of ticket touting as a “disreputable scourge” and (2) said that the “activities of ticket touts are pernicious. Doubtless they will never be eradicated; but the courts will lend their assistance to institutions seeking to detect and prevent those activities. Defendants who engage in such activities should not be surprised that, when detected, they may face robust orders and sanctions”.
Event owners and consumers should feel encouraged that the Courts will do what they can to prevent the harvesting and touting of tickets to popular sporting, music and cultural events. It is clear that event owners who wish to ensure that their events are open to genuine consumers are well advised to ensure that their ticket resale restrictions are drafted carefully and clearly and with the benefit of legal advice.
Hunter & Anor, R. v (Rev1) [2021] EWCA Crim 1785 (26 November 2021) (bailii.org)
