In Green v Petfre (Gibraltar) Ltd (t/a Betfred), the High Court ruled that Betfred were liable to pay out a customer’s £1.7 million winnings on a side bet allegedly caused by a software defect, despite Betfred’s claims that their consumer terms excluded liability for such defects. This judgment provides an important reminder for any B2C businesses, not just gambling operators, seeking to exclude their liability for software defects online (or indeed for anything else). In particular, online businesses should be asking themselves whether their exclusions of liability are sufficiently (1) specific; (2) prominent; and (3) fair. If they fall short in any of those three areas, they may not be enforceable.2

The dispute arose when Andrew Green won £1,722,500.24 worth of betting chips on a side bet in “Frankie Dettori’s Magic Seven Blackjack”, an online blackjack game provided on Betfred’s website (the “Game”).

Betfred withheld Mr Green’s winnings, maintaining that they were under no obligation to pay out, as the abnormal winnings were caused by a defect in the Game’s software and liability for this was excluded in their terms and conditions.

Mr Green’s success underlines the importance of companies drafting fair and precise exclusion clauses, as well as clearly signposting those clauses to customers on their websites.

Points of Contention

Betfred cited clauses in three website documents which it believed to be contractually effective in excluding their liability to Mr Green:

1. General Betfred terms and conditions of use (the “Terms”).
2. An end-user licence agreement (the “EULA”).
3. Individual Game rules.

Mr Green’s Claim

Mr Green argued that Betfred’s failure to pay out was in breach of Clause 2.4 of the Terms, which governed the withdrawal of customer funds:

• Clause 2.4: “Customers may withdraw funds from their account at any time providing all payments have been confirmed.”

Mr Green maintained that Betfred’s attempts to exclude their liability through clauses in the Terms were ineffective and that the clauses did not cover his specific circumstances as the wording did not authorise Betfred to avoid paying out winnings due to hidden defects in the Game’s software. Software had been defined in the Terms as software providing access to the game, rather than relating to the online game itself.

In addition, Mr Green argued that he was insufficiently notified of Betfred’s exclusion clauses, so they were not incorporated into the contract between the parties.   In any event, under the Consumer Rights Act 2015, the exclusion clauses did not meet the threshold of being fair and transparent so could not be relied upon.

Betfred’s Defence

Betfred maintained that the rights referred to in Clause 2.4 concerned the withdrawal of the customer’s own money placed into the account rather than the “chip balances” in the Casino area of the website that Mr Green sought to withdraw.

Betfred highlighted the following clauses which it felt sufficiently excluded any liability for paying out Mr Green’s winnings:

• Clause 5 of the EULA – “Disclaimer of Warranties” – “WE AND THE VENDOR DO NOT WARRANT, AMONG OTHER THINGS, THAT (A) THE SOFTWARE WILL BE NON-INFRINGING, (B) OR THAT ANY DEFECTS IN THE SOFTWARE WILL BE CORRECTED, OR THAT THE SOFTWARE IS VIRUS-FREE; (C) THE SOFTWARE IS OF SATISFACTORY QUALITY OR FIT FOR ANY PARTICULAR PURPOSE; OR (D) USE BY YOU OF THE SOFTWARE WITH ANY OTHER SOFTWARE, OR WITH INAPPROPRIATE HARDWARE, WILL NOT CAUSE ANY DISTURBANCE TO THE SOFTWARE OR TO SUCH OTHER SOFTWARE … NEITHER WE NOR OUR AFFILIATES AND RELATED PARTIES WILL BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR PAYMENTS MADE TO YOU AS A RESULT OF A DEFECT OR ERROR IN THE SOFTWARE, OR IN CONNECTION WITH ANY CLAIM OR DEMAND MADE BY THE VENDOR OR ANY THIRD PARTY FOR THE RETURN OF SUCH PAYMENTS OR OTHERWISE IN CONNECTION WITH SUCH PAYMENTS”.
• Clause 4.4 of the Terms – “WE DO NOT WARRANT THAT THE SOFTWARE WILL BE NON-INFRINGING OR THAT THE OPERATION OF THE SOFTWARE WILL BE ERROR FREE OR UNINTERRUPTED OR THAT ANY DEFECTS IN THE SOFTWARE WILL BE CORRECTED, OR THAT THE SOFTWARE OR THE SERVERS ARE VIRUS-FREE. IN THE EVENT OF COMMUNICATIONS OR SYSTEM ERRORS OCCURRING IN CONNECTION WITH THE SETTELMENT OF ACCOUNTS OR OTHER FEATURES OR COMPONENTS OF THE SOFTWARE NEITHER US NOR OUR SOFTWARE PROVIDER WILL BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR ANY COSTS, EXPENSES, LOSSES OR CLAIMS ARISING RESULTING FROM SUCH ERRORS“
• Clause 2 of the EULA – to incorporate the Game Rules – “The rules of the Online Games are placed in www.betfred-casino.com as well as other sections of the Software and the Website, including but not limited to rules describing how to play the Online Games, tournaments, and any other rules governing particular game, event and tournament. All such rules are incorporated and included under the Terms and Conditions set out herein”.

Judgment

The court’s decision covered three main issues:

1. The natural interpretation of the clauses relied upon and whether they excluded liability.
2. Whether the clauses were incorporated into the contract between Betfred and the customer.
3. Whether Betfred were able to rely on any (or all) of the clauses to exclude liability.

With respect to the first issue, the court found that the language (particularly in Clause 4.4 of the Terms) could only exclude Betfred for obvious malfunctions, such as software or connectivity issues which would be easily detectable by the consumer. The wording of these clauses failed to make adequate reference to voiding bets or withholding winnings in circumstances such as Mr Green’s. In particular, the intended meaning of the phrase “payments made to you” (Clause 5 of the EULA) was considered too obscure cover a customer in Mr Green’s position and so could not be construed to exclude liability for Betfred to pay out Mr Green’s winnings.

On the incorporation of the clauses, the court found that Betfred inadequately signposted the exclusion clauses to online consumers. The clauses, and their importance to the customer, were not prominent enough or “brought to the consumer’s attention in such a way that the average consumer would be aware” of them (section 64(4) of the CRA 2015).

With reference to the Consumer Rights Act 2015, the court concluded that the clauses were not fair or transparent. Despite the court’s acceptance that Mr Green qualified as an experienced and competent online betting player, the obscurity of Betfred’s language meant that its terms were unfair. Such unfair terms could not bind Mr Green.

Whilst Betfred proposed an additional argument that Mr Green’s winnings were the result of a mutual mistake from both parties, the court found mistake to be inapplicable. The reasoning was that the mistake did not render the contract impossible to perform, but simply less advantageous to Betfred.

Conclusion

This case offers a stark reminder to gambling operators that ensuring their consumer terms are fair within the meaning of the Consumer Rights Act 2015 is not just important for compliance with their licence conditions but a failure to do so can have very real consequences. Within the circumstances of the case, general exclusion clauses were deemed insufficient for excluding liability to pay out. Therefore, gambling operators would be well advised to double check their existing terms and conditions to ensure that they are adequately clear and specific on what they are excluding liability for. Where clauses are open to interpretation, courts are likely to adopt the meaning which is most favourable to the consumer.

Even if exclusion clauses are specific enough, there is an onus on online businesses to draw those clauses sufficiently to the customer’s attention. Failure to do so will mean that clauses are inadequately incorporated into the contract between the parties and, therefore, cannot be relied upon.

Clauses must also be fair and transparent, with onerous clauses, or those made in bad faith, likely to be judged firmly by courts. Unfair terms within such clauses will not be binding on the consumer.

Whilst the outcome of this case was specific to the circumstances, it underlines the significance of drafting specific, fair and transparent exclusion clauses, and bringing them to the customer’s attention. Online operators must provide clear language within their terms and conditions, addressing the occurrence of hidden technical defects and the consequences this will have on the consumer.  Ultimately, it must be clear which terms apply to a consumer, particularly within an online environment.