England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE WALSALL COUNTY COURT
HHJ GREGORY
8WJ00613,8WJ00608,
8WJ00605 & 8WJ00610

		Royal Courts of Justice Strand, London, WC2A 2LL
		29/10/2010

Lord Justice Mummery :

1. Get Training Limited (the Company) brought actions in three different County Courts for the recovery of liquidated sums charged under contracts with the appellants for the provision of training services to them in 2007. The courts at first instance and on the first appeal were unanimous. Judgments obtained by the Company in proceedings allocated to the small claims track in the County Courts at Hereford (District Judge Nield on 16 March 2009 in the case of Jamie Perkins), Walsall (District Judge England on 17 March 2009 in the case of Ciarian Darby) and Wolverhampton (Deputy District Judge Mason on 14 April 2009 in the cases of Steven and Robert Clarke) were upheld by HHJ Gregory on appeal in the Walsall County Court on 13 July 2009. He also dismissed the appeals against the costs orders at first instance and made no order for the costs of the appeal to him. On an application for permission to appeal the judge correctly pointed out that only the Court of Appeal could permit a second appeal.
2. In granting permission to appeal and a stay on 17 February 2010 Stanley Burnton LJ stated that there was a sufficient compelling reason for a second appeal "given that a number of young people are affected who, on one view, have been involved in a fraudulent misrepresentation of which they were innocent." At the hearing of the appeal it became perfectly plain that the grant of permission was fully justified.

Background

3. Although the appellants' cases differ in detail, all the essential facts are the same and are not in dispute on the appeal. The separate proceedings were treated by HHJ Gregory on the first appeal and by the parties in this court as giving rise to identical issues. Some of the original defences, such as that no agreements for training services were made or that no training services were delivered, were dropped.
4. The Company, which is based in Wolverhampton, provided adult vocational training courses for people wishing to qualify as Domestic Energy Assessors by obtaining a Domestic Energy Assessment Diploma or Certificate. The qualification would enable its holder to seek employment generated by the Government's then requirement for a Home Information Packs (HIPs) on a house sale. (HIPs were abolished in May 2010 following a change of government.)
5. The charge for the two week course was £3,595 plus a deposit of £400. Payment in full had to be made by the appellants before the start of their course. The Company then informed the appellants of an alternative method of paying for the course. They were each issued with an application form for a loan under a Fixed-sum Loan Agreement with a finance company, GE Money Home Lending Limited or GE Money Consumer Lending Limited (GE Money), a dealer within the Consumer Credit Act 1974 (the 1974 Act). In May 2007 each appellant gave a signed application form to the Company for it to process. The loan, which would cover the cost of the course, was repayable over a period of 120 months. Each appellant had by then in fact paid to the Company the £400 deposit and the "Balance Payment" of £3,595 for the course charges.
6. The applications for finance were accepted. The Company (via a sister company, Northern Gas Heating Limited) received in respect of each appellant payment from the "finance provider" GE Money of an amount equivalent to the course charges. The Company refunded to the appellants the sums previously paid by them direct.
7. Problems surfaced when, some months later, GE Money received a complaint from one of the appellants about the quality of the Company's course. GE Money contacted the Company and alleged that there were inaccuracies in the application forms: the loans were wrongly stated to be for the purposes of home improvements in the form of purchasing central heating for installation in the appellants' homes. It was stated that the payment was to be made to Northern Gas. GE Money would not normally lend for training courses of the type provided by the Company. GE Money did not serve a notice of cancellation on the appellants under s76 of the 1974 Act terminating the loan agreements. It dealt only with the Company. (In two of the cases it was contended that the appellants themselves had cancelled the finance agreement, but that was not an issue on this appeal.)
8. The Company admitted to GE Money that it had altered parts of the application forms after the appellants had signed them. Parts of the forms were filled in by one of the Company's employees, who mistakenly entered "Central Heating" instead of "Training Course" in the relevant box and named "Northern" (meaning Northern Gas Heating Limited) as intermediary. The Company accepted responsibility for the misrepresentations that the loans were required for central heating. Without consulting the appellants the Company refunded to GE Money (via Northern Gas) the sums that it had received pursuant to the Loan Agreements. The first that the appellants knew of the refund was when the Company turned to them with demands for payment in accordance with invoices for the cost of the course. By then the appellants had received the training and obtained Domestic Energy Assessment Certificates, though not without voicing complaints about the quality and cost of the course. The Company's position was quite simply that, in consequence of the course of events, the appellants had not paid it for their training courses.

Proceedings

9. As the appellants refused to comply with its demands, the Company commenced proceedings against them early in 2008. It pleaded that the monies were due under invoices for training services rendered, together with interest. The Particulars of Claim in each case gave details of the invoice on which the claim was based. The claim was referable to the training contract. It was not, it should be noted, a claim for repayment of monies under the Loan Agreements, or for unjust enrichment resulting from the Company's refunds to GE Money, or for a quantum meruit for the provision of the course. GE Money was not a party to the proceedings. It had no need to be, having been repaid the sums advanced.
10. The appellants met with no success before the District Judges or on their appeals to HHJ Gregory before whom it was argued that they had fulfilled their side of the bargain, that the cost of the courses had been paid by GE Money to the Company and that they were not party to any misrepresentations to GE Money. If the Company had taken it upon itself to refund monies to GE Money without their knowledge or consent, it had done so voluntarily and had no right to claim the invoiced sums from them.

Judgment below and appeal

11. HHJ Gregory was assisted by an agreed "Note for the Court" produced by the parties at the request of the Wolverhampton County Court for a document setting out the essential issues and facts. In brief, the judge held that the charges in the invoices were unpaid and that the appellants' financial obligations to the Company for them had not been discharged. The Company had fulfilled its part of the bargain by providing the course: the appellants had not fulfilled theirs of paying for it. HHJ Gregory agreed with the District Judges that the 1974 Act did not apply to the claims. It was irrelevant, as the claims were under the training contracts and invoices, not under the Loan Agreements. The two kinds of contract were separate: one was for services supplied by the Company, the other was for credit supplied by GE Money. The facility for the loans was an additional benefit or option, which did not form part of the training contracts between the Company and the appellants. As for the reimbursement by the Company of the loan monies to GE Money, that had caused the consideration for the training contracts to fail. The District Judges were entitled to give judgment for the Company.
12. HHJ Gregory concluded:-

"20. The counter argument put before the court by Mr Adams is that the proper interpretation is that somebody who signs a contract is in law responsible for its contents even though they themselves may not have put the false information upon it. In those circumstances the conduct of the finance company had the effect of causing the consideration for the agreement to fail totally, because the finance company insisted upon reimbursement, and that insistence was quite properly acceded to, and thereby through the repayment of these monies, what was intended to be the discharge of the financial obligations of the various appellants failed.

21. That, it seems to me is in effect the decision to which each of the district judges came. On reflection it seems to me that that is a decision to which the district judges were in each case, for the reasons they gave, entitled to come and therefore it is not open to me to say that in any case the decision of the district judge was wrong. It is not the one to which I would necessarily have come, but that is not the decision which I am asked to make today…"

Company's submissions

13. On behalf of the Company Mr Richard Adams sought to uphold the judgments below. He said that each appellant had attended a course provided by the Company, which, to use his words, "represented the gateway to a business opportunity." Each appellant had achieved the intended qualification, but had not paid for it. The Company had fully performed its obligations under its contract with each appellant. None of the invoices delivered to the appellants had been paid. The invoices were the bases of their liability. If they were not liable to the Company on the invoices, each appellant would be £3,595 better off than he thought he would be.
14. The appellants, it was contended, could not rely on the payment by GE Money to the Company, because GE Money was entitled as a matter of law to the return of that payment. It could have brought a claim against the Company (or Northern Gas) to compel it to return the money, either as money paid under a mistake of fact (i.e. loans for central heating, not for training course), or for negligent misstatement as to the purpose of the finance, having relied on the mis-statement and suffered loss. GE Money could have brought an action for negligent misrepresentation as to the purpose of the loans against the appellants themselves. The claim would be for damages for the sum of the GE Money payments to the company. The ultimate failure of the appellants to receive funding from GE Money did not vitiate their contractual obligations to pay the Company for the course, or prevent the Company from recovering payment of the course charges from them.
15. It is submitted that the return of the payments to GE Money by the Company caused the consideration in respect of the contracts between the Company and the appellants to fail totally. That was the central plank of the judge's reasoning. It was a correct legal analysis and it was a fair outcome, as otherwise the appellants would have received a free course. Mr Adams said that the appeal should be dismissed.

Discussion and conclusion

16. In my view, the arguments advanced by Mr Adams and broadly accepted by the District Judges and by HHJ Gregory are based on an unsound appreciation of the claims made in the Company's proceedings against the appellants. I prefer the following analysis as discussed between the court and counsel during the hearing.

(1) The training contracts were concluded between the Company, which agreed to provide training, and the appellants, who agreed to pay, and did initially pay, the course charges up-front.

(2) However, those contracts were varied by agreement between the parties so as to provide that the Company would be paid in full by money to be advanced by GE Money on the basis of the appellants' applications for loans covering the course charges. The variation of the original agreements was supported by consideration, the appellants agreeing to sign the application forms and to enter into Loan Agreements with GE Money.

(3) The legal effect of the varied agreements was that the appellants' contractual obligations to the Company to pay fees for the course would be discharged by the payments of the fees by GE Money to the Company. The appellants' only financial obligation would be to GE Money to repay the loans to it.

(4) It was an implied term of the varied agreement that the Company, in completing the application forms on behalf of the appellants, would not make any misrepresentation in the form on their behalf that would render the Loan Agreement voidable or liable to cancellation.

(5) In breach of that term and without the knowledge or consent of the appellants the Company made misrepresentations as to the reason for the loans i.e. that they were for central heating, not for training.

(6) The Company received from GE Money the sums covering the course charges and repaid to the appellants the course charges amounts previously paid by them to the Company.

(7) As a consequence of the misrepresentations made by the Company GE Money had the right to avoid / terminate the Loan Agreements, but, before that was done, the Company repaid to GE Money all the sums advanced under the Loan Agreements. It did so without the knowledge or consent of the appellants. The Company is not entitled to recover from the appellants, who are not liable to pay the course charges under the training contracts, as varied.

(8) As for other possible causes of action Mr Adams sought leave at the hearing of this appeal to amend the Particulars of Claim in order to plead unjust enrichment and negligent mis-statement. As the application was made too late and without prior notice, it was refused.

Result

17. Accordingly, I would allow the appeals and set aside the orders for payment of the course charges wrongly made by the District Judges and the order made by HHJ Gregory dismissing the appeals against those orders.
18. Mr Rushton asked for an order that the Company pays the appellants' costs. His solicitors have supplied the court with a statement of costs totalling £37,702.25. They include costs throughout of the hearings at first instance and on the appeals to HHJ Gregory and to this court. A summary assessment in that sum is sought. The Company's solicitors comment on the costs statement that most of the costs claimed are not allowable under the small claims costs rules and that the various items have been intermingled in such a way that they cannot work out what is being claimed and what is allowable, so that it is not a proper and appropriate statement on which it is possible to make a summary assessment of the costs of the appeal to this court.
19. The District judges had made costs orders against appellants, which were not disturbed by HHJ Gregory. He made no order for costs on dismissing the appeals. The position is that, as the claims were allocated to the small claims track, no order for costs can be made, including those relating to an appeal, except in certain cases, such as a summary assessment of costs to be paid by a party who has behaved unreasonably: CPR 27.14(2)(g). The appellants contend that there has been unreasonable behaviour on the part of the Company and have supplied some details of various criticisms of the way in which the Company has conducted the proceedings at various stages.
20. Although the Company has failed in resisting the appeal, I am not persuaded by the materials supplied that the Company has acted unreasonably in relation to it. I would make no order for costs of this appeal. As for the costs orders made in the courts below there are no grounds for interfering with the exercise of the discretion of HHJ Gregory in making no order for the costs of the first appeal or for interfering with the exercise of discretion of the District Judges to make costs orders at first instance.
21. Finally, I record a sense of relief that Stanley Burnton LJ granted permission. It enabled this court to do justice between the parties, which it would not have been able to do, if a different view been taken on the application of the criteria for a second appeal.

Lord Justice Aikens:

22. I agree.

Lord Justice Gross:

23. I also agree.