England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION )
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR JUSTICE JACK)

		Royal Courts of Justice Strand, London, WC2A 2LL
		12th March 2010

Lord Justice Pill:

1. This is an appeal by JBW Group Ltd ("the applicants") against a decision of Mr Justice Jack on 3^rd November 2009, whereby on the issue of liability he dismissed a claim for damages for breach of contract by the applicants against Westminster City Council, to whom I will refer even though this is an application as the "respondents".

2. The applicants are a bailiff company employed by the respondents to enforce warrants of execution for unpaid parking fees. They still had in their hands, on the termination of the contract on 31 August 2008, about 9,400 warrants. The amount involved in the claim is approaching £500,000, the respondents declining to pay the applicants for work done during the period of the contract which had not come to fruition in terms of recovery of the debt to the council during that period.

3. As Mr Knox QC puts it in his skeleton, the main question is whether, on a proper construction of the contract, the applicants lost a right to charge debtors for its pre-enforcement work upon expiry of the contract when it handed the warrants back to the council as it was required to do under the contract. The submission is that, by reference to the terms of the contract, the right was expressly reserved so that the council had to instruct any successor bailiff company to whom the warrants were subsequently transferred to collect the fees already due to the applicants in addition to the successor's fees.

4. The legislative background is set out in paragraph 2 of the judgment of Jack J and in the appendix which Mr Knox has added to his skeleton argument.

5. The contract was initially for a six-month period and was extended to the 31 August 2008, giving a total contract period of two years. Warrants were transferred to a successor company but the breach of contract Mr Knox alleges is that the respondents refused to instruct the successors to collect from the debtors fees already owed to the applicants or to account for them to the applicants. The successors were instructed to commence work afresh. This leads to a situation, which Mr Knox persuasively describes as absurd, that the applicants will have done substantial work during the currency of the contract for which they will, if the respondents are right, not be paid. This will particularly be so for work done towards the end of the contract period. The debtors are by definition bad payers and there will inevitably be cases in which work has commenced on enforcement where the sum due to the council has not been recovered by the end of the contract period.

6. Mr Knox submits that the initial period of the contract, which was one of only six months, demonstrates the absurdity of such a situation and the terms of the contract should be viewed in the light of that. Particular reliance is placed on clause 31.1 of the written contract, which provides that:

"Termination shall be without prejudice to the rights and remedies of the Contractor and the City Council accrued before such Termination or expiration and nothing in the contract shall prejudice the right of either party to recover any amount outstanding as of the date of such Termination of expiry."

7. The question as to what is to happen to the relevant sums, that is the sums for work done by the applicant during the period of the contract, is, Mr Knox submits not answered in the contract. I agree with that submission if one is confined to express terms. Mr Knox submits that one must look for clues in the working of the contractual terms. I agree with that too.

8. Mr Knox has referred me to the definition provisions in the contract where the word "charges" is used in the definition of fees and particularly to clauses 25 and 31. Mr Knox submits that rights have accrued to the applicants to receive the fees for the work they had incurred during the contract period. If those rights had accrued, he submits, then the later provisions of clause 31 cannot take the rights away.

9. The case is put by Mr Knox in three ways, first that there was an assignment of the entitlement and he relies on the presence of the word "charges". I cannot accept that submission. These are debts due to the council by reason of parking defaults, and it appears to me inappropriate to the commercial and public setting that the right to fees has formally been assigned. Mr Knox accepts that the right to the debt has not been assigned. That is an inevitable acceptance. I cannot accept that there has been any assignment of the fees.

10. The second way, and I have already referred to it, is to rely on the accrued rights clause under clause 31.1. The third way, though as I see it the various submissions do come together, are that there was an implied term in the contract that the respondents would ensure that successors were obliged to collect and account to the applicants for the work that they had done prior to termination of the contract.

11. Clause 25 appears to me to limit the rights of the applicants. The sub-clauses refer to particular situations which may arise and which are entirely predictable. It is very clear that the applicants are not entitled to payment from the respondents for the services (25.1). 25.2 makes clear that it is only when the debt has been paid that any right to retain the fees, which by statute can be charged on enforcement, are retained by the applicants. 25.3 again is designed to protect the respondents from any liability, as is 25.4. Those clauses appear to me to limit the applicant's rights. I find great difficulty in reading into them the implied term for which the applicants contend or to construe the later clause to which considerable reference has rightly been made, 31.1, as giving an accrued right to the applicants for fees to work done before termination.

12. There was no exclusivity in this contract. The respondents were entitled to issue warrants to the applicants. Equally, they were entitled not to do so during the period of the contract and to instruct other companies. There is no provision for the applicants to collect and account for work which their predecessor bailiff organisation may have done before the contract with the applicants.

Clause 3.2 of the contract clearly provides for a clean break on termination. Documents, material and data must be returned to the respondents. I see no right, I can say at this stage, to complete work on any warrants.

13. I do not accept that there has been any assignment. The essential point made by Mr Knox is in relation to an accrued right. Considering the terms of the contract as a whole to which I have helpfully been referred, I am unable to conclude that there is a real prospect that the applicants would be able to establish an accrued right. The rights of the applicants were to retain the fee element in money they in fact recovered from debtors during the contract period. The provisions of clause 25 appear to me to lean firmly towards a construction whereby the rights of the applicants are limited to that proportion of the money recovered once the debt has been paid, which by statute or by contract can be charged as fees.

14. I would be inclined to accept that, if there was an accrued right, then the latter parts of clause 31 do not defeat that right, but I am quite unable to accept that a right defined as alleged had accrued to the applicants in this case. It appears to me that this was a contract in which the applicants must have understood, when entering into it, that they took the rough with the smooth. The fees involved are clearly substantial and the applicants are at risk that the contract will not be further extended (it was extended from six months to two years) and that if it is not extended, the work done during the latter part of the contract period may not in some or many cases be recoverable.

15. I agree with the judge's conclusions and I agree with his conclusion that, serious though the commercial risk was to the applicants in the situation which in fact arose, if some other arrangement were to be made then I would have expected a specific term to deal with it. As it was, the applicants were prepared to enter this contract with the limiting provisions (as I see them) in clause 25, though in certain respects they do provide protections for the applicants (for example clause 25.2), but this was not a case where one can read into the contract either from the expression in clause 31.1, accrued rights, or from any other part of the contract a result for which the applicants contend.

16. There is no accrued right unless the relevant fees in addition to the debt have been recovered during the contract period. In my judgment there is no real prospect that this court will take the view of the contract for which the applicants contend. Moreover the smaller claim, which is put on a different basis, for a sum in the region of £18,000, is not in my judgment sustainable on the construction of the contract which I give to it.

17. I agree substantially with the judge's reasoning at paragraphs 19 to 22. I also do not accept that the applicants had a right to complete work or warrants on which they had been instructed and started work.

18. For those reasons this application for permission must be refused.

Order: Application refused