England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM PRESTON COUNTY COURT
HIS HONOUR JUDGE NIGEL HOWARTH
8PR04066

		Royal Courts of Justice Strand, London, WC2A 2LL
		03/11/2011

Lord Justice Aikens:

1. On Tuesday 1 November 2011 we heard the appeal of BVM Management Limited ("BVM") from an order dated 16 March 2011 of Deputy Circuit Judge Howarth. At the end of the hearing we announced that the appeal would be dismissed. These are my reasons for dismissing this appeal.

The Facts

2. James Yeomans and Adele Yeomans, who are the respondents on this appeal, (" the Yeomans"), own the Great Hall at Mains in Lancashire. They operate an events management business from that venue. Prior to 2007, a company called GBFR Limited ("GBFR") had been providing catering services for the respondents for events at that venue. They did so under the trading name of "Chicory Outside". One of the four directors of GBFR was Mr Bevan Middleton.
3. GBFR and the Yeomans (who traded as "The Great Hall at Mains") entered into an agreement in relation to the catering services on 7 August 2006. This stipulated that GBFR would provide catering to all 2006/7 functions and events. The contract contained a page and a half of terms. The penultimate one allowed either party to terminate the contract by giving three months written notice.
4. For reasons which I need not go into, in early 2007 Mr and Mrs Yeomans approached Mr Middleton and asked him whether GBFR would be interested in taking over the events management at the Great Hall. An agreement was reached and GBFR started to provide event management services from about 21 May 2007.
5. In the course of the negotiations a draft "Management Service Agreement" was produced which it was anticipated would be concluded between GBFR and the Yeomans. Underneath the heading the draft stated "Chicory Outside agrees to be the Management Agents for functions and events at The Great Hall at Mains in 2007/2008." This draft contract, which runs to over two pages of typed clauses, also contained a provision concerning termination. It provided that if either side wished to terminate the contract, three months written notice must be given. Mr Middleton consulted a chartered accountant, Mr Swarbrick, for advice concerning the proposed contract terms. However, no written agreement was signed by the Yeomans and GBFR.
6. In the early summer of 2007 there were internal problems in GBFR. One of the directors, Mr Cartwright, wished to leave the business and, it appears, GBFR was in financial difficulties. Mr Middleton told Mr Yeomans of these problems and Mr Yeomans was concerned about them. Mr Middleton told Mr Yeomans of a proposal to create a new company, without Mr Cartwright's involvement.
7. Then on 4 July 2007 a meeting was held between Mr Middleton, Mr Swarbrick and Mr Yeomans to discuss a proposed contract whereby Mr Middleton would take over GBFR's position and provide event management services for the Yeomans at the Great Hall at Mains. The judge records that Mrs Yeomans may also have been present. A copy of the draft agreement that I have referred to above was before all who were present at the meeting. Mr Swarbrick and Mr Middleton had made many manuscript comments on their copies of the draft agreement.
8. The upshot of this discussion on 4 July 2007, as the judge found at paragraph 5 of his judgment, was that it was agreed between Mr Middleton and Mr Yeomans that, with effect from 1 July 2007, Mr Middleton would take over from GBFR the management of events at Great Hall. The judge stated, at paragraph 5 of his judgment that "it would be done on the same terms as already applied".
9. Subsequently the appellant company, BVM, was incorporated on 24 July 2007. There is no dispute that, whatever the terms of the contract between Mr Middleton and the Yeomans might be, it was novated on those terms to BVM.
10. BVM continued to provide event management services until 8 February 2008, when the Yeomans terminated the contract. The Yeomans alleged that (1) BVM was in repudiatory breach of the contract; and (2) in any event, the contract could be terminated on three months' written notice and that was what was being done. BVM denied any breach of contract. It further argued that there was no term of the contract which entitled the Yeomans to terminate the contract, either without notice or even on three months' written notice. Instead, BVM asserted that the contract was for a fixed term of two years, with no option for early termination at all.

The Trial

11. Proceedings were brought by BVM. It alleged that the Yeomans had wrongly repudiated the contract on 8 February 2008 by purporting to terminate the contract without notice. BVM claimed damages and interest for this repudiatory breach. BVM pleaded that the contract was for a minimum period of two years and that neither side was contractually entitled to terminate the contract before the end of that period. The Yeomans' defence asserted that the contract contained a term that either side could terminate the contract on giving three months' notice. The Yeomans denied any repudiatory breach on their part and asserted their right to terminate the contract.
12. On 10 August 2009 an order was made for a trial on the issue of liability only. The order of District Judge Anson specifically stipulated that this trial should consider: (a) whether the contract between BVM and the Yeomans was for a fixed term of two years; (b) whether the contract was, in any event terminable on three months notice; (c) whether the Yeomans had the right to terminate the contract without notice; and (d) whether BVM breached the contract as alleged by the Yeomans and, if so, (e) whether the breaches entitled the Yeomans to terminate the contract.
13. The trial before Deputy Circuit Judge Howarth took place over ten days between September and December 2010 and a further two days in February 2011. The judge delivered his judgment, ex tempore, on 23 February 2011. The judge heard oral evidence from Mr Middleton, Mr Swarbrick and Mr and Mrs Yeomans.
14. The judge made the following findings of fact which are important to this appeal: (1) at the meeting on 4 July 2007 the draft contract, based on the catering contracts used previously and containing all the terms of those contracts and including the three month termination on notice clause, was before all those at the meeting. (2) At that meeting Mr Middleton stated that "he wanted some security because of his personal circumstances" and so wanted a contract for a period of two years. (3) At that meeting Mr Swarbrick advised Mr Middleton that he should have an option at the end of the two year period of the contract to extend it or take a lease on the hall or have an option to buy the business being run there. (4) At that meeting there was no mention by anybody of the three month notice provision in the draft agreement and no one said anything about three months' notice. (5) Mr Middleton believed it was agreed, in principle, that the contract would run for two years without any right to serve any notice of whatever period to terminate. Equally the Yeomans believed that the two year period could be terminated by the party by the service of a three month notice.
15. The judge also found that, subsequent to the meeting on 4 July 2007, the Yeomans' solicitors produced various drafts of a contract between BVM and the Yeomans. All those drafts contained a three month notice provision. The judge found that BVM (through Mr Middleton or Mr Swarbrick) did not object to this particular provision. However no formal contract was ever signed by the parties.
16. The judge held that Mr Middleton and the Yeomans concluded an oral contract on 4 July 2007 whereby Mr Middleton would provide event management services at The Great Hall. He found (at paragraph 10) that it was a term of the oral contract that it would be for a two year period. The crucial question, the judge held, was whether the termination on three months' notice provision in the draft agreement, which was before the parties at the meeting, was incorporated into that oral contract. The judge concluded that it was and that such a term was not incompatible with a fixed contract period of two years.
17. The judge went on to conclude that BVM was not guilty of any repudiatory breach of contract. Accordingly, as the Yeomans had terminated the contract on 8 February 2008 without any notice, BVM was, in principle, entitled to damages, but only in respect of the three month notice period. Those damages have yet to be assessed.

The Appeal

18. The issue on this appeal is whether the judge was entitled to hold that the three month notice period term was incorporated into the oral contract concluded on 4 July 2007. The issue is, obviously, fundamental to the quantum of damages that BVM can obtain following the judge's other conclusions.

The arguments of the parties

19. Both Mr Grantham, who appeared for BVM, and Mr Hobson, who appeared for the Yeomans, produced very helpful written arguments and made excellent and concise oral submissions. Mr Grantham submitted that the judge was wrong to have concluded that the three month termination provision was included. He pointed in particular to the fact that there was no discussion of the three month termination provision in the draft contract that was before the parties in the meeting and the fact that the judge found, on the other hand, that the two year term for the contract was agreed. Mr Grantham also emphasised that Mr Middleton had explained that he wanted "security" and so needed the certainty of a two year contract. Mr Grantham submitted that an "objective bystander" would have understood that the parties were agreeing a contract for a two year term with no possibility of an earlier termination on notice.
20. Mr Hobson emphasised the fact that the three month termination term had been present in all previous contracts with which Mr Middleton had been concerned with the Yeomans. It was not in dispute, he said, that all the other terms of the draft agreement that was before the meeting on 4 July 2007 were a part of the oral contract concluded that day, by virtue of incorporation. (That was, indeed, expressly conceded by Mr Grantham). In principle there was no inconsistency in having a 2 year term to the contract and a provision for termination upon three months notice. Above all, he submitted the judge had made a finding of fact as to what the parties had agreed at the meeting and that finding was based on the oral and written evidence adduced at the trial, which the judge was in the best position to assess. He submitted that this court should not interfere with those findings unless they were obviously wrong or were legally incoherent and neither was the case.

Conclusions

21. There is no dispute that the parties concluded an oral agreement on 4 July 2007 by which Mr Middleton agreed to provide event management services to the Yeomans at Main Hall for 2 years. There is no dispute that, apart from the termination on notice provision, all the other terms of the draft agreement before the parties at that meeting were incorporated into the oral agreement. The only term in dispute is the three month termination provision.
22. In my view the judge was correct to state that the issue in this case is whether the provision that either side could give three months written notice to terminate the contract, contained in the draft agreement before the parties at the meeting on 4 July 2007, was incorporated into the oral agreement made that day. To determine that issue the judge had to decide whether the parties agreed, either expressly or tacitly, that the three month notice provision was an express term of the contract. (It has never been suggested that it was an implied term).
23. When the terms of a contract have to be ascertained from oral exchanges and conduct that is a question of fact: see Carmichael v National Power plc [1999] 1 WLR 2042 at 2049C per Lord Hoffmann; Thorner v Majors [2009] 1 WLR 776 at [82] per Lord Neuberger of Abbotsbury. Moreover, in the case of a contract which is entirely oral or partly oral, evidence of things said and done after the contract was concluded are admissible to help decide what the parties had actually agreed: Maggs v March [2006] BLR 395 at 400 per Smith LJ; Crema v Cenkos Services plc [2011] 1 WLR 2066 at [34] per Aikens LJ. Many cases have emphasised that an appellate court should not readily hold, particularly in a case where the finding is dependent upon oral evidence, unless the judge's finding is obviously wrong, is an unreasonable finding on the evidence or the finding produces a result unsustainable in law. All this means that we must be very slow to reverse the judge's evaluation of the facts.
24. In this case the judge had the following key material before him, on the basis of the evidence: (1) the fact that all previous contracts with which Mr Middleton had been concerned (when director of GBFR) had contained a three month termination on notice clause. (2) The draft agreement which had been given to Mr Middleton before the 4 July meeting had such a clause in it. (3) That draft had been studied by Mr Middleton and Mr Swarbrick. (4) No one said anything about that provision, either for or against inclusion in the contract, at the meeting. (5) Mr Middleton did state that he wanted security in the contract, but he did not go on to say "and so there cannot be a termination clause in the contract". (6) The 2 year term was orally agreed. (7) After the meeting, the Yeomans' solicitor produced a number of draft written contracts, all of which contained the three month termination clause. Those were given to Mr Middleton but he never objected to them, although neither did he sign a contract on behalf of BVM.
25. In addition the judge did make the finding that Mr Middleton believed it was agreed, in principle, that the contract would run for two years without any right to serve any notice of whatever period to terminate it. On the other hand, he also found that the Yeomans believed that the two year period could be terminated by either party by the service of a three month notice. These are findings on the parties' subjective understanding of what they thought they were agreeing. But they are of no help to the appellant because they cancel one another out.
26. In my view the judge was entitled, on the evidence before him, to reach a finding of fact that the parties did agree that the three month termination provision was a part of the contract concluded orally on 4 July 2007. It is consistent with Mr Middleton's desire for some security, because he had the agreement to a two year term for the contract. There is no legal difficulty in having a contract for a period of two years with a provision that it can be terminated by either side on three months' written notice. The two year period will be the maximum period of the contract, but both sides will have a right to end it (on giving proper notice) at an earlier stage.

Disposal

27. Accordingly, this appeal must be dismissed.

Lord Justice Lewison:

28. I agree.

Lord Neuberger MR:

29. I also agree.