Neutral Citation Number: [2018] EWHC 2915 (Comm)
Claim No: D40LS284
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
CIRCUIT COMMERCIAL COURT (QBD)
Leeds Combined Court Centre,
The Courthouse,
1 Oxford Row,
Leeds, LS1 3BG.
Date: 08/11/2018
Before :
HIS HONOUR JUDGE KLEIN
SITTING AS A JUDGE OF THE HIGH COURT
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Between:
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UK LEARNING ACADEMY LIMITED |
Claimant |
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THE SECRETARY OF STATE FOR EDUCATION |
Defendant |
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James Fryer-Spedding (instructed by Avisons Law Ltd. ) for the Claimant
David Warner and Kristina Lukacova (instructed by Government Legal Department ) for the Defendant
Hearing dates: 24-27 September, 1-5, 8, 10 October 2018
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Judgment Approved
HH Judge Klein:
1. The Learning and Skills Council (“LSC”) was created by the Learning and Skills Act 2000 to secure the provision of education and training to people who had reached compulsory school leaving age. In 2006, it established a national training programme called Train to Gain (“TTG”), the principal aim of which was to improve the literacy and numeracy skills of those in employment in the UK by funding the education of participants (called “learners”) to National Vocational Qualification (“NVQ”) Level 2 or by funding their education on Skills for Life (“SFL”) courses. TTG has been the subject of criticism. In 2009, the National Audit Office concluded that the programme had not provided good value for money. [1]
4. The Defendant has (indirectly) taken on LSC’s liabilities.
5. The principal dispute between the parties relates to the 2008 Yorkshire Contract. [2] UKLA contends that (i) the Defendant is (and LSC was) liable to pay it £800,553.24 (in addition to £135,553.76 which has already been paid), as a result of an effective variation of the 2008 Yorkshire Contract, for learners who “started” [3] before 1 April 2009 [4] [5] and (ii) if the Defendant contends that there has been no effective variation because any necessary contractual formalities have not been complied with, he is estopped from doing so. [6] The Defendant disputes that; principally because, he contends that:
i) LSC’s conduct (including its written statements), properly interpreted, did not amount to an offer to vary the 2008 Yorkshire Contract as UKLA contends. In fact, LSC, he contends, made no offer at all which could have contractual effect;
ii) any offer made had to be accepted and there was no acceptance at all or in accordance with the terms of any such offer;
iii) the contractual formalities for an effective variation were not complied with;
iv) there was no sufficient representation to give rise to any estoppel, in particular to overcome any failure to comply with the contractual formalities for an effective variation;
v) UKLA cannot prove that the learners for whom it claims payment had been taught (that is, on the Defendant’s case, had started) before 1 April 2009, which, the Defendant contends, was a pre-condition for payment under any effective variation (“the 1 April pre-condition defence”).
6. UKLA contends it had three further contracts with LSC:
i) for the Yorkshire region, for the 2009-2010 academic year;
ii) for the North East region, for the 2008-2009 academic year;
iii) for the North East region, for the 2009-2010 academic year;
(“the further contracts”).
8. The Defendant also defends the claim in relation to the 2008 Yorkshire Contract, in particular, and, more generally, raises a set off defence and brings a counterclaim; which Mr Warner, who appeared, with Miss Lukacova, for the Defendant, explained thus on the second morning of the trial. The defence is to the effect that, if UKLA is otherwise entitled to the sum it claims in relation to the 2008 Yorkshire Contract, it is not entitled to, or, by way of counterclaim, it is liable to repay 29.2% of that sum (and, by way of counterclaim, is liable, in any event, to repay 29.2% (£39,581.70) of the £135,533.76 which has been paid) because, in 2009, LSC auditors determined that there was an “error rate” of 29.2% in UKLA’s records and, so, by clause 12.3 of the 2008 Yorkshire Contract, LSC was (and the Defendant is) entitled to “claw back” these sums (“the 2009 audit defence and counterclaim”). [7]
10. This is the judgment following the trial of UKLA’s claim and the Defendant’s counterclaim.
The statements of case
11. The parties’ statements of case are discursive, unstructured and, in places, difficult to follow. [8] Counsel who represented the parties at trial did not draft the initial statements of case and, although they may have had some input in the amendment of those documents, understandably, those documents were used as the framework for the amendments. As I reminded the parties at the pre-trial review and at trial, the statements of case ought, at the very least, to identify the issues to be determined. I recognise that a prevailing view may be that parties should not be held to their pleaded cases but it is unhelpful if parties proceed on the basis that the statements of case do not act as a limit on the issues to be tried. I was left with the clear impression, by the conclusion of the trial, that, in many significant respects in this case, both parties, more or less, were advancing cases which were unpleaded. [9] As it appeared to me that both parties encouraged me to determine the proceedings on the basis of the cases they actually advanced at trial, that is what I propose to do. But for the very great assistance given to me by counsel, this would have been an even more difficult task that it has been.
“…LSC was unable to commit to pay more because of budget constraints from pressures caused by colleges taking on too many learners but LSC would review progress under the contract and assess the MCV “in light of performance in terms of quality and volume and the level of funds available to us.” [10] [11]
15. Prior to 19 September 2008, [12] the following events had occurred:
i) LSC held a meeting, on 3 April 2008, at the Lancashire County Cricket Club ground at which the tendering process for the second procurement exercise was explained. Imran Bham was told that contracts would be “performance led: so that initial volumes would be given but if they were achieved then further volumes would be easily available”;
ii) LSC held a further meeting, on 3 April 2008, at its Bradford office at which Yusuf Bham [13] was given the same information;
iii) Yusuf Bham met Shafqat Rahim at UKLA’s Bradford office on 17 July 2008, when Mr Rahim said that LSC was “seeking training providers who would actively engage learners and deliver”;
iv) UKLA received LSC’s “Clarification of Employer Responsive Funding and Payments 2008-09” document;
v) Sarah Haigh told Imran Bham, Yusuf Bham and John Kinsella, at a meeting on 1 September 2008, that the “contract volumes” (that is, I understand, the number of learners who could be taught under the terms of the 2008 Yorkshire Contract) were “initial volumes”;
vi) at a TTG provider induction session on 8 September 2008, Clive Howarth said that there was a need to recruit learners.
i) Mrs Haigh sent an email to UKLA on 24 September 2008 (“the 24 September email”), informing UKLA about the “initial volume” of learners allocated to UKLA (that is, 100 for SFL courses and 100 for NVQs) and continued:
“As discussed at the contract clarification meeting, these amounts can be negotiated upwards when the initial volumes have been achieved”;
ii) Mrs Haigh and Mr Rahim visited UKLA’s Bradford office on 5 November 2008. They were given a list of 400 “learner files” (a number substantially in excess of the contract volumes). On that occasion, neither Ms Haigh nor Mr Rahim raised concerns about the number of learners UKLA had recruited.
17. After the 2008 Yorkshire Contract was signed:
i) LSC wrote to UKLA on 15 December 2008 saying that the maximum contract value was only an indication of potential earnings in any contract year and could be revised up or down, and that contractors would be paid on what they delivered;
ii) at an initial monitoring visit by LSC on 18 December 2008, LSC’s auditors saw that UKLA had over 700 learners. The auditors did not complain about that;
iii) a meeting took place on 27 January 2009 at which LSC became aware that UKLA had 185 SFL learners;
iv) in a circular, dated 19 May 2009, from Geoff Russell (LSC’s chief executive), the following was written:
“I also want to reassure you that we will guarantee that there is funding available for you at the agreed rates to support learners who were legitimately in learning before 1 April 2009 through to completion.
…I can assure you that all learners legitimately starting training before 1 April 2009 whether apprenticeship programmes or [TTG] courses will be funded to complete their training at agreed rates”;
v) a further circular, dated 12 June 2009, said:
“The start date is defined as the date on which the learner’s learning programme begins”;
vi) LSC wrote to UKLA, on 12 June 2009, saying:
“As you will already be aware, the LSC has committed to funding all legitimate [TTG] and adult apprenticeships starts prior to 1 April 2009. A “legitimate start” in this context is one that meets our normal requirements. Funding is set out in the Funding Guidance 2008/9.
For audit purposes, the provider must have evidence to demonstrate that the learner has actively participated in a structured programme as detailed in their individual learning plan prior to 1 April 2009”;
vii) an LSC update of June 2009 said:
“A one-off allowance to permit providers to upload potentially un-funded learners outside of MCVs enrolled prior to 1 April 2009 was announced in June 2009”;
viii) on 16 June 2009, Mrs Haigh confirmed, during a telephone call, the LSC’s commitment to pay UKLA for “everyone that was enrolled before April”;
ix) Sarah Haigh emailed UKLA, on 1 July 2009, saying:
“you will have noted from Geoff Russell’s letter of 11 April 2009 (sic) that all legitimate starts prior to 1 April need to be recorded on the ILR by 30 June 2009. Obviously this date has now passed so any omissions will not be taken into account”;
x) Mrs Haigh emailed UKLA on 8 July 2009, saying:
“the LSC is only paying prior to 1 April 2009 as per Geoff Russell’s letter of 11 June 2009”;
xi) LSC published a newsletter, which was emailed to UKLA on 10 July 2009, which contained scenarios. By one of the scenarios, LSC indicated that it had committed to funding legitimate learners to whom a funding commitment had been made and that:
“the provider’s MCV would need to be increased in order to cover the full costs of these learners”;
xii) Mrs Haigh emailed UKLA on 15 July 2009 instructing it to remove from the relevant computer records:
“any learners that are not fundable as per the 1 April guidance”;
xiii) Matt Findull (an LSC employee) sent a further email, on 17 July 2009, to UKLA about the removal, from the relevant computer records, of certain learners, adding:
“we will not be able to consider removing any capping on payments for legitimate learners until this has been done”;
xiv) Keith Woodcock (an LSC Programme Advisor) wrote to UKLA, on 20 July 2009, saying:
“The first priority is to fund learners recruited prior to 1 April 2009…The [TTG] split is skewed because we have a commitment to fund the legitimate pre-1 April starts as a priority and many providers have exceeded 08/09 academic year budgets with legitimate starts”;
xv) during a telephone call, on 27 July 2009 (“the 27 July telephone call”), Mrs Haigh said:
“And you get paid for everything that, you know, you’re overdue for the eligible learners prior to 1 April 2009”;
xvi) a meeting, between LSC and UKLA representatives, took place on 4 August 2009 (“the 4 August meeting”), during which Margaret Cobb said:
“…basically…I think there’s 281 learners for NVQs that started prior to 1 April and 185 skills for life learners that started prior to 1 April, and they’re the ones that obviously we have a commitment to pay…
…If there’s an assessment, an individual learning plan and those are in place and dated by the learner prior to 1 April 2009…and there’s been some training delivered prior to 1 April then it will stand up to the auditors then we will make those…
…My understanding and I hope I can make this clear, that the LSC will pay for all the learners that have a start date prior to 1 April…We have a commitment to that…
…I think that what we’re saying is that we are…if you’ve got 281 learners with start dates and 155 skills for life with a start date prior to 1 April then we will meet that commitment.”
20. So far as the further contracts are concerned, UKLA’s pleaded case is as follows.
22. There was a contract, between LSC and UKLA, for TTG funding, in the North East region, for the 2008-2009 academic year. The contractual documentation is limited to a Contract Clarification Form (“the 2008 North East Contract Clarification Form”), which provided that, from January to July 2009, the value of the contract was £50,000. In fact, UKLA trained 29 NVQ learners during this period and is entitled (presumably, contractually) to be paid £53,331. [14]
i) there was no meeting on 1 September 2008;
ii) UKLA has only partially quoted Mrs Haigh’s 16 June 2009 statement and has so taken it out of context.
27. As to the further contracts, the Defendant contends that “LSC did not enter into [them], as [UKLA] did not provide the LSC with a signed copy of the said contracts” [15] and, in the case of the 2009 Yorkshire letter of intent, any offer was withdrawn before it was accepted. In any event, in relation to the (purported) contract relating to the North East region for the 2008-2009 academic year:
i) UKLA is not entitled to payment because it has not uploaded onto LSC’s computer system any data showing that any training was given;
ii) LSC reduced the MCV of this (purported) contract to £5,000.
28. As I have indicated, the Defendant also raises the 2009 audit defence and counterclaim.
“the Defendant failed to supply the written contract but since both parties acknowledged that each was performing its obligations and was treating the other as performing its obligations there was a contract on known and understood terms”.
30. In relation to the 2009 audit defence and counterclaim, UKLA also contends as follows. Implied into the 2008 Yorkshire Contract, in order to give that contract business efficacy, was a term that, in deciding the error rate (which involved considering the materiality of errors), LSC would not unreasonably conclude that an error was material. In this case, the decision to conclude that there were any material errors at all (and so, that there was any error rate) was unreasonable. UKLA also contends that the sample files LSC audited must have included those learners for whom the Defendant now contends UKLA is not entitled to payment and, so, such files should not have been audited. [16]
Contractual documentation
31. The 2008 Yorkshire Contract contained the following provisions:
i) By clause 1.1:
““Contract” means the Contract between [UKLA and LSC] consisting of these General Terms and Conditions, the specification and any other documents (or parts thereof) specified in the contract and any variations to the Contract agreed in writing and signed by both Parties”;
ii) By clause 2.1:
“The Contract shall commence on the date on which the provision of Services under this contract commence as provided in Schedule 1 and shall finish on the date on which the Services provided under the Contract finish as provided for in Schedule 1 or as otherwise provided in the Contract”;
iii) By clause 11.2:
“For monitoring and evaluation purposes, the Council [that is, LSC]…shall have the right to visit all or any site(s) and view operations relating to the provision and to inspect relevant documents and interview learners and the contractor’s [that is, UKLA’s] staff during these visits”;
iv) By clause 11.3:
“The contractor shall, and shall ensure that subcontractors shall, permit access at any reasonable time to any of the representatives listed in clause 11.2 in order to examine, audit or take copies of any original or copy documentation, accounts, books and records of the contractor and its subcontractors that relate to the Contract [in order to] carry out examinations into the efficiency and effectiveness with which the contractor has used the Council’s resources in the performance of the Contract”;
v) By clause 11.7:
“The contractor shall in performing the Services comply fully with all relevant rules and regulations of the Council in force from time to time especially when on Council premises”;
vi) By clause 12.1:
“In consideration of the Services to be provided by the contractor, the Council will make the payments to the contractor in accordance with Schedule 2”;
vii) By clause 12.2:
“Payment by the Council shall be without prejudice to any claims or rights, which the Council may have against the contractor and shall not constitute any admission by the Council as to the performance by the contractor of its obligations hereunder. Prior to any such payment, the Council shall be entitled to make deductions or deferments in respect of any disputes or claims whatsoever with or against the contractor, arising from this Contract or any other Contract between the contractor and the Council”;
viii) By clause 12.3:
“Where the Council carries out a review or audit of a sample of the evidence which the contractor is required to provide under the Contract to support the payments made by the Council and identifies errors in that evidence which it deems are material, the Council reserves the right to recover from the contractor an amount based on the error rate identified and the total value of the Contract. Such amount may be recovered by making deductions from future payments due to the contractor under the Contract. In all such reviews the decision of the Council is final”;
ix) By clause 15.2:
“The contractor shall comply with the requirements and observe guidance, which may from time to time be issued by the Council…and of which the contractor was made aware”;
x) By clause 15.3:
“The contractor shall ensure that all activities carried out pursuant to this Contract shall be documented in accordance with the requirements of the Council and shall provide such documentation to the Council, as the Council shall request from time to time”;
xi) By clause 15.4:
“The contractor shall have in place a rigorous system of quality assurance based on the regular review and assessment of the quality of the Services delivered. The contractor shall comply with the requirements and observe guidance on the process of review and assessment, which is issued by the Council”;
xii) By clause 15.6:
“Where the Council assesses the quality and delivery of the Services during its business cycle through the annual provider and commissioning dialogue, the contractor will be informed of the outcome of that process. The Council may require the contractor to agree an action plan for the improvement of services following the provider and commissioning dialogue, analysis of performance against the Council’s published minimum levels of performance, financial health and/or control check performed by the Council… Failure to agree an action plan or failure to comply with the agreed targets set out in the action plan will constitute a Serious Breach under clause 18 of the Contract”;
xiii) By clause 30.1:
“The Contract shall comprise the following: The General Terms and Conditions, Schedule 1…Schedule 2 [and] Schedule 3”;
xiv) By clause 30.2:
“This Contract constitutes the entire Contract between the parties and shall not be varied except by instrument in writing signed by the parties”;
xv) By Schedule 1, paragraph 2.2:
“The maximum value for each learning programme as shown in Appendix 1 above may not be exceeded for any reason except by an agreed variation in writing to the Contract. The Council will not be liable to make any payment in excess of the maximum values set out above or as varied in writing. Where the Contract period is longer than one year funding for subsequent years is subject to funds being made available to the Council…”;
xvi) By Schedule 1, paragraph 2.4:
“For the avoidance of doubt the overall maximum values for each learning programme at Appendix 1 above take precedence over the delivery profile and volumes in Appendix 2. Where the contractor considers that the combination of funding rates…and volumes would result in the overall maximum value being exceeded, the contractor must notify the Council and the parties will either agree a variation to the volumes, funding rates or to the maximum value for the learning program to ensure the contractor remains within the agreed maximum value”;
xvii) By Schedule 2, paragraph 2.1:
“The Council agrees to pay to the contractor the amounts set out in Schedule 1, Appendix 1…of this Contract on condition that the contractor delivers the Services in accordance with the terms and conditions of the Contract…”;
xviii) By Schedule 2, paragraph 2.2:
“Where the contractor delivers learner responsive provision, payments will be made in accordance with the Funding Agreement set out in the Supporting Documentation for the Learning Programmes which have been agreed at Schedule 1 Appendix 2 of this Contract”;
xix) By Schedule 2, paragraph 2.3:
“Where the contractor delivers Employer Responsive provision, payments will be made in arrears, in accordance with the actual delivery reported to the Council through the ILR submissions”;
xx) By Schedule 2, paragraph 4.1:
“Where the contractor receives profile payments from the Council payments will be reconciled to cash earned by actual delivery of the Services or the period to the timetable published in the Funding Requirements”;
xxi) By Schedule 2, paragraph 4.2:
“Where the contractor’s actual delivery will result or has already resulted in an overpayment to the contractor by the Council, the Council will withhold from, or deduct the amount owed from, the payments due to the contractor under the Contract for current or subsequent months or years accordingly”;
xxii) By Schedule 2, paragraph 4.3:
“Where the contractor’s actual delivery has resulted in an underpayment to the contractor by the Council, the Council will adjust the amount due to the contractor accordingly. This adjustment shall not exceed the overall maximum value set out in Schedule 1 of this Contract”;
xxiii) By Schedule 2, paragraph 4.4:
“Should there be an under…payment to the contractor, the Council’s Contract Manager may at their absolute discretion require a contract variation”;
xxiv) By Schedule 2, paragraph 7:
“The evidence requirements in respect of each learning programme are set out in the Funding Requirements and the contractor must retain such evidence for inspection on demand”;
xxv) Appendix 1, entitled “Summary of Programme Funding 2008/2009”, contained the following information:
a) The Contract Start Date was expressed to be 1 August 2008;
b) The Contract End Date was expressed to be 31 July 2011;
c) The learning programme was expressed to be ER: Train to Gain, ER being a reference to “employer responsive”;
d) The Maximum Value was expressed to be £135,553.76;
xxvi) Appendix 2 contained a “Funding Agreement” which contained a “Delivery Profile” which contemplated payments of (or of up to) the MCV in January, April and July 2009;
xxvii) A document entitled “Funding Allocation Detail”, which appears to have been part of Appendix 2, indicated that, under the 2008 Yorkshire Contract:
a) The “total adult learners” were to number 200;
b) Of that number, 70 were to be SFL learners on a literacy course, 30 were to be SFL learners on a numeracy course and 100 were to be NVQ learners.
32. The evidence requirements referred to in Schedule 2, paragraph 7 included the following. [17] [18]
i) By paragraph 240, that:
“The following notes apply to all listed and unlisted NVQs…LSC funding should not be claimed for learners on NVQ programmes who are not registered with an awarding body”;
ii) By paragraph 343, that:
“Colleges and providers should ensure that learners are enrolled on learning aims that are appropriate to their needs and are aiming to improve their skills to a level above their current attainment. For example, prior to enrolment onto basic skills learning aims, learners should have a demonstrable need for this provision, shown, for instance, by previous educational attainment or through initial guidance and assessment”;
iii) By paragraphs 514-521, that:
“...The initial and diagnostic assessment of learners’ literacy, language and numeracy needs will determine the appropriate level of qualification required to meet those needs and help the learner improve their skills. Improvement within the Skills for Life strategy is defined by, and measured as, a learner moving up a level of attainment from, for example, Entry 3 to Level 1. A learner assessed as already having a majority of skills at, for example, Level 1, has a need for provision at Level 2 in order to achieve measurable improvement…”;
iv) By paragraph 529, that:
“In order to claim the higher SLN value providers will need to be able to evidence to LSC-appointed auditors the following: a minimum of 15 hours of eligible support/learning/training consisting of underpinning knowledge and understanding as detailed in Table 7 below. This may also include provider staff feedback and instruction and evidence of provider input into assessing/reviewing distance learning materials by a suitably competent person but will always exclude Induction, IAG and Assessment. In principle, any activity that forms part of the standard LSC glh definition apart from assessment and observation (as defined in paragraph 110) counts towards the 15 hour definition.”
i) By Annex B, paragraph 18, that:
“The following evidence should be retained to support monthly NVQ on-programme payments: evidence that the learner is registered for the NVQ (although providers may want the learners to meet their SLN start criteria before incurring this cost)…”;
ii) By Annex B, paragraphs 21-22, that:
“Where basic skills funding is being claimed, the provider must retain written evidence of the learner’s need. This evidence must be produced from an initial and/or full diagnostic assessment of a learner’s literacy, English-language or numeracy need and the results recorded in the learner’s ILP, confirming that the learner has a basic skills requirement in accordance with the document Principles, Rules and Regulations, Section 9, paragraphs 514-525. The LSC does not prescribe the use of a particular assessment tool; however, providers must use Skills for Life initial assessment tools that are based on literacy and numeracy standards. The provider must be able to demonstrate the learner is progressing towards an approved basic skills qualification as detailed in the paragraphs referred to above.”
35. LSC Funding Guidance 2008/09: Funding Formula (April 2008) provided, by paragraph 54, that:
“A learner is deemed to have started a learning aim once they have remained on the learning aim for [in the case of an NVQ, it appears not to be disputed] 6 weeks.”
“…It is normally expected that the provider itself will be registered with the awarding body for the qualification being studied and learners must be registered with the awarding body in order to be eligible for LSC funding…”
“I am writing to confirm your Maximum Contract Value (MCV) for Train to Gain for 2009/10 – covering the period from August 2009 to July 2010…This final MCV constitutes the maximum level of funding [LSC] is providing to cover the commitments of both existing learners started in 2008/09 and new starts over the next year. It is on this basis that I am now in a position to provide your MCV for 2009/10…
2009/10 MCV £130,000
Please note that the MCV is not guaranteed but we will pay for funding up to the MCV based on actual delivery…We cannot commit to pay for any delivery above the agreed MCV because of budgetary constraints or pressures incurred by colleges and providers recruiting more learners than the MCV provides for…
This MCV confirms the intention of [LSC] to enter into a formal agreement for the provision of the Services as set out in this letter for 2009/10 as at 19 June 2009.
In order for the services to continue prior to the parties entering into the formal signed variations to our agreement, the current terms and conditions will apply in the interim to this letter. The formal variation agreement will be issued following any discussions that need to take place to support the profiling of activity. The interim arrangements will operate from 1 August 2009 until 31 October 2009 or until the formal contractual variation is signed by both parties, whichever is the earliest.
The Services shall be delivered in accordance with the following:
- The terms and conditions set out in the Contractor’s…agreement…
- The Funding Guidance for and/or other general requirements which apply to the Services…
Either party shall have the right to terminate the arrangements set out in this letter by one party giving one week’s notice in writing to the other.
By signature of this letter…LSC confirms its intention to enter into these arrangements and I would be grateful if you arrange for a copy of this letter to be signed on behalf of the contractor…to signify agreement to the terms set out above.”
The 2009 Yorkshire letter of intent was signed, on behalf of LSC, by Mike Lowe (Director of Area, West Yorkshire).
Chronology
40. Before turning to the witness evidence, it is helpful to consider, chronologically, some of the documentary evidence (including, in more detail, some of the documents to which I have already referred). [19]
41. LSC published a newsletter in February 2008 which recorded:
“At present we have all the SFL qualifications and 28,000 of the NVQs under contract – with the remainder of places to be allocated from Regional Response Funding either to new providers delivering specialist qualifications or as negotiated growth for existing providers who have fully utilised their current allocations. We will also retain the flexibility to move provision between under and over performing providers to ensure that no provider will run out of capacity during 2007/08. The money is there for you to earn if you can engage with the employers and find the learners…
We have received some worrying feedback from providers in recent weeks. Some of you are telling us that you will have to stop recruiting learners next month [March 2008] because you won’t have enough time for the learners to complete before the end of the 07/08 academic year. Please be reassured that there is absolutely no need to stop recruiting [TTG] learners – in fact doing so would mean you almost certainly wouldn’t be able to deliver your contracted allocations for 2007/08.
If we are to meet the extremely tough challenges laid down by Leitch we need providers to keep recruiting learners. If you haven’t enough places available in your contract talk to your Contract Manager. If your performance is good on learner starts and achievements and you can recruit them we can fund them!”
43. Mark Haysom (the then LSC Chief Executive) wrote to providers on 19 June 2008, as follows:
“…Where training is addressing the needs of learners and employers, successful colleges and training providers will be able to increase their contracts both in their existing region and across the country, without the need to go through a further tendering exercise…
There is still significant urgent work to be undertaken to clarify the policy, and operational issues (including systems and payments) arising from these changes. The funding and audit guidance for the 08/09 academic year will be reviewed and published…”
“…It is necessary for planning and budgetary purposes to define what the overall indicative maximum contract value (MCV) is, building this from provider level to give regional and national figures and be able to give providers an indication of the value of contracts linked to specified volumes of learners…
Within the Employer Responsive Model the provider factor is used for planning purposes only to calculate the initial maximum contract values for providers. It will not be used in the calculation of actual payments as had previously been indicated.
The indicative MCV is for planning purposes only and is not a guarantee of income. Payments to providers will be made based on actual activity at an individual learner level…” [20]
“…tender has been successful and that it is the LSC’s intention to award a contract to your organisation for this provision… Until the terms of the contract are agreed your organisation should not undertake any work and the LSC will not be liable to make any payments for any activity carried out before a contract is entered into.”
“The arrangements set out in this letter shall operate from 1 August 2008 to 31 December 2008 or until [the 2008 Yorkshire Contract] is entered into, whichever is the earliest. When [the 2008 Yorkshire Contract] is entered into by the parties for the Services, the provisions of that agreement shall be operative from 1 August 2008.
The Services shall be delivered in accordance with the following:
- The Terms and Conditions set out in any draft agreement
- The Funding Guidance for and/or other general requirements which apply to the Services…”
51. The 24 September email (from Mrs Haigh to UKLA) said as follows:
“…Hopefully you will have received a letter informing you of your successful bid and forthcoming contract. The initial volumes are as follows:
Retail and Commercial Enterprise NVQ Level 2 30
Education and Training NVQ Level 2 30
Leisure Travel and Tourism NVQ Level 2 40
Skills for Life 100
As discussed at the contract clarification meeting, these amounts can be negotiated upwards when the initial volumes have been achieved…”
“As David discussed in the clarification meeting, low volumes have been given in the first instance and when they have been achieved then the possibility of further volumes being added will be considered regardless of timescales.”
“…If you can sign this document and return it to me at the address below, I can start the contracting process…”
“I am writing to ensure that all providers in Yorkshire and the Humber have access to the latest information about LSC priorities for 2009-10…
Attached are three annexes which provide further information which you may find helpful…
The second outlines the allocations methodology for 2009-10…
Annex 2 – Allocations Methodology 2009/10 (Draft)
This is a national process, which will be applied equally in all regions. At this stage, given the Annual Statement of Priorities has only recently been published, this process remains draft…
2009/10 Maximum Contract Values
- MCV is only an indication of potential earnings in year subject to performance review in year and can be revised upwards or downwards within year. Providers will be paid on what they deliver.
- 2009/10 negotiated maximum contract values will be notified to providers on…31 March 2009 in respect of…[TTG]...
- It is important to stress that the employer responsive model is demand led. The LSC must be responsive to employers’ needs; even more so at a time when the economy is facing a downturn.” [21]
58. (An Initial Monitoring Visit took place on 18 December 2008.)
59. LSC published a newsletter in January 2009 which said:
“Variations to contract and maximum contract values will continue to be driven by actual provider performance.”
“…There are presently 180 Skills for Life learners in learning…UKLA were asked as a matter of priority to submit the 180 ILRs to the LSC, the deadline for submissions being 4 February. Mo asked about additional funding for the 80 over contracted learners and was advised that until at least 80% of the contract had been delivered/claimed a formal request could not be made…” [22]
“Margaret Cobb opened the meeting by stating that its purpose was to review UKLA’s contract in terms of the remaining periods and with a look ahead to 2010 and 2011, as all providers were currently being reviewed at this time…
The importance of Initial Assessment and Skills Checks was emphasised in ensuring that candidates were placed on appropriate courses. In the event that IAs and Diagnostics were not available for Audit then all providers would be subjected to funding clawback.
Margaret Cobb stated that negotiation of the Individual Learning Plan with each candidate was stressed as also the need for evidencing this for audit purposes. Furthermore, the ILP should be in resonance with the IA and Diagnostics and negotiated by a Level 4/5 tutor with the learner. Once again lack of robust evidence of this process or not being carried out by a L4 tutor would result in funding clawback for all providers…
Ataul Ali stated that a rationale for determining the appropriate banding of each candidate would need to be evidenced. This would need to be placed in the ILP. Ataul Ali also added the previous experience needed to be considered would also be a determinant of the banding rate. Furthermore, Margaret Cobb stated that the lack of a valid rationale for applying the higher banding would result in funding clawback for all providers…
Commenting on UKLA’s Funding situation, Margaret Cobb stated that this had been originally fixed at £135,000 to deliver 100 NVQs and 100 Skills for Life courses. UKLA was currently in a position to claim some £90,000 of this. UKLA would need to plan to stay within this budget. Margaret Cobb stated that the situation is no different for all other providers who were being constrained to stay within their preliminary budgets. Imran Bham pointed out that according to the initial volumes given to UKLA, the targets of 100 SFL and 100 NVQ courses would equate to £200,000 and not £135,000. Imran Bham stated that this should be looked at as the shortfall would be disadvantageous to UKLA’s initial delivery plan.
John Kinsella stated that at the launch of [TTG] the opening speech gave a strong indication that initial budgets would be increased for providers who can demonstrate that they could exceed their targets. Indications were that there was ample funding available for this to happen. In reply, Margaret Cobb stated that this was not so, that funding was tight as all providers were exceeding the targets. John Kinsella further clarified this point with Margaret Cobb that there was, in fact, a mismatch of funding as demand was outstripping supply. Margaret Cobb stated that all providers were in a similar position and would have to adhere to the original target set.
Imran Bham stated that there was an additional 320 candidates ready to start at UKLA and that, altogether, about 700 candidates had completed IA and Diagnostics with UKLA. Each of these candidates UKLA had been the first choice of provider. Imran Bham asked advice as to what to do with such numbers. Sarah Haigh suggest that UKLA could signpost access to other providers. John Kinsella queried how this could be done when, as Margaret Cobb had just reported, they too were oversubscribed…”
“…left unchecked, [TTG] activity will exceed the budget allocations we have available for the 2009-10 financial year and create further pressures in the 2009/10 academic year and beyond. We must take action now and agree with you contracts that enable you to meet the needs of employers and learners, within the levels of investment we have available…
In taking these actions our underpinning commissioning principle remains unchanged – we want to ensure the best performing colleges and training providers can continue to offer the highest quality service to learners and employers. These colleges and training providers should be able to continue to operate across the country and respond to demand within the national resources we have available and the contract limits we agree with them.
In outline, the measures and actions we propose to take include:
Train to Gain
- We will work with you to ensure that we remain within budget from April and for the remainder of this academic year as well as for the 2009/10 academic year. You must manage within the overall maximum contract value agreed with us. We will also want you to ensure that sufficient levels of provision are available to employers and learners across the whole of the academic year...
- We cannot “over contract” with colleges and training providers at either a regional or national level. Contract values cannot exceed the overall budgets we have available.”
64. UKLA obtained a PFR on 7 April 2009 (“the April Yorkshire PFR”), which was based on information which UKLA had transmitted to LSC up to 5 April 2009. Based on that information, the April Yorkshire PFR recorded that, by 5 April 2009, in the Yorkshire region, 195 NVQ learners had started and 178 SFL learners had started. [23] The April Yorkshire PFR also recorded that, by 5 April 2009, UKLA had earned £178,078.19. The April Yorkshire PFR indicated that all the NVQ learners who had started had done so in March 2009 (except for one who, anomalously, was shown as having started on 23 April 2009). Many, if not all, the NVQ learners who were recorded as having started in March 2009, were recorded as having started in the last two weeks of that month.
65. Mr Lowe wrote to providers on 1 May 2009 (“the 1 May letter”) as follows:
“…Following on from the letter issued by Margaret Coleman recently, there are a number of factors that we must manage collectively in order to actively manage the delivery of [TTG] over the remainder of this year and the movement into the next academic year.
The attached spreadsheet has been produced in order for the LSC and the provider network to actively manage both the commitment to learners in the system as of 1 April 09 and determine individually with providers the opportunity to recruit learners between periods of 1 April 2009 to 31 July 2009. This activity will help us to determine the financial cost of carry in learners into the 2009/10 academic year which would also include starts recruited during this period subject to you having sufficient headroom within your existing…MCV…
- With regard to the period April 09 to July 09 you should show your anticipated delivery taking into consideration delivery against your allocated MCV.
- Where you have not yet reached your agreed MCV based on current in learning numbers, you can continue to recruit learners subject to this commitment not exceeding your maximum contract value for 08/09.
- From 1 April 2009 where you have already or are likely to exceed your maximum contract value for 2008/09 you will need to postpone any further recruitment until August 2009 to ensure that you have sufficient funds to meet the requirements to learners in learning…”
“…the [TTG] programme had proven to be very successful, with significant uptake over the last 6 months in response to the stimulus in demand activated in the summer of 2008. It was therefore necessary to ensure there was no overspend, whilst continuing to fund the best performing providers to maintain quality. In response, Partnership Teams were considering the level of performance and number of learners enrolled up to the end of March to enable confirmation of the 2009/10 budget. It was important providers manage within formally agreed MCVs and managed the April to July offer accordingly. More funding would therefore be made available in this academic year by transferring resources from 2009/10 into 2008/09…It was confirmed the LSC would stand by its MCV contractual commitments where delivery quality was good and would ensure the LSC could fund all those learners who started before 1 April 2009. Anything beyond that would be funded based on availability. It was noted failure to meet MCVs could be legally challenged, whilst recognising the LSC and sector clearly could not allow funding to remain with poor quality provision. Regions and National Office were working together to ensure MCVs were issued by 31 May…”
“I write as the legal officer of [UKLA] with regard to recent communications from the LSC concerning the value of the contract the company has with the LSC. It is our company’s understanding that, whereas it was a term of the contract between the LSC and our company that an initial contract value was set by the LSC, that the amount of training contracted with our company would be increased upon our company’s achieving the initial contract value. However, the LSC, in its letter dated 16 April 2009 and telephone conversation on Friday, 15 May 2009 to our company appears to seek breach of its contractual obligation by refusing to pay for training over and above the initial contract value.
We would be most grateful if you could clarify the LSC’s position in the next seven days, and, if it is the case that the LSC does not wish to move beyond the initial contract value with our company, then, can you please stipulate the LSC’s reasons for this…” [24]
68. Mrs Haigh emailed UKLA on 19 May 2009, as follows:
“…you will need to resubmit in period 10 including the starts for period 10 plus all existing learners still on programme. It should however be noted that you must only submit volumes up to your contracted volumes as laid out in your summary statement of activity, and within your overall maximum contract value in order to avoid being capped…”
“…We are now coming to the end of the settlement process for 2009/10 funding….
I know that some of you have been concerned about aspects of this year’s process and I appreciate the difficulties it may have caused you…
I want to be absolutely clear with you on a number of specific issues around future allocation that I know have caused some anxiety over the past few weeks. I am therefore setting out below the current position on funding allocations. I also want to reassure you that we will guarantee that there is funding available for you at the agreed rates to support learners who were legitimately in learning before 1 April 2009 through to completion…
Indicative contract values have been issued and we are currently in the process of revisiting allocations and, where possible, increasing them…
As noted already, I can assure you that all learners legitimately starting training before 1 April 2009…will be funded to complete their training at the agreed rates.
I do hope that this note reassures you that we are resolving some of the legitimate concerns many of you are expressing to me, and others.”
70. Clive Howarth wrote an email on 21 May 2009, which said:
“…Final allocation letters for 2009/10 will be sent in the next fortnight but you should be aware from your initial allocation letter of the scope you have for new starts from August…
We are working hard to try to alleviate the problems we are all facing because of the pressures on the [TTG] budget and will let you know how things progress as soon as we have any viable solution. Unfortunately in the meantime the message is still the need for you to manage within your maximum contract value...”
“You will have been notified at the end of last week that, as a result of the discussions with Ministers on the current [TTG] funding position, we agreed to move the date to confirm…MCVs to 19 June. I am writing to you to provide specific details of the package of measures now in place to manage the ongoing success of these services to employers and provide early notification of other options we are currently exploring…
Actions for 2008/09
As you will already be aware, the LSC has committed to funding all legitimate [TTG] starts prior to 1 April 2009. A “legitimate start” in this context is one that meets our normal requirements for start funding, as set out in the Funding Guidance 2008/09.
For audit purposes, the provider must have evidence to demonstrate that the learner has actively participated in a structured programme as detailed in their individual learning plan prior to the 1 April 2009. In line with our structured assurance approach, funding claims will be checked, during assurance visits to ensure that for any learners submitted as new starts dated before 1 April 2009 there is evidence that learning had taken place on or prior to 31 March 2009…
To continue to ensure we remain within the budget available, we can only commit to funding within the overall MCV those learners that meet these conditions. All remaining new activity will be funded based on the specific agreements made with our local teams and will be subject overall affordability. As already notified, from April onwards you should only have been taking on new starts where they can be accommodated within your agreed MCV for this year…
Through our Regional teams, we have been working with providers to ensure MCVs for 2008/09 reflect our commitment to existing learners…However, to ensure we are able to cover those commitments, we ask that all legitimate starts prior to 1 April are recorded on the ILR by 30 June 2009…”
“Further to Geoff Russell’s letter to all providers via Regional Directors on 19 May 2009, National Office has been asked to provide clarification as to what constitutes a “legitimate” start:
“…I can assure you that all learners legitimately starting training before 1 April 2009…will be funded to complete their training at agreed rates.”
For clarification, the standard definition of a “start date” should be used to determine the learners to which this assurance applies.
“The start date is defined as the date on which the learner’s learning programme begins”…
This…is the date on which learning for the learning aim began…
Any learning programme for which the start date is on or before 31 March 2009 will therefore be included in this assurance.
The provider must have evidence to demonstrate the learner has actively participated in a structured programme as detailed in their individual learning plan prior to 1 April 2009. This will be after all the pre-start activity has been completed and they have started learning…
This assurance applies to all learners who meet the above criteria, including where providers have received prior authority to exceed their Maximum Contract Value and their contract has not formally been changed to reflect this agreed level of recruitment.”
74. There is a transcript of the 16 June conversation, [25] which records Mrs Haigh saying to Imran Bham:
“Everyone that was enrolled before April you’ve got a commitment to.” [26]
“Chris Nicholls: …for the remainder of this year you’ll still have an allocation in the North East…Is it 50 K you’ve got?
Imran Bham: We had 50 K initial contract value then 500 K.
Chris Nicholls: Yes. 50 K. That’ll all be put in place for the North East.
Imran Bham: So can we deliver to the initial contract value or the maximum contract value.
Chris Nicholls: It’s the 50 K value. The maximum contract value…
Chris Nicholls: …what we decided to do in the North East is that all providers who were new to the North East and was successful to tender we offered them all…within a expectation that as time moved on we’d be able to increase that will stop now obviously as you’ll be aware things have changed significantly and we don’t have as much money as we did have when we set up the initial contract. So I think, well, cut the long story short, as you know the money has run out….
Imran Bham: …so we can deliver you’re saying up to 50 K in the North East?
Chris Nicholls: Yes.”
76. UKLA contends that the 2009 Yorkshire letter of intent was received by it on about 19 June 2009. [27] That letter read:
“I am writing to confirm your Maximum Contract Value (MCV) for [TTG] for 2009/10 – covering the period from August 2009 to July 2010…
This final MCV constitutes the maximum level of funding [LSC] is providing to cover the commitments of both existing learners started in 2008/09 and new starts over the next year.
Maximum Contract Value
Your MCV in 2009/10 for [TTG] is shown below…
2009/10 MCV £130,000
Please note that the MCV is not guaranteed but we will pay funding up to the MCV based on actual delivery…We cannot commit to pay for any delivery above the agreed MCV because of budgetary constraints or pressures incurred by colleges and providers recruiting more learners than the MCV provides for…
This MCV confirms the intention of [LSC] to enter into a formal contract for the provision of the Services as set out in this letter for 2009/10 as at 19 June 2009.
In order for the Services to continue prior to the parties entering into the formal signed variations to our agreement, the current terms and conditions will apply in the interim to this letter. The formal variation agreement will be issued following any discussions that need to take place to support profiling of activity. The interim arrangements will operate from 1 August 2009 until 31 October 2009 or until the formal contractual variation is signed by both parties, whichever is the earliest.
The Services shall be delivered in accordance with the following:
- The Terms and Conditions set out in [UKLA’s] agreement
- The Funding Guidance for and/or other general requirements which apply to the Services…
Either party shall have the right to terminate the arrangement set out in this letter by one party giving one week’s notice in writing to the other…
By signature of this letter the LSC confirms its intention to enter into these arrangements and I would be grateful if you arrange for a copy of this letter to be signed on behalf of [UKLA] to signify agreement to the terms set out above…
Please sign and return one copy of this letter by 3 July 2009…”
78. Mrs Haigh emailed UKLA on 22 June 2009, as follows:
“All “legitimate learners” must be submitted to us by 30 June 2009 to be able to claim for activity delivered…”
79. Mrs Haigh emailed UKLA again in June 2009, as follows:
“Following on from my earlier emails of 19 May and 22 June regarding the data issues I thought it would be useful to confirm what is outstanding with regard to your [TTG] contract…
With regard to the important issue of data, you must ensure that starts for each period plus all existing learners still on programme are submitted via batch. If only starts are submitted your payments will be affected as reduced volumes will be shown. It should however be noted that you must only submit volumes up to your contracted volumes as laid out in your summary statement of activity, and within your overall maximum contract value in order to avoid being capped…”
“Permission to upload pre-April 1 2009 learner starts potentially outside MCV
A one-off allowance to permit providers to upload potentially un-funded learners outside of MCVs enrolled prior to 1 April 2009 was announced in June 2009…”
82. Mrs Haigh emailed UKLA on 1 July 2009, as follows:
“…With regard to the data, you will have noted from Geoff Russell’s letter of 11 April 2009 (sic) that all legitimate learner starts prior to 1 April need to be recorded on the ILR by 30 June 2009. Obviously this date has now passed so any omissions will not be taken into account.”
83. As I have noted, Mrs Haigh emailed UKLA on 8 July 2009, as follows:
“…as you are exceeding your MCV you will need to remove all starts from the system for April, May and June 2009 as the LSC is only paying prior to 1 April as per Geoff Russell’s letter of 11 July 2009…”
84. Keith Woodcock emailed UKLA on 9 July 2009, as follows:
“Please note that in order for the LSC to make all legitimate payments to which [TTG] providers are entitled to as part of their…MCVs for 2008/09, it is necessary to ensure that there are sufficient funds within individual providers contracts. The final opportunity for the LSC to make any changes to MCVs for the 08/09 contract year is 31 July 2009…”
“What happens if I exceed my MCV?
The LSC has determined 3 scenarios whereby a provider might breach their MCV. These are outlined below along with LSC’s policy line and how these scenarios will be dealt with.
Scenario a) Where a provider breaches their MCV because of payments associated with “legitimate” learners, to whom the LSC has made a funding commitment
Answer – The LSC has committed to funding these learners and so the provider’s MCV would need to be increased in order to cover the full costs of these learners…”
86. The National Audit Office report was published on the same day. The report said:
“…[TTG] has been subject to frequent policy and process changes as the Department has sought to address performance issues and act quickly to offer help in the recession…The LSC had to implement these changes but was not always able to communicate them in a way that enabled providers to respond swiftly and effectively. The LSC needed to develop policy and operational guidance within a tight timeframe, and did not always keep its regional staff, providers and brokers well informed. In particular, the main information sources were not consistently reliable or up-to-date: funding guidance for providers was not user-friendly – early versions were long and vague, leading to inconsistent interpretation by providers and LSC staff…”
87. Matt Findull emailed UKLA on 17 July 2009, as follows:
“As you will see below we are contacting all providers who have exceeded the 2008/09 MCV and who have learners starting post 1 April to ask that these are removed from the P12 data submission as these are not fundable. Please note we will not be able to consider removing any capping on payment of a legitimate learners until this has been done…”
“2009/10 Employer Responsive Allocation Letter
Dear Colleague, Please find attached a PDF copy of your 2009/10 Allocation letter. A hardcopy will follow for signature.”
Attached to the email was a PDF named “UK Learning Academy”. The second email said:
“Further to the 2009/10 Employer Responsive allocations confirmed with you earlier today, and Geoff Russell’s letter of 11 June, the LSC are to agree a full Summary Statement of Activity (SSoA) and a funding profile with each provider…
The Maximum Contract Value (MCV) you were allocated for Employer Responsive 2009/10 contract year (sent 19 June) has been…pre-populated within the relevant profiles in the attached Excel workbook…
The [TTG] split is skewed because we have a commitment to fund legitimate pre-1 April starts as a priority and many providers have exceeded 08/09 academic year budgets with legitimate starts. Therefore funds have been brought forward from 09/10 academic year budget to fund this over performance resulting in less available for the months 1-8 of the academic year…”
90. The transcript of the 27 July telephone call records that Mrs Haigh said:
“…Everybody’s post-1 April, that together, it’s really important you do that Imran because…you’ll be able to get paid for your activity up to then, and that’s kind of what’s holding it back at the moment…
…as soon as you take those learners off from April onwards, it’ll release capping in a way, so you would get the delivery then…
…we’ll be able to pay from everything up to April, you know for those eligible learners that you had prior to 1 April…
And you get paid for everything that you know, you’re overdue for the eligible learners prior to 1 April…
[Following Imran Bham saying: “So, does that mean to say that we’re going to get paid for them, this is not the [SFL] because so far, I think what we’ve been paid for is the [SFL] learners”, Mrs Haigh continued:] You’ll get paid for any eligible learners prior…you know they’re starting prior to 1 April…”
“…basically Ann I think there’s 281 learners for NVQs that started prior to 1 April and 185 [SFL] learners that started prior to 1 April, and they’re the ones that obviously we have a commitment to pay…
[Ann Craven (LSC’s Economic Director):] We do.
So basically what we need to understand is how much from 1 April to July they’re going to cost us…because you’ve actually got a contract of 135,554 which you’re going to go over…
[Imran Bham:] …you see in relation to these additional learners, the 185 over and above the 281 which is 1 April, so, as I say you see these individuals had actually commenced with us…they have been enrolled for the RPVD as of post 1 April, but in the main 90% of them they had started with us as such on the programme…
My understanding Ann is the answer’s very clear, if there’s an assessment, an individual learning plan and those are in place and dated by the learner prior to 1 April and there’s been some training delivered prior to 1 April and will stand up to the auditors, then we will make those…
[Ms Craven:] That’s correct. That’s absolutely correct…
…some training [must have been] delivered
[Imran Bham:] Training delivered as well?
Yes. So having said that, does that change that 281 and that 185?
[Imran Bham:] It will do in actual fact. Yes. But obviously I have to go back and…
[Ms Craven:] You’ll have to have a look at that?
[Imran Bham:] Yes of course, physically at the files, yes…
[Ms Craven:] Because once the system comes right then we can look up what the contract value ??? [28] be for 8/9 and release those funds…
[During a discussion about the contract or purported contract for the academic year 2008-2009 in relation to the North East region:] Well it’s really important that we understand all this, because we’re at a period now where all the money for 8/9 has to be found to pay for all the learners that are in the system…My understanding and I hope I can make this clear [is] that the LSC will pay for all the learners that have a start date prior to 1 April. We have a commitment to that, and if the auditable evidence is there that we’ve talked about then the LSC will fund that ??? [29] whatever it be; the North East or Yorkshire and Humber. It’s really important that we understand how many learners, and how much money that is. And the fact that we don’t understand that, because you still got some April, May, June, July learners on the system makes it very difficult for us to come to an agreement in terms of the money that we owe you…
[Ms Craven:] That’s correct. Until we are confident that the April to July learners have been taken off we’ll be [un]able to pay you for the ones prior to 1 April and we’ll be [un]able to look at how much those that are going to cost you if they’re carrying on to 9/10 and whether or not you’ve got enough money in your 9/10 allocation… [30]
So at the moment you’ve hit the maximum contract value. We can’t pay you any more until we know how much we owe you…
[Imran Bham:] Just touching on may be the first issue as such that we’ve put on our agenda which was about the 08/09 contract allocation. I believe you say you are going to give us an update with regards to your expectations to us to deliver 100 NVQs and 100 [SFL] based on 135k allocation. So I was just wanting to know what have you got an update for us as such.
I think that what we’re saying is that if you’ve got 281 learners with start dates and 155 [SFL] with a start date prior to 1 April, then we will meet that commitment…”
93. Mrs Haigh re-sent the 12 June letter to UKLA on 5 August 2009.
94. Lucille Ingham (LSC’s Regional Contracts Director) wrote to Yusuf Bham on 12 August 2009 saying:
“The LSC recently issued you with a letter that set out your allocation for [TTG] provision 2009/10. We asked you to sign and return this letter by 3 July 2009. A signed and returned letter constitutes acceptance of the terms under which you will operate.
As yet, we have not received a signed return from you. If you fail to accept our terms and conditions, we will withhold payments for this activity until we receive your signed return…” [31]
“…As [LSC] has still not received a signed copy of this letter accepting the terms and conditions under which [UKLA] would operate [TTG] we have decided to withdraw the offer of a contract to [UKLA] to deliver [TTG] for the academic year 2009/2010.
Please provide your LSC Contract Manager with information on all “legitimate learners” recruited prior to 1 April 2009. [LSC] is committed to funding these learners to successful achievement of their qualifications and [TTG] and this information is required so that [LSC] can transfer these learners to alternative providers to complete their training…
Please note, as you have already received funding up to the Maximum Contract Value set out in your contract for 2008/09 you are not entitled to any further payments…”
“Where providers have exceeded their MCV by funding legitimate learners (i.e. those that started before April 1 2009), the appropriate adjustment should be made to their MCV so that it matches the value of the legitimate 2008/09 activity.”
“UKLA has had a letter advising that we will not be contracting with them in 09/10. I hand-delivered a letter…[Yusuf Bham asked] on what grounds had we decided not to contract with them. I referred him to the relevant para in the letter re not returning the signed document re the allocation which in essence was the agreement to accept terms and conditions etc. He advised that this had been signed and had been returned. He advised it had been returned on 25 June. I have checked in the system in WY and we have no record of it being returned. In addition there is a complication that we did not send the letter to UKLA until 20 July as we were trying to ascertain from them their potential carry in which involves them removing post 1 April starts. In essence we needed the info to help us make a judgment re the allocation. In light of this the letter that was sent to all other providers on 19 June did not go to them until 20 July but by mistake the letter date had not been changed…I did point out we had sent a reminder letter but they state they have not received that…
Re 08/9 we are still in a position where they have not removed the post 1 April starts and I have advised they need to do this as soon as possible. I have also reminded them re box 44 or 45 and they again advised that this was really difficult. In my view we should leave this and wait for audit to pick up these issues. Kay is going in on the 5 7 8 October…”
98. UKLA obtained a PFR (“the October Yorkshire PFR”) on 5 October 2009, based on information it had supplied up to that date for the Yorkshire region. The October Yorkshire PFR records that UKLA had earned nothing in the 2009-2010 academic year. [32]
99. UKLA also obtained a PFR (“the October North East PFR”) on 5 October 2009, in relation to the North East region, [33] based on information UKLA had provided up to that date. The October North East PFR recorded that (i) 29 NVQ learners had started, (ii) all 29 NVQ learners started in the second half of July (including 19 who had started in the last 5 days in July) and (iii) UKLA had earned nothing in the 2009-2010 academic year.
“Kay Skidmore or Ian Stafford: Foreign doctor came over and first thing he did was give someone an overdose. It was on the news. [34]
Kay Skidmore or Ian Stafford: Stains on the walls of toilet (UKLA) [and, later, on commenting about a sign on the toilet:] Well put a normal lock on then. It is a bit dodgy isn’t it…
Kay Skidmore or Ian Stafford: [After a lunch break:] Speaking about toilets in mosque in Cairo, so bad that…You have to take your shoes off for the mosque, looked at carpet and was filthy… [35]
Kay Skidmore: I’d already typed some feedback…I typed it up last week.
Ian Stafford: What. Before we’d even gone here?
Kay Skidmore: It was about those two duplicate learners.
Ian Stafford: Started the report as well. Ha ha…
Kay Skidmore: …here’s your report thank you very much. I put this has resulted in a recovery in funds but can we class it as a recovery of funds when we haven’t paid them. I’m really confused.
Ian Stafford: Does this start after --
Kay Skidmore: After 1 April…
Ian Stafford: I suppose if they haven’t been paid for it you can hardly take their money back for it can you.
Kay Skidmore: No. So I can’t put in this has resulted in a recovery of funds so what am I going to put in? …Could I put this has resulted in data collecting? Has a certain ring to it…
Ian Stafford: Why have they got a shower thing next to the loo?
Kay Skidmore: Because it’s an Asian toilet.
Ian Stafford: Yes. I was thinking that because in Libya there was quite a few of them.
Kay Skidmore: They still use toilet paper…I be taking my boots off at the door. We had one of those in hotel room in Egypt…”
“As the…MCV has already been paid, no further amounts will be paid other than for viable learning aim starts which took place and were registered prior to 1 April 2009, or those included within the MCV starts. Further information regarding this matter can be obtained from the partnership team.”
That document had, at Annex A, information showing what appeared to be “potential funding errors…on a learner-by-learner basis.” The first page of Annex A contained computations, including an error rate of 29.2%. The second page of Annex A (“the Errors List”) identified 15 learners and, in each case, what were described as the “error description”, which substantively comprised the following categories of “error”:
i) A full level increase from the initially assessed level to the SFL level being undertaken had not been evidenced;
ii) The learner had withdrawn from the SFL programme prior to achievement, but no actual end date or an incorrect date had been entered on LSC’s system;
iii) On-programme payments had been made when the learner had not been registered with an awarding body for an SFL qualification; [36]
iv) The learner was not registered with an NVQ awarding body.
As part of the audit process, Testing Working Papers were produced. Those documents identified a number of questions which the Defendant contended (and which, it appeared to me, was not to be disputed) the auditors were required to answer and which gave rise to the first three categories of error I have identified (which, in turn, contributed to the 29.2% error rate calculation). [37] The relevant questions were said to be these:
v) Does the learner have an Initial Assessment which identifies their needs? Is there evidence that the learner has had their Numeracy need assessed?
vi) If the learner has not achieved, is there evidence to confirm that the learner is making progress towards their funded learning aims?
vii) If the learner has left, was the correct date of withdrawal recorded on the ILR? Is there evidence of a written notice of termination?
103. Mr Lowe wrote to UKLA on 18 January 2010 as follows:
“…I can confirm that your [MCV] for the 2008/9 year was £135,533.76 and the full amount has been claimed.
After reviewing the LSC’s database and the results of the recent audit we conclude that all of the NVQ learners pre and post 1 April were not eligible for payment over and above the [MCV]. These eligibility decisions are in accordance with the LSC Funding Guidance 2008/09: ILR Funding Compliance Advice and Audit Guidance for Providers Annex B, paragraph 18.
I can therefore confirm that there are no further payments due to [UKLA] in respect of your contract in 2008/9.”
“Executive Summary
Use of Funds Opinion: Qualified (Unsatisfactory)
Recovery amount: £Nil…
The LSC is obliged to safeguard public funds. Therefore, we seek to recover any monies paid which have not been spent in accordance with our contractual conditions, or where it has been used for purposes other than those for which it was intended.
The provider has been paid up to their [MCV] of £135,533.76.
Due to the high error rate identified in respect of the potentially payable amounts listed on the LSC database for this provider, 29.2%, we have concluded that there will be no further funds payable to the provider.
This is due to all of the NVQ learners being ineligible for on programme payments until period 11 (June 2009), at which time they were registered with the awarding body, EDI. Further explanation of this issue was provided in Mike Lowe’s letter to you, dated 18 January 2010.”
The final audit report was accompanied by an annex, Annex A, which related to recommendations which had been made following the initial monitoring visit by LSC’s auditors in December 2008 and which had not, according to the auditors who conducted the 2009 audit, then been adequately addressed. Nevertheless, the following was said in Annex A:
“…At the time of the substantive testing visit, we found that there was no evidence of registration with the awarding body held on the learner files, for both the NVQ and [SFL]. It is a requirement of funding that the learner is registered and that evidence of this is retained to support any funding claimed…Further testing has been performed with regard to this issue and several learners do not appear to have been registered with the awarding body and are therefore ineligible for funding. All the learners registered for [SFL] are eligible for funding, provided they started before 1 April 2009. Learners who have been registered for the NVQ with the awarding body are eligible for payments following the date of registration which in all cases was in June 2009…
At the time of the substantive testing visit, we found that there was a lack of initial assessment for the NVQ, resulting in a lack of individualisation of the programme, and no units being assessed as ready for observation/assessment and immediate entry into the learner’s portfolio of evidence (accredited prior learning). We also noted that, in most cases, the same optional units were delivered which further suggests that there is little or no individualisation of the programme. The statement to support the need for high band rate funding, held on the Individual Learning Plan (ILP) for all learners checked, was not adequate to support the band rate – the need to undertake the technical certificate is not justification for a requirement of over 15 Guided Learning Hours (GLH). On some of the learner files, more than the two optional units had been claimed within the GLH. We note the provider’s comments regarding this issue, and, although we find the delivery method does not adhere to the principle of [TTG] funding, due to the late registration of learners and the maximum contract value having been reached, we have not represented these as errors… [38]
At the time of the substantive testing visit, we found that there were a number of learners who were undertaking the Adult Numeracy qualification at the level at which they had been assessed…We note the provider’s comments regarding the assessment of learners, but, as the regional skills team consider a majority to be anything above 66%, the threshold applied of 75% is unacceptable. This has resulted in a recovery of funds…”
105. The claim was begun on 17 June 2014.
106. I now consider the witness evidence.
UKLA’s witnesses
Imran Bham
108. Mr Bham [39] said that UKLA became interested in the TTG programme in about early 2008. He said that he attended an LSC meeting at the Lancashire County Cricket Club ground on 3 April 2008 at which he was told that contracts would contain “initial volumes” but that “if these had been achieved by training providers then further volumes would easily be available.” [40]
“11. By way of an explanation I can confirm that the Agreed Start Date field is the date that we have entered on UKLA’s Management Information System once the learner had enrolled with UKLA…
15. By way of further explanation of how UKLA treated a learner’s “start date” I would add as follows. UKLA had a process in place when we enrolled learners. Once a learner had chosen UKLA as a training provider, we would first conduct an Initial Assessment, a Diagnostic and would devise an Initial Learning Plan. Once this was concluded an induction would take place and we would agree with a learner as to what modules they would be enrolled on. Once some initial training had been provided, the actual training would commence based on an agreed start date which would be the date of the first unit that they would attend…
18. When learners had completed their Initial Learning Plan we would then register them onto the system and provide them with a number of options as to when they would like to commence the training that had been planned for them…
20. [On the schedules] there are…a number of learners who have an agreed date post 1 April, however [they] still form part of this claim. The reason they still form part of this claim is because all these learners came to [UKLA] and enrolled prior to 1 April 2009. They all had an Initial Assessment, Diagnostic test and an Initial Learning Plan created prior to 1 April 2009. However, because the situation with [Leeds City Council] was making learners nervous, these were the learners who asked us to put matters on hold as they did not wish to have to pay for training out of their own pockets in the event that qualifications obtained at UKLA were not recognised.
21. Although we had conducted a fair amount of work with these learners, we as a company took the decision that we would not register them or give them a start date as we did not wish to put these learners in a situation where they had to pay for their training with another provider in the event that [Leeds City Council] succeeded against us in the judicial review that we were in the process of commencing against them…These learners had stated that they wished to wait and see how the situation developed. It was therefore only fair that we did not jeopardise their chance of going to another provider in the event that they chose to do so.”
Yusuf Bham
125. Mr Bham said that he was at a Yorkshire region LSC meeting, at LSC’s Bradford premises, on 3 April 2008 at which it was said that “contracts were performance led”. [41]
“…our recruitment trends would dictate the level of the contract and increase in value accordingly as a result of the underspend in previous years and if there were employees who wanted to achieve an NVQ then there should be no problem with the funding as the funding was employer responsive led and would meet the demand.”
128. Mr Bham said that, at the 8 September meeting:
“Providers were being encouraged to recruit in excess of the stated value in their contract and I specifically recall Mr Howarth saying “recruit, recruit, recruit”.”
In cross-examination, Mr Bham said he understood, from what was said on 8 September, that the Yorkshire region LSC wanted to spend the budget which had been allocated to it. Mr Bham also acknowledged that the 24 September email stipulated that there was a requirement for negotiation in order for learner numbers to be increased but, he said, he was not sure what such a negotiation was.
134. The following exchange, in relation to the 12 June letter, took place in cross-examination:
“Q. …The final paragraph on page 96: “To continue to ensure we remain within the budget available, we can only commit to funding within the overall MCV those learners that meet these conditions”, and that condition is that they had legitimately started before 1 April 2009. That is in the paragraph above.
A. Yes.
Q. You saw this letter, I presume?
A. I must have seen it at the time, yes.
Q. …What did you understand Mr Russell to be saying when he said, “We can only commit to funding within the overall MCV those learners that meet these conditions”?…
A. Well, there’s two things in this letter. The first is that the learners who were enrolled prior to 1 April -- and to be in your budget.
Q. …You had to be within your budget, didn’t you?
A. …In one of the paragraphs it says that as long as the learner – it is evident that the learner had started before 1 April.”
John Kinsella
“I remember that UKLA received the letter of intent for [the Yorkshire region] 09/10 around the same time that we received the North East 09/10 letter of intent…I certainly recall signing both letters of intent, for both regions, at the same time and handing them back to Imran to send back together.
I signed the letters on the afternoon of 25 June 2009, after I, Imran and Mohammed Dawoodji had met and discussed the contents of the same. I specifically remember it being the afternoon because we had to wait until Mohammed Dawoodji arrived at the office and he usually only arrived after lunchtime.
My recollection is further assisted by the fact that the following morning I contacted Imran around 7:30 a.m. I was already at the office and heard the news about Michael Jackson’s sad passing. I called Imran and had a discussion regarding a number of matters including whether he had posted the letters that I had signed the previous day. Imran confirmed that he had. He then ended the conversation discussing Michael Jackson…
I can strongly confirm that the letter of intent was both signed by myself and was posted back to the LSC by Imran…”
150. It is convenient to say something, at this point, about Mr Kinsella as a witness.
Taxi drivers
159. Mr Maskeen said that he had his first lesson in the week following Sunday 29 March 2009.
161. Mr Zaroof believed that he had his first NVQ lesson in April or May 2009.
163. Of the 9 taxi drivers UKLA called:
i) 4 were uncertain about when they had their first lesson;
ii) 1 (Mr Quereshi) gave what seemed to me to be contradictory evidence in cross-examination and re-examination and I do not place any more than the most limited weight on his evidence;
iii) In relation to 2 (Mr Maskeen and Mr Naveed Ahmed), the picture is unclear about whether they had an NVQ lesson before 1 April 2009;
iv) In relation to 1 (Mr Hamid), I am satisfied that he had his first NVQ lesson after 1 April 2009. He did not have his NVQ induction until 30 March 2009 and, on 9 April 2009, it appears that his NVQ was still to be arranged;
v) 1 (Mr Zaroof) believed he had his first NVQ lesson in April or May 2009.
The Defendant’s witnesses
Clive Howarth
“…providers were told that, to obtain an increase in MCV, they should discuss this with their contract managers as soon as they had reached the point where 80% of their existing MCV had been delivered. We also asked providers to supply information on the exact number of learners for which an increase in MCV was sought, and to demonstrate that they had additional activity to deliver and capacity to deliver this activity. We then required approval from two different members of the area team, including the budget holder (i.e. me), before issuing a written contract variation.”
He explained that the 8 September meeting was one of 3 similar events held about the same time at which what he said did not vary. In a second witness statement, he said:
“…I certainly never suggested that training providers had carte blanche to recruit as many learners as they liked, irrespective of contract value, as UKLA later did. The LSC had to have control over its spending. It could not afford the providers to take as much funding as they liked, and the tool that we used to achieve this was the MCV…I do not recall ever using, and I am certain I would not have used, the phrase “recruit, recruit, recruit.” Nor is it the case that the LSC would have encouraged UKLA to recruit learners in excess of its contract value… ”
“…before guidance came out in May or June what was being communicated to providers was that there was a commitment to fund learners who started before 1 April who were defined as legitimate starts within the funding guidance, even if it happened that they were recruited in excess of maximum contract value.”
He explained that he interpreted the “commitment” in this way, because there was no reference, in the 1 May letter, to MCVs. He was taken, again, to the 1 May letter in re-examination. It was drawn to his attention that Geoff Russell’s first “commitment” on behalf LSC was contained in the 19 May letter. In the light of that, he said that the “commitment” contained in the 1 May letter (and any “commitment” before that date) was undefined.
“Looking back now, I can see the decisions that were taken within the LSC as to funding pre- and post-1 April learners starts were not communicated as clearly as they might have been. As I understood our approach, providers were always required to work within the MCVs – hence my 21 May email reiterated this point. However, there was also an assurance in Geoff Russell’s letter of 19 May that legitimate starts prior to 1 April 2009 would be funded.”
173. It is convenient to say something, at this point, about Mr Howarth as a witness. Mr Howarth struck me as someone not driven to hyperbolic statements. He gave his evidence in a calm, measured and fair way. [42] His oral evidence leads me to conclude that he is someone who, if he has a practice, is likely to invariably adopt that practice. As is to be expected from an LSC TTG regional director, he struck me as being very familiar with the funding (and other) arrangements for the TTG programme. I must add that it seemed to me that, at times during his oral evidence, Mr Howarth was somewhat confused about the chronological order in which certain events occurred. [43]
Sarah Haigh
“Q. …“We would also retain the flexibility to move provision between under and over performing providers to ensure that no provider will run out of capacity during 2007/08. The money is there for you to earn if you can engage with employers and find the learners.” That is the message, isn’t it?
A. Yes.
Q. “The money is there for you to earn”?
A. Yes.
Q. Is what you would tell providers?
A. I’ve said there was additional funding available, yes, definitely.
Q. Yes. Can you please turn the page and look under the heading, “Learner start dates”, “We have received some worrying feedback from providers in recent weeks. Some of you are telling us that you will have to stop recruiting learners next month because you won’t have enough time for the learners to complete before the end of the 2007/08 academic year. Please be reassured there is absolutely no need to stop recruiting Train to Gain learners. In fact doing so would mean you almost certainly would not be able to deliver your contractual allocation for 2007/08.” So far from reining in the providers, you are spurring them on, are you not, to continue recruiting?
A. Yes.
Q. “If we are to meet the extremely tough challenges laid down by Leitch, we need providers to keep recruiting learners.” What were the challenges laid by Leitch so far as you understood them?
A. I can’t remember.
Q. It was to recruit more learners in a nutshell, wasn’t it?
A. Yes.
Q. “If you haven’t enough places available in your contract, talk to your contract manager.” So you knew about this?
A. I will have received the newsletter, yeah.
Q. You knew you would get approaches from providers saying, “I’d like some more allocation”?
A. Yes, yeah.
Q. And your message was this: if your performance is good on learner starts and achievements and you can recruit them, we can fund them. That was the messaging, wasn’t it?
A. Yes.
Q. Did you give out that message?
A. I don’t recall having a meaningful discussion about increasing the contract value, but to other providers I would have done, yes.
Q. What, UKLA is the only one you didn’t have that conversation with?
A. No, no, not at all. I mean what I’m saying is I don’t specifically remember in this instance having a discussion about increasing the contract value.
Q. But the message you were giving out was consistent with this, wasn’t it?
A. Yes, yes.
Q. So I suggest to you the message you were giving out to UKLA is consistent with this, wasn’t it?
A. Yes.
Q. You were telling them if their performance was good on learner starts and achievements and they could recruit them, you would fund them?
A. I think I would have said, we could negotiate the volumes upwards.
Q. Well, this is with the benefit of hindsight and knowing what's happened, isn’t it? At the time you were saying, “If you can recruit them, we will fund them”?
A. Yes, but I don’t think that means giving people free rein to deliver because we still had regional budgets. So I’d be very conscious of that in any messaging to a provider for any funding stream.
Q. But that’s the benefit of hindsight, Mrs Haigh, isn’t it?
A. No, I think I’m always conscious about the contract value.”
“…I also recall developing something of a “stock” answer – which was that a request for an increase could be discussed when 80% of the initial volumes had been delivered. What I meant by this was that 80% of the initial volumes had been recorded on our data systems, following an upload of the individual learner records by UKLA in the usual way. I think it unlikely that I would have said that there would be “no problems” with an increase, as I did not have the authority to increase the MCV, nor would I have known if there was financial capacity to do so.”
In cross-examination, she said that she encouraged providers to increase delivery and she said: “there’s money”. However, she added that the “messaging” was that, if contracts got to “80%”, there would have to be a “conversation” about additional “volumes”.
“We told him that until at least 80% of the contract had been delivered and claimed, a formal request for an increase in MCV could not be made…”
“I think the maximum contract value could be increased but not without a conversation and not without limits, because we have got a regional budget to work within.”
184. LSC was a large organisation with a complex structure. [44] Mrs Haigh has worked in LSC or similar organisations for many years. It would be unsurprising, perhaps, if Mrs Haigh was someone who was particularly concerned that LSC’s correct processes and procedures were followed, as I found her to be. This conclusion is supported, I believe, by her 19 May 2009 email and by her 2 June 2009 email to which I have already referred. By way of further example, this is part of how Mrs Haigh described the 4 August meeting, in her witness statement:
“As UKLA had not submitted the correct data on fields A44/45 in its ILRs, we reminded its representatives that this amounted to a breach of contract and it was therefore at risk of the funding it received being recovered at audit. UKLA was also instructed to remove all ineligible post-April 1 learners still recorded on its ILRs and reconcile its data by the end of August. We made it clear that the LSC needed this information to establish the number of learners that UKLA would carry over to its 2009/10 allocation. I recall that the aim was learners who had started post-1 April needed to be carried over into the following academic year, 2009/10, because the LSC had gone over budget for 2008/09. UKLA was also advised that it would only be paid for pre-April 1 learners if they met the eligibility criteria.”
Kay Skidmore
186. Miss Skidmore explained, in her witness statement, thus how an “error rate” was calculated:
“The error rate was the ratio between the financial value of the [funding] errors identified in the payment period being reviewed [during the audit] and the value of all the payments made in respect of the learners within the sample during that period.”
187. Miss Skidmore gave the following evidence in cross-examination.
190. Miss Skidmore was cross-examined about conversations she and Mr Stafford had during the course of the 2009 audit. Because those conversations formed a significant part of UKLA’s response to the 2009 audit defence and counterclaim, [45] it is appropriate for me to set out that cross-examination:
“Q. …Do you know that it records you making certain disparaging remarks about the toilets at UKLA’s premises?
A. Yes, that was pointed out to me.
Q. I see. Can we start earlier on with a remark you made about a foreign doctor killing someone. Ms Skidmore, can you please read at the top of the page, “A foreign doctor came over and the first thing he did was give someone an overdose, was on the news.” What brought that on?
A. I believe it was a news story at the time.
Q. Why did it come up in the course of you carrying out an audit at UKLA?
A. I have no idea.
Q. Why are you remarking on what foreign doctors have been getting up to?
A. I’ve no idea except it was a news story at the time.
Q. What significance lay in the fact that this doctor was foreign?
A. None, I don’t think.
Q. Then why mention it?
A. It was a conversation that was nothing to do with the audit.
Q. I see, because going down the page you say – I take this to be you. Do you see the entry 12.26 to 13.41? “Speaking about toilets in a mosque in Cairo, so bad that you have to take your shoes off for the mosque, look at the carpet”, and someone else says, “Was filthy”. “Took socks off too and had to wet my feet on the way out.” Have you been to Cairo?
A. I have, yes.
Q. And did you visit a mosque in Cairo?
A. Several.
Q. Did you consider that the toilets were worthy of remark?
A. Obviously.
Q. And did you find the carpet there filthy?
A. It would appear so, yes.
Q. So that you had to wash your feet on the way out?
A. It would appear so.
Q. When you say “it would appear so”, do you remember saying those things?
A. I remember a vague conversation. I don’t remember the specifics of this.
Q. Right. Now, you were at UKLA’s premises in Bradford, weren’t you?
A. Yes.
Q. You were surrounded by Muslim people?
A. Yes.
Q. Is that what brought on your remarks about a mosque’s toilets?
A. No, I don’t think so.
Q. It just happened to come up?
A. I think that it was the holiday that I did just before this audit.
Q. Because there are several other occasions on which you remark about the particular toilets at UKLA that you found unpleasant, evidently.
A. Yes.
Q. Is that connected with what you are saying here?
A. I believe it’s related to a comment that I possibly made about the toilets being like a Third World country…I believe actually I said I’d seen better.
Q. You’d seen better toilets in a Third World country than at UKLA?
A. Yes.
Q. And you connected that with a remark about a mosque you visited in Cairo?
A. Well, about some toilets at a mosque in Cairo.
Q. Yes, so the common denominator between a mosque and the toilets at UKLA is the fact that UKLA was run by Muslims, isn’t it?
A. No. It just happens to have been a place that I’d been.
Q. Of all the toilets you could remark on in the world, you remark on dirty Muslim toilets?
A. No, dirty toilets in Cairo.
Q. In a mosque?
A. Yes.
Q. I see. Can you please look at page 1181? Could you look round about the bottom hole punch against the time marked 2.52? Mr Stafford is asking, “Why have they got a shower thing next to the loo?”, and you replied, “Because it’s an Asian toilet”. “Yeah, I was thinking that because in Libya there was quite a few of them”. You reassure Mr Stafford they still use toilet paper. “So, that’s the sort of – It’s portable. I’d be taking my boots off at the door” – “It’s portable”. Then I think that must be, “I’ll be taking my boots off at the door. We had one of those in the hotel room in Egypt”. “Yeah, I’m surprised they haven’t got a proper loo there.” And then you move back to you auditing. Why are you remarking on this being an Asian toilet?
A. Because the hose attachment is something that you generally only find in Asian toilets.
Q. Or in Libyan ones?
A. It was Ian that had been to Libya. I haven’t been to Libya.
Q. …why are you saying you’d be taking your boots off at the door?
A. Because the floor was filthy.
Q. Was this in UKLA or when you get home?
A. When I got home.
Q. Yes, so you found…this was a filthy Asian toilet and you’d be taking off your boots when you got home?
A. That’s not what I said.
Q. You observed it was an Asian toilet?
A. Yes.
Q. And you observed that you felt it was so dirty that you would take your boots off before going into your house?
A. Yes.
Q. So, you found the premises disgusting, did you?
A. I found them insanitary.
Q. Did you mention that to anybody at UKLA at the time?
A. No, it would have been rude.
Q. Why?
A. It’s not within the social mores.
Q. If you had known that you were being recorded, would you have said these things?
A. As I said earlier, I wouldn’t have said anything at all.
Q. Why not?
A. Because I would have known that every word was going to be picked apart.
Q. You wouldn’t have said it because it would have exposed your attitude towards the premises, wouldn’t it?
A. It would have exposed everything that was said.
Q. …you would have been embarrassed about making disparaging remarks about the toilets at UKLA wouldn’t you?
A. Yes, I wouldn’t have said it to their face.
Q. …On reflection, do you think this is a proper discussion for auditors to have had during conduct of an audit?
A. No, but it’s a discussion that two friends would have had who enjoy travelling.
Q. You were there not in the capacity of making conversation with Mr Stafford. You were there to do a professional job, weren’t you?
A. Yes.
Q. Do you regard this as being a professional attitude to bring towards the audit?
A. Probably not.
Q. You accept that you behaved in an unprofessional way during the audit by what you said?
A. No…I don’t take the view that I behaved unprofessionally towards the provider.
Q. …you accept that you behaved unprofessionally in at least one respect?
A. In that I had non-audit-related conversations, yes.
Q. Which were disparaging towards the premises of the company that you were auditing? That is the case, isn’t it?
A. I wouldn’t put it quite so vigorously but yes.
Q. In what sense were you not being disparaging towards UKLA’s premises? You said they were so filthy you’d take your shoes off when you got home. Is that not --
A. Yes, I made a comment that I would be taking my shoes off when I got home because I felt that the premises were dirty.
Q. Isn’t that being disparaging towards the premises?
A. I could just as easily have said it about a hotel room that I stayed in.
Q. …you should audit the premises of a company which are dirty the same way you’d audit a company whose premises were clean, shouldn’t you?
A. And I did.
Q. …A reasonable person listening to your conversation might believe that you are bringing your attitude of disgust towards your audit work as well as your remarks on toilets, mightn’t they?
A. They might.
Q. …while you were at the premises, you found them so unpleasant you were avoiding going to the toilet. Is that right?
A. Yes.
Q. And you didn’t feel able to draw that to UKLA’s attention? You’d rather exchange jokes with Mr Stafford about it?
A. It wasn’t jokes.”
In answer to questions from me, Miss Skidmore accepted that the remarks in question made during the 2009 audit were inappropriate, but, she said, she would have commented on the state of UKLA’s premises whether or not UKLA was owned by someone who is Muslim.
Keith Hunter
194. Mr Hunter explained how payments to providers were calculated thus, in his witness statement:
“The provider would receive monthly payments during the learner’s planned period of study. 25% of the overall payment for the qualification would be retained until the learner obtained the qualification. As for the remaining 75%, this would be paid in monthly instalments, with a double payment made in the first month to reflect the costs incurred during recruitment and the initial assessment. Accordingly, the monthly payments were calculated using the following formula, where R equals the overall payment rate for the qualification (x 75) and n equals the projected number of months of learning + 1 (to allow for the double payment in the first month):
(0.75 x R)
(n + 1)”
Margaret Cobb
197. Mrs Cobb said this, in her witness statement, about the 2009 Yorkshire letter of intent:
“On or around 19 June 2009, the LSC issued letters of intent to most [TTG] providers in the Yorkshire…region, confirming the LSC’s intention to enter into a contract with the provider for the academic year 2009/2010 and specifying the MCV that had been allocated to the provider for that new academic year.
However, by this point, we had experienced several issues with the way UKLA had been uploading data in order to claim funding for its learners…
Given our lack of confidence in UKLA’s data and its processes, I made a recommendation during discussions with my line manager, Director Mike Lowe, that the LSC delay sending its letter of intent to UKLA…Following further discussions with Mr Lowe, Ms Lucille Ingham (the LSC’s Contracts Director for Yorkshire…) and members of the TTG team, my recommendation was followed. I recall that no letter of intent was therefore sent out to UKLA with the other letters of intent on or around 19 June 2009…
However, as time went by and the issues with UKLA’s data remained unresolved, I became concerned that our decision to delay sending out a letter of intent to UKLA might make it difficult for UKLA to plan ahead for the following academic year and might expose us to claims that we were not following our own processes or not dealing fairly with one of our providers. I discussed this again with Mr Lowe and Ms Ingham and other members of the [TTG] team. At some point…we decided to deliver the letter of intent to UKLA. My recollection is that I hand delivered the letter to UKLA on or around 20 July 2009 although I cannot now be sure of this and I have been unable to find documentation from July 2009 to support it…Unfortunately, as a result of an administrative oversight, the date of the letter, 19 June 2009, was not amended to reflect its later date of delivery, nor was the deadline for UKLA to sign and return a copy of the letter amended – this was stated to be 3 July 2009.”
“Q. [Referring to Mrs Cobb’s 22 September email] Halfway down, just in between the two hole punches, there is a paragraph which begins: “His main question was on what grounds had we decided not to contract with them”…[and] then a couple of lines further on you record: “He advised that this had been signed [this is the 2009 letter of intent] and had been returned. He advised it had been returned on 25 June.” “I have checked in the system in WY [which I take to be West Yorkshire] -- …and we have no record of it being returned.” Did the LSC have a practice of recording the date when letters of intent were returned…?
A. Yes. So, we had, I think it was mentioned earlier, we would have a post book so that would stamp the letter and then actually record it in the post book.
Q. I have a vision of the post book being a little book that somebody wrote in…I take it, it is not that?
A. No, it’s a much bigger book. It’s an A4 book that literally has the date and then records, I think at that stage it would be manually, but records every letter that has come in.
Q. …So, are you saying…that you…looked in that book and that book did not show the letter coming back?
A. I am saying that what my checking would be is I would ring the contracts team and check whether or not anything had been entered into the book and I would also check with Mike Lowe because Mike Lowe sent the letter and there was nothing in either of those two books.
Q. …You have explained to Mr Fryer-Spedding that in relation to letters that were posted out they would also be recorded in the post book.
A. Yes, yes.
Q. Was there any procedure to stop letters going out to one contractor when they would otherwise have gone out? Was there some standard practice?
A. It would rely on the quality assurance within the team. So, if we were sending a big bundle out we would have a list of who they needed to go to and we would actually do the cross-referencing in terms of the letter and the list. It wouldn’t actually be at the sealed envelope postal stage. It would be before it got to that. So, usually a team of people would work on things.
Q. So, there would be people stuffing envelopes?
A. Yes, people printing, people stuffing, people checking against the list.
Q. And if the letter was not to go to one person, that would depend on whoever was stuffing the envelopes at the time ensuring that a letter did not go to that address?
A. Yes, you would get the bundle of letters and then you would do the cross-check against the list.
Q. Was that your team?
A. That would be the contracts team.
Q. It would have been the contracts team which would have sent out the [2009 Yorkshire] letters [of intent]?
A. Yes.
Q. And there were a number of people in that team?
A. Yes.
Q. They would have had a pile of letters and their job was to cross-refer the addressees on the letters to a list showing who those letters should go to?
A. Yes.
Q. If there was a letter that should not go out as shown on the list, they were supposed to take it out of the pile and not post it?
A. Yes. The list would be annotated that it should not go to this provider.
Q. …[Lucille Ingham’s 12 August 2009 letter] is a letter, as I understand it, that you say was the chaser letter because the letter of intent had not been returned…[Was] there any…standard procedure in place within the LSC which would have alerted Lucille Ingham on or about 12 August that the 2009 letter of intent had not been returned which would then cause her to write this letter? How come she wrote this letter?
A. Right, the process would be we have a list of providers, we have a list of letters that have gone out and these are the ones that we still actually haven’t had returned. So, what we actually now need to do is to chase those providers up and check that they -- well, they are aware that they have got it and that they need to return it.”
Earlier, in cross-examination, Mrs Cobb had said that Ms Ingham’s 12 August 2009 letter was a standard letter which was sent out to all providers who had not returned, countersigned, the 2009 Yorkshire letter of intent.
Shafqat Rahim
“…I am certain that I never said to UKLA’s representatives, or indeed to any provider, that the LSC would fund any increase in learning delivered irrespective of the provider’s contract. Even though managing providers and their contracts was not part of my responsibilities, having worked at the LSC for some time, I did have some understanding of the workings of provider contracts. In particular, I knew that it would not have been for me (in my role) to discuss or promise anything in relation to levels of funding or contracted volumes.
…my discussions with UKLA centred on their role as a BME provider and the possibility of UKLA providing us with case studies and sharing their experiences of learner recruitment so that we could use these elsewhere.”
“…unlike me not to have diarized such a meeting (though in fairness, it’s not impossible that I omitted to do so).”
Whilst he acknowledged that someone could remove an entry from his electronic diary, Mr Rahim said that that would not have happened in practice. He added that he had nothing in his electronic diary for 5 November 2008.
Meetings
209. Because some disputed meetings may be relevant to the issues in these proceedings, it is appropriate for me to set out some of my conclusions in relation to those disputes. [46]
210. If there are points of dispute between Yusuf Bham and Clive Howarth about what happened at the meeting on 3 April 2008 at LSC’s Bradford office, I prefer Mr Howarth’s evidence to that of Mr Bham, because Mr Howarth is, as I have explained, someone who is likely to have been familiar with standard TTG-related arrangements (as any 3 April 2008 meeting was), because Mr Howarth gave his evidence fairly and because, as I shall explain, I have rejected other evidence from Mr Bham in relation to other meetings. [47]
214. I have concluded that there was no meeting on 1 September 2008. I am conscious that Yusuf Bham said that he particularly recalled that there was a meeting on 1 September 2008, because it was the first day of Ramadan and he was fasting. However, as I have said, I have rejected Mr Bham’s evidence in relation to other meetings, [48] and, because I have concluded, in relation to the 8 September meeting, that Mr Bham has probably reconstructed rather than recalled events, I think it is probable that he has done so in this context too. In any event, in my view, the weight of the evidence very much favours the Defendant’s case on this issue. It is improbable that there was a meeting on 26 August 2008 (a Tuesday) at which Sarah Haigh arranged a meeting for 1 September 2008 (the following Monday) to discuss matters which no-one suggests could not have been discussed on 26 August. Further, Mrs Haigh’s electronic diary shows that she was on annual leave that day (and she recalls being on annual leave that week). Whilst I do not rule out entirely the possibility that her electronic diary may not be accurate, I do not think it is probable that she would not have recorded a meeting on that day in her diary, because that is inconsistent with her nature, and, whilst I do not rule out entirely the possibility that an entry has been removed from her diary, having in mind how LSC operated, I do not think that that is probable. [49] Further, in cross-examination, John Kinsella was equivocal about whether a meeting took place on 1 September.
Documentary interpretation
222. When interpreting a document, the court’s aim is to determine how a reasonable person, with the background knowledge of the parties, would understand the document. So, as Lord Bingham explained in BCCI v. Ali [2002] 1 AC 251, at [8]:
“In construing this provision, as any other contractual provision, the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties’ intentions the court does not of course inquire into the parties’ subjective states of mind but makes an objective judgment based on the materials already identified. The general principles summarised by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896, 912-913 apply in a case such as this.” [50]
223. An important point to have in mind in this case is that a document, in particular a contract, must be interpreted as a whole. A contract clause, or part of that clause, should not be interpreted in isolation. So, for example, in Re Sigma Finance Corpn. [2010] BCC 40, Lord Collins said, at [35]:
“In complex documents of the kind in issue there are bound to be ambiguities, infelicities and inconsistencies. An over-literal interpretation of one provision without regard to the whole may distort or frustrate the commercial purpose. This is one of those too frequent cases where a document has been subjected to the type of textual analysis more appropriate to the interpretation of tax legislation which has been the subject of detailed scrutiny at all committee stages than to an instrument securing commercial obligations.”
“…I must say that I had thought that it is now well settled that it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made. Otherwise one might have the result that a contract meant one thing the day it was signed, but by reason of subsequent events meant something different a month or a year later.”
226. Only certain pre-contractual proposals are capable of amounting to offers. To amount to an offer, a pre-contractual proposal must convey to the reasonable person (having the knowledge of the recipient of the proposal) that the maker of the proposal intended to be immediately bound by the proposal if the recipient accepted it. In Crest Nicholson (Londinium) Ltd. v. Akaria Investments Ltd. [2010] EWCA Civ 1331, Sir John Chadwick explained, at [25]:
“…the court’s task when seeking to determine whether or not a contract has been made at all [requires it to ask] the questions…(i) “was there a proposal (or “offer”) made by one party which was capable of being accepted by the other” and, if so, (ii) “was that proposal accepted by the party to whom it was made”. In determining the first of those questions – was there a proposal made by one party (A) which was capable of being accepted by the other (B) – the correct approach is to ask whether a person in the position of B (having the knowledge of the relevant circumstances which B had), acting reasonably, would understand that A was making a proposal to which he intended to be bound in the event of an unequivocal acceptance.”
“Acceptance is the unequivocal assent on the part of the offeree to the terms proposed by the offeror in his offer. The subjective decision on the part of the offeree to accept an offer is not in itself sufficient, but the offeree must respond to the offer overtly, demonstrating objectively to the offeror his intention to accept…
Before a communication can constitute an acceptance, it must be made in response to an offer…”
228. Where it applies, the “postal rule” of acceptance has the effect of deeming an offeree to have accepted an offer when the offeree posts its acceptance to the offeror, not when the offeror receives the posted acceptance. [51] Cartwright explains the rule thus, at paragraph 3-42:
“…if the offeror, by the terms of the offer and the circumstances in which it was made, has led the offeree reasonably to believe that there is an offer to be accepted and that the dispatch of his acceptance by the postal service is the way (or, at least, a way) in which the contract can be concluded, then the posting of the acceptance is the form (and the time and place) of acceptance.”
229. There are circumstances where the requirement for a written or oral communication of the acceptance of an offer is waived. [52] However, it is exceptional for mere silence to be a sufficient acceptance of an offer. Cartwright explains the position thus, at paragraph 3-39:
“…There are two situations, however, in which it may be claimed that an offer has been accepted by silence: where the offeree’s silence is said to have been sufficient in itself to show that he accepted the offer; and where the offeror in his offer prescribed silence as a form of acceptance. Both present difficulties for the reason that silence in itself presents a difficulty in the formation of a contract.
The refusal generally to accept that silence and inactivity can constitute acceptance follows from, or at least is closely connected to, the general objective approach in English law. Mere mental assent is insufficient to constitute acceptance; and it is not even sufficient that there may be evidence of the offeree’s decision to accept which has not been communicated to the offeror, since in principle the offeror is entitled to know whether the contract has been concluded. It has also been said that the principal problem with silence as a means of acceptance is that it does not constitute a sufficiently unequivocal communication of the offeree’s assent: “silence and inaction are of their nature equivocal, for the simple reason that there can be more than one reason why the person concerned has been silent and inactive”. However, this does not exclude all possibility of “silence and inaction” constituting communication of a person’s intention if, in the circumstances, the silence is not in fact unequivocal. Such a case does not involve the waiver of the requirement of communication of acceptance; rather, the silence itself communicates acceptance – acceptance by silence. It is evident that this will be very rare, for the very reason that we have already noted: a person’s failure to respond may be attributed to a range of reasons, and the offeror is not generally entitled to assume that the silence does in fact indicate assent. Even if the offer appears to be very favourable to the offeree, that is not in itself sufficient to entitle the offeror to assume that silence indicates assent…”
230. Generally, to effect a contractual variation, there must be mutual agreement by the contracting parties, [53] so that, on the offer/acceptance model of contractual formation, [54] to find such a variation requires the court to be satisfied that one party has offered to vary the contract and that the other party has accepted that offer. However, a contract may contain a term allowing one party to unliterally vary that contract. [55]
The 2008 Yorkshire Contract – requirements for a variation
231. Mr Fryer-Spedding contended that, by Schedule 2, paragraph 4.4 of the 2008 Yorkshire Contract (“Paragraph 4.4”), LSC could, and did, in this case, unilaterally vary the 2008 Yorkshire Contract to remove any limit on payments (disapplying the MCV) for learners who had started before 1 April 2009. [56] I disagree.
233. As appears from Schedule 2, paragraphs 2.2-2.3 to the 2008 Yorkshire Contract, there were broadly two types of programme intended to be covered; namely, learner responsive programmes and employer responsive programmes. As I have indicated, TTG was an employer responsive programme. Providers offering employer responsive programmes were to be paid, in arrears, based on the information they uploaded to LSC’s computer system, by reference to the amount of training actually provided, up to the MCV. [57] However, providers offering learner responsive programmes were to be paid in accordance with a Funding Agreement, which, in this case, by way of example, contained a “Delivery Profile” contemplating payments 3 times a year (not by reference to the amount of training actually provided but only by reference to the MCV). Such regular payments were, I understand, “profile payments” [58] and, as I have said, were not made by reference to the amount of training actually provided. However, there had to be an adjustment, in due course, to bring profile payments in line with the amount of training actually provided on a learner responsive programme so that a provider was not, ultimately, overpaid or underpaid by way of profile payments when compared to that amount of training. [59] Put another way, there was an underpayment when, “measured” against the profile payments actually paid to a provider of a learner responsive programme, more should have been paid to that provider because of the amount of training it had actually provided. Paragraph 4.4 was part of the mechanism, along with Schedule 2, paragraphs 4.1-4.3 to the 2008 Yorkshire Contract, for balancing profile payments with the amount of learner responsive training actually provided. As I have indicated, in this case, because TTG was an employer responsive programme, UKLA did not get any profile payments. It follows that UKLA cannot rely on Paragraph 4.4 in this case. [60]
234. I am satisfied that, otherwise than under Paragraph 4.4, any variation of the MCV in the 2008 Yorkshire Contract was required, by the contract, to be in writing. Further, I am satisfied that any such written variation was required, by the contract, to be signed by LSC and UKLA. [61] That a variation was required to be in writing is clear, in my view, from clauses 1.1 [62] and 30.2 of and Schedule 1, paragraph 2.2 to the 2008 Yorkshire Contract. That the written variation was required to be signed by LSC and UKLA is clear from clauses 1.1 and 30.2 of the 2008 Yorkshire Contract.
Offers to vary the 2008 Yorkshire Contract
i) The 1 May letter;
ii) The 19 May letter;
iii) The 12 June letter;
iv) The LSC website update;
v) The July 2009 newsletter.
i) The 2008 Yorkshire Contract was for a 3 year period;
ii) The MCV specified in the 2008 Yorkshire Contract was £135,553.76;
iii) That MCV was apparently intended, and understood, by the contracting parties to be the funding available, according to the 2008 Yorkshire Contract, for the 2008-2009 academic year;
iv) In the case of employer responsive programmes, by the 2008 Yorkshire Contract, further funding (or, to put it another way, an increase in the MCV), in particular for the 2009-2010 academic year, required a contractual variation which had to be mutually agreed, in writing and signed by the contracting parties;
v) In the 15 December letter, Mike Lowe had made clear that providers would be informed about the MCV for the 2009-2010 academic year (that is, the further funding for that academic year) on 31 March 2009;
vi) Margaret Cobb made clear, at the 11 March meeting, that LSC was then considering the funding available for all providers for the 2009-2010 and 2010-2011 academic year, that funding was “tight” and that UKLA would not receive funding for the 2008-2009 academic year in excess of the MCV;
vii) Providers were not apparently informed about the MCV for the 2009-2010 academic year on 31 March 2009. Instead, they received the 31 March letter;
viii) By the 31 March letter, Margaret Coleman made clear, in my view, that:
a) the TTG budget for the 2009-2010 academic year was a matter of concern;
b) something had to be done to meet this concern;
c) effectively, MCVs would need to be set to take into account the available budget;
d) LSC was very much focused on the 2009-2010 academic year;
e) LSC was also concerned to ensure that, for the remainder of the 2008-2009 academic year (April – July 2009), it stayed within its TTG budget; and,
f) to that end, providers had to ensure that they did not claim funding in excess of their 2008-2009 academic year MCV.
i) What the 1 May letter, as I have interpreted it, said;
ii) By 19 May 2009, as Mohamed Dawoodji confirmed in his letter of that date, LSC had apparently made clear that it would not fund any training in excess of the MCV (although, perhaps, that related to funding for the 2009-2010 academic year and an MCV, for that year, of £130,000);
iii) Sarah Haigh had emailed UKLA, on 19 May 2009, that information UKLA uploaded to LSC’s computer system had to be “within your overall [MCV] in order to avoid being capped…”
244. Mr Russell added, in the 19 May letter, as I have noted:
“…I also want to reassure you that we will guarantee that there is funding available to you at the agreed rates to support learners who were legitimately in learning from 1 April 2009 through to completion…
…I can assure you that all learners legitimately starting training before 1 April 2009…will be funded to complete their training at the agreed rates.”
I am satisfied that, by these statements, Mr Russell was dealing with the funding of learners, who had started before 1 April 2009, during the 2009-2010 academic year. He was not dealing with their funding during the 2008-2009 academic year. There was no need for him to do so. LSC’s position, that funding for the 2008-2009 academic year could not exceed the MCV (at least, without a mutually agreed written and signed variation), was made clear in the 2008 Yorkshire Contract, at the 11 March meeting, in the 31 March letter and, to a degree at least, in the 1 May letter.
245. I cannot discern any offer, in the 19 May letter, to vary the 2008 Yorkshire Contract, in connection with the amount of funding available (that is, in connection with the MCV), in relation to the 2009-2010 academic year. [63] The reasonable person by reference to whom I must interpret the 19 May letter would know that the 2008 Yorkshire Contract required any such variation to be in writing and to be signed. In any event, the 19 May letter made clear (by its reference to the “coming to an end of the settlement process” and the “revisiting” of “allocations”) that LSC was not intending to make an immediately binding promise in relation to funding for the 2009-2010 academic year.
i) What the 19 May letter, as I have interpreted it, said;
ii) On 21 May 2009, Clive Howarth had sent his email of that date to UKLA reminding it that it needed to “manage within [its MCV]…” Although it was not agreed that UKLA had received this email, I am satisfied that it did. The email was apparently written to providers in the Yorkshire region. Mr Howarth did not strike me as someone who would write such an email and then not send it to providers and it is inherently probable that UKLA received it.
247. The purpose of the 12 June letter was to inform providers:
i) that the confirmation of providers’ MCVs for the 2009-2010 academic year had been delayed;
ii) what LSC meant by “a legitimate start” or, to put it another way, which learners qualified as being “legitimately in learning before 1 April 2009”;
iii) in my view (taking into account, in particular, the heading “Actions for 2008/09”), that even for learners who had started before 1 April 2009, LSC would only fund their training up to the MCV but that, by agreement with “Regional teams”, MCVs could be increased to take into account the funding requirements for such learners which would cause the existing MCV to be exceeded.
It is right that, in the 12 June letter, Mr Russell refers to an existing commitment to fund all “legitimate [TTG] starts prior to 1 April 2009” but I do not believe that, by the 12 June letter, LSC was making an offer to vary the 2008 Yorkshire Contract. The commitment Mr Russell had in mind was one which had been previously made. It was not a commitment which was being given by the 12 June letter. In any event, the 12 June letter sufficiently clearly indicated, in my view, that any alteration in the level of funding for the 2008-2009 academic year required the agreement of LSC’s “Regional teams”, so that the letter made no offer to vary that funding in particular. [64] [65]
i) The MCV, for the 2009-2010 academic year, for all of UKLA’s TTG learners (whenever they started), was limited to £130,000, on the proper interpretation of the 2009 Yorkshire letter of intent;
ii) LSC continued to require formality in the fixing of the MCV for the 2009-2010 academic year;
iii) UKLA had accepted that limited increase in funding by countersigning and posting back the 2009 Yorkshire letter of intent on 25 June 2009, so that it is to be taken (objectively) to have agreed that funding for learners who had started before 1 April 2009 was not unlimited.
Such a reasonable person would also have known that:
iv) by then, LSC had not made an offer to vary the 2008 Yorkshire Contract;
v) Mrs Haigh had reminded UKLA, in her second June 2009 email, that UKLA had to remain within the MCV “in order to avoid being capped”;
vi) LSC’s position, as explained in Keith Woodcock’s email of 9 July 2009, was, in my view, that, if a provider was to receive funding, for the 2008-2009 academic year, in excess of its existing MCV, that MCV would have to be specifically increased by LSC.
251. UKLA’s case is that, otherwise than by the 2009 Yorkshire letter of intent, the 2008 Yorkshire Contract was varied to effectively disapply the MCV, for the 2008-2009 and 2009-2010 academic years, so that LSC was liable to fund all learners who had started before 1 April 2009 to completion of their training. [66] For the reasons I have explained, such a variation would have been required to be mutually agreed. UKLA contends that such a mutual agreement came about because of offers LSC made to it, which it accepted. As set out above, I have concluded that none of the documents relied on by UKLA amounts to an offer to vary the 2008 Yorkshire Contract.
Acceptance
i) The uploading of information to LSC’s computer system after any offer was made;
ii) The statements of UKLA’s representatives at the 4 August meeting.
Contractual formalities
261. Both parties referred me to and relied on MWB Business Exchange Centres Ltd. v. Rock Advertising Ltd. [2018] 2 WLR 1603. In that case, Lord Sumption, with whom Lade Hale, Lord Wilson and Lord Lloyd-Jones agreed, made the following points:
i) At [10], English law gives effect to No Oral Modification clauses;
ii) At [16]:
“The enforcement of No Oral Modification clauses carries with it the risk that a party may act on the contract as varied, for example by performing it, and then find itself unable to enforce it…In England, the safeguard against injustice lies in the various doctrines of estoppel. This is not the place to explore the circumstances in which a person can be estopped from relying on a contractual provision laying down conditions for the formal validity of a variation…I would merely point out that the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty for which the parties stipulated when they agreed upon terms including the No Oral Modification clause. At the very least, (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself: see Actionstrength Ltd. v. International Glass Engineering INGLEN SpA [2003] 2 AC 541, paras 9, 51, per Lord Bingham of Cornhill and Lord Walker of Gestingthorpe.” [67]
Lord Briggs, in that case, whilst reaching the same conclusion about the outcome of the appeal as the other Supreme Court Justices, but for different reasons, expressed the view (particularly at [31]), effectively, that the court ought only to find that a contracting party is estopped from relying on a No Oral Modification clause if that party must necessarily have had the clause in mind when it indicated (or purportedly indicated) that it intended not to rely on it.
The meaning of a “learner start”
264. If the 2008 Yorkshire Contract was varied so as, in effect, to disapply the MCV for learners who started before 1 April 2009, contrary to the conclusions I have already reached, it is not disputed that the variation would only cover those who had “started” before 1 April 2009. There appears to be a dispute between the parties about when a learner “started” for the purpose of such a variation. [68] This is a matter to which I now turn (and, in so doing, deal with the 1 April pre-condition defence). In the light of the conclusions I have already reached, I propose to deal with this dispute only briefly.
265. The 1 May letter referred to “learners in the system as of 1 April 2009”. The 19 May letter referred to “learners who were legitimately in learning before 1 April 2009” and “learners who legitimately [started] training before 1 April 2009”. By 12 June 2009, LSC had made clear (in the 12 June letter and the June 2009 Clarification document) that, to have started before 1 April 2009, a learner must “have actively participated in a structured programme”. [69]
267. It follows that, if the 2008 Yorkshire Contract was varied so as, in effect, to disapply the MCV to learners who started before 1 April 2009, that variation would only apply to learners who had had their first lesson before 1 April 2009. [70]
268. In closing, Mr Fryer-Spedding suggested that an NVQ learner who had earlier started an SFL course, started, for the purpose of such a contractual variation, when he started the SFL course, not when he started the NVQ course. I agree with Mr Warner that this is not the correct interpretation of when a learner started for that purpose. As the June 2009 Clarification document makes clear, a learner’s start date is determined, in part, by reference to a learner’s “learning aim”. The aim of an SFL course, to obtain an SFL qualification, is different, as a matter of ordinary language, to the aim of an NVQ course, which is to obtain an NVQ qualification. [71]
269. The April Yorkshire PFR showed that all the NVQ learners, who had started before 1 April 2009, had started in March 2009, and mainly in the last two weeks of that month. [72] Imran Bham did not apparently appreciate, at the beginning of the 4 August meeting, that a learner only started when he had had his first lesson (and that he had not started by having an induction). As the transcript of the 4 August meeting tends to show, records provided, by that time, by UKLA appear to have assumed that a learner started before his first lesson. In his second witness statement, on my reading, Imran Bham suggested that:
i) at paragraph 11, a learner’s start date was recorded by UKLA as the date that learner enrolled with UKLA;
ii) at paragraph 15, a learner’s start date was when that leaner had his first lesson;
iii) at paragraph 18, a learner was “registered on the system” when that learner completed his Initial Learning Plan, which preceded his induction. It is not clear, from this paragraph, if Mr Bham intended to suggest that a learner was registered as having started on the date the Initial Learning Plan was completed;
iv) at paragraphs 20-21, that a learner’s start date was not recorded by UKLA as the date the learner enrolled with UKLA.
The date UKLA took as a learner’s start date and the date UKLA recorded as that learner’s start date is unclear from Mr Bham’s second witness statement. Mr Bham said, in re-examination, that a learner’s start date was the date that learner had his initial assessment (so before his first lesson). The evidence of the taxi drivers does not establish sufficiently clearly that UKLA had a practice of giving learners their first lesson on the same date as their induction.
“The upshot of [UKLA’s] case is that it is entitled to recover the sum for which it sues because the contract was varied so as to disapply the…MCV first included in the agreement…”
UKLA did not pursue any claim, at trial (or, at least, by the time of Mr Fryer-Spedding’s closing), that UKLA was funded, and entitled to be paid, for those learners because (i) they received training in the 2009-2010 academic year and (ii) by virtue of the countersigned and posted 2009 Yorkshire letter of intent, the 2008 Yorkshire Contract was varied to fix the MCV, for the 2009-2010 academic year, at £130,000, so that under the 2008 Yorkshire Contract, LSC had an obligation, in any event, to fund the 2009-2010 training for such learners up to (the otherwise unallocated part of) that MCV.
274. It is not difficult to deduce how UKLA might have come to make its claim for learners who started in the 2008-2009 academic year. What was said at the 4 August meeting, for example, is likely to have been reassuring [73] and, as Clive Howarth admitted, LSC’s proposals were not communicated as clearly as they might have been. It is also very easy to be sympathetic to UKLA’s complaint that many NVQ learners have been trained and, if its claim fails, they will have been trained solely at UKLA’s cost. However, I must decide UKLA’s claim, as it was put, on evidence before me, and by applying the law. In the light of all I have said, it must follow that UKLA’s claim for payment for training for learners who started in the 2008-2009 academic year (and, in particular, its claim for £800,553.24) fails.
Contract for the Yorkshire region for the 2009-2010 academic year
275. As I have shown, UKLA’s pleaded claim is that, by John Kinsella’s countersignature of the 2009 Yorkshire letter of intent and by its postal return, a (separate) contract for the 2009-2010 academic year came about. As ought already to be clear, in that factual scenario, no separate contract came about (or was intended to come about), in my view. Rather, there would be an effective variation of the (3 year) 2008 Yorkshire Contract to provide for an MCV of £130,000 for the 2009-2010 academic year. [74]
285. As Mr Warner correctly pointed out, UKLA does not make a claim for damages for a repudiatory breach of the 2008 Yorkshire Contract by LSC (by the 17 September letter). Instead, UKLA makes a debt claim for the funding it is entitled to for the period from 1 August 2009 to 18 September 2009. [75]
286. My review of the October Yorkshire PFR suggests that, by 5 October 2009, UKLA had recorded that 21 NVQ learners had started in the 2009-2010 academic year. This is a slightly lower number than UKLA now claims and I prefer to calculate the value of UKLA’s claim on that lower number because it is improbable, in my view, bearing in mind all that had gone on beforehand, that UKLA would not have recorded, by October 2009, NVQ learners who had already started in the 2009-2010 academic year. It is UKLA’s case that about half the NVQ learners started in the first two weeks of August 2009 and the remainder started in the first two weeks of September 2009. I have already explained that what UKLA recorded as a learner’s start date is uncertain and, therefore, I am not satisfied that the start dates given by UKLA are the dates when those learners had their first lesson (which, in this context too, I am satisfied was when UKLA was entitled to a payment from LSC). [76] I am also not satisfied, because of the conclusions I have already reached, that any of the 21 (or 23) learners had a first lesson on the day of their induction. Because the picture is uncertain, to calculate the value of UKLA’s claim, it is appropriate for me to do the best I can.
287. Taking into account what I have already said, I am satisfied, on the balance of probabilities, only that 21 learners had their first lesson before 18 September 2009. [77] [78]
289. I have already pointed out that there were two rates of payment (the higher rate and the lower rate) for NVQ learners and that LSC’s models assumed that 70% of NVQ learners would be funded at the higher rate and 30% of NVQ learners would be funded at the lower rate. UKLA contends that 100% of the NVQ learners in question were entitled to funding at the higher rate. I was taken to no contemporaneous evidence to support that contention. Doing the best I can, the principal amount due to UKLA needs to be calculated on the assumption that 70% of 21 NVQ learners were eligible for funding at the higher rate and 30% of 21 NVQ learners were eligible for funding at the lower rate. [79]
290. The parties will need to agree the principal sum due to UKLA on the approach I have set out. If they are not able to do so, I will hear further submissions about how the sum ought to be determined. [80]
Contract for the North East region for the 2008-2009 academic year and the 2009-2010 academic year
“For its part [UKLA] says that it was entitled to, and did, supply services between January and July 2009 on the strength of the Contract Clarification Form…” [81]
293. In BJ Aviation Ltd. v. Pool Aviation Ltd. [2002] P & CR 25, Chadwick LJ said, at [18]-[24]:
“The problems which arise in law in a case where parties have entered into an agreement which, although it has the appearance of a bargain, leaves something to be agreed, are the subject of numerous authoritative decisions…
It is unnecessary, and would be superfluous, to review those authorities again in this judgment. It is I think sufficient to identify five propositions which, as it seems to me, are not capable of dispute.
First, each case must be decided on its own facts and on the construction of the words used in the particular agreement. Decisions on other words, in other agreements, construed against the background of other facts, are not determinative and may not be of any real assistance.
Secondly, if on the true construction of the words which they have used in the circumstances in which they have used them, the parties must be taken to have intended to leave some essential matter, such as price or rent, to be agreed between them in the future – on the basis that either will remain free to agree or disagree about that matter – there is no bargain which the courts can enforce.
Thirdly, in such a case, there is no obligation on the parties to negotiate in good faith about the matter which remains to be agreed between them…
Fourthly, where the court is satisfied that the parties intended that their bargain should be enforceable, it will strive to give effect to that intention by construing the words which they have used in a way which does not leave the matter to be agreed in the future incapable of being determined in the absence of future agreement. In order to achieve that result the court may feel able to imply a term in the original bargain that the price or rent, or other matter to be agreed, shall be a “fair” price, or a “market” price, or a “reasonable” price; or by quantifying whatever matter it is that has to be agreed by some equivalent epithet. In a contract for sale of goods such a term may be implied by section 8 of the Sale of Goods Act 1979. But the court cannot imply a term which is inconsistent with what the parties have actually agreed. So if, on the true construction of the words which they have used, the court is driven to the conclusion that they must be taken to have intended that the matter should be left to their future agreement on the basis that either is to remain free to agree or disagree about that matter as his own perceived interest dictates there is no place for an implied term that, in the absence of agreement, the matter shall be determined by some objective criteria of fairness or reasonableness.
Fifthly, if the court concludes that the true intention of the parties was that the matter to be agreed in the future is capable of being determined, in the absence of future agreement, by some objective criteria of fairness or reasonableness, then the bargain does not fail because the parties have provided no machinery for such determination, or because the machinery which they have provided breaks down. In those circumstances the court will provide its own machinery for determining what needs to be determined—where appropriate by ordering an inquiry…”
294. By the North East 9 September letter, LSC made clear that the terms of a contract for the North East region were yet to be agreed and that, until they were agreed, LSC was not liable to pay for any training in that region. As I have said, the 2008 North East Contract Clarification Form contains no express terms and it was made clear, by the email to which it was attached, that the signing of it would allow the contracting process to begin. Whilst it may be said, in support of UKLA’s case, that, by 19 November 2008, it had received the 2008 Yorkshire letter of intent (which, it seems to me it was not disputed, was capable of being a contractual document and which it might have been supposed would inform LSC’s approach in the North East region), taking into account the other matters I have just mentioned, I have concluded that the signing and return of the 2008 North East Contract Clarification Form did not bring about a contract between LSC and UKLA. I am not satisfied, objectively, that LSC and UKLA intended that, thereby, any bargain between them would be enforceable or, following the approach of Sir John Chadwick in Crest Nicholson , that a reasonable person, receiving the 2008 North East Contract Clarification Form in the circumstances I have summarised, would have understood that LSC intended to be immediately bound by the signing and return to it of the form. [82]
297. The parties’ cases in relation to funding in the North East region for the 2009-2010 academic year were hardly addressed at trial, so it is not clear to me what UKLA contends were the terms, express or implied, of any contract for the 2009-2010 academic year. Indeed, UKLA put forward no case that any terms are to be implied into the 2009 North East letter of intent. Because there were no “current terms and conditions” nor an existing “agreement”, what the obligations of LSC and UKLA were under any proposed variation (or, indeed, any purported contract) is uncertain, in my view. It is impossible to deduce, from the 2009 North East letter of intent, in my view, what sort of TTG training UKLA was promising to provide. The provision of TTG training by UKLA was its principal obligation under any contract with LSC. In these circumstances, I am not satisfied that the 2009 North East letter of intent gave rise to a contract. [83]
298. For all these reasons, UKLA’s claims in relation to the North East region fail.
The 2009 audit defence and counterclaim
300. Without objection from Mr Warner (in my view, quite properly), Mr Fryer-Spedding contended, in closing, that there is nothing due to the Defendant on the counterclaim (or by way of set-off), [84] because LSC determined that there was no sum owing to it from UKLA. I agree.
301. By clause 12.3 of the 2008 Yorkshire Contract (“clause 12.3”), LSC could recover “an amount” if LSC identified “errors [in the provider’s] evidence which it deems are material”. The whole of clause 12.3 is qualified by its final sentence that “the decision of [LSC] is final”. [85]
304. It is right that the final audit report makes reference to a 29.2% error rate. However, it is reasonable to suppose that the error rate was carried over from the Final Feedback document. Further, having noted the error rate, the final audit report concluded that UKLA was entitled to no further payment (not that UKLA is liable to make any payment). On the proper interpretation of the final audit report, I am not satisfied that it reveals any decision by LSC that there were material errors for the purpose of clause 12.3.
305. The final audit report (i) made the point that LSC “seek to recover any monies paid which have not been spent in accordance with…contractual conditions…” but (ii) recorded that the “recovery amount” was £nil. [86] By clause 12.3, it was for LSC to decide the amount recoverable (based on the error rate and the MCV). LSC did decide the amount recoverable. As I have said, it decided that the amount recoverable was £nil. As clause 12.3 makes clear, that decision is final. How LSC was (and the Defendant is) entitled to resile from that decision was not explained to me and I am not aware of any basis on which (on the facts of this case) that would be permitted.
306. It follows, therefore, that the 2009 audit defence and counterclaim fails.
Disposal
i) UKLA’s claim for payment for learners who started in the 2009-2010 academic year in the Yorkshire region succeeds, to a limited extent;
ii) Otherwise, UKLA’s claim is dismissed;
iii) The Defendant’s counterclaim is dismissed.
[1] In its report, the National Audit Office summarised TTG as follows: “The Train to Gain service was introduced in April 2006 to support employers in improving the skills of their employees and to contribute to improved business performance. It had cost £1.47 billion by March 2009 and has a budget of £925 million in 2009-10. It comprises a skills brokerage service to advise employers on identifying training needs and sourcing training; flexible training, for example delivered in the workplace and at a convenient time; and for public funding of training for eligible employees taking specified courses and qualifications, and contributions to some other training paid for by employers…Organisations such as further education colleges, private companies and voluntary organisations provide the training, costing £1.2 billion by March 2009. Most learners train with a college or a private provider…”
[2] I consider the parties’ statements of case in more detail below.
[3] A “start” is a term of art in these proceedings (as are related phrases).
[4] It is not clear, from the Amended Particulars of Claim, that this is UKLA’s case. As I shall explain, there is a claim in relation to what it contends was a contract for the Yorkshire region for the 2009-2010 academic year. A fair reading of paragraph 20 of the Amended Particulars of Claim (which relates to that later contract (or purported contract)) is that UKLA also claims £42,297 for all learners (whenever they started) for training from the beginning of the 2009-2010 academic year (in August 2009) (see also paragraphs 3.5, 6.10 of the skeleton argument of Mr Fryer-Spedding (who appeared, at trial, for UKLA); although I do note that paragraph 5.22 of the same skeleton argument does advance the case on this point as it was finally put by UKLA).
[5] During the trial, I understood it to be UKLA’s position that a learner started (that is, a learner was, for the purposes of this claim, a “legitimate start” (one of the phrases to which I make further reference below)) on that learner’s participation in a “structured learning programme” (see, for example, paragraph 5.16 of Mr Fryer-Spedding’s skeleton argument) (see also paragraph 15 of Imran Bham’s second witness statement). A “structured session” is, in effect, a lesson (even if self-guided). I understood UKLA to (i) accept that a learner started, for the purposes of these proceedings, when that learner had a lesson and (ii) contend that the learners in respect of whom the £800,553.24 claim is made all started (that is, had a lesson), on its case, before 1 April 2009. During the course of Mr Fryer-Spedding’s closing submissions, UKLA’s position seemed to me to be at least more equivocal. Mr Fryer-Spedding told me that all the learners in respect of whom that claim is made had had their first lesson before 1 April 2009 (although in the case of 15 NVQ learners, their only lessons before 1 April 2009 were on an SFL course and not an NVQ course). However, Mr Fryer-Spedding also drew my attention to, and relied on, paragraph 20 of Imran Bham’s second witness statement, which suggests that about half of the learners in question did not have any lessons before 1 April 2009. In fairness, I should note that, in its Amended Reply and Defence to Counterclaim, UKLA does address the question about when a learner started. UKLA contends there that no learner was required to be taught in order for that learner to have started. It was enough that a learner had an induction.
[6] As pleaded, UKLA’s estoppel claim is somewhat wider than this. At trial, Mr Fryer-Spedding advanced, properly, the more limited estoppel case I have summarised here.
[7] This reflects the note I made at the time Mr Warner explained this defence and counterclaim to me, which Mr Warner confirmed to me was accurate.
[8] I sought to overcome this problem by requiring the parties to agree a list of issues, which they apparently did. However, this led to further dispute between the parties when it became clear that they interpreted the agreed issues differently.
[9] Indeed, in closing, Mr Fryer-Spedding encouraged me to follow the evidence wherever it might lead, whatever UKLA’s pleaded case. If that is the appropriate course, so far as UKLA’s pleaded case is concerned, as a matter of logic it ought to be the appropriate course in relation to the Defendant’s pleaded case.
[10] At trial, UKLA’s case was that it did not know about the MCV before it received a copy of the 2008 Yorkshire Contract for signature in December 2008 and, as I understand UKLA’s case, that that MCV was not otherwise drawn to their attention until March 2009.
[11] In fact, as I explain below, although there is a letter of intent in relation to the 2008 Yorkshire Contract (“the 2008 Yorkshire letter of intent”), it is dated 19 September 2008.
[12] UKLA accepted, at trial, it appeared to me, that the 2008 Yorkshire letter of intent was not sent before this date.
[13] Mr Bham’s full name is Mohammed Yusuf Bham but, throughout the trial, all who knew him called him Yusuf. I shall call him Yusuf Bham in this judgment because I understand that is how he is known. I do not intend to cause any offence if I am mistaken.
[14] There is no pleaded explanation for the claim being in excess of the contended for £50,000 MCV for this period.
[15] In relation to the (purported) contract relating to the North East region for the 2009-2010 academic year, according to the Defendant: “The North East Region did issue a contract to [UKLA] for 2009/10 for a maximum contract value of £3,381. The Claimant did recruit 8 learners, but it never returned a copy of this contract…”. I do not understand the Defendant to contend, by the averment that a contract was “issued”, that a contractual relationship between UKLA and LSC came into existence.
[16] UKLA pleads a limitation defence to the counterclaim, which it abandoned.
[17] I did not understand it to be disputed that UKLA was provided with the Funding Requirements at the outset of its contractual dealings with LSC.
[18] The evidence requirements to which I refer are those which the Defendant relied on, at trial, to support the 2009 audit defence and counterclaim.
[19] I also refer, in brackets, to dates of some of the meetings (or alleged meetings) which are referred to in the agreed chronology.
[20] As I have noted, UKLA contends (and it was apparently not disputed) that it received this document.
[21] There is no dispute that TTG was an “employer responsive model” (as the 2008 Yorkshire Contract recorded).
[22] As I understand it, UKLA disputes that there was any reference to “over contracted learners” and also disputes that there was a discussion about “additional funding”(that is, funding in excess of the 2008 Yorkshire Contract MCV).
[23] It will be recalled that, by the Amended Particulars of Claim, UKLA contends that 449 NVQ learners and 143 SFL learners had started before 1 April 2009.
[24] I was not taken to any letter dated 16 April 2009 and there was no reference, at trial, to any telephone conversation on 15 May 2009. It may be that the 16 April 2009 letter was one containing UKLA’s “indicative contract value” for the 2009-2010 academic year which Geoff Russell refers, in the 19 May letter, to having been “issued” by 19 May 2009.
[25] UKLA audio recorded and, in relation to meetings at UKLA’s premises, video recorded conversations its representatives had with LSC representatives and between LSC representatives. LSC representatives have explained they were not aware that their conversations were being recorded. It appears that there are or may be gaps in the transcriptions (or, perhaps, what was picked up by the recording equipment) and some inaccuracies in the transcriptions (at least in relation to the 4 August meeting). Save where I indicate otherwise, I have tried to copy verbatim, in this judgment, those parts of the transcripts to which I refer.
[26] The Defendant contends that, as partially quoted in the Amended Particulars of Claim, this statement by Mrs Haigh has been taken out of context.
[27] LSC disputes this.
[28] At this point in the transcription, the text is incomprehensible, so I have replaced the text with question marks.
[29] These question marks appear in the transcription.
[30] The transcription suggests that Ms Craven used the word “able” twice but that makes no sense grammatically. She must have used the word “unable” twice.
[31] UKLA denies receiving this letter.
[32] There is a dispute about whether nil entries were generated because LSC’s computer system prevented any other entry, in the light of the 17 September letter, or because UKLA had, in fact, in effect, provided no lessons to learners in the 2009-2010 academic year.
[33] This is the only PFR, in the trial bundle, relating to the North East region.
[34] Mr Fryer-Spedding put to Miss Skidmore, in cross-examination, that she had made this remark. In his witness statement, Imran Bham contends that Mr Stafford made this remark. It is not possible to establish in all cases, from the transcript, who the speaker was. It was not clear to me that Miss Skidmore accepted, in cross-examination, that she made this remark.
[35] It is not clear to me, from the transcription, who made these remarks. Imran Bham says that Mr Stafford did so but Miss Skidmore appeared to accept, in cross-examination, that she did so.
[36] An entry in Annex A to the final audit report, which I quote below, suggests that, by the time of the final audit report, this category of error may have been “cleared” (a word used by Miss Skidmore in cross-examination) even on the Defendant’s case.
[37] Miss Skidmore confirmed this in re-examination.
[38] The final sentence has been carried forward from the Final Feedback document where it appears in an action plan relating not to funding errors but to internal control weaknesses.
[39] In this part of the judgment, references to Mr Bham are to Imran Bham.
[40] He accepted, in cross-examination, that the first time he mentioned this meeting (and the first time he mentioned a meeting with Mr Rahim on 17 July 2008) was in June 2018.
[41] In this part of the judgment, references to Mr Bham are to Mr Yusuf Bham.
[42] See, for example, the evidence I note in the two immediately preceding paragraphs.
[43] See, for example, his cross-examination and re-examination in relation to the 1 May letter.
[44] Mr Fryer-Spedding cross-examined a number of the Defendant’s witnesses at length about LSC’s structure. It is not necessary to set out that structure in this judgment. It is enough to say that, by the end of the trial, LSC’s structure and internal management system remained something of a mystery to me, because, as Mr Fryer-Spedding was able to establish, LSC’s structure was extremely complex.
[45] It is also appropriate for me to set out, in detail, this part of Miss Skidmore’s cross-examination to further explain my comments at footnotes 34 and 35 above.
[46] I do not expressly consider, in this judgment, all the evidence which I heard or to which I was taken. Nor do I expressly consider all the submissions made on the parties’ behalves. Nevertheless, I have had in mind all that evidence and all those submissions in reaching the conclusions I set out in this judgment.
[47] I have reached the same conclusion in relation to the meeting on 12 December 2008.
[48] Including the alleged visits on 5 and 26 November 2008.
[49] For the same reasons, I have reached similar conclusions about the absence of further diary entries in Mrs Haigh’s and in Mr Rahim’s electronic diaries.
[50] See also, for example, Arnold v. Britton [2015] AC 1619, particularly at [14]-[22] and Wood v. Capita Insurance Services Ltd. [2017] AC 1173, particularly at [9]-[15].
[51] Mr Warner accepted, properly in my view, that the postal rule is capable of applying to the dispute relating to the 2009 Yorkshire letter of intent.
[52] See Chitty on Contracts (32 nd ed), paragraph 2-046, to which Mr Fryer-Spedding took me. When the postal rule applies, the requirement that an acceptance is communicated is waived.
[53] See Chitty, at paragraph 22-032.
[54] A model which is uncontroversial in this case.
[55] See Chitty, at paragraph 22-039.
[56] Mr Fryer-Spedding encapsulates UKLA’s case in relation to such learners in this way, in paragraph 5.22 of his skeleton argument: “The upshot of [UKLA’s] case is that it is entitled to recover the sum for which it sues because the contract was varied so as to disapply the…MCV first included in the agreement…”
[57] See, for example, Schedule 2, paragraph 2.3 to the 2008 Yorkshire Contract.
[58] I did not understand this to be disputed.
[59] As I have said, see Schedule 2, paragraphs 4.1-4.3 to the 2008 Yorkshire Contract.
[60] In the light of this conclusion, I do not need to consider Mr Warner’s further submissions that (i) on its proper interpretation, Paragraph 4.4 does not permit unilateral variations but only mutually agreed variations which had also to be in writing and (ii) in any event, the Contract Manager (Sarah Haigh) had not actually required a variation.
[61] These conclusions address Mr Fryer-Spedding’s alternative submission that, under the 2008 Yorkshire Contract, all that was required was some written (unsigned) evidence of an otherwise orally agreed variation.
[62] Which defines the “Contract” as including only written variations signed by LSC and UKLA.
[63] Or in relation to the 2008-2009 academic year.
[64] To be clear, I am also satisfied that the 12 June letter contained no offer to disapply any funding cap, for learners who had started before 1 April 2009, for the 2009-2010 academic year. The final section of the letter, headed “Timetable and Process”, makes it clear that the funding for those learners for the 2009-2010 academic year would be agreed by adopting the procedure set out there.
[65] Also, to be clear, in my view the June 2009 Clarification document contains no offer to vary the 2008 Yorkshire Contract. The purpose of the document was to clarify when a learner started for the purpose of the “assurance” given in the 19 May letter. A reasonable reader of the document, with LSC’s and UKLA’s background knowledge, would not have understood it to be making any offer at all which had not previously been made, except, perhaps, by extending any such offer to those cases where “providers [had] received prior authority to exceed their [MCV] and their contract [had] not formally been changed to reflect this agreed level of recruitment”. Because I have concluded that, by 12 June 2009, no offer had been made, there can have been no extension to that offer.
[66] See footnote 56.
[67] Lord Walker’s emphasis in Actionstrength , at [51], was on the need for an “unambiguous representation”.
[68] See footnote 5.
[69] As it happens, by 4 August 2009, LSC representatives were saying explicitly that a learner started only when he had had some training.
[70] As I have explained, a lesson could be self-guided (and so could include the completion of a workbook, for example).
[71] It seems to me that there is some support for this conclusion from LSC Funding Guidance 2008/09: Principles, Rules and Regulations. Paragraph 126 defines a “learning aim” as: “…a single element of learning that attracts a funding at either a listed SLN value or has an unlisted SLN value that is based on a delivered glh”. NVQ courses received funding separately from SFL courses.
[72] A random sample of entries on the April Yorkshire PFR and the relevant schedule to Imran Bham’s second witness statement suggest that the “agreed start dates” shown for learners on both documents are the same.
[73] It is against just such “loose talk” that a No Oral Modifications clause guards (see per Lord Sumption in Rock Advertising at [12]: “…There are at least three reasons for including such clauses. The first is that it prevents attempts to undermine written agreements by informal means, a possibility which is open to abuse, for example in raising defences to summary judgment. Secondly, in circumstances where oral discussions can easily give rise to misunderstandings and crossed purposes, it avoids disputes not just about whether a variation was intended but also about its exact terms. Thirdly, a measure of formality in recording variations makes it easier for corporations to police internal rules restricting the authority to agree them…”).
[74] As Mr Fryer-Spedding properly recognised in paragraph 6.2 of his skeleton argument.
[75] See paragraph 20 of the Amended Particulars of Claim.
[76] See LSC Funding Guidance 2008/2009: Funding Formula (April 2008), paragraph 54, for example.
[77] It is inherently probable that a learner who had his induction by 8 September 2009 (which is the latest recorded start date according to UKLA’s evidence) had his first lesson before 18 September 2009.
[78] To be clear, I did not understand the Defendant to contend that the 21 learners shown on the October Yorkshire PFR (i) were not given an induction, contrary to what I have already concluded the PFR shows or (ii) were not trained. If the Defendant did so contend, I reject his points. Mr Kinsella was very involved in the provision of training and in the development of UKLA’s business. I am satisfied that Mr Kinsella would not have countenanced the recording of induction dates which were false or claims for learners who were given an induction but no training.
[79] I recognise that this is a somewhat arbitrary approach because 70% of 21 learners amounts to 14.7 learners; a practical impossibility.
[80] I hope that the parties can reach agreement. It would be unfortunate if I was compelled to order an inquiry into the amount due. On the assumption that all the 21 NVQ learners in question were eligible for funding at the higher rate, by my rough and ready calculation the principal sum due to UKLA might be about £8,275.50.
[81] This is something of a departure from UKLA’s pleaded case which is that there was no written contract for funding for the North East region for the 2008-2009 academic year (see the Amended Reply and Defence to Counterclaim).
[82] For the reasons I have already explained, the conversation between Imran Bham and Chris Nicholls, on 17 June 2009, is not relevant to whether the 2008 North East Contract Clarification Form is a contract.
[83] It appears that UKLA’s claim for payment under the 2009 North East letter of intent is only for training 7 NVQ learners who it contends started in the 2009-2010 academic year. Although the Defendant does not take the point, it is right that I note that there is no contemporaneous evidence that any of those learners were trained by UKLA.
[84] The balance of the defence having fallen away in the light of the conclusions I have already reached.
[85] Mr Warner did not suggest otherwise.
[86] Clive Howarth explained, in his witness statement, why, nevertheless, the 2009 audit defence and counterclaim was brought. He said: “I recall discussing this internally at the LSC in early 2010 and at the time a view was taken that it would be better simply to try to move on, rather than incur further public money in pursuing a claim against UKLA. When UKLA issued these proceedings however, we decided to seek to recover the funds that the LSC had paid out.”