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Ledger & Anor (t/a Lewis Carpets) v Customs and Excise [2004] UKVAT V18756 (03 September 2004)

18756

Value Added Tax – Supply – Appellants selling carpets – Whether services of fitters supplied by Appellants (as sub-contractors) – appeal dismissed

LONDON TRIBUNAL CENTRE

J M LEDGER & C E LEDGER T/A LEWIS CARPETS Appellants

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MISS J C GORT (Chairman)

MR R K BATTERSBY

Sitting in public in London on 12 July 2004

Mr John Shelley, FTII of Shelley & Co, appeared on behalf of the Appellant

Mr I Hutton of counsel, appeared on behalf of the Respondents

© CROWN COPYRIGHT 2004

DECISION

This is an appeal against an assessment dated 22 August 2002 in the sum of £80,871. The assessment was subsequently reduced to £73,967 by a notice of amendment of assessment dated 22 October 2002, and was confirmed by the Commissioners in a letter dated 19 December 2003. The assessment was in respect of output tax which the Commissioners maintain is due on sums paid by the Appellant's customers for carpet-fitting services.

The Facts

Jason Michael Ledger and Colin Eric Ledger ("the Appellants") were registered for value added tax with effect from 17 April 1993. They trade as carpet retailers under the name "Lewis Carpets" from premises in Ramsgate in Kent.

Jason Ledger gave evidence to the Tribunal. We found his evidence contradictory at times, but find the following facts.

Lewis Carpets trade from two stores, one in Ramsgate and one in Canterbury. Jason Ledger makes the day-to-day decisions and there is also a manager. Colin Ledger is his father. Prior to opening the business approximately eleven years ago Jason Ledger himself had worked for another carpet retailer. Many of the systems which were in place and the style of documents which were used were copied from those systems and documents used by his previous employer.

The Appellants retailed to the public supplying remnants, off-cuts and larger carpets. They dealt principally with the bottom end of the market. No changes had been made in the business practices in the eleven years of its trading. In addition to carpets they also dealt in vinyl flooring.

The Tribunal saw a ticket headed "remnant bargain" which displayed the length in both metres and feet, and gave a description of the piece in question as well as a price. We also saw a copy of a ticket which according to Mr Ledger could either be attached to a remnant or to a carpet roll, but was not invariably so attached. That ticket was headed "Free" and then had the words also in capitals beneath "Fitting", "Underlay", "Gripper rods" and "Door bar". Beneath that in smaller print was written: "Offer shows inclusive price guide. Discount given on items not wanted. Fitting arranged only if requested". Underneath that it indicated that the underlay and gripper rods were only included if the carpet were hessian backed.

In circumstances where a customer required a carpet which he had purchased to be fitted, the Appellants would arrange a suitable date whilst the customer was in the shop, they would then contact one of a number of fitters and arrange for him to visit the property and fit the carpet on the appointed date. The fitter himself would collect the carpet from the warehouse and also collect items such as underlay, gripper rods and door bars to take to the customer's premises. He would supply his own van and his own tools. The Appellants would try to arrange for several customers to have their carpets fitted on the same date to make a full day's work for the fitter. The fitters were said to be extremely unreliable and quite frequently would not turn up for a particular job and therefore the Appellants would have to arrange for a different fitter to do the job.

At the time of the sale the Appellant would fill in an invoice which had three carbon copies. That invoice, which was said to have been modelled on the ones used by Mr Jason Ledger's previous employer, contained inter alia a box stating 'Fitting amount' and beneath that 'paid direct to fitter £…'. Beneath that in a larger box there was a blank space in which would be written a description of the type of carpet in question and the size amongst other things. To the right of the description would be an amount in pounds; in the two samples that we saw beneath the amount in pounds was written 'Total'. The total in both cases was less than the amount written in the amount column by the amount which was included in the box entitled 'Fitting amount'. Also written on the invoice was 'All goods must be paid in full before leaving the store' and this was in the box containing the description of the goods. The amount due to the fitter was only paid to the fitter at the time that he did his work. On the back of the top copy, the one which was given to the customer, were written the conditions of sale. These were as follows:

1. Deposits on goods are non-refundable.

2. Stop! Are you certain that this is the correct carpet, size and colour and with no visible defects?

Once you cut the carpet, you own it and no claims can be considered. Rooms should be clear of all furniture. We do not trim doors and we cannot give a time of day for fitting. 48 hours notice must be given for re-arranging fitting date to avoid cancellation charges.

3. We base our price on a Cash and Carry basis therefore if you require a fitting service, we can arrange a Sub-Contract fitter to carry out the work. He is completely separate from us, therefore any queries reference fitting errors, should be taken up with the fitter as we will not accept any liabilities.

4. Goods will be held for a period of six weeks, after this period the goods will be sold, and deposits will be non-returnable, unless otherwise pre- arranged at the point of sale.

5. Re-selection of goods is not acceptable after a period of 48 hours (also see condition 2).

These conditions do not effect your statutory rights.

A blue copy of the invoice would be supplied to the fitter, the Appellants would keep the next copy, which was a yellow copy, and the fourth copy, which was pink, would go to the accountant. The fitting price was calculated by the yard over a certain amount, but there was always a minimum charge of £20. A document headed "Memo to fitters" was produced. This document stated inter alia the customer's name, the date and the address. It also said: "You are one of our independent self-employed carpet fitting contractors. We only supply carpets and fittings but if the customer wants his carpet fitted we will act as agent to arrange for you to do the fitting work." The document then set out the rates, various matters relating to notification, and also the following:

"It is your responsibility to fit your customer's carpet correctly and if there are any mistakes it is between you and your customer to make them good. If a damaged carpet has to be replaced we will try to help you by supplying replacement carpet to you at cost price.

"The fitting charges are shown on the blue copy Customers Order and it is your customer's responsibility to see that you are paid.

"If some customers still owe us a balance for the sale price of the carpet that will be shown on the customer's order. If we ask you to collect any money please ask for a cheque payable to Lewis Carpets. If cash is offered (not advised) you should receipt the blue Customer Order. All cheques and money should be paid to us at the end of that working day."

The fitters were paid a set rate, and there appeared to be no possibility for the fitters to negotiate different rates. The rates paid were said to be standard through the industry although some big companies paid more when they were supplying larger carpets.

Since the decision of the Commissioners in this case the Appellants had redesigned their invoice, but the newly designed invoice was not considered by the Commissioners at the time and is therefore not relevant to this case, in any event the trading terms between the parties were said not to have changed despite the introduction some six months previously of this new style of invoice.

Mr Ledger said both that where customers were unhappy with the fitting they would contact the Appellants who would contact the fitters, and that any problem with the fitting would be apparent at the time of fitting, and therefore the customer would deal directly with the fitter about that problem. We find that both these statements are correct and that on occasion a customer would contact the Appellant about a fitting problem, but more usually the problem was dealt with at the time.

In cross-examination Mr Ledger said that at the time of the purchase of a carpet he was unable to tell the customer the name of the fitter, that could only be supplied on the day of the fitting. He accepted that the customer was unable to negotiate the price of the fitting, as well as fitters being unable to negotiate the price they were paid. If a carpet which was supplied was damaged, the customer would contact the Appellants.

Mr Ledger accepted that it was not really correct to say that the customers were getting a free fitting. The ticket described above was used because it gave a competitive edge in that the customer could see the total cost of the carpet including fitting, and would not have any add-ons to take into account.

Mr Ledger referred to two visits from officers of Customs and Excise, one in 1997 to the Ramsgate store when he had been there, and one in 2002 when he was not present. He described the officer in the 1997 visit as having been there for two days and being mainly interested in the value added tax invoices relating to purchases made by the Appellants from abroad. He also said that the officer on that occasion was situated in the sales area and saw how purchases were made by the customers and how the business was run. He went through all the invoices.

In circumstances where a customer did not require the Appellants to provide a fitting service, then a discount was made from the price displayed on the carpet or remnant in circumstances where the offer of free fitting was displayed.

Following the lunch adjournment and a discussion between Mr Ledger and Mr Shelley, Mr Ledger was recalled and gave further evidence to the effect that on occasion fitters would be called on to trim a customer's doors, to screed the floors, to move furniture about and to uplift old carpet. Any additional charges in respect of such work would not be known to the Appellants, and would be a matter between the customer and the fitter.

Mr John Maharry, the value added tax officer who had carried out the inspection at the Appellants' premises in May 2002, also gave evidence to the Tribunal. Having seen that value added tax was not charged on the fitting element, he issued his assessment. Subsequently the Appellants' accountants had suggested that it was the industry practice to exclude value added tax on the fitting and he therefore had himself telephoned three of the major carpet suppliers in the area, all of whom had said they were declaring value added tax on the fitting charges, and were aggrieved that one company was obtaining a competitive edge by not doing so.

Mr Maharry accepted that it was not possible to tell from all the invoices whether or not work was done but he had in the course of his visit photocopied the accounts which showed the figures. He had also taken two sample invoices, which were produced to the Tribunal and which showed a separate charge for fitting. He had asked for detailed calculations from the Appellants but had not received them and so he had made an assessment on the basis of the figures which he had. He confirmed that the Commissioners would look for value added tax on any further work done by the fitters in respect of items such as shaving of doors, if the work was done and paid for.

The Respondents' case

It was the Respondents' case that, contrary to the Appellants' opinion, there was not an agency arrangement between the Appellants and the fitters, there was a sub-contract.

It was necessary where there was a contract for the parties to be able to identify it as such. In the present case the customer had no knowledge of the identity of the fitter with whom he was said to be contracting, and even on occasions when the identity of the fitter was known, the customer had no choice of supplier. There was conflicting evidence from Mr Ledger as to whether or not the customers did in fact know the fitter's identity, and in the circumstances it seemed unlikely that the customers would be told the identity of the party of whom they were contracting. The Tribunal was referred to the case of Homberg Houtimport BV v Agrosin Private Limited, and also to The Starsin [2003] 2WLR7 111, paragraph 175 per Lord Millett:

"The identity to the parties to a contract is fundamental. It is not simply a term or condition of the contract. It goes to the very existence of the contract itself. If it is uncertain, there is no contract. Like the nature and amount of the consideration and the intention to create legal relations it is a question of fact and may be established by evidence. Such evidence is admissible even where the contract is in writing, at least so long as it does not contradict its expressed terms, and possibly even where it does, see Young v Schuler (1983) 11QBD 651; Chitty on Contracts, 28 ed (1999), 41, para. 12 to 112, page 633."

In the present case if a fitter did not term up, the Appellants would find another one, and this was consistent with the existence of a sub-contract, it was not consistent with his being only an agent. There was no principle of law which allowed the Appellant to find another fitter.

A practical reason for making identity an essential element of the contract was demonstrated by asking the question "Against whom could the customer seek recourse if the fitting was defective?" the answer could only be the Appellant, as the customers had no knowledge of the fitter's identity and no way of contacting him. The transaction structure contended for by the Appellants could be significantly detrimental to the customer who experienced problems with the fitting yet was told he had no action against the person with whom he had concluded his contract. This was true not withstanding the fact the relevant clause was not brought to the customer's attention.

The customer had no ability to negotiate the price of the fitting services with the party with whom he was said to be freely and independently contracting. The price was agreed by the Appellants and before the provision of the relevant service, only the Appellants knew the identity of the alleged supplier. The importance of identifying a selling price was recognised in both EU and domestic legislation. Article 2 of Directive 98/6/EC defined the selling price as the final price for a unit of the product or a given quantity of the product, including VAT and all other taxes. Article 4(1) states that:

"The selling price and the unit price must be unambiguous, easily identifiable and clearly legible".

Those provisions were implemented into domestic legislation by the Price Marketing Order 1999 (SI 1999/3042), Article 1(2) of which defines the "selling price" as "the final price for a unit of a product or a given quantity of a product, including VAT and all other taxes". Article 4(1) provides:

"… where a trader indicates that any product is or maybe for sale to a consumer, he shall indicate the selling price of that product in accordance with the provisions of this order".

In the present case there was a requirement on the Appellants fully to explain to the customers if two separate contracts were going to be created, here the customer would believe he had a contract for a free, fitted carpet. This confirmed the Commissioners understanding of the relevant contract, given that the Appellants raised an invoice/order form with a global price for a fitted carpet, the figure for fitting was not separated out and no party raised a separate invoice for "fitting services". Mr Ledger's evidence was not entirely clear, he had not been advised about the documents and he did not fully understand them, so he was not in a position to explain them to the customers. The customer would consider that there was only one contract.

The Appellant relied on the fact that the customer pays the fitter, but that is not sufficient to create a separate contract. The customer, if he considered the matter at all, would no doubt see that as no more than an act of commercial convenience undertaken at the direction of the supplier. Even if the customer identified the fact that the money was being retained by the fitter, that was in no sense sufficient to establish a separate contract. Any post contractual actions of the customer and/or fitter could have little relevance.

The way in which the Appellants decided to structure their transactions had no effect on the underlining commercial reality of those transactions for VAT purposes: see Lord Advocote v Largs Golf Club [1985] STC 226; Trafalgar Tours [1990] STC 127.

The wording on the invoice on which the Appellants relied, where it is said that the sub-contractor was completely separate from the Appellant, was insufficient to create two clear separate contractual relationships. The conditions of sale themselves were misleading in that customers did not all have to pay up front, the business was not a cash and carry business said by conditions three, a reasonable man would see all the conditions one, two, four and five as limitation clauses limiting the Appellants' liability. The Tribunal was referred to the case of Telewest Communications [2004] STC 517 where far more explicit words than those used by the Appellants were said to create a contract between Telewest Publications and the customer. Sir Francis Ferris took the view that the following words were not sufficient to create a separate contract:

"If you agree to subscribe for television services then you agree to the provision of Cable Guide Magazine as part of those services. Cable Guide Magazine will be provided to you by Telewest Communications (Publications) Limited and you agree that we may provide details of your name and address to Telewest Communications (Publications) Limited. Payment for Cable Guide Magazine will be due to Telewest Communications (Publications) Limited. We will collect the due amount from you as agent from Telewest Communications (Publications) Limited within the cost of your monthly subscription."

At paragraphs 60 to 61 he stated that:

"The Tribunal did not accept this argument and neither to I. Looking only at the language of section Q, this is not, to my mind, appropriate to show that the customer was contracting not only with one of the regional companies but also with Publications. It is stated that the magazine 'will be provided to you' by Publications. It is not said that Publications, acting by the regional company, agrees to supply and the customer agrees to acquire the magazine. The price of the magazine is not stated and the regional company's agency is only mentioned in the context of collection of the unspecified price. The customers agreement to the provision of his name and address to Publications sounds as if it is directed to data protection laws. If it has any significance I think it points away from the Appellant's argument. If the customer was really contracting with Publications there would be no need for the customer to consent to Publications being told his name and address.

"These views concerning the effect of section Q are strongly reinforced when the context is looked at. As I have already noted, the printed terms state that they set out the terms of the agreement between the customer and a regional company, not an agreement between the customer and any other party. The magazine is to be provided as part of 'services' and it is the regional company, not some other party, which engaged itself to provide 'the Services'. The reference to the regional company collecting the money for the magazine as agents for Publications does not, in my view, conflict with this. Nor does the fact that this money is described as 'the due amount' for it does not indicate to whom the money is contractually due."

It was submitted that the terms of the present contract were not appropriate to show that the customer was contracting not only with the Appellants but with some other unknown (and at that point unappointed) third party. The Tribunal was also referred to the Tribunal case of Susan Elizabeth Lockwood (18235). That case similarly concerned the supply of carpet fitting.

It was submitted that in considering the VAT position the approach of the English courts had been to take the contract as the starting but not the end, position, the Tribunal was referred to the case of Customs and Excise Commissioners v Reed Personnel Services Limited [1995] STC 588 where Laws J (as he then was) stated:

"First, as I have already said, the concept of 'supply' for the purposes of VAT is not identical with that of contractual obligation. Secondly, in consequence, it is perfectly possible that although the parties in any given situation may conclude their contractual arrangements in writing so as to define all their mutual rights and obligations arising in private law, their agreement may nevertheless leave open a question, what is the nature of the supplies made by A to B for the purposes of A's assessment of VAT … There may be cases, generally (perhaps always) where three or more parties are concerned, in which the contract's definition (however exhaustive) of the parties' private law obligations nevertheless neither caters for nor concludes the statutory question, what supplies are made by whom to whom. Nor should this be a matter for surprise: in principle, the incidence of VAT is obviously not by definition regulated by private agreement. Whether and to what extent the tax falls to be exacted depends, as with every tax, on the application of the tax and statute to the particular facts. Within those facts, the terms of contracts entered into by the taxpayer may or may not determine the right tax result. They do not necessarily do so"

This passage was endorsed by the House of Lords in Eastbourne Town Radio Cars Associations [2001] STC 606, per Lord Slyn at paragraph 14, who went on to hold on the facts of the case that a mere change in legal form will not change the VAT analysis, if nothing changes as a matter of economic substance, Lord Slyn saying that his conclusion "reflects the commercial reality whatever the drafting changes in the Association's constitution".

In order to determine what was being supplied one must ascertain 'the essential features' of the transaction. In the present case the essential features of the contract, from the point of view of the customer, were:

a The customer does not know the identity of the fitter with whom he is said to be contracting;

b The customer has no ability to negotiate any terms of the contract with the fitter;

c There was nothing to suggest that the Appellants had the legal power to bind their "principles";

d The customer wished to purchase the fitted carpet;

e The customer was provided, following discussions with the Appellants, with a fitted carpet;

f The customer was provided with an invoice with a global price for a fitted carpet;

g The customer paid a global price for a fitted carpet.

In the circumstances the VAT analysis and the contractual analysis both led to the conclusion that there was a supply of a fitted carpet from the Appellants to the customer. Insofar as it was relevant, if there were a separate supply of fitting services, those services would nevertheless be ancillary to the supply of the carpet: see Case C – 349/96 CPP [1999] ECR 1 – 973; and CPP [2001] STC 174.

The Appellants' case

On behalf of the Appellants it was submitted that the Appellants' own understanding of the situation was not relevant, it was a matter for the Tribunal.

It was normal practice in the retail business for prices not to be negotiable as here. There was an agreement with the fitters as to the price, but that rate was known to the customer.

In the present case there was not a contract to supply and fit, the fitting was extra. It was open to the customer to choose whether or not to have the fitting. The contract was only made once the customer actually agreed what he actually wanted, and the price was then adjusted according to that.

The fitting charge never came into the Appellant's hands, but went straight to the fitter. The fitter was not an employee of the Appellant. Furthermore the contractual liability for any errors in fitting stayed with the fitters.

The terms of the Appellant's business had not changed subsequently, only the documents had changed. That was simply to clarify the trading terms as the Respondents had said that the documents were ambiguous.

It was proper to infer agency from the documents and from the manner of the business, there were two different suppliers as well as two different supplies. There were different sets of rights and obligations to the fitters and the Appellants.

It was contended on behalf of the Appellants that the situation was analogous to that of a taxi company which supplies drivers. In the present circumstances a named fitter may not be available and somebody else came. That did not effect the nature of the contract. It was not inconsistent with agency that the Appellants should be contacted if anything went wrong with the fitting.

With regard to the essential features of the contract identified by the Respondents, it was submitted as follows:

a The customer did in fact know with whom he was contracting, it was the person who arrived at the time of the fitting, as with a taxi. The Tribunal was referred to the case of Lockwood (supra) paragraph 20 where the chairman said:

"One of those factors is the customer's perception, which is not necessarily decisive, and may even be of little relevance when, for example, the customer is indifferent about the identity of the person with whom he is dealing."

b In the present case there was nothing to be negotiated, but if additional work were required, then such work was negotiated with the fitter.

c The Appellant was able to act as agent for both the fitters and/or the customers.

d and e were not disputed.

f The invoice made clear that there was a separate price for the fitting.

g The price was merely a guideline, there was no global price.

It was submitted that the Appellants stood as agent between the contractors who performed a fitting service and the purchase of the carpet. This was reflected by:

i The carpet buyers have complete freedom of choice whether or not to have their carpet fitted.

ii The Appellant periodically agrees with the contractors the tariff prices they can expect to be paid and the individual carpet buyers are informed of these rates.

iii The Appellant has no legal liability for any mistakes in the fitting.

iv The Appellant has no control over the contractor's work.

v The Appellant receives no payment from the customer.

vi The customer pays the fitting contractor directly.

It was submitted that the fitting contract was quite separate from sales of carpets, that the fitting contract takes place directly between the contractor and the customer at the time when the individual contractor attends at the customer's premises and actually performs the fitting service. In all circumstances the Appellants supplied only an introduction to the contractors and not the services of those contractors.

With regard to the tag advertising a global price for a fitted, delivered carpet including ancillary fittings, this was an invitation to treat and it was for the customer to decide whether to take advantage of the global price or to negotiate a reduced price if some items were not required. The so called "free fitting" was merely a pre-contractual sales inducement which carried no more legal or contractual significance than such sales promotions as "buy one get one free" or "VAT free offer".

The Tribunal was referred to the case of Dr R Nader t/a Try Us (Tribunal decision number 4927). That case was heard in 1990 and concerned the question of whether the supply to customers of meals delivered by taxis were supplied by the Appellant as a principle and not as an agent. In that case the Tribunal adopted bowstad definition of 'agency' which is as follows:

"Agency is a relationship which exists between two persons, one of whom expressly or impliedly consents that the other should represent him or act on his behalf, and the other of whom similarly consents to represent the former or so to act."

The Tribunal subsequently set out the terms of the agreement which is headed "Driver's Agreement" and which under clause 4 states: "The agent hereby undertakes to use all effective and reasonably (sic) means to solicit, advertise, promote, market and otherwise generate business and customers for the principle."

The Agreement goes on to provide as follows:

"7 The principal undertakes that whenever a customer requires the purchase and delivery of food stuffs in whatever reasonable manner that the food stuffs which are so ordered hall be purchased and delivered by the principal in a reasonable and a speedy manner.

8 The principal undertakes to pay the agent an "Agency Fee" the amount of which is dependant on the time of the season and is agreed by both parties on a weekly basis."

The Tribunal held that the Appellant was the agent of the principal in that case.

In the case of Reed Personnel (supra) it was submitted that negotiability was not a determining feature and the Tribunal was referred to the head note in that case where it was stated:

"In reaching its conclusion the Tribunal had relied on the contracts; but in the end its decision had rested on an overall view of the facts, namely that Reed had supplied the nurses, who in turn had supplied their services to the hospitals. There was therefore no proper basis on which the Tribunal's conclusion could be interfered with."

In the course of his judgment Laws J (as he then was) said at page 591:

"I certainly accept that where any issue turns wholly upon the construction of a document having legal consequences, the exercise of construction is one of law for the judge. But for the proper resolution of a case of this kind, there are I think two qualifications. The first is that the concept of making a supply for the purposes of VAT is not identical with the performance of an obligation for the purposes of the law of contract, even where the obligation consists of the provision of goods or services."

The Tribunal was referred to the case of Customs and Excise Commissioners v Music and Video Exchange Limited [1992] STC 220. In that case the Appellants sold second hand musical equipment. The goods were purchased from members of the public who were not registered for value added tax and, to avoid having to account for value added tax on the whole of the sale price, the company adopted a special form of trading. This involved the original owner being given a valuation and if he accepted that, a written agreement was completed. That agreement provided that the goods were "accepted for sale on X's behalf by the company acting as his agent in accordance with the terms and conditions of trading". The terms and conditions of trading provided that the company "trades and acts at all material times as the original owner's agent." McCullough J held that, on the facts and from the terms of the written agreement properly construed, it was clear that the company in making the supplies had acted as the original owner's agent. In that case it was said at page 224:

"Once the sale to C has taken place, A is given no information about it – neither the date of the sale nor the price nor the identity of the purchaser, nor does he learn the size of B's commission. But these features are not inconsistent with agency.

"The fact that B, despite the term to the contrary, in practice assumes responsibility for damage to or loss of the goods while in the shop, although consistent with the sale by A to B, is not inconsistent with agency. The goods are, after all, in B's care.

"The fact that B gives a 'guarantee' to C is consistent with B acting as A's agent; the guarantee is a collateral contract.

"The fact that C is given no information about A is also consistent with agency; it happens whenever an agent does not disclose the fact that he is so acting."

The principal case on which the Appellants relied was Triumph and Albany Car Service (Tribunal decision number 977). That case was heard in 1980 and concerned the hiring of minicabs. The drivers in that case each maintained his own car and provided his own petrol. He paid a weekly sum to Triumph and Albany and for this obtained the hire of a radio, the right to be selected for hiring in his turn on the rota and the right to use Triumph and Albany's offices as a restroom whilst waiting to be hired. The minicab drivers were independent operators who were introduced to customers through the Appellant company. The fares were arranged by the Appellant. In that case it was common ground that no VAT was chargeable to the Appellants on cash payments made to the drivers in respect of ordinary cash hirings of their minicabs. The claim was limited to the amounts invoiced by the Appellants to account customers. The Appellants in that case said that they were not providing a service of hiring minicabs but merely acting as agents for the individual drivers in procuring hirings for them. It was held that the Appellants were acting as agents in procuring the requisite minicab and driver.

Reasons for Decision

Whilst we accept that in the present case the customer would not know the identity of the fitter with whom he was said to be contracting, we do not find that this is a relevant factor in determining the question of whether or not there was a separate contract with the fitters. We are only concerned here with those instances where a customer uses the fitting service provided by the Appellant. A customer on seeing the tag advertising a free fitting service would conclude that there was but one contract, and that was with the Appellants for the supply and fitting of the carpet.

We consider that it is a matter of great importance that the customer has no ability to negotiate any of the principal terms of the contract with the fitter, in particular if the customer wishes to change the day of the appointment to have the carpet fitted, he has to contact the Appellants and is asked to do so at least 48 hours beforehand. If he did indeed have a separate contract with the fitter, then it would be expected that such negotiations would be made directly with the fitter. Whilst this of itself might be indicative of the Appellant acting as agent for the fitter and for the customer as well, the fact that the customer has an invoice which includes a price for the fitting, but which price has been settled by the Appellant, rather than being a matter for negotiation or agreement between the customer and the fitter, points to there being a sub-contract with the fitter.

In the circumstances of this case it would be possible for the Appellants to create a situation of agency, but in our judgment they have not done so. The customer has no control over who will act as fitter, he has no control over the amount paid to the fitter and if things go wrong he will on some occasions look to the Appellants to correct matters. If a fitter does not arrive, it is to the Appellants that the customer turns. If he wishes to change the date of the fitting, it is the Appellant who deals with this. Whilst it was stated by the Appellants on their documents that they had no legal responsibility if the fitting went wrong, this is not necessarily a matter on which they can rely. It was Mr Ledger's evidence that if he were asked, he would say to a customer that the fitters were "Very good", and this therefore becomes an implied term of the contract as to the standard of fitting to be expected. The fact that the Appellant pays the fitter is not sufficient by itself to create a separate contract. There is nothing to indicate to the customer that there will be a separate contract because he pays the fitter directly. The customer would perceives that there is one contract with the Appellants.

It is the case that certain additional matters, such as the removal of doors, are negotiated between the customer and the fitter, and a price for those services is similarly negotiated, this is not incompatible with the initial arrangement being a sub-contract, and any such additional matters being part of a separate contract between the fitter and the customer.

We distinguish the case of Music and Video Exchange Limited (supra) relied on by Mr Shelley because the factual situation is entirely different. There the customer was dealing with the same person for all aspects of the purchase; in the present case the customer is dealing with two separate people, and his view of the relationship between those two people is relevant. In the Music and Video case the customer had no knowledge of the existence of the third party on whose behalf the company was held to be acting. The Triumph and Albany Car Service case can also be distinguished in that there was no contract for goods in that case to which a supply of service, was ancillary, as in the present case, nor were there any written contractual terms, as here, which specified that the drivers were sub-contractors. The situation is not analogous.

A further indication that in the present case there is a sub-contract between the Appellants and the fitters is the fact that on the invoice which is given to the customer it states that the fitter is a sub-contractor, the customer would therefore believe that this was the case. On the conditions of sale which are on the back of the copy of the invoice which a customer receives it says inter alia: "Rooms should be clear of all furniture. We do not trim doors and we cannot give a time of day for fitting. 48 hours notice must be given for re-arranging fitting date to avoid cancellation charges." This gives the customer the clear indication that the Appellants are in overall charge of the arrangements for the fitting of the carpet, despite the following statement that a sub-contractor can be arranged to carry out the work who is "Completely separate from us" and that any queries reference fitting errors should be taken up with the fitter as we will not accept any liability." For there to be a separate contract with the fitters this would have to be made clear to the customers, which it is not from the contradictory nature of these two conditions of sale.

In the circumstances where a fitter does not turn up, it is the Appellant who finds another one, this is consistent with a sub-contract and is not consistent with agency. There is no principal of law which allows the Appellants to find another fitter unless there is a contract between him and the customer in respect of the fitting.

We do not consider that in this case it is necessary to look separately at the VAT position and we decide this matter on the basis that there was a sub-contract, as stated on the invoice, between the Appellants and the fitters and in the circumstances this appeal is dismissed.

No order for costs.

MISS J C GORT

CHAIRMAN

Release date: 2 September 2004

LON/03/959