Derek Hodd Ltd v Climate Change Capital Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henderson |
| Judgment Date | 14 June 2013 |
| Neutral Citation | [2013] EWHC 1665 (Ch) |
| Court | Chancery Division |
| Date | 14 June 2013 |
| Docket Number | Case No: HC11C02983 |
[2013] EWHC 1665 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building
Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Mr Justice Henderson
Case No: HC11C02983
Mr Gary Blaker (instructed by Downs Solicitors LLP) for the Claimant
Mr Alexander Wright (instructed by Climate Change Capital Limited) for the Defendant
Hearing dates: 26, 27, 28 February and 4 March 2013
Introduction
This is principally a claim to recover a contingency fee alleged to be payable for consultancy services in the field of expense reduction provided under a written agreement dated 13 November 2006 ("the 2006 Agreement"). The sum charged for those services by an invoice issued on 12 February 2008 was £125,250 plus VAT, making a total of £142,674.38. That is the amount which the claimant now seeks to recover, together with interest from the invoice date.
There are, however, some preliminary issues about the identity of the parties to the 2006 Agreement, and its legal validity, with which I will need to deal. The introductory details which follow will help to set the scene for the resolution of those issues.
The claimant, Derek Hodd Limited, is the corporate vehicle through which Mr Derek Hodd, a procurement consultant, now carries on business. Nobody suggests that either Mr Hodd or his company was a party to the 2006 Agreement, but his company now sues as assignee of the benefit of the 2006 Agreement from a company called Zukra Limited ("Zukra"). Zukra was the corporate vehicle through which another procurement consultant, Mr Dominic Hollywood, carried on business from 1 August 2006.
At the time when the present story begins, both Mr Hollywood and Mr Hodd were sole traders who operated as franchisees of an organisation called Expense Reduction Analysts (or " ERA" for short). ERA was a worldwide business operating on a franchise model. The UK arm of the business was conducted through a company called Expense Reduction Analysts (UK) Limited (" ERA (UK)").
Mr Hodd was an experienced consultant, having worked in the field of procurement since 1999. He was evidently good at this job, and in 2006 he was ERA's consultant of the year. Mr Hollywood, by contrast, was a relative newcomer to procurement consultancy. His background was in accountancy, and after qualifying as a chartered accountant in 1995 he then worked for ten years in that field, rising to hold posts at corporate finance director level. In late 2005 he decided on a change of career, and bought a franchise from ERA (UK) on 6 December 2005.
As Mr Hollywood explains in his written evidence:
"Everyone who becomes a franchisee of [ ERA (UK)] is entitled and licensed to trade as ERA. Franchisees often begin working as sole traders and later on form a limited company. We tend to find that ERA consultants talk to each other as fellow associates and use each other's knowledge when this is required. I trained on a course operated by [ ERA (UK)] which commenced in January 2006. I began working as a sole trader and then on 1 August 2006 I transferred the franchise to my company Zukra Ltd.
[ ERA (UK)] would give franchisees access to their brand and we were required to trade under the name Expense Reduction Analysts. They had a standard methodology and corporate identity and supplied marketing material, template terms and conditions and letter of engagement."
The claimant's case is that it was Zukra which agreed to provide the relevant services under the 2006 Agreement. Reliance is placed, in particular, on the " ERA Terms and Conditions of Trading" set out on the reverse of the letter of engagement which Mr Hollywood signed on 13 November 2006 ("the Letter of Engagement"). Those terms said at the top of the page:
"This Agreement is between Expense Reduction Analysts ( ERA) and the Client named in the Accompanying Letter of Engagement, and consists of these ERA Terms and Conditions of Trading, together with the Letter of Engagement (LoE) and any additions or modifications it contains."
At the foot of the page, beneath the terms and conditions, was the statement, in a larger font and olive green instead of black ink:
" ERA is the trading name of Zukra Ltd, 2 Marlborough House, 317 Kennington Road, London SE11 4QE."
On the face of it, therefore, it seems reasonably clear from the terms and conditions on the reverse of the Letter of Engagement that the party which contracted to provide the services was indeed Zukra, trading as ERA. This is not accepted by the defendant, which relies on the Letter of Engagement itself. The Letter of Engagement was written on the headed notepaper of "Expense Reduction Analysts", giving its London address and contact details, including Mr Hollywood's ERA email address. At the foot of the page, beneath the signatures, one finds in the left hand corner, in small print, "Associate Office of Expense Reduction Analysts (UK) Limited", while in the right hand corner, in various fonts of differing sizes, is the web address of ERA (UK) placed immediately above the words "Releasing hidden profits", and a reference to offices in Asia, Australasia, Europe, North America and South America.
The body of the Letter of Engagement contained no reference to Zukra, and described the body that would perform the work as " ERA". It also said that the project would be completed "according to the Terms and Conditions overleaf". The letter was signed by Mr Hollywood, with his name printed under his signature, but giving no indication of the capacity in which, or on whose behalf, he was signing.
Against this background, the defendant does not admit that any contract was made with Zukra and says that at all material times it believed that Mr Hollywood was representing ERA (UK).
Alternatively, the defendant says that if it did contract with Zukra on the terms of the Letter of Engagement, that contract was concluded only because Zukra failed to state its company name in legible characters on the Letter of Engagement in breach of section 4(1)(a)(iii) of the Business Names Act 1985, and that the defendant suffered loss and damage as a result of that breach. Accordingly, it is pleaded in paragraph 26 of the defence that the Letter of Engagement (and any contractual debt purportedly created thereunder) was unenforceable by Zukra as against the defendant, and the claimant as assignee of the alleged debt can be in no better a position than Zukra itself.
I now turn to the problems associated with the identity of the defendant, Climate Change Capital Limited ("CCC"). The Climate Change Capital group of companies was established in October 2003 to provide advice and invest in products and services operating in the low carbon economy. By 2007 it had grown rapidly, and significant sums had been invested in funds which it managed, first by retail investors and later by financial institutions. The clients paid either a management fee or an advisory fee. The group's initial investment products were in the wind energy market in the UK, but the group was also at the forefront of emerging carbon markets worldwide. In 2006 and 2007, the parent company of the group was Climate Change Holdings Limited ("Holdings"), which was owned by a mixture of the founders, staff, private individuals known to the founders, and a small number of financial institutions. Holdings operated the group through 18 subsidiary companies, each of which had a particular function. The main subsidiary was CCC, which was authorised by the Financial Services Authority to conduct investment business, and was appointed as the manager of the investment funds to which external investors subscribed. The other subsidiary companies had various roles in the holding structures of the funds, some of them acting as general partners. Apart from its central role as the FSA-regulated manager of the funds, CCC also provided advisory services to external professional clients. All staff within the group were employed by Holdings, which also paid for most expenses, including travel. There were internal contracts in place for services between the different companies, not always written but clearly understood. Thus, for example, Holdings provided services to CCC, and charged CCC a fee for those services.
Thirteen of the subsidiaries were incorporated in England and Wales, the remainder of them being incorporated in the Cayman Islands or the USA. None of the subsidiaries was called Climate Change Group Limited. That, however, is the name which appears on the Letter of Engagement as the name of the client, and the letter was expressed to be signed "For and on behalf of Climate Change Group Ltd" by Mr Paul Bramley, who appended the description "Group FD" to his signature.
Mr Bramley had joined the group in April 2006 as interim group finance director on a consultancy contract. He was the senior finance professional in the internal finance department, and reported to the Chief Operating Officer of the group, Mr Mark Bell. He was not a director of any of the group companies, and subsequently left the group on 31 May 2007.
The question which thus arises is: with which company in the group was the 2006 Agreement made? Was it the principal operating subsidiary, CCC? Or was it Holdings, the company which employed staff and paid for most expenses, including the air travel expenses which formed part of the subject matter of the Letter of Engagement?
In his witness statement, Mr Hollywood said that he had made a mistake in preparing the Letter of Engagement. He went to the Companies House website to check on the correct name for the company he was going to contract with, but made a mistake and instead of writing down Climate Change Capital Limited, he wrote down Climate Change...
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