A L Barnes Ltd v Time Talk (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Clarke,Lord Justice Ward |
| Judgment Date | 26 March 2003 |
| Neutral Citation | [2003] EWCA Civ 402 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case Nos: 2002 0953 & 2002 0964 A2 |
| Date | 26 March 2003 |
[2003] EWCA Civ 402
Lord Justice Ward
Lord Justice Clarke and
Lord Justice Longmore
Case Nos: 2002 0953 & 2002 0964 A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (Leeds District Registry)
His Honour Judge Langan
Royal Courts of Justice
Strand,
London, WC2A 2LL
MICHAEL J BOOTH Esq QC and EDWARD P MORGAN Esq
(instructed by Graham & Rosen, HU1 2BB) for the Appellant
STEPHEN J GLOVER Esq
(instructed by Haliwell Landau, M2 2JF) for the Respondent
This appeal from His Honour Judge Langan sitting in Leeds is a consequence of the downturn in the mobile telephone market. The appellants, Time Talk (UK) Ltd, who were the defendants to a claim for the balance of unpaid invoices, were and are part of the Time Group which is well known for the retail sale of computers and other electronic goods. In 2000 they became Time Group's chosen vehicle for retailing mobile telephones and they needed to organise outlets for that purpose in various parts of the country; they engaged shop fitting contractors who agreed to set up and fit out, under the supervision of a project manager, shops or areas in larger stores where mobile telephones could be displayed and purchased. The respondents ("Barnes") were one such contractor. Edwin Dyson & Sons Ltd were another. During a previous course of trading with Time Group, quotations were asked for and accepted. In relation to what became known as the Time Talk Project there was merely an agreement that work would be done at a particular site; since there was no agreement as to price, any claim by the contractor had to be for reasonable remuneration on a quantum meruit basis. The claims in the proceedings that have led to this appeal all related to the Time Talk Project and were, therefore, quantum meruit claims.
After some months, Time Talk decided that the venture had been a failure and employed a firm of Quantity Surveyors, Building Cost Services ("BCS"), to look into the costings and claims for payments made by three of the contractors engaged by Time Talk. They unearthed the fact that the contractors were charging Time Talk for sums which the project manager was claiming for his services, although the project manager was engaged and (BCS assumed correctly) paid by Time Talk. The judge held that this arrangement had been initiated by an agreement made in Leicester in 1997 between a Barnes director (Robert Gibson), a Time Talk director (John Colbert) and the project manager (Andrew Craft, trading as Craftwork). This agreement was that Barnes was to go on Time Talk's list of contractors who would be invited to tender for work and, if work was done, Mr Craft was to raise an invoice against Barnes for his supposed services and Barnes would then incorporate the sum so invoiced in the invoices they raised against Time Talk. Those Barnes invoices would then be passed for payment by Mr Colbert and once Barnes had received payment, they would pass a sum of £2,500 or so to Mr Craft for services rendered; the Defendants further alleged that, to the extent that any such services might be rendered by Mr Craft, they might include selection of Barnes for future projects and a not too exacting scrutiny of the bills and invoices rendered by Barnes to Time Talk. The judge, however, made no finding to that effect.
The case for Time Talk was presented at trial by Mr Booth QC, first as a broad conspiracy between Barnes, Mr Colbert and Mr Craft to obtain the work and charge artificially high prices and secondly on the basis that Time Talk's relationship with both their employee/director Mr Colbert and the project manager Mr Craft was a fiduciary one, that their actions in enabling Mr Craft to be paid twice for the same work constituted a breach of that fiduciary relationship and that Mr Gibson had dishonestly assisted in that breach of trust. This was supported by reference to Royal Brunei Airlines Sdn Bhd v Tan [1995] 2AC 378, 389 per Lord Nicholls. The judge rejected the conspiracy allegations but accepted the second contention and decided that Mr Gibson had, indeed, dishonestly assisted in Mr Craft's and Mr Colbert's breach of trust. He held that Mr Gibson realised that the arrangement with Mr Colbert was of a discreditable nature and in paragraphs 79–80 of his judgment said this:-
"79. After much thought, and bearing in mind that a judge should never lightly make a finding of dishonesty, I have come to the conclusion that the defendant has established a failure to ask questions which an honest person in Mr Gibson's position would have asked. As I have already said, what was proposed by Mr Colbert was a procedure of a kind of which no one (including Mr Gibson) had ever heard, and it was something for which there was no conceivable commercial explanation. Further, for the agent for one party to a contract to be dependent for payment of part of his fees on the other (even though that other is put in funds by the first) is potentially subversive of the agent's duty of good faith to his principal and of his independence of the other party. To the limited extent to which it may be permissible to take subjective matters into consideration, it must be relevant that [Mr Gibson] had by late 1997 been working for the claimant for fourteen years, and was a long way beyond the novitiate of the construction industry. In my judgment, the situation called at the very least for the asking of the single question 'That's so unusual, I've never come across it before; what's the point?' I conclude that the failure on Mr Gibson's part to ask the question was deliberate, and that the underlying reason was that he knew that no legitimate explanation would be produced.
80. My conclusion on the first issue is therefore that Mr Gibson was dishonest within the test prescribed in Tan and that he knowingly assisted Messrs Colbert and Craft in breach of the duties of good faith which they owed to the defendant."
Nothing in these paragraphs was challenged by Mr Glover on behalf of Barnes on the present appeal, save that he submitted that the word "suspected" was more appropriate than the work "knew" in the last sentence of paragraph 79. He agreed that that made no difference to the finding of dishonesty.
Mr Booth then submitted that, as a consequence of this dishonesty, Barnes could not recover any part of their claim. As I have said, this claim consisted of unpaid invoices for work done in the setting up and fitting out of the mobile telephone outlets and, since no price had ever been agreed for the work, was a quantum meruit claim for the reasonable cost of goods and services provided. It was submitted by Mr Booth that the claim must fail because the arrangement for Mr Craft to be doubly paid was an integral part of the contractual relationship between Barnes and Time Talk and the whole claim must fail because it was tainted with that illegality. Judge Langan decided that the quantum meruit claim for work actually done and accepted by Time Talk succeeded but that Barnes could not recover that part of their quantum meruit claim which included any project management fees element (£15,250); he also decided that Time Talk's counterclaim to recover the project management fees previously paid by them (or any associated company) to Barnes should succeed in the sum of £87,003.72. (In the light of the judge's findings that Mr Gibson was dishonest, there is now no challenge to the counterclaim.) The judge then assessed the quantum meruit claim in the sum of £216,968.11, deducted the counterclaim of £87,003.72 and entered judgment in Barnes' favour for the balance.
Time Talk now appeal against the judge's decision that Barnes were entitled to be paid for work actually done, repeating their argument that Mr Gibson's dishonest assistance in Mr Craft's and Mr Colbert's breach of trust prevents recovery.
Mr Booth relies in particular on the decision of this court in Taylor v Bhail [1996] CLC 377 in which the court refused to enforce a corrupt bargain between a building contractor and a headmaster of a private school made after storms had damaged a wall in the school playground. The cost of the repairs was recoverable from the school's insurers and the agreement made between the claimant contractor and the defendant headmaster was that the contractor would do the work for £13,480.00 plus VAT and pay the headmaster £1,000 out of the insurance proceeds as a return for obtaining the contract. The estimate delivered to the insurers included, with the connivance of both parties, the additional £1,000. The contractor did the work and sued on the contract for his remuneration. The headmaster claimed that the contract was a contract made to defraud a third party viz. the insurers and was, therefore, unenforceable. The contractor replied that the "bribe" of £1,000 could be severed from the agreement to undertake the work for £13,480 plus VAT and that he should be paid the balance since he had actually done the work. That appealed to Judge Marcus Edwards at Brentford County Court but his decision was reversed by the Court of Appeal. Sir Stephen Brown P said (pages 380–1):
"The important feature of this case is that the contract was, in substance, an agreement between the appellant and the respondent to defraud a third party, the insurance company. This, in my judgment is not capable of severance … . the message should be sent out loud and clear that, if parties conspire to defraud a insurance company, as in this case, they cannot expect the courts to assist them in...
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