Re Charge Card Services Ltd
| Jurisdiction | England & Wales |
| Judge | THE VICE-CHANCELLOR,LORD JUSTICE NOURSE,LORD JUSTICE STUART-SMITH |
| Judgment Date | 04 July 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0704-1 |
| Docket Number | 88/0572 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 July 1988 |
[1988] EWCA Civ J0704-1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(COMPANIES COURT)
(MR. JUSTICE MILLETT)
Royal Courts of Justice,
The Vice-Chancellor
(Sir Nicolas Browne-Wilkinson)
Lord Justice Nourse
and
Lord Justice Stuart-Smith
88/0572
CH/444/87
MR. R. POTTS Q.C. and MR. M. TODD (instructed by Messrs. Sebastian Coleman & Co., London, EC4, Local Agents for Messrs. Wragge & Co., Birmingham) appeared for Copes Service Station Limited.
MR. J. CHADWICK Q.C. and MR. R. GILLIS (instructed by Messrs. Cameron Markby, London, EC2) appeared for Commercial Credit Services Limited.
This is an appeal from the Judgment of Millett J. which is reported at (1987) Ch. 150. The litigation arises out of the winding-up of Charge Card Credit Services Ltd. ("the Company"), which ran a scheme, the Fuel Card Scheme, for the purchase of petrol and other fuels from approved garages with the use of charge cards issued by the Company. The Company ceased to trade on 21 January 1985 and went into creditors' voluntary liquidation on 4 February 1985 with an anticipated deficiency of some £1.9 million. At the date of the liquidation, the Company owed substantial sums to garages which had supplied fuel in return for vouchers signed by Fuel Card holders. There were also substantial sums owing to the Company from card holders who had purchased fuel with the use of Fuel Cards before the date of the liquidation. Under a factoring agreement the Company had assigned all its receivables to the Respondent to this appeal, Commercial Credit Services Limited.
Soon after the winding-up, there were disputes as to who was entitled to the moneys owed to the Company by the card holders. Under an Order of the Court made in the winding-up, the liquidator of the Company has collected rather over £2 million net from the card holders, which moneys have been paid into a separate account pending the determination in these proceedings of the question to whom they belong.
The dispute is between the garages who supplied fuel but have not been paid by the Company on the one hand and Commercial Credit, as assignee of the Company's receivables, on the other. Under a representation order made by the Court, the Appellants, Copes Service Station Ltd., are representatives of such garages. The Appellants claim that the garages only accepted payment for fuel by means of the Fuel Card as a conditional discharge of the purchasers' obligation to pay the price for the fuel and that accordingly, since the Company failed to honour its obligation to pay the garages, the garages were entitled to recover the price direct from the purchasers of the fuel i.e. the card holders. So, say the garages, the sums collected by the Liquidator belong to the garages as representing payments of the purchase price due to the garages. The Respondent, on the other hand, contends that the moneys collected by the Liquidator represent the debts due from the card holders to the Company of which they are the assignees.
The Judge rejected the garages' claim that the payment by credit card was conditional and held that the price owed for the purchase of fuel from the garages was unconditionally discharged by the acceptance of the Fuel Card. He accordingly held that the Respondent was absolutely entitled to the moneys collected by the Liquidator under the order of the Court. The garages appeal against that decision. The learned Judge at the same time decided a question as between the Liquidator and Commercial Credit Services Limited as assignees: there is no appeal against that part of his decision.
The detailed facts (which are agreed) are so fully set out in the judgment of the learned Judge that I will not repeat them here.
The case raises fundamental questions as to the legal character of credit card sales. It is therefore convenient, before turning to the specific questions argued, to set out what, in my judgment, are the normal features of credit card or charge card transactions, there being no relevant distinction between charge cards and credit cards for present purposes.
1. The general features of credit card transactions.
(A) There is an underlying contractual scheme which pre-dates the individual contracts of sale. Under such scheme, the suppliers have agreed to accept the card in payment of the price of goods purchased: the purchasers are entitled to use the credit card to commit the credit card company to pay the suppliers.
(B) That underlying scheme is established by two separate contracts. The first is made between the credit company and the seller: the seller agrees to accept payment by use of the card from anyone holding the card and the credit company agrees to pay to the supplier the price of goods supplied less a discount. The second contract is between the credit company and the card holder: the card holder is provided with a card which enables him to pay the price by its use and in return agrees to pay the credit company the full amount of the price charged by the supplier.
(C) The underlying scheme is designed primarily for use in over-the-counter sales, i.e. sales where the only connection between a particular seller and a particular buyer is one sale.
(D) The actual sale and purchase of the commodity is the subject of a third bilateral contract made between buyer and seller. In the majority of cases, this sale contract will be an oral, over-the-counter sale. Tendering and acceptance of the credit card in payment is made on the tacit assumption that the legal consequences will be regulated by the separate underlying contractual obligations between the seller and the credit company and the buyer and the credit company.
(E) Because the transactions intended to be covered by the scheme would primarily be over-the-counter sales, the card does not carry the address of the card holder and the supplier will have no record of his address. Therefore the seller has no obvious means of tracing the purchaser save through the credit company.
(F) In the circumstances, credit cards have come to be regarded as substitutes for cash: they are frequently referred to as "plastic money".
(G) The credit card scheme provides advantages to both seller and purchaser. The seller is able to attract custom by agreeing to accept credit card payment. The purchaser, by using the card, minimises the need to carry cash and obtains at least a period of free credit during the period until payment to the card company is due.
2. The particular features of this scheme.
In the present case, the Fuel Card Scheme run by the Company contained all those features. The scheme and the contracts in which it is contained draws a distinction between the Account Holder and the Card Holders, the former being the company or person who contracts with the Company, the latter being the persons authorised by the Account Holder to use the card. The distinction is of no significance in the present case and I will refer to both classes as "the card holder". It merely reflects the fact that many account holders were haulage and fleet operators rather than individuals.
The underlying scheme is constituted by two bilateral contracts, viz:
(a) The contract between garage and the Company ("the Franchise Agreement"). By the Franchise Agreement the garage undertook to honour the Company's Fuel Card. There were two different ways in which the garage could claim payment: nothing turns on the difference between them. The Company in effect undertook that on receipt of vouchers signed by the cardholders together with a claim form, payment of the price (less commission) would be made to the garage within five days at the latest.
(b) The contract between the card holder and the Company ("the Subscriber Agreement"). There is a major issue as to the proper construction of the Subscriber Agreement to which I will have to revert. In essence, the card holder authorised the Company to pay for fuel supplied to the card holder and to debit the card holder. The Company was to send to the card holder a monthly statement of the amount debited and the card holder was bound to pay to the Company within 14 days the full amount shown owing in the statement.
In addition there was a third contract ("the Forecourt Agreement") made between the card holder and the garage. This contract came into existence when the card holder bought fuel at the garage. It was necessarily an oral agreement. In the present case, the Forecourt Agreement has a special feature not to be found in the majority of credit card purchases. At a self-service garage, the petrol is put into the tank by the purchaser/card holder before there is any contact between him and the staff of the garage. It is common ground that the contract for the sale of the petrol is made at that stage, the garage having made an open offer to sell at pump prices which is accepted by the motorist putting petrol in the tank. Having done so, the motorist then goes to pay for the petrol and produces the Fuel Card. That is the first time at which the garage knows that payment is to be made not in cash but by using the card. There is a dispute between the parties whether, in those circumstances, the purchaser ever becomes liabile to the garage to satisfy the price by payment in cash.
3. The issues
The following principal points were argued:
(a) The respondent contended that self service forecourt sales do not at any stage give rise to a primary obligation on a Fuel Card holder to pay cash for the petrol....
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