Whittle Movers Ltd v Hollywood Express Ltd
| Jurisdiction | England & Wales |
| Judge | Waller,Dyson,Lloyd L JJ. |
| Judgment Date | 11 November 2009 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 November 2009 |
Court of Appeal (Civil Division).
Waller, Dyson and Lloyd L JJ.
Edward Bartley Jones QC (instructed by Beachcroft LLP) for the appellant.
Paul Chaisty QC (instructed by Nexus Solicitors) for the respondent.
The following cases were referred to in the judgment:
Aramis, The[1989] 1 L1 Rep 213.
Baird Textile Holdings Ltd v Marks & Spencer plcUNK [2001] EWCA Civ 274; [2001] CLC 999.
British Steel Corp v Cleveland Bridge & Engineering Co LtdUNK [1984] 1 All ER 504.
Contract — Restitution — Tenders invited for new sub-contract for distribution services — Negotiations with appellant as winning tenderer for new long-term contract — Appellant began to perform services — Contract never agreed — Judge wrong to find parties concluded interim contract — Highly unlikely that parties negotiating long-term contract would by conduct conclude interim contract containing terms still subject to negotiation — No need to find contract when restitutionary remedy for unjust enrichment available — Arguable that respondent unjustly enriched because appellant received less than reasonable sum for services — Inquiry directed as to whether respondent unjustly enriched.
This was an appeal by a subcontractor (Whittle) from a decision that in the circumstances no long term contract had been entered into between the parties, but that they had by conduct concluded an interim contract terminable on six months' notice.
The respondent (Hollywood) was a subsidiary of a cinema group for which it undertook distribution and warehousing services. The distribution services were outsourced and Hollywood invited tenders for a new subcontract and sought indicative prices for one, three and five year contracts. Whittle was the successful tenderer. The invitation to tender was expressed to be “subject to contract” and clearly contemplated the preparation and execution of a formal written agreement. Further negotiations took place and ultimately a letter of intent was issued by Hollywood and signed by Whittle.
The drafting of a long-term contract continued but before it was finalised, Whittle commenced performing the services that were the subject of the tender. Whittle invoiced on the basis of the prices that had by then been negotiated for a five and a half year contract.
When the parties were agreed as to all matters to be contained in the contract, Hollywood was put up for sale and no contract was ever signed.
Hollywood asserted that the parties had reached an interim agreement based on the contract with the previous subcontractor which could be terminated by either side on six months' notice. Hollywood accordingly gave six months' notice to terminate the interim agreement.
The judge held that no long-term contract had been entered into, but the parties had entered into an interim contract and Whittle was bound by the prices negotiated for the long-term contract.
Whittle appealed challenging the finding that there was no long-term contract. It also sought to set aside the finding of an interim contract. It sought a declaration that no contract was concluded, and a restitutionary remedy on the basis that Hollywood had been unjustly enriched by only having paid prices fixed by reference to a long-term contract during the relatively short period for which Whittle supplied services.
Held, allowing the appeal:
1. The judge was right to find that no long-term contract had been concluded. There was nothing on which to base a finding that the parties had either expressly or by implication agreed to waive the requirement for a formal document in writing before they were to be bound.
2. While parties were negotiating a contract under which they would, if the contract was concluded, enter into reciprocal obligations binding each other as to future performance, it was highly unlikely that by conduct they would conclude in the interim an executory contract containing terms still the subject of negotiation. It was more likely that they would have entered into a contract under which if one party supplied, the other agreed to pay a reasonable remuneration. Even such a contract would not have been entered into if important terms such as those relating to standard of performance were still under negotiation, and in such cases the proper answer was no contract but a restitutionary remedy to the extent that one party had been unjustly enriched. (British Steel Corp v Cleveland Bridge & Engineering Co LtdUNK[1984] 1 All ER 504applied.)
3. There might be little distinction between a contract entitling the provider of services to reasonable remuneration and a restitutionary remedy based on the unjust enrichment of the recipient of the services, but before it was possible to find any contract it was necessary to analyse precisely the terms so as to test whether the reality was that such terms were still under negotiation and the proper answer was no contract. The court should not strain to find a contract because a restitutionary remedy could solve most if not all the problems.
4. The judge's determination to find some contract, and his lack of analysis as to what the terms of any contract would be, led him into error. No interim agreement could be implied because no contract would be implied unless it was necessary. Terms as to performance were still under negotiation. All negotiations were subject to contract and no binding arrangement was to come into existence until a formal document was signed. Thus the answer the judge should have reached was that there was no contract. It was arguable that Hollywood had been unjustly enriched and an inquiry was directed as to whether further remuneration was due.
Waller LJ:
1. Once again there is before the court a case in which the parties, in contemplation of the signing of a formal written long term contract, have commenced operating on the basis that the contract will be signed — performing services as contemplated by the terms being negotiated and being remunerated by a price contemplated by the terms being negotiated.
2. At the trial before His Honour Judge Raynor QC the appellants (Whittle) were primarily contending that by conduct the parties had actually entered into the long term contract; the respondents (Hollywood) were primarily contending that by conduct the parties had entered into an interim contract terminable on six months' notice. Neither put as their primary case the possibility that there was no contract with the consequences that would flow from that, although the possibility of no contract was raised from time to time as will appear hereafter. His Honour Judge Raynor QC, by a judgment handed down on 22 December 2008, found that no long term contract had been entered into, and found that the parties had by conduct concluded an interim contract terminable on six months' notice. He found Whittle bound by the prices negotiated for the long term contract.
3. Whittle appeal and seek to challenge the finding of no long term contract with, it should be said, little enthusiasm. More forcefully they seek to set aside the finding of an interim contract. They seek a declaration that no contract was concluded, and that Whittle are entitled to a restitutionary remedy. They claim that Hollywood has been unjustly enriched by only having paid prices fixed by reference to a long term contract during the relatively short period for which Whittle supplied services.
4. The respondents (Hollywood) through Mr Chaisty QC (a) seek to uphold the judge's finding that no long term contract was entered into; (b) seek to uphold the judge's finding of an interim contract; and (c) maintain that it is not open to Whittle to contend for “no contract” and a restitutionary remedy in that (it is said) their case at the trial was that there was a contract and they should not be allowed to change tack now.
5. There is no challenge to the judge's findings of fact and the documents speak for themselves. It is possible to summarise the position as follows:
(i) Hollywood were a subsidiary of United Cinemas International (UK) Limited (UCI) and prior to January 2006 undertook the distribution and warehousing services for the UCI cinema chain and Blockbuster Stores in relation principally to food and drink products and subcontracted the same to Trailers Limited (Trailers). In 2004 the Terra Firma Group purchased the UCI and Odeon cinema chains. Odeon products were distributed differently from those of UCI and what was envisaged was an integration of the operations.
(ii) The decision was that the distribution would take place through Hollywood, with Hollywood subcontracting the same to a third party. Hollywood thus invited tenders from entities including Whittle and Whittle were the successful tenderers. The invitation to tender was expressed to be “subject to contract” and clearly contemplated the preparation and execution of a formal written agreement. Express terms of the tender included the following.
Clause 2.4 headed “Acceptance of the Tender Response” included the following:
“Tenderers will be notified by the Joint Procurement team of the outcome of the tender process at the earliest opportunity.
An initial draft of a formal contract is referred to in Appendix 6 and included with this tender. The successful tenderer will receive as a part of this tender process, the final draft of the contract, which Odeon or UCI would like to enter into. Prior to completion of this contract a non binding ‘Letter of Intent’ confirming that Odeon and UCI wish to award a contract to the winning tenderer and a time line to complete the contractual negotiations, will be issued. Odeon and UCI may require the successful tenderer to start supplying products and services before these contractual negotiations are completed. The winning tenderer will be asked to finalise its suggested delivery schedule with the Odeon and UCI Senior Ops team prior to...
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