Dougland Support Services v Allscan Services Ltd.

1. LORD JUSTICE SCHIEMANN: I will ask Lord Justice Dyson to give the first judgment.

2. LORD JUSTICE DYSON: This is an appeal by Dougland Support Services Limited ("Dougland") from the decision of His Honour Judge Bursell QC on 16 February 2002, sitting at the Bristol County Court. He allowed the appeal by Allscan Limited ("Allscan") from the decision of District Judge Frenkel made on 13 December 2001, whereby he awarded Allscan damages of £2,510 for wrongful termination of a contract. Dougland had purported to terminate the contract by giving one month's notice in writing on 8 March 2001. The district judge held that the contract was terminable on three months' notice at any time. The judge held that the contract was terminable by at least three months' notice expiring on the anniversary date of the contract, on 19 January 2001.

The Facts.

3. Allscan had originally supplied the service of collection and disposal of sanitary and clinical waste at Bristol International Airport under a direct contract with Bristol Airport Plc ("BAP"). It was common ground that this contract could be terminated by either party on three months' notice at any time. BAP decided to let the contract for supply of these services to Dougland. On 23 May 1999 they served on Allscan a formal three months' notice terminating the contract with Allscan on 28 August 1999.

4. On 24 June 1999 Allscan wrote to Dougland offering to supply the services as subcontractor to Dougland. Thereafter there were discussions as to price; for example on 4 August 1999 Allscan offered a monthly rate of £666.66 plus VAT as from 1 September until end of February 2000 when additional arrangements would be required when new terminal buildings came into service. On 5 August Dougland replied by letter accepting the offer of 4 August saying that they looked forward to discussing the new airport's requirements in January 2000. This new contract was not further recorded in writing.

5. On 26 August 1999 Mr Peter Smith, the managing director of Allscan, wrote to Mr Bailey of Dougland to confirm that the supply of the service would:

"Continue as per quotation without any interruption from 1 September 1999."

Thus it was there was no interruption from supply from Allscan as from 1 September.

6. In December discussions took place regarding the provision of services for the new terminal building. On 17 December 1999 Allscan sent Dougland a quotation in its standard form for the supply of services at the new building as from 16 December. The document was headed "Healthcare agreement/quotation". It identified the precise services to be provided and proposed a monthly rate of £953.33 plus VAT. It gave 16 December 1999 as "the commencement date". It also contained the following:

" ALL CONTRACTS WITH ALLSCAN SERVICES LTD ARE SUBJECT TO AN ANNUAL CHARGE REVIEW WHICH IS HELD IN JANUARY. IF YOU ARE AFFECTED A NEW CHARGE DOCUMENT WILL BE ISSUED TO YOU. THE SAME TERMS AND CONDITIONS OF CONTRACT AS AGREED TO ON THIS ORIGINAL DOCUMENT WILL APPLY.

THIS CONTINUOUS AGREEMENT MAY ONLY BE TERMINATED PROVIDED WRITTEN NOTICE IS GIVEN BY THE PARTY TERMINATING IT TO THE OTHER AT LEAST 3 (THREE) MONTHS PRIOR TO THE ANNIVERSARY DATE. THE ANNIVERSARY DATE THEN BECOMES THE TERMINATION DATE."

7. On 11 January 2000 Dougland responded saying that the price was above the budget set by BAP "and they clearly wish to see a reduced figure, I am seeking your response to their request".

8. On 19 January 2000 Mr Smith replied enclosing a revised quotation. This, too, was on Allscan's standard form of agreement/quotation. The revised quotation showed a new commencement date of 19 January 2000 and the revised monthly rate of £872.25 plus VAT. In all other respects it was the same as the previous quotation. The revised quotation contained a termination clause in precisely the same terms as that contained in the earlier quotation. There was no written response to this revised quotation. It is unclear to what extent there was any subsequent oral discussion about it. Certainly the district judge made no findings on this. Thereafter Allscan supplied the extended services described in the revised quotation and was paid in accordance with it.

9. In the Spring of 2000, and from time to time thereafter, there were discussions as to increases in the number of sanitary and clinical units that were to be serviced at the airport and the sums to be paid. At no time was there any discussion about the termination clause. An example of what was taking place appears in Mr Smith's letter to Mr Oldham of Dougland dated 4 December 2000 in which Mr Smith set out Allscan's proposed charges from April 2001 for both the existing services and certain additional services which were to be provided as from November 2000.

10. It would appear from the witness statement of Mr Smith that in early March 2001 Mr Oldham told him that Allscan could retain the contract only if they could match a competitive bid that had been received by Dougland from Rentokil Initial. Mr Smith realised this would not be possible and informed Mr Oldham, whereupon Mr Oldham said that Dougland would have to give one month's notice terminating the contract. On 7 March 2001 Mr Smith wrote a letter to Mr Oldham which included the following words:

"I have written to your company and direct to Bristol Airport on three occasions indicating we require three months notice of termination and, therefore, this is still applicable."

11. On 8 March Mr Oldham wrote to Mr Smith giving Allscan one month's notice expiring on 9 April. In his response, dated 13 March, Mr Smith wrote:

"I trust you will appreciate my company's position and honour the commitment of three months' notice."

12. There is a further letter dated 13 March 2001, apparently written by Mr Smith to Mr Oldham, to which the district judge did not refer and which was apparently not shown to the circuit judge. Mr Ascroft is unsure whether this document was before the district judge at all. It is, however, relied upon by Mr Kennedy and I should refer to the material parts of it. They are:

`"However I wish to point out the following, it is not acceptable at this late date for yourselves to amend the notice period to one month.

You have in your possession copies of letters dated 28 May 1999 from Bristol International Airport, Allscan quotations dated 16 December 1999 and 19 January 2000 clearly stating three months' notice of termination.

....

Therefore, in the circumstances, I will accept three months' notice of termination from your letter dated 8 March 2001 and to cease the service on Friday 8 June 2001."

The proceedings

13. Allscan started proceedings against Dougland. By its particulars of claim Allscan alleged that it was a term of the contract that it could be terminated by at least three months' notice prior to the anniversary date on 19 January, and that the one month's notice purportedly given by the letter of 8 March was unlawful. Allscan claimed damages for breach of contract, which it quantified at £11,831 odd. In its defence Dougland alleged that it had expressly been agreed that the agreement could be terminated on one month's notice given at any time. Accordingly, the notice of 8 March was in accordance with the terms of the contract.

The District Judge's judgment

14. The district judge heard evidence from Mr Smith on behalf of Allscan and Mr Bailey on behalf of Dougland. In his judgment he said that he accepted the analysis of counsel for Dougland that there had been "an exchange of contracts" in August 1999. Save as to price, the parties informally agreed at that time to abide by the terms of the contract between Allscan and BAP. As regards the events in December 1999/January 2000, the district judge rejected the evidence of Mr Bailey that there was an oral agreement to accept the terms of Allscan's revised quotation with the substitution of a provision that the contract could be terminated on one month's notice. The district judge said that he was not satisfied that, in sending the quotation on 17 December and the revised quotation on 19 January, "it was the intention of Allscan to amend the other terms save that of quantity and price". By "other terms", he was referring to the other terms of the previous contract between Allscan and BAP.

15. The reason given by the district judge for reaching this conclusion was that in his letters of 7 and 13 March 2001 Mr Smith had referred to a simple three months' notice, not "at least three months' notice prior to the anniversary date". The district judge said of these two letters (having made no reference to the third letter):

"These are talking about 3 months' notice. This was the understanding of both companies. The only inference that I can draw from the letters was that it was Peter Smith's intention to just amend the price and scope.

....

Given these two opportunities to point out the annual termination clause I find that evidence inconsistent with an intention to renew the whole contractual basis at page 120."

16. The document at page 120 was the quotation sent on 17 December 1999. He concluded, therefore, that Allscan was entitled to three months' termination given at any time.

The decision of Judge Bursell QC

17. The judge made the point at paragraph 17 of his judgment that the district judge rejected the evidence of Mr Bailey that there was any concern in Mr Bailey's mind as to the termination clause contained in Allscan's quotations. He then continued at paragraph 18 and following:

"It seems to me that, in those circumstances, I must go back and look at the document itself, particularly bearing in mind that the learned judge, in the note of judgment which is before me, does not deal with the question as to why, if the intention of the claimant had been merely to revise the contract as to costs and services they did not incorporate those amendments merely in a letter as indeed had happened in previous correspondence between the parties, which can be found at pages 108 -- 110 of the trial bundle.

19. It seems to me that it is apparent that the claimant did in fact take its opportunity, specifically to set out in its relationship with the defendant, first of all in December and then in January, not only its position as to costs and then the provision of the services but also in relation to the termination of the contract. It would have been very easy for Mr Smith, at that time, to put a line through the relevant part, if he wished, just as he did in relation to the word 'quarterly' changing it to monthly, an inch above the relevant clause. Equally, it would have been very possible for the defendant to have come back and rejected that agreement quotation, as they had done earlier in relation to the question of cost.

20. The claimant, in its case, has relied upon the conduct of the parties. As I say, Mr Kennedy accepts that the amendments in relation to costs and the scope of the services was accepted by a course of conduct It seems to me that it is impossible to break down that course of conduct and relate it solely to the costs and the services. The only time that conduct could bite in relation to the specific clause in relation to termination would in fact be the time of termination itself. It seems to me, therefore, that the conduct of the parties (bearing in mind the rejection of the evidence of Mr Bailey, as the learned judge was entitled to do), manifestly therefore did accept the whole of the standard form of quotation. If that be right, then the learned judge would not have been entitled and indeed he did not seek to use the subsequent letters at 136 and 132 to reinterpret that particular contract.

21. In my view, this case is a difficult one because of the irony which I briefly referred to earlier. Nonetheless, it seems to me that what is of particular importance in this case is that the claimants specifically set out to use its standard form of quotation, contrary to what had been the relatively short course of conduct between the parties earlier. But Mr Bailey, at the very least, by the time of the defence, appreciated the difficulties in which that placed the defendants and no doubt, because of that, attempted to put forward the case that there had been an amendment of it.

22. In those circumstances, in my view the learned district judge was wrong in law, in finding that there had been no binding contract between the parties in January 2000, in relation to the termination clause, and this appeal is therefore allowed."

18. The letters referred to by the judge at pages 136 and 132 were the letters of 8 and 13 March 2001.

The appeal to this court

19. On behalf of Dougland, Mr Kennedy submits that the judge was wrong to reverse the findings of the district judge. The district judge had the advantage of hearing the oral evidence of the witnesses who were parties to the negotiations in December 1999 and January 2000. The district judge was entitled to regard Allscan's quotations as merely an offer to vary the price and scope of the work and was right to do so. Allscan's evidence was that the only terms which were the subject of discussion were those relating to the price and scope of the services to be supplied. Mr Kennedy submits that the district judge was entitled to take into account the subsequent letters of Mr Smith as an indication of what he had intended at the time of the negotiations and, having heard the oral evidence and read the witness statements, to conclude that he was not satisfied that it was the intention of Allscan to amend the existing terms save as to quantity and price. He further submits that the district judge made no error of fact and his conclusions were reasonable in the circumstances. Accordingly, the judge was wrong to substitute his own findings for those of the district judge. Mr Kennedy relies on Tanfern Limited v Cameron-MacDonald [2000] 1 WLR 1311.

20. On behalf of Allscan, Mr Ascroft, in his skeleton argument, contends that the judge reached the correct conclusion and for the right reasons. He points out that the sole reason for the district judge's conclusion as to Allscan's contention only to vary the scope and the price of the work was that Mr Smith wrote the two letters in March 2001. The judge did not substitute his own findings of fact for those made by the district judge. Rather he drew different legal conclusions from the same findings. The district judge made no findings of fact in respect of what passed between the parties before, or at the time of, the submission of Allscan's quotations which required that they should be construed as offers in respect only of price and the scope of the service to be supplied. The judge was, therefore, right to conclude that the quotations were offers as to the basis on which Allscan was willing to provide services in the future and that the quotation of 19 January 2000 was accepted by conduct.

Conclusion

21. I see no answer to the submissions made on behalf of Allscan by Mr Ascroft in his skeleton argument. I shall refer only to the revised quotation sent on 19 January since it superseded the earlier quotation.

22. On its face, the quotation was not merely an offer to vary the existing terms as to price and supply. The document was headed "healthcare agreement/quotation". It purported to set out all the terms of the contract that would apply from its commencement date of 19 January 2000. It made clear that if the prices were to change pursuant to an annual review "the same terms and conditions of contract as agreed to on this original document would apply." In other words, the quotation was an offer to supply the specified services at the specified time from the specified commencement date on the terms and conditions stated in the document. These terms included the new termination clause. It is impossible to construe the quotation as not including the termination clause. If the district judge was relying on the March letters as a basis for construing the quotation, he was plainly wrong to do so. It is trite law that "it is not legitimate to use as an aid in the construction of the contract anything the parties said or did after it was made" (per Lord Reid in Whitworth Street Estates v Miller [1970] AC 583 at 603E).

23. On the other hand, I would accept that it is legitimate to have regard to what is said and/or done after a contract has been made in order to determine whether the parties have in fact agreed to vary its terms. On the same page of the report of Lord Reid's speech to which I have referred, appear these words:

"Of course, the actings of the parties (including any words which they used) may be sufficient to show that they made a new contract. If they made no agreement originally as to the proper law, such actings may show that they made an agreement about that at a later stage. Or if they did make such an agreement originally such actings may show that they later agreed to alter it."

24. An obvious example of a case where it would be legitimate to have regard to what the parties said is where there is a dispute as to whether there has been a variation of a contract. If, for example, A says that there was an oral agreement to vary his contract with B, and B denies that any such oral agreement was made, the evidence that B later admitted that the agreement had been made is plainly relevant and admissible to prove the variation. The position is quite different where there is no dispute as to what was done or said at the time of the making of the contract or variation of contract. That is this case. In particular, it is not permissible for the purpose of determining whether a contract or variation was made, for one party to adduce evidence as to what he intended by his acts and words, or what he understood his words and acts to mean.

25. In the present case there is no dispute that (a) there were no discussions in December 1999 or January 2000 about the termination clause or any contractual provisions except those relating to the scope and the supply of price; and (b) neither Mr Smith or Mr Bailey communicated to the other his intention in relation to the termination clause at the time. The issue for the district judge was whether in these circumstances the termination clause contained in the quotation was accepted by Dougland's conduct.

26. It seems to me that the district judge never addressed that question. He reached the conclusion that it was the intention of Allscan not to amend the existing termination clause solely on the basis of the March 2001 letters. There is nothing in his judgment to indicate that he relied on the oral evidence to reach his conclusion. Mr Kennedy suggests that there are certain passages in the witness statement of Mr Smith which could have supported a finding that it was the intention of Allscan not to amend the existing termination clause. But in my judgment there is nothing in the witness statement of Mr Smith as to what was said and done in December 1999 and January 2000 which supports a conclusion that he did not intend to amend the existing three months' termination clause.

27. In my judgment, therefore, the passages in Tanfern which are relied upon as justifying the conclusion that the judge should not have interfered with the findings of the district judge have no application here, because the district judge did not make any appropriate findings. For the reasons I have given, I consider that the district judge reached the wrong conclusion. The evidence as to the intention of Mr Smith, not even communicated to Mr Bailey until about 15 months after variation was made, was not a proper basis for reaching a conclusion as to the extent to which the quotation was accepted. It follows that, in my view, the judge was right to consider whether the termination clause contained in the quotation was accepted by Dougland's conduct and to do so on the basis of the material before him. Whether there has been an acceptance by conduct must be judged objectively. The question is whether it is clear that, by accepting supplies after January 2000 and paying for them, Dougland was accepting all the terms of the quotation including the termination clause. In my judgment the answer to this question must be "yes". As I have already said, the quotation was plainly an offer which set out all the terms on which Allscan was willing to do business with Dougland and the stated commencement date. These included an offer to supply on the basis that the contract could be terminated by at least three months' notice expiring on the anniversary date and not, as hitherto, on three months' notice given at any time.

28. The only sensible inference that can be drawn from the fact that Dougland performed the contract after receipt of the quotation is that it accepted its terms. It was certainly not possible to infer from the letters sent in March 2001 that Dougland did not accept the termination clause by its conduct. The letters were not even written by Dougland. But even if they had been written by Dougland, they would not have shed any light on whether the termination clause had been accepted by Dougland's conduct in the period after receipt of the quotation in January 2000. In my judgment, the judge reached the correct conclusion. I would dismiss this appeal.

29. LORD JUSTICE MUMMERY: I agree.

30. LORD JUSTICE SCHIEMANN: I also agree.

Order: Appeal dismissed with costs assessed in the sum of £4,209.