Coupers Partnership Ltd v Erol Basarik (t/a Uppers Bistro)

On 3^rd July 2006 I adjourned Mr Basarik’s applications to put in fresh evidence, for an extension of time and for permission to appeal from a judgment of His Honour Judge Simpson dated 15^th April 2005, to the full court with appeal to follow, if permission was granted. Permission was being sought to bring a second appeal since the decision of HH Judge Simpson was itself an appeal from Deputy District Judge Gambrill of 17^th October 2003. It had to be accepted that no important point of practice or principle was involved but I was concerned as to whether the fresh evidence did not demonstrate that the judgments below had been entered against Mr Basarik on a false factual basis and as to whether, in consequence, Mr Basarik might have suffered a serious injustice. Thus, I thought there might be a compelling reason for granting his applications and, in particular, grant permission to appeal.

I am clear that it is right to grant an extension of time and to grant permission to appeal because in both courts below an assumption was made about the facts which was clearly inaccurate. What is less clear is whether in fact Mr Basarik has suffered an injustice because Coupers seek to argue a point they did not previously argue on the basis of the facts as they now accept them to be. I accept that the position is by no means as straightforward as I had been inclined to think, when ruling as I did.

Let me explain in a little more detail the position. Mr Basarik owned and operated a restaurant in Islington (the property). He sold the same with effect from 5^th March 2001. On 6th September 1999 he made a contract in writing with Coupers on a “no reduction-no charge” basis. That contract provided as follows:-

“I/We hereby instruct The Coupers Partnership to undertake and administer proposal(s) as deemed necessary to alter my/our present 1990 and 1995 Rateable Value entries in the rating list.

In consideration of the above a reduction given to either Rateable Value for any reason by the Valuation Office shall incur charges levied at 25% of the monetary benefit gained through the reduction up to and inclusive of the financial year of settlement or if not the current ratepayer 40% of the reduction(s) in Rateable Value attained.

I/We further authorise proposal(s) as deemed necessary to be made against my Rateable Value to be implemented 1/4/2000 and upon reductions made thereto after this date for any reason agree to pay 25% of the reduction(s) in Rateable Value awarded.

I/We confirm that no other parties or individuals (including my/ourselves) are currently party to any rating appeals and that this contract shall remain one of sole agency until all appeals are concluded.

Cancellations only accepted with the written approval of the Directors and will not be considered unless physical changes to trading or property status occurs. I/We understand that an invoice will be raised for each appeal completed and that VAT will be applicable.

This note confirms that I am the present ratepayer of the property as indicated above and authorise The Coupers Partnership to attain billing information from my Local authority as necessary. I understand that Coupers reserve the rights given in this contract should this not be so.”

It will be noted that the contract recognised that Rateable values normally had a five year term – 1990 for five years - 1995 for five years. It is common ground that that is the context in which this agreement must be construed and that, in the sentence in italics “Rateable Value to be implemented 1/4/2000”, what is in contemplation is the 5 year period commencing 1/4/2000. In Halsbury’s Laws Volume 39(1) paragraph 714 neatly summarises the context in which this contract was signed:-

“Compilation of local non-domestic rating lists. A valuation officer for a billing authority must compile and maintain lists of non-domestic hereditaments, known as local non-domestic rating lists. Local lists initially had to be compiled on 1 April 1990 and on 1 April every five years thereafter. Before a list is compiled the valuation officer must take such steps as are reasonably practicable to ensure that the list is accurately compiled. The list comes into force on the day on which it is compiled and remains in force until the next list is compiled five years later. On or before 31 December preceding the day on which the list is to be compiled, the valuation officer must send the billing authority a copy of the proposed list. As soon as is reasonably practicable after receiving the copy, the authority must deposit it in its principal office and take such steps as it thinks most suitable for giving notice of it. The same procedure applies to the list once it has been compiled. A list must be maintained for so long as is necessary, so that expiry of the five year period for which it is in force does not detract from the duty to maintain it.”

It will be noted that under the contract the charging basis was different, depending on whether Coupers were dealing with the past periods 1990 –95 and 1995-2000, where the fee was “25% of the monetary benefit gained” provided Mr Basarik continued to be the ratepayer, whereas for the future i.e. the period of 5 years from 1/4/2000 the charge was “25% of the reduction(s) in Rateable Value awarded”. It is the 5 year period commencing 1/4/2000 with which we are concerned.

Some facts are not clear or are unexplained in the evidence because of the way proceedings developed in the courts below but both parties were anxious that if possible we should resolve matters rather than send the matter back for a further trial. Having regard to the sums involved and the costs already incurred it is obviously sensible that we should try and do so.

The sequence of events following the documents seems to have been as follows. The contract was signed on 6^th September 1999. In the period 1995-2000 the rateable value appears to have been £51,000 (see page 45). The Islington Council put up the rateable value of Mr Basarik’s property to £75,750 as from 1^st April 2000 and if the paragraph in Halsbury is accurate some notification of that would have been given by 31^st December 1999. For reasons not apparent only on 17^th August 2000 did Coupers make an application for a reduction in rateable value for the period commencing 1^st April 2000 from the £75,750. Some applications were it seems made for the periods 1990-1995 and 1995-2000 but they are not with the papers. It was apparently only on 4^th September 2000 that Coupers thanked Mr Basarik for his instructions from the year before informing him that they had “submitted an appeal …and are waiting for the Valuation Office to issue a target date for settlement. This is the date when the Valuation Office considers negotiations should be complete and is some time off due to the large number of appeals currently outstanding. Once we receive indication that the Valuation Office are ready to deal with your appeal we shall contact you again, in order to arrange a surveyors visit.” This letter does not state whether it relates to all three periods or simply the period commencing 1^st April 2000 but that matters not.

Coupers internal record shows that the survey date was 21/11/2000. We do not I believe have any document showing the Valuation Office indicating readiness to deal with the appeal or appeals. The internal notes (page 45) indicate that on 13^th December 2000 (after the survey) the 1990-1995 and 1995-2000 cases were withdrawn. It seems Coupers concluded that there was no reduction that they could achieve for the five-year periods 1990 to 1995 and 1995 to 2000.

What is in issue relates to whether Coupers have earned their fee in relation to the rateable value to be implemented for the 5 year period commencing 1^st April 2000. Coupers internal note indicates that the target date for conclusion of an agreement with the Valuation Officer for this period was 15 April 2002 and that agreement was reached reducing £75,750 to £65,500 on 22 April 2002. The reason for this delay has not been fully explained in any evidence but it is suggested that it flowed from the enormous number of appeals which are lodged in relation to rateable values.

The effect of the delay was that no agreement had been reached before an important occurrence on 6^th February 2001. On that date unbeknown (it seems) to Coupers or indeed (it seems) to Mr Basarik the rateable value was in fact increased to £76,750 with effect from 6^th February 2001. Furthermore no agreement was reached by Coupers before Mr Basarik sold the property with effect from 5^th March 2001.

On 22^nd April 2002 what was in fact agreed with the Valuation Officer (although Coupers did not appreciate this and indeed the communication from the Council certainly did not reveal it [see page 52]) was a reduction of the £75,750 to £65,000 backdated to 1^st April 2000 but only for the period of ten months to 6^th February 2001. From 6^th February 2001 the rateable value remained at the figure of £76,750.This is the significant point on the facts now conceded by Coupers but misunderstood before the Deputy District Judge and the Circuit Judge. The Deputy District Judge, encouraged by the representative of Coupers, interpreted the documents before him as establishing that Coupers, in agreeing the reduction on 22^nd April 2002 to £65,000, had achieved that reduction for the whole 5 year period overriding the increase as from 6^th February 2001. But in fact the reduction they achieved was only from 1^st April 2000 until 5^th February 2001, i.e. up until the date on which the rateable value was increased to £76,750. What is more, because no agreement had been reached to reduce the Rateable Value from 1^st April 2000 to £65,000 prior to the alteration made on 6^th February 2001, that agreed reduction had no impact on the alteration made (presumably on some general change in circumstances basis) as at 6^th February 2001.

Mr Basarik has applied to put in fresh evidence demonstrating that so far as Islington Council were concerned the rateable value of Mr Basarik’s property was reduced to £65,000 up until 6^th February 2001, but was increased to £76,750 from that date onwards. Quite properly Coupers have not resisted that application since on their own investigations that evidence accurately represents the position. What Coupers’ evidence also seems to demonstrate is that, following Mr Basarik’s sale of the property, the new owners appealed the £76,750 but were unsuccessful in obtaining a reduction.

The argument of Coupers, through Mr Hoffman, is that it matters not at all whether there was, during the 5 year period, an increase in the rateable value. Mr Basarik, he submits, had “authorised proposals . . . to be made against [his] rateable value to be implemented 1/4/2000” and “upon reductions made thereto” agreed to pay “25% of the reduction(s) in Rateable Value awarded”. He submits that means that one first identifies the rateable value to be implemented at 1/4/2000, i.e. £75,750; second one identifies whether there has been any reduction in that rateable value, i.e. that to be implemented on 1/4/2000; third, if there has (on his most extreme argument whether achieved by Coupers work or not), one must simply calculate 25% of that reduction and that produces the sum due under the contract. He accepts that the percentage of rateable value would have been intended to reflect in some measure the likely benefit that Mr Basarik would obtain from the rateable value reduction over 5 years, but he submits it is not to the point if, once the rateable value has been reduced, the Council, for reasons unconnected with anything that Coupers may or may not have done, decide to increase the rateable value as from some date after 1/4/2000.

Mr Yeo rightly accepted that if, while the rateable value remainedat £75,750, Coupers had achieved a reduction in rateable value to commence as from 1^st April 2000 then, on the wording of the contract, a fee of 25% of the reduction would be due, even if, at some later date and from some later date, the rateable value were increased. That was because they would have negotiated a reduction in the rateable value which would be “capable” of applying for a whole period of 5 years, and because that reduction would impact on any variations during the 5 year period. Thus he did not suggest that some later revaluation following an agreed reduction would in some way bring about an obligation to repay the fee.

But he submitted that the position was different if the rateable value had increased before Coupers completed their work and if the reduction agreed did not apply to or, at the very least, impact on the proposed variation. He submitted in those circumstances Coupers could no longer assert that they had negotiated a reduction “capable” of being in effect for the 5 year period. In this case, by the time Coupers were completing their negotiation of a reduction of the original rateable value, the rateable value as from 6^th February had actually been increased, and the reduction to the value to be implemented on 1/4/2000 was not for the 5 year period but simply for a 10 month period. Furthermore it had no impact on the variation as at 6^th February 2001.

There was some debate before us and in the skeleton arguments as to whether a term should be implied into the contract and precisely what that term would say. In my view this is not a case where the court would be likely to imply a term. It is a case where the court must decide whether, on the true construction of the written contract, Coupers have performed that for which they were to receive their remuneration.

In considering that question I ask myself first whether Coupers were bound, when negotiating a reduction, to be seeking a reduction for a five year period from 1^st April 2000 to 1^st April 2005 or could they simply have agreed with the valuation officer a reduction that would last a week and agreed that the rateable value thereafter could be fixed without regard to the reduction negotiated? Coupers, in the evidence they have put in, accept that what was in the contemplation of the parties was that in normal circumstances what they were negotiating was a reduction for a five year period (see Mr Hughes’ statement paragraph 6 and Mr Hoffman’s first skeleton paragraph 10(1)). In my view it is clear that what the agreement is contemplating is Coupers attempting to obtain a reduction which will be effective in normal circumstances for 5 years.

One must then deal with a situation in which Coupers attempt to gain a reduction for the five years, and have apparently done so but, thereafter during the 5 years, the Valuation Officer increases the rateable value. It is conceded by Mr Yeo that Coupers are entitled to their fee on achieving the reduction. In my view that is rightly conceded because having achieved the rate reduction at a time when it would normally last five years and because having achieved that reduction before the rating officer makes any increase, the officer, in considering the extent of any increase, would be bound to start his calculation from the reduced rateable value. In that way Coupers have achieved a reduction, effective for five years.

What then about a situation in which Coupers are seeking to agree a reduction of the rateable value as from 1^st April 2000 but do not so agree until there has been an increase commencing as from a date prior to Coupers concluding their negotiation, i.e. as in this case? If Coupers were aware of the increase and expressly agreed that any reduction should only last for ten months, and that the increase should continue unaltered by the impact of the reduction agreed, it seems to me that they would not have performed their part of the bargain so as to entitle them to 25% of the reduction achieved for the ten month period. They would not have agreed a reduction, effective over five tears.

If they knew of the increase and negotiated first the reduction of the rateable value for the ten month period, and then also negotiated a reduction in the increased rateable value by reference to what they had achieved for the first ten months, in those circumstances, in my view, they would be entitled to their fee based on 25% of the reduction of the rateable value as it was on 1^st April 2000.

The difficulty which is presented by the case before us is that Coupers did not know of the increase, nor did Mr Basarik. But, on the facts, what Coupers achieved was a reduction for ten months only, and no reduction in the increased rateable value by reference to the reduction achieved for the first ten months. [Ultimately the increased rateable value was, it seems, appealed by the owners who succeeded Mr Basarik, but unsuccessfully. It is unclear whether those owners knew of Coupers’ success for the first ten months, but on the figures it seems unlikely, and the Council’s reticence in providing information does not encourage one to think they would have been generous in what they informed the next owners.]

What then is the answer? In my view it comes to this. First, Coupers have (possibly through no fault of their own) not achieved a reduction effective over the full five years. They in fact negotiated a reduction for only 10 months (although they may not have known this) and the increase as from 6^th February 2001 was not negotiated down by reference to the 10 month reduction. It follows they have not earned their fee. Can they, however, say that they have been prevented by Mr Basarik from earning that fee and are thus entitled to the fee for that reason? This seems to me to be the reality of some of the arguments put forward forcefully by Mr Hoffman. They would argue that Mr Basarik should have known of the increase as at February 2001, that he should have told them of that increase and that he should then have allowed them to carry out negotiations to reduce that increase by reference to the arguments they were using in relation to the original £75,750.

In my view there are many reasons why Coupers cannot establish any entitlement on this basis. First it would require the implication of a term to impose positive duties to seek out and obtain information on Mr Basarik and Mr Hoffman has not sought to go down that route. Since Coupers were not bound to do anything but simply had the right to negotiate reductions and, since Mr Basarik would not necessarily know whether Coupers were proceeding with the appeal on the period 2000-2005, an implication of any term imposing obligations on Mr Basarik to seek out information would be difficult [see generally Bowstead and Reynolds on Agency l7th Edition Article 60]. Second, Coupers were the experts in this area. I am still unclear why, if they were dealing with this particular property, they could not check before reaching any concluded agreement with the Valuation Officer that there had not been any increase since 1^st April 2000 In preparation for this appeal they obtained the information quite simply through the internet. If they had done that check and then sought to appeal, but Mr Basarik had refused to consent to their appealing, then the position might be different.

The final point I would make at this stage is that this is Coupers’ contract, entitling them to a substantial payment if they achieve a result which both parties contemplate should be a result for the 5 year period. I accept that the terms are clear as entitling them to their fee if they happen to move fast and achieve a reduction, albeit later there is an increase impacted by the reduction they achieved. But that construction is favourable to them entitling them to a substantial fee based on the original reduction. In my view it is equally clear that, if they do not achieve a reduction which impacts on whole five years, they should not be entitled to their fee. But, even if I am wrong in suggesting that that is clear, it cannot be suggested, in my view, that the opposite is clear. If there is doubt the contract, beneficial to Coupers as it is, should be construed against Coupers as the authors.

In my view on the facts, Coupers did not earn the 25% of the reduction that they achieved for ten months as from 1^st April 2000. In those circumstances I would allow the appeal from the judgment of His Honour Judge Simpson.

It is right finally to record that Mr Yeo represented Mr Basarik pro bono, and I would express my gratitude to him for so doing so.

I gratefully adopt the history of the matter set out in the judgment of Waller LJ. I agree that the appeal should be resolved, bearing in mind the amount at stake, on the basis of the information that we have, even though that is incomplete. I also agree that the question that we have to resolve is essentially one of construction of the contract, and does not require us to consider the implication of any terms.

The contract is badly drafted. It is not in plain English. The italicised portion is particularly illiterate. A company providing the extent of the services which it clearly does to the public should be ashamed of this document. It should not be surprised if the court is not prepared to construe the document in its favour.

However, I have come to the conclusion that the contract is sufficiently clear to entitle the respondents to the sum which they have claimed. Despite my criticism of the way it has been drafted, I think it sufficiently identifies that there would be two basis upon which the respondents would be entitled to a fee.

It is suggested the later entitlement can only arise if the rateable value, as reduced, is “capable” of extending over the full five year period for rate valuations. I have two difficulties about that construction. First, that is not what the contract says. The contract, despite its illiteracy in other respects, makes it plain that the percentage is to be based upon the reduction in the valuation as at the 1^st April 2000. To make good the interpretation that that valuation should be “capable” of extending for the full valuation period is to imply into the contract words which are not there. In any event, I am not entirely clear what the word “capable” is intended to mean in this context.

This leads me on to my second reason for rejecting this argument. The contract has, as agreed by both parties, to be interpreted in the context of the valuation scheme. As Waller LJ has demonstrated, that scheme involves valuation periods of five years. The rateable value, therefore, of any property will, prima facie, be secured at the beginning of that period for the whole of the five year period. But valuation authorities are entitled to increase such valuations at any stage during the five year period, provided they do so for good reasons. It follows that the valuation achieved at the beginning of the period is always at risk, to that extent. But the base figure from which any such increase will operate will always be the valuation at the beginning of the valuation period. Although we have no evidence to this effect, the natural inference must be that if a valuation authority wishes to increase valuations within its area within the five year period, it would do so by applying whatever criteria it considers to justify an increase to the rateable valuation at the beginning of the relevant period. It follows that if an appeal against a valuation at the beginning of the relevant period is successful, so as to reduce that valuation, the appeal will be effective in determining the extent to which any increase which the valuation authority considers is appropriate should impact on the property in question.

If this approach is correct, the respondents can properly say that the italicised term in relation to the remuneration to which they are entitled in the current valuation period, is both rational and justifiably. Clearly their remuneration cannot be determined by reference to the benefit to the appellant for the new valuation period, as there will be at least two uncertainties. First, he may or may not remain in rateable occupation of the premises for the whole period. Second, there may be variations in the rateable value, as I have indicated, during that five year period. But one thing is clear, namely that if the rateable value for the beginning of that period has been reduced as a result of a successful appeal, that will either be reflected in the rateable value throughout the period, if it is not raised, or should be reflected in any increase in the valuation, which should be based upon the reduced valuation, as opposed to the valuation before the successful appeal. It follows, in my view, that the reduced value is capable of subsisting for the whole five year period.

The problem in the present case arises because, for reasons which are unclear from the papers before us, the increased valuation, which was clearly based upon the original valuation, was not the subject of a successful appeal. It should have been. But that cannot affect the entitlement of the respondents to their fee. Two things appear to have gone wrong. First, the increase itself took place when the appellant had, apparently, no further interest in the property; and the respondents were not aware of the increase so as to alert the appellant or his successors in title to the problem that might be presented if there was an increase whilst the appeal in which they were instructed was still extant. Second, the valuation authority, for that reason, appears to have dismissed the appeal against the increased valuation without taking into account the appeal in relation to the original valuation. On the evidence before us, none of this can be said to be the fault of the respondents in any way which could affect their entitlement to their fee.

For these reasons, I would dismiss this appeal.

I agree with Waller LJ that the appeal should be allowed. I have not found the question of interpretation an easy one. It is plain why the period from April 1, 2000 was treated differently from the earlier periods, and why Coupers’ fee is based on the amount of the reduction from that date and not on the benefit received by the client.

In my judgment the meaning of the charging clause is that Coupers are entitled to their fee if they obtain a reduction from April 1, 2000 capable of subsisting for the whole of the five year period. They are not entitled to their fee in the present case because by the time the reduction was obtained the decrease was effective only to February 2001. It is not necessary to decide what the position would have been had Coupers been in a position to contest the February 2001 increase.

It was said on behalf of Coupers that the situation which occurred in this case is not uncommon, and they would be unfairly deprived of their fee by reason of circumstances unknown to them and with which they could not deal. But they are the persons who claim to be the experts in the field, and if (as they say) this is a situation which is common and which they (but not the client) anticipate, then they are in a position to tighten up their form of contract for the future.