Whittle Movers Ltd v Hollywood Express Ltd

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.

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 6 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^nd 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.

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.

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.

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:-

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.

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:-

The judge described other terms of the invitation to tender and the Whittle’s tender in the following way:-

There were negotiations during November 2005 during which Whittle were persuaded to tender for a six year contract and on a basis that involved undertaking to distribute the Blockbuster products for one year free of charge.

Further negotiations took place and ultimately on 29^th November 2005 a letter of intent was issued in the following terms:-

Mr Fleetwood for Whittle signed that letter. At this stage the date for commencement of the long term contract was 9^th January 2006. [At the trial Mr Fleetwood gave evidence that he thought a long term contract had come into existence on 29^th November. That evidence was unsurprisingly rejected].

In December 2005 Mr Hobbs for Hollywood told Mr Fleetwood that Whittle could proceed with arrangements under “TUPE” for taking over the Trailer contracts. Although Mr Fleetwood’s evidence was to the contrary, the judge found he agreed that this was at Whittle’s risk and this is consistent with the letter of intent.

On 2^nd December there was faxed to Whittle a written “interim agreement” relating to distribution services previously carried out by Trailers in relation to 36 UCI cinemas and 4 Blockbusters and that is in contrast to the approximately 130 cinemas the subject of Whittle’s tender. The interim agreement, which was signed and returned by Mr Fleetwood, provided as follows:-

During December 2005 and January 2006 the drafting of the long term contract was continuing within UCI/Odeon/Hollywood and Whittle were supplying answers to points as they arose. At a meeting on 17^th January delivery and loading schedules were agreed and Mr Fleetwood was told the draft contract should be agreed by Odeon/UCI that week.

On 18^th January Mr Fleetwood was notified that a Mr Roberts had now “picked up” the contract negotiations and he asked for a meeting on 27^th January, i.e. four days after the contract as it then was in draft provided for commencement. A meeting was in fact arranged for 3^rd February at which Mr Roberts was to seek to understand “the commercial points before issuing the first draft of the contract.” On 20^th January or thereabouts it was appreciated within UCI/Odeon/Hollywood that because of the termination of Hollywood’s lease the contract would not be for the full six years.

On 23rd January, notwithstanding the lack of any written contract or indeed any draft contract, Whittle commenced performing the services that were the subject of their tender. The judge found that at this stage the contract terms were still being negotiated relying on correspondence dealing among other things with the fact that a six year contract was no longer on the cards. He indeed sets out matters still being negotiated in February and March.

On 29^th March the pallet volume was renegotiated to 22,500 at a price of £46 per pallet for a five and a half year contract.

Whittle had originally invoiced on the basis of what they thought was agreed as at 23^rd January, i.e. a volume of 25,000 pallets at £44 per pallet, with Blockbusters free of charge for a year, a 2% tolerance over 25,000 and additional pallets at £41 per pallet. Following the meeting on 29^th March the appellants varied their invoices to reflect what had by then been negotiated, i.e. 22,500 at £46 per pallet for a five and a half year contract and Blockbusters to be charged for.

A draft contract was only finally supplied by the respondents on 8^th May 2006. The terms of that contract were then the subject of negotiation. There was a hiatus described by the judge in paragraph 67 and negotiations resumed in July. The detail of the negotiation is set out in the judge’s judgment. It suffices to say that the judge accepted and it is not challenged that in a conversation on 27^th or 28^th September 2006 the parties were agreed as to all matters to be contained in the contract and on 3^rd October Mr Fleetwood emailed Mr Roberts asking him to email “the proposed contract” to him for checking over. Mr Fleetwood chased for that contract by email of 17^th October.

No contract came because Odeon/UCI had decided to put Hollywood up for sale. Whittle were invited to submit a proposal for acquisition but that came to nothing.

By e-mail of 19^th January Odeon/UCI told Whittle that “the contract had not been signed, only a letter of intent and an interim agreement at the end of 2005. The interim agreement was based on the old Trailers’ contract which could be terminated by either side based on 6 months notice.” On 24^th January 2007 Mr Fleetwood protested, stating that as far as Whittle were concerned “a contract came into existence on 23^rd January 2006 which replaced the interim arrangement . . . and we have been trading in accordance with the terms of that contract since that date . . . ”.

Solicitors’ letters were exchanged to which I will return. Ultimately by letter of 22^nd May 2007, Hollywood gave six months’ notice determining the interim agreement dated 5^th December, the agreement they were asserting covered the relationship under which the appellants had been acting since the 23^rd January 2006.

The judge set out the legal principles he was to apply in paragraphs 87 to 91. He deals with the cases where the negotiations have been “subject to contract” and says:-

He then identified the issues he had to determine in this way:-

Thereafter he determined first that no fixed term contract had been concluded as at 23^rd January in these terms:-

The judge also then rejected there being a contract as at September 2006 in these terms:-

Despite Mr Bartley Jones’ argument, persisted in I should add for only a very limited time, it seems to me that the judge’s finding that no long term contract had been concluded as at 23^rd January 2006 is quite unassailable. There was neither complete agreement on important terms nor any indication that either party was resiling from the requirement that negotiations were clearly subject to contract in the sense not only of requiring a formal document but in the sense of nothing being binding until a written document was signed. I do not accept his conclusion as to an interim contract as I will explain hereafter but that finding was not essential to his conclusion that no long term contract had been agreed.

Again, despite Mr Bartley Jones’ efforts, in my view the finding that no long term contract had been concluded in September 2006 was also unassailable. There is simply nothing on which there could be based a finding that the parties had by this stage either expressly or by implication agreed to waive the requirement for a formal document in writing before they were to be bound.

The judge’s approach was as follows:-

By the time counsel made their closing submissions to him, the judge had made up his mind that there was a contract of some sort covering the period post 23^rd January. This is clear from passages of the transcript to which I will refer in more detail below. The possibility that there might be no contract and if there was no contract the possibility of a restitutionary claim, was not addressed by the judge in any detail. In his judgment he makes reference to a restitutionary claim as part of Whittle’s case (paragraph 3) and to the fact that his findings mean there was no place for a restitutionary claim (paragraph 110), but that is the extent of any consideration given to that possibility.

Furthermore although the judge was referred to British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 he does not seem to have had in mind (possibly because Mr Bartley Jones was not putting no contract as his primary case) important passages in the judgment of Robert Goff J from 509 to 511.The passages demonstrate the following matters of relevance to the analysis required in this case. First, while parties are negotiating a contract under which they will, if the contract is concluded, enter into reciprocal obligations binding each other as to future performance, it is highly unlikely that by conduct they will conclude in the interim an executory contract containing terms still the subject of negotiation [see 510b to f]. Second it is more likely that they will have entered into what Goff J refers to as an “if” contract i.e. a contract under which if one party supplies, the other agrees to pay a reasonable remuneration. Third even an “if” contract will not have been entered into if important terms such as those relating to standard of performance are still under negotiation, and in such cases the proper answer is no contract but a restituionary remedy to the extent that one party has been unjustly enriched [see page 511].

There may be little distinction between an “if” contract entitling the provider of services to reasonable remuneration and a restitutionary remedy based on the unjust enrichment of the recipient of the services in many cases but before it is possible to find any contract, whether “if” or executory, it is necessary to analyse precisely the terms so as to test whether the reality is that such terms are still under negotiation and the proper answer is no contract. In Goff and Jones 7^th Edition page 662 there is a reference to an article by Professor McKendrick in which the professor argues that a court should not strain to find a contract because a restitutionary remedy can solve most if not all the problems. [See footnote 7]. That, it seems to me, is the correct approach.

The judge was clearly right to reject any case that the interim agreement dated 5^th December covered the arrangements from 23^rd January 2006 onwards, and indeed that does not appear to have been Mr Chaisty’s case by the time of closing speeches. But it seems to me that his determination to find some contract, and his lack of analysis as to what the terms of any contract would be, led him into error. If the parties were not bound by a long term executory contract with obligations undertaken on each side, precisely when and how did they agree an executory contract with obligations on either side of some other kind? What precisely were the terms of that executory contract in relation to performance and how were they agreed? How were prices agreed for a contract determinable on notice at any time when what Whittle were offering was prices for a long term contract?

Mr Chaisty having not pressed the application of the interim contract of 5^th December 2005, did not before the judge or before us suggest any other express agreement for the period post-23^rd January 2006. His argument was that such an agreement was made by implication. The difficulty with that contention is that no contract will be implied unless it is necessary to do so [see Baird Textile Holdings v Marks and Spencer [2001] EWCA Civ 274 paragraph 18]. In that paragraph is cited a passage from a judgment of Bingham LJ in The Aramis [1989] 1 Ll L R 213 at 224 which puts the matter in this way:-

It seems to me that it cannot be said to be necessary to construct an executory contract, particularly one which fixes the price at a rate which Whittle would be unlikely to accept. Indeed the judge’s own observations in the course of argument that Whittle should not be bound by any agreement as to a price fixed on a long term basis supports the conclusion that such a price simply could not be said to have been agreed by implication. At pages 1189 and 1190 of the transcript during Mr Bartley Jones’ reply and in answer to Mr Bartley Jones’ argument that, having regard to the fact that the prices were long term, if there was a contract, notice of termination would have to be in excess of 6 months, the judge suggested more than once that the answer to that contention was that Whittle might not be bound by the prices or that there might be implied into the contract a term allowing for variation.

In my view not only was there no necessity to find some executory contract, there was a difficulty and thus no necessity in finding even what Goff J called an “if “ contract because 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.

It does not follow that if goods or services were provided before the contract was signed Whittle were not entitled to some remuneration and thus the receipt of remuneration does not of itself dictate that there was a contract.

Thus in my view the answer the judge should have reached was that there was no contract. The question whether he should have directed an inquiry as to whether further remuneration was due depended on whether it was arguable that Hollywood had been unjustly enriched and whether it was open to him to do so following the way in which the issues had been placed before him.

No consideration of whether it was arguable that Hollywood had been unjustly enriched was carried out by the judge. But it is right to note that in the context of other arguments Mr Chaisty was suggesting to the judge that Whittle had made a considerable profit out of supplying services as they did and that they had taken the risk of a long term contract not being signed. If it were right that they had taken the risk in a relevant sense that might preclude a restitutionary claim [see Goff and Jones page 663]. I did not however understand Mr Chaisty before us to be arguing, in the alternative to his main point (that the argument was simply not open to Whittle), that Whittle were precluded from a restitutionary remedy because they took the risk. Indeed I understood him to accept that if the judge had been entitled to find and had found no contract Whittle would be entitled to a restitutionary remedy.

In my view Mr Chaisty was correct in what I understood to be his position. Both parties were in one sense taking the risk that a long term contract would not be signed but Hollywood wanted services before that contract had concluded, accepted those services and were bound to pay a reasonable sum for them. If the sum received was reasonable then Hollywood would not have been unjustly enriched but if Whittle received less than a reasonable price then Hollywood would have been unjustly enriched. It appears at least arguable that Whittle may have received less than a reasonable price.

To assist in answering that question it is right to examine whether it would have been open to the judge as the respective cases were presented to conclude there was no contract and whether on that basis Hollywood would have been able to resist a claim that Whittle were entitled to a restitutionary remedy. To answer that question it is necessary to see what was in issue before the judge.

Prior to commencement of proceedings, Whittle contended primarily that the service which they had provided had been provided under a long term contract, albeit unsigned. But, at the conclusion of the letter of 26^th February 2007 written by their solicitors, the assertion was as follows:-

In their points of claim, once proceedings commenced, Whittle asserted that it was common ground that there was a contract and asserted that a long term contract had come into existence. Alternatively it asserted that a contract had come into existence only terminable on notice, such notice to be sufficient to enable Whittle to amortise the capital cost and risk it took in gearing up. That there was a long term contract was very much their primary case, as appears from the different alternative bases on which they asserted that it was made. But, in paragraph 51 it was pleaded as a further alternative that:-

In his skeleton argument on behalf of Whittle for the trial, Mr Bartley Jones identified the issues in the case. The first issue raised the question whether there was a fixed term contract expiring on 19^th June 2011 or alternatively 23^rd January 2012. Paragraphs 2 and 3 of the opening read as follows:-

That opening skeleton referred, in paragraph 98, to what it described as:-

Mr Chaisty in his skeleton prior to the commencement of the trial essentially took the point that no long term contract had been agreed and ultimately in paragraph 11 said this:-

In paragraph 13 Mr Chaisty described Hollywood’s position as follows:-

It would seem to me that Whittle had properly raised as a possible result “no contract” and a restitutionary remedy on its pleadings and in its skeleton for the trial and Hollywood, insofar as it responded, also raised the possibility of no contract, but was denying a restitutionary remedy

When final speeches began Mr Bartley Jones commenced by referring to the fact that Whittle had charged only £44 a pallet, a price fixed by reference to a long term contract. He then said:-

Mr Bartley Jones responded:

During further interchanges with Mr Bartley Jones the judge made clear that he was going to find that there was an agreement. Indeed, when Mr Bartley Jones referred to the possibility that the defendants’ position still appeared to be that there was no contract at all, the judge intervened to say that he doubted whether Mr Chaisty would run “no-contract” but he would see. At that juncture Mr Chaisty rose to say “I am not going to argue that there was no contract. Our position will be that there was, in effect, an interim contract – ”. (See page 1104 at G).

There is then an interchange on which Mr Chaisty relied at page 1105. The interchange is recorded as follows:-

Further at 1106, again the judge said:

Later at 1121 the transcript records, again, the judge saying:-

In the context of considering what interim contract might have been made Mr Bartley Jones kept emphasising that the price that was being paid was not appropriate for a short or shorter term contract. In that context he again referred to the possibility of a quasi contractual remedy (see page 1122 E-F).

When Mr Chaisty came to make his final submissions, he started as follows:-

Immediately thereafter, at 1159B, Mr Chaisty is recorded as saying:-

Towards the conclusion of his submissions Mr Chaisty is recorded as saying:-

It is also right to say that Mr Chaisty in his final submissions was stressing the profitability of the price actually charged by Whittle to Hollywood and was stressing that Whittle were prepared to take the risk.

Finally, the only matter on which Mr Bartley Jones replied related to the length of notice of any interim contract and it was in that context that the judge suggested as I have already indicated that, in relation to any interim contract, Whittle might not be bound by the price or that there might be an implied term relating to price variation.

Finally, so far as tracing through the history is concerned, there is the reference in the judge’s judgment to a restitutionary remedy as already indicated.

It seems to me that although the judge clearly indicated that he was going to find that there was a contract, if when he had considered the matter fully he had concluded that that was not tenable and the only proper conclusion was that there was no contract, nothing which the parties had said would have precluded him from so deciding. Whether he would have felt obliged to reconvene, having regard to the indication he had given, is another matter. The important point is that it would be quite unfair to construe remarks made by Mr Bartley Jones, once the judge had indicated that he was going to find there was a contract, as a concession that it was not open to him to find no contract or that if the right answer was no contract a restitutionary remedy was not to be sought by Whittle. Undoubtedly Whittle’s primary case was that there was a long term contract but, time and again, in correspondence, in the pleadings and in argument before the judge, it was made clear that in the final alternative, if there was no contract, a restitutionary remedy was claimed.

Thus, the position at the trial was, as it seems to me, that if the judge concluded no contract he would have been bound to consider the arguability of a restitutionary claim. For the reasons I have already given he should have found that a restitutionary claim was arguable and ordered an enquiry as to whether Hollywood had been unjustly enriched. A pleading point might have been taken in that although there were references to a restitutionary claim in the pleading, as already indicated, for an enquiry a more detailed pleading would be needed as to precisely the way in which the unjust enrichment was asserted. That, however, would have caused no embarrassment or prejudice to those acting for Hollywood, and directions could have been given in that regard.

That being the position so far as the trial was concerned, it seems to me that it would be unjust if Whittle were not entitled to be placed in the same position in an appeal on the basis that the proper conclusion that the judge should have reached was that there was no contract. We are in precisely the same position as the judge would have been in ensuring that a proper pleading is produced as to how Whittle suggest that Hollywood has been unjustly enriched and we are in a position to direct that Whittle serve within 28 days full particulars of the unjust enrichment they assert.

I would thus allow the appeal and direct an inquiry as to whether Hollywood were unjustly enriched and direct service of particulars of Whittle’s case on unjust enrichment within 28 days.

I agree.

I also agree.