Willett v Economy Power Ltd

This is the hearing of the appellant Mr Terence Willett's appeal against an order made by HHJ Gosnell sitting in the High Court at Leeds on 12 October 2011, although the order was formally drawn up on the 18 October 2011. That was an order made by the judge consequent upon his judgment delivered on 12 October at the conclusion of a three-day trial before him on 20, 21 and 22 September 2011.

Economy Power, the defendant at trial, is a supplier of electricity. Mr Willett by his claim brought an action for substantial damages against Economy Power. He brought his claim in contract, negligence, malicious prosecution of a bankruptcy petition and malicious falsehood. He sought damages in excess of £450,000.

The claim was defended in its entirety. At trial Mr Willett, who was then represented by solicitors and counsel, abandoned the claim in malicious falsehood but pursued the rest of his claim.

The upshot of the trial was that the judge gave judgment for the claimant for £405.95. He directed that there be no order in respect of the claimant's costs but that the claimant should pay 90 per cent of the defendant's costs from 20 November 2008 to be assessed on the standard basis if not agreed, and he also directed that the claimant should make a payment on account of costs of £40,000.

The case is concerned with a contract made on 3 June 2003 for the supply of electricity to premises at 20 Market Place Doncaster. Those were premises which, at the time when this contract was made, Mr Willett intended to occupy as a licensee. The premises were themselves intended to be used as licensed premises. The case revolved around Mr Willett's contention that, at the time when the contract for the supply of electricity to those premises was made, he made it clear that the contract was to be concluded on a provisional basis, that is to say that it was to be subject to a condition precedent of his going into occupation of the premises, from which it follows that he was not to be responsible for any supply of electricity to those premises unless and until he had gone into occupation. It was his case that that condition precedent was never fulfilled and that that had become apparent by a date in July 2003. As a result his case was at trial either that the condition precedent was not fulfilled or alternatively that in such circumstances there simply never was a contract pursuant to which he could have been under any liability in respect of the supply of electricity.

He also alleged that in November of 2003 the parties had entered into a further contract -- if that be the correct description, bearing in mind his contention that there never had been a supply contract in the first place -- the effect of which was to compromise any liability arising out of the supply contract made in June.

His case at trial was that the defendant, Economy Power, was in breach of the compromise contract by making financial demands upon him arising out of the supply of electricity. Economy Power's defence was that the supply contract was never subject to any condition precedent and that it remained in full force and effect so that Mr Willett was fully responsible for the supply of electricity to the premises.

Mr Willett appeals to this court pursuant to limited permission granted by Rix LJ on 22 December 2011. Mr Willett is not present today and is not represented. Until 1 June of this year he was represented by a firm of solicitors in Wakefield, Messrs Henshaw Pratt, and in turn Messrs Henshaw Pratt had instructed counsel on his behalf, a Mr Timothy Hirst of Park Lane Plowden Chambers in Leeds. On 1 June of this year Mr Willett executed a notice of change of solicitor, which was served on the respondent's solicitors some time in the middle of June; that is to say last month. That document appears to have been completed by Mr Willett himself and signed by him and in it he gives notice that his solicitor, John Dennison of Henshaw Pratt, had ceased to act for him and that he would henceforth be acting in person. He gives an address to which documents about this claim should be sent, which is c/o 27 Farway Approach, Normanton, West Yorkshire together with a postcode.

On 13 June Messrs Henshaw Pratt came off the record of this court in relation to these proceedings. We are told by the associate who has consulted the court's records that Mr Willett's former solicitors Henshaw Pratt were informed on 10 April 2012 that this case was listed at that stage floating over 11 or 12 July 2012. It is to be inferred that the solicitors would in accordance with their normal professional responsibilities have informed Mr Willett their client of the date of the hearing.

Mr Mohyuddin, who is instructed today on behalf of the respondents, has told us on instructions that his solicitors have twice corresponded with Mr Willett concerning the forthcoming appeal and he has placed before us a letter written by those solicitors, Messrs Irwin Mitchell, on 2 July of this year to Mr Willett at the address given in his notice of change of solicitor c/o 29 Farway Approach, Normanton. That letter is headed Court of Appeal, with all the references, 11 July 2012 or 12 July 2012, and with that letter Messrs Irwin Mitchell enclosed a small further bundle “for the above hearing”.

As I have indicated, Mr Willett is not here today and he has been telephoned by the associate of the court using the telephone number which he had supplied on his appellant's notice. He indicated that he was unaware of the date for the hearing.

It seems to us that the appropriate course is that we should proceed to deal with the appeal and Mr Willett will have the opportunity, if so advised, to apply to set aside our judgment. We infer, however, that notwithstanding his protestation that he was unaware that the hearing had been listed for today it is overwhelmingly likely that he must have been informed by his former solicitors that the case had been listed to float over yesterday and today. Of course that is a provisional conclusion which may fall to be revised in the event of evidence tending to suggest that it is wrong, but it is on that basis that we have decided that it is appropriate that we should proceed to dispose of the appeal.

Returning to the brief facts of the case, the position is that notwithstanding the making of the compromise agreement to which I have referred, Economy Power the respondents sought to recover from Mr Willett sums due for electricity supplied to the premises. Those attempts ultimately resulted in Mr Willett being adjudicated bankrupt on Economy Power's petition. Subsequently however that bankruptcy order was annulled on the basis of an order to which I will refer in due course, and it was after that that Mr Willett commenced the action to which we have referred. He made the claim which I have descrobed, claiming under a number of heads of damage, which included not just interest on monies which he said had wrongly been taken by Economy Power from him by direct debit but also the costs incurred by him in setting aside the bankruptcy order and certain further damages, which he said were recoverable in respect of losses on his sale of a property which he said had been delayed in consequence of the bankruptcy order, in consequence of which the potential purchasers reduced the amount which they were willing to pay. He also suggested that he had suffered a further substantial loss in relation to the sale of some licensed premises. In all, the claim was of the order of £450,000.

The successor of Economy Power as the electricity supplier in relation to the relevant premises was Powergen, and Powergen went so far as to make an open offer to make compensation to Mr Willett of £18,000 in respect of his treatment by their predecessor which is in the bundle that we have for the purposes of this appeal, but that offer was rejected and so the matter proceeded to trial.

The judge made the following findings of fact, none of which, as I understand it, are sought to be disturbed on the appeal. The judge found, contrary to the evidence of the defendants, that Mr Willett was assured that he could cancel the supply contract if the deal for the premises did not go ahead; that is to say if he did not go into occupation as the licensee of those licensed premises. The judge found that by 5 September 2003 Economy Power had been told that Mr Willett had not gone into occupation of the premises. The judge found that there was a condition precedent to the supply contract that Mr Willet would go into occupation of the premises, which he never did; alternatively that the parties were not of one mind so that there was no true offer and acceptance, the effect being one way or the other that the supply contract was never effective.

The judge found that in about November 2003 there was a conversation between Mr Crawshaw, who was an agent acting for Economy Power, and another representative of the defendant, and that pursuant to that conversation copies of bank statements showing the amounts taken by direct debit were faxed to Economy Power and Economy Power agreed that they would refund to the claimant the sum of £1,412 and cancel the supply agreement. The judge found that there was another conversation at around that time between the claimant and a representative of the defendant in the course of which, as I understand it, the agreement which Economy Power had indicated to Mr Crawshaw was communicated, but that the defendants indicated to Mr Willett on this occasion that they wished him to complete what was described as an erroneous registration form and required evidence from him to prove that he had not gone into occupation of the premises.

It follows therefore that the judge found that as at November 2003 there had been concluded an oral contract, to which I will refer hereafter as the compromise contract, that in consideration of Mr Willett agreeing to transfer some of the retained money which had been taken by direct debit in order to discharge other accounts held by Mr Willett with Economy Power in relation to the supply of electricity at other premises, Economy Power would refund to him £1,412, which was I think half of the amount that they had taken, and that the supply contract would, whatever its previous status, be cancelled. That is to be found in paragraph 36 of the judgment as supplemented by the judge's analysis at paragraph 45.

However, as I have indicated, Economy Power had evidently decided, as Mr Willett well knew, that a refund could not be sent to him in the absence of proof that he had not actually taken up occupation of the premises. The judge found in relation to that that after Economy Power had mentioned the erroneous registration form and the evidence which they required to help prove that he had not gone into occupation, Mr Willett told the representative of Economy Power to whom he was speaking, that he could not remember the identity of the leasing agents with whom he had been dealing and that he did not wish to become involved. The judge found that in the course of this conversation Mr Willett became abusive and hung up the telephone. The judge indicates in his judgment that he was able to make that finding because these facts were clearly recorded on the database; that is to say the defendant's database.

Thereafter Economy Power instructed solicitors to recover invoices outstanding by the time that the electricity supply to the premises was cut off, which occurred in August of 2004. In doing so it failed to advise its solicitors that there was any potential issue about the account having been cancelled or about there having been a compromise involving agreement to a refund, and so it was that in due course Economy Power through its solicitors came to demand further payment pursuant to the supply contract -- they demanded in fact £10,454 -- which was then followed up with a statutory demand and a bankruptcy petition. The judge found that demanding £10,454 and following it up with a statutory demand and bankruptcy petition constituted a breach of the compromise contract: that is to be found in paragraph 45 of the judge's judgment.

The judge went on to find that following attempted service of the statutory demand Economy Power's solicitors had been met with what he described as a wall of obfuscation by either Mr Willett and/or his family in an effort to avoid service of the bankruptcy proceedings. The judge described that in this way at paragraph 40 of his judgment in these terms:

The judge went on to find at paragraph 46 of his judgment that it was a natural and probable consequence of the breach of the compromise contract which he had found that if Economy Power failed to pay the agreed refund of £1,412 Mr Willett would be without the use of that money and would suffer a loss which could properly be compensated in interest. However, the judge also found that the remainder of the losses claimed by Mr Willett as having flowed from that breach could not reasonably be supposed to have been in the contemplation of both parties at the time they made the compromise contract. That is to be found at paragraph 46 of his judgment. The judge said this:

The judge dismissed all of the claims insofar as they had not already been abandoned, except that one claim which succeeded to the extent of the appropriate amount of interest on the amount which had not been refunded when it should have been; that resulted in the Claimant being awarded judgment in the sum of £405.95. The judge was also referred to and had to deal with the effect of the consent order pursuant to which the bankruptcy order had in fact been set aside on 14 June 2005. That order is before us and it recites that by consent the bankruptcy order made on 11 March 2005 be annulled and at paragraph 5 it provides:

The judge was asked to deal with the effect of that order and he found that that order, and in particular the agreed order as to costs, in any event compromised any claim made by Mr Willett in respect of the costs involved in dealing with the bankruptcy petition.

As I have already indicated, this appeal is brought pursuant to limited permission granted by Rix LJ. Rix LJ granted permission to appeal, limited to causes of action in contract and/or negligence and limited to the costs of dealing with the bankruptcy petition. By an email sent on 21 May 2012 Mr Willett's former solicitors confirmed that the appeal relates solely to items 2 to 7 in the schedule of loss which is appended to the claimant appellant's amended Particulars of Claim which was before the judge at trial. Those items are item 2, monies paid to the official receiver -- it is said that £800 was required to be paid to the official receiver in connection with his involvement in the bankruptcy proceedings; item 3 is then a claim for interest on those monies, £300.48; item 4 is £6,841.75 in legal fees paid to White Rose Solicitors to secure the annulment of the bankruptcy order; item 5 is interest on those costs paid to White Rose Solicitors in a total of about £2,500; item 6 is an amount paid to some insolvency consultants in relation to the setting aside of the bankruptcy order, a sum of £3,000, and item 7 is a small amount in respect of interest on those sums.

The total amount claimed is in fact now something of the order of £13,500, which I observe is less than the amount offered by Powergen in order to dispose of the claim.

The judge found at paragraph 42(b) of his judgment that the claimant had indeed paid £6,841.75 to his solicitors and £3,000 to insolvency advisers in connection with the bankruptcy proceedings. I do not think that there is an express finding so far as concerns the £800 paid to the official receiver but I approach the appeal on the basis that the judge has found that the costs claimed were indeed incurred by Mr Willett and so the question arises as to whether or not they are recoverable. The judge, as I have indicated, found that they were not, and his reasoning is to be found at paragraph 46 of his judgment to which I have already referred.

The appeal is brought on essentially two bases, perhaps three. The central point made in Mr Hirst's skeleton argument which was before the court for the purpose of supporting the application for permission to appeal and is before us for the purposes of this appeal is that the judge was wrong to find that the cost of dealing with the bankruptcy order was too remote a consequence of the defendant Economy Power's breach of contract. The second way in which the appeal is put is that, over and above the compromise contract upon which the claimant sues, the contract of supply into which the claimant and Economy Power entered should be regarded as having in turn given rise to a duty of care resting upon Economy Power which was pleaded in the Particulars of Claim in this way at paragraph 16:

Then further matters are pleaded to which I do not need to refer, and in due course it is alleged that the making of a demand for £10,500 amounted to a breach of the duty of care which Economy Power must be regarded as having assumed towards its customer. That is the second way in which the appeal, as I understand it, was to be brought, and in the skeleton argument at paragraph 41(b) it is suggested by the appellant's previous counsel, Mr Hirst, that Economy Power must be regarded as having:

The third broad ground upon which the appeal is brought is that the judge should have characterised the compromise agreement made in November 2003 as a contract for services which would in turn attract the term implied by Section 13 of the Supply of Goods and Services Act 1982, which is an implied term to the effect that the supplier would carry out the service with reasonable care and skill. Pursuant to that it is said that one of the services that the defendant undertook to perform was to cancel the account and that it failed to go about the cancellation of the account in a reasonably careful and skilful manner with the effect that the appellant incurred the costs to which I have referred in dealing with the bankruptcy order.

Finally it is suggested, as I understand it, that the judge was wrong to conclude that the consent order made in the bankruptcy proceedings was conclusive because it was said the defendant had made clear in correspondence before that agreement was made that he reserved his right to make certain claims.

It seems to me that the difficulty which the appellant faces in pursuing an appeal against the judgment of the learned judge is that the judge's finding is essentially to the effect that the bankruptcy order was something which the claimant brought upon himself. That is clear from the judge's finding at paragraph 46, where he says that it could not be said that a bankruptcy order was a natural consequence of the defendant's breach in demanding more money than that to which they were entitled, because, as the judge said:

Although the judge has expressed his finding at that point as a matter of remoteness, it seems to me that it can equally, and perhaps more appropriately, be characterised as a finding relating to causation; the judge was simply finding that although Economy Power had been in breach of their contract and breach of the compromise agreement by demanding any sum of money from Mr Willett as opposed to refunding him the £1,400 which they had agreed to refund, that notwithstanding, the making of that demand in breach of contract could not properly be regarded in law as having caused either the making of the bankruptcy order or the necessity on Mr Willett's part to spend money in having that order set aside, and the reason for that is plain, because the judge considered that Mr Willett had evaded service of the bankruptcy petition and that he had done everything in his power to conceal his whereabouts, whereas the normal consequence of the presentation of a bankruptcy petition upon unfounded grounds would have been a dialogue pointing out that the whole matter had already been compromised in the manner which I have described.

So as it seems to me the judge has found, as I say, that all this was brought upon himself by the claimant. That, as I see it, is something which in fact is recognised by Mr Hirst in his skeleton argument on the appellant's behalf. At paragraph 5 he says this:

As pointed out by Mr Mohyuddin in his skeleton argument for the purposes of today, it is not correct to say that the causation argument had not been pursued by the defendant. It was common ground at the trial that the question of causation was one of common sense, as can be seen by a skeleton argument described as a rider on causation which was placed before the judge by Mr Hirst at trial dated 19 September 2011.

In that skeleton argument Mr Hirst made the entirely correct point that the question to be asked in respect of contract was whether the breach of contract was the effective or dominant cause of the loss, and he went on to point out that that called for a common sense analysis of the facts, citing in support the decision of this court in Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360.

Precisely the same point had been made by Mr Mohyuddin in his skeleton argument for the purposes of the trial, which at paragraph 18 says this:

Finally, for good measure, it was in any event the position on the pleadings that Economy Power had denied that the alleged breach, the breach now found, had caused the alleged loss: that is to be found at paragraph 45 of the defence.

Indeed, I note that in relation to the bankruptcy order the defendant said this:

Mr Mohyuddin also points out that insofar as Mr Hirst in his skeleton argument referred to some conversation with an alleged employee of the defendant called Ronald or Ron, that was something to which the defendant had specifically responded in its Part 18 response in that it had denied that it employed any person by that name, and the judge had simply made no finding to the effect that the defendant had agreed to stay pursuit of the bankruptcy petition.

It seems to me therefore that the question of causation was squarely before the judge and, as I read his judgment, although he has expressed his conclusion in terms rather of remoteness of damage than causation, it is plain that the long and the short of his findings upon the basis of the evidence was that, so far as concerns the costs incurred in dealing with the bankruptcy order, they could not be said properly to have been caused by the breach of contract consisting in making an unjustified demand for payment.

For that reason alone, as it seems to me, the appeal must fail. The finding which the judge made was one which fell squarely within the range of findings which a judge could reasonably make upon the basis of the evidence that he had heard, and indeed, as I understand it, it had not been Mr Hirst's intention necessarily to challenge that finding, albeit there seems to be a complaint that the judge should perhaps have elaborated a little more upon it in his judgment. Whether or not that is so, the gist or the plain effect of the judgment is, in my view, clear.

It follows that it is, to my mind, academic whether or not any duties owed by the defendant to the claimant could properly be characterised as arising in tort as well as in contract, but I would merely add that insofar as the claimant seeks to rely upon some tortious duty, bearing in mind that the losses which he claims are purely economic, he would need to formulate the duty in terms of an assumption of responsibility by the defendant specifically to avoid the infliction of loss of the sort claimed. However, I need not pursue that point.

Likewise, as it seems to me, it does not advance the Appellant’s argument to analyse the compromise agreement in terms of it being a contract for the supply of services and therefore attracting the implied term to which I have already referred. I would however express my own view that it is simply impossible to characterise a compromise agreement of that sort as a contract for the provision of services; it was simply a contract pursuant to which the defendant agreed a) to cancel an outstanding contract insofar as it existed and b) to make a refund. That is not an agreement for the provision of services; it is simply an agreement to bring about a certain state of affairs and to pay money.

In any event that analysis would not assist the appellant, because he is faced with the difficulty that a breach of duty, if the duty were to be expressed in that way, would still fall foul of the objection that the consequences were not caused by the breach but rather by Mr Willett's own activity, or inactivity, faced with the making of the demand and the service upon him of a bankruptcy petition.

Finally I should say that the judge was in any event, in my view, quite right to regard the order cancelling the bankruptcy as having had the effect that any claim in relation to the costs of setting aside that order was compromised within the agreement that there should be no order as to costs. The claimant says that the order must be read together with two letters which preceded it. The first of those letters is a letter written between solicitors on 20 May 2005, and it is written by Mr Willett's solicitors White Rose to Halliwells for Economy Power, and at paragraph 2 it says this:

Then there is a second letter of 1 June, again written by the solicitors, which says this in the third paragraph:

The judge, as I have already indicated, came to the view at paragraph 52 of his judgment that the consent order amounted to an effective compromise of any claim which the claimant may wish to bring against the defendant for costs associated with the bankruptcy proceedings. He said:

It seems to me that the more natural reading of the correspondence to which I have referred is that Mr Willett was reserving for further treatment not the costs of the bankruptcy proceedings in the sense of the fees that he had paid to his solicitors and to an insolvency specialist in relation thereto, but rather the further claims which he wished to make arising out of the bankruptcy order, which form items 8 and following of the schedule of loss. That, as it seems to me, is particularly the case bearing in mind that what was reserved in the language of the second letter was the pursuit of such causes of action as may exist against Economy Power for the loss and damage he had sustained as a consequence of them wrongly issuing the petition.

For my part, I would not read that as intended to be a reservation so far as concern the costs of the bankruptcy proceedings, an impression which is borne out by the circumstance that the order which was on the table and was under discussion at the time and was then made provided in terms that, so far as concerned the costs, there should be no order save that the applicant was to pay the official receiver's costs as I have already described.

I would therefore for my part uphold the judge's decision on that point too, which renders academic the appeal, confined as it is by reason of Rix LJ's permission being limited to items 2 to 7 of the schedule of loss.

For all those reasons therefore I would dismiss this appeal.

I agree.

So do I