MPloy Group Ltd v Denso Manufacturing UK Ltd

The Claimant in this action (“MGL”) is an employment agency and employment business. The Defendant (“DMUK”) is part of the Toyota Group, and is a manufacturer of automotive technology, systems and components.

Between 2003 and 2012, MGL supplied temporary agency workers to DMUK, under a series of contractual arrangements. In 2012, DMUK decided to end the relationship, and to source agency workers from another supplier. This dispute arises from that decision.

MGL has brought claims for sums said to be due by way of debt and for damages for breach of contract and fraudulent or negligent misrepresentation. DMUK denies all the claims made against it.

MGL was originally Gap Recruitment Services Ltd, and was founded by Mary (known as Kate) Welding in 2000. It changed its name to MGL in 2005. When it began, it was a micro business run from Ms Welding’s home. Between 2000 and 2003 it grew rapidly, recruiting staff and in 2001 moving to office premises at Wolverhampton.

DMUK operates a production centre at a site in Telford. It has around 550 permanent employees, but in order to cater for demand, which fluctuates, it engages temporary agency workers through an intermediary employment business.

The terms “employment business” and “employment agency” are established by the Employment Agencies Act 1973. The activity of supplying a temporary agency worker for commission on an ongoing basis is that of an employment business. The activity of supplying the introduction of a worker for a fee is that of an employment agency. This case is principally concerned with MGL’s activity as an employment business.

MGL and DMUK’s relationship began in 2003, when MGL tendered for and won a contract to be the sole supplier of temporary workers for DMUK. The contract was renewed in 2006. By reason of the quantity of staff required by DMUK and the support required to manage the temporary workforce, MGL maintained an office onsite at DMUK’s premises. The relationship with DMUK was important to MGL, as DMUK was easily its largest client.

On 5 November 2007, MGL entered into a new contract with DMUK setting out the terms on which, from that date forwards, MGL would supply temporary staff for DMUK’s Quality Incoming Inspection department (“the Qualdep Contract”).

After a period of negotiation, on 14 December 2009, MGL and DMUK entered into a new contract which set out the terms on which MGL would supply temporary staff for DMUK’s Assembly Line, Process Line and Warehouse temporary labour (“the APW Contract”).

Under Section 1a of the Qualdep Contract, it is provided that “This contract is for the sole supply of temporary staff to DMUK goods inward inspection, problem containment and rectification functions (Quality Incoming Inspection)”. There is an issue between the parties as to whether this amounted to an obligation on the part of DMUK to use MGL as the exclusive supplier of temporary staff to this department. Subject to that point, no issue arises from the terms of the Qualdep Contract. The Qualdep Contract was terminable on three months’ notice in writing (Section 1, clause 1.9).

The APW Contract comprised detailed contractual terms and 12 appendices. It was signed by Mr Williams and Mr Taylor for DMUK and by Ms Welding for MGL.

There has been argument in this case about a number of the terms of the APW Contract. I have set out in Annexe 1 to this judgment the terms of the APW Contract most relevant to the issues which arise.

An important feature of the APW Contract as agreed in December 2009 is that, by Clause 1.3, it provided that MGL’s General Terms and Conditions of Business “attached as Appendix 11” were to apply to the agreement except to the extent to which there was an inconsistency with the provisions of the Contract itself. The terms of business which were attached were entitled “Mploy General Terms and Conditions of Business (Mploy GTCB)”, contained 11 clauses and a schedule, and are referred to in this judgment as “the old TOB”.

There are certain factual issues between the parties as to the circumstances in which the APW Contract was extended. I will have to consider these below. The basic outline of what happened is, however, not in dispute.

By Clause 6.1 of the APW Contract, it was provided that the contract term would end on 30 November 2011. Clause 8.1 provided that MGL should inform DMUK’s Head of Purchasing in writing of the contract end date by 1 September 2011. On 23 August 2011 Ms Welding of MGL accordingly wrote to Mr Williams, DMUK’s Head of Purchasing, to remind him that the contract was due to end on 30 November 2011. Mr Williams replied on 8 September 2011 noting that the parties were at that time involved in a period of change due to the then imminent implementation of the Agency Worker Regulations 2010 (“the AWR”). Mr Williams stated that DMUK considered that a rolling monthly contract would be most suitable, and that that was DMUK’s intention from 1 December 2011.

A meeting was held between MGL and DMUK on 12 October 2011. There is an issue as to whether, at the outset of the meeting, new terms and conditions of business which had been prepared by MGL (“the new ToB”) were handed to Ms Le Gros of DMUK, and as to what, if anything, was said about them. What is not in dispute is that, at this meeting, Ms Welding made it clear that MGL was not happy to agree to a monthly rolling extension of the APW Contract. On 7 November 2011 Mr Williams wrote to Ms Welding saying that DMUK would agree to a three month extension to the contract, subject to there being agreement to an addendum varying certain of its terms.

At another meeting on 23 November 2011, the terms of the extension of the contract were further discussed. Ian Trennan, DMUK’s Head of Human Resources, told MGL that DMUK wished, during the extension period, to engage between 10 and 15 of the temporary workers supplied to it by MGL without paying a Transfer Fee. Ms Welding said that that would not be acceptable. During the course of the meeting, Mr Trennan stated that he was unaware of MGL’s new ToB. After the meeting, Mr Poole of MGL sent a copy of the new TOB to Mr Trennan by email on 24 November 2011. Mr Trennan replied to Mr Poole’s email on the same day, stating, in part: “The current contract ends on 30^th November 2011…. Could you confirm Mploy’s view of what happens in the event that we do not agree a way forward by that date? I think I recall you previously mentioning that your standard terms of business would then apply?”

A meeting was held between Ms Welding and Mr Trennan, at her home, on 28 November 2011. On 29 November there was a telephone call between the two. There is an issue about what exactly was said, to which I return below. What is clear is that Mr Trennan indicated that DMUK was willing for there to be an extension of the contract for 3 months.

On 1 December 2011, Mr Williams sent Ms Welding a letter which stated as follows:

“Dear Kate

Further to your telephone conversation with Ian & Filomena on the 29^th November regarding the contract extension.

During the conversation it was agreed verbally that the contract will rollover with effect from 1^st December 2011 for another 3 months and will expire on the 2^nd March 2012. It has been agreed that the notice period will be 1 month, please accept this letter as confirmation of this agreement.

During this rollover period all other contract terms will remain the same and all dates will rollover to correspond with the rollover period

In your conversation with Ian you offered to assist us with our forward planning by offering us, at no charge, the transfer of up to 15 temporary to permanent staff during this rollover period should we require that facility. I would like to thank you for your flexibility and willingness to work with DENSO on this matter.

I would like to thank you in advance for your ongoing support.”

In the meantime, and whilst this process of agreeing an extension of the contract was taking place, DMUK had announced that it wished to conduct a tender exercise in relation to its arrangements for the provision of temporary workers. MGL had received an Invitation to Tender from DMUK on about 28 November 2011. MGL submitted its response to that Invitation to Tender on 16 December 2011, and attended a further meeting with DMUK on 10 January 2012 at which it gave a presentation in connexion with its tender.

On 27 January 2012, at a meeting between MGL and DMUK, it was orally agreed that there should be a further extension of the contract for 3 months from 3 March 2012. This agreement was confirmed by an email from Ms Le Gros to Ms Welding of 2 February 2012. That email stated, in part:

“Further to our meeting on 27^th January with Ian and myself regarding extending the current agency contract.

During the meeting it was agreed verbally that the contract will roll-over with effect from 3^rd March 2012 for another 3 months and will expire on the 31^st May 2012 whilst the tender is being undertaken. This roll-over period will be rendered invalid if Mploy were to remain a key business partner, in this instance new terms and effective start dates would be agreed.

The notice period for this extension will be 1 month, please accept this letter as confirmation of this agreement.”

The tender process continued. By mid April 2012 MGL had been told by DMUK that the choice was between MGL and Prime Time Recruitment Ltd (“Prime Time”). There was a meeting of MGL and DMUK on 9 May 2012. What was said is a matter of some dispute, to which I will revert. It is not in dispute that Mr Williams of DMUK indicated that no decision had yet been taken by DMUK.

On 11 May 2012, Mr Williams spoke to Ms Welding on the telephone. He agreed that the contract should be extended for a further period of three months. On 14 May 2012 he sent a confirmatory email, which stated:

“Further to our conversation on Friday I would like to confirm our agreement to extend the current contract by three (3) months. This means that the existing contract will end 31^st August 2012, including 1 months notice period.

In the event that Mploy is awarded a new contract then the three (3) month extension of the existing contract will be reduced by joint negotiation.

I would also like to confirm our meeting on Thursday 17^th where Mploy will present their training academy proposals.”

To this Ms Welding replied, on the same date:

“Thanks for your email.

The contents of the email in relation to the contract extension is agreed under current terms.

During our conversation you mentioned that you would ask Ian to email bullet points detailing the items you now want to discuss with us that were not in the original Invitation to Tender document.

Please advise when we are likely to receive these, so that we may consider them before our meeting.”

It is MGL’s case that by what he had said on 9 May, Mr Williams had fraudulently or negligently misrepresented the position. It is alleged that he had represented that MGL was, as at 9 May 2012, still “in the running”, and that this was untrue in that, MGL contends, DMUK had by then decided to select Prime Time as the successful tenderer for the new long-term contract. MGL contends that it was in reliance on that misrepresentation that Ms Welding agreed to the further extension of the contract up to 31 August 2012. MGL also contends that, in reliance on the misrepresentation, it devoted time and effort to the preparation of proposals in relation to a training academy.

The meeting to discuss MGL’s training academy proposals, referred to by Mr Williams in his email of 14 May, was deferred from 17 May to 23 May. When the time for it came, an issue had arisen about a temporary worker who had been found by DMUK to be on methodone. This was something about which MGL had known, but which had not been communicated to DMUK. The surfacing of this issue meant that MGL did not make its presentation about the training academy on 23 May. There was, instead, discussion about the worker’s fitness for a contract with DMUK.

Subsequently, on Friday 25 May 2012, Ian Trennan telephoned Ms Welding to inform her that he would like to have a meeting on the following Monday morning, as he was in a position to make a decision on the award of the long term contract. Ms Welding, having considered this over the weekend, concluded that this must mean that MGL had lost the contract, or that it would only be renewed on the basis of a “mobile worker contract” which MGL was not willing to contemplate. She accordingly rang Mr Trennan after the weekend and informed him that MGL was withdrawing from the tender process.

In the meantime, Prime Time had signed the new long term contract on 22 May 2012. Mr Williams had signed the document on behalf of DMUK on 25 May, but it was not delivered to Prime Time until on or shortly after 28 May 2012.

As already set out, MGL had produced new TOB, and had provided a copy of these to DMUK at latest by 24 November. It is MGL’s case that it was these new TOB which were applicable to the APW Contract as extended by each of the three extensions referred to above. Whether that is correct is one of the most important issues in the case.

Without yet considering that issue, the distinction between MGL’s old TOB and the new TOB is of relevance in understanding the remainder of the narrative of events, and it is thus convenient to refer to the new TOB at this point.

The new TOB were, in large part, drawn up to take account of the AWR. The clauses dealing with the requirements of AWR are not of direct relevance to the present dispute. What is of relevance are the terms relating to Transfer Fees. Those terms are set out in Annexe 2 to this judgment. One feature of significance is that the new TOB specified a Period of Extended Hire of 48 weeks. That compares with the 12 weeks provided for by the old TOB.

A meeting took place on 13 June 2012 between MGL and DMUK. There is an issue as to what was said. MGL contends that DMUK indicated that it wished to transfer the temporary workers, and would comply with clause 8 of the APW Contract as to the payment of Transfer Fees. DMUK denies that it gave any assurance as to the payment of Transfer Fees.

There was another meeting on 20 June 2012. On this occasion Mr Williams handed Ms Welding a letter, which was headed “Notice of Termination of Contract and Extended Hire”. The letter stated that DMUK was giving one month’s notice to terminate the contract of December 2009. It continued:

“Furthermore DMUK hereby gives notice of its decision to elect for an extended period of hire in respect of the temporary workers currently supplied by Mploy to DMUK as named in the Appendix to this letter pursuant to clause 7.1 of Mploy’s standard Supply of Temporary Staff Services Client Terms of Business, attached as appendix 11 to the Contract. Accordingly DMUK shall have no liability to pay Mploy transfer fees in respect of the temporary workers concerned in the circumstances described in clause 7.1.

Pursuant to clause 7.1 the period of extended hire will commence on 26 June 2012 (5 clear days after the date of this letter) and will continue for 12 weeks until 18 September 2012.”

Thus this letter gave a notice of an Extended Period of Hire (“EPH”) by reference to the old TOB. The Appendix to the letter contained the names of 153 workers. The letter itself was written on paper which was marked “Draft” as a quasi-watermark, but was signed by Mr Williams.

On 26 June 2012, MGL’s then solicitors, Lanyon Bowdler, wrote to DMUK about the letter of 20 June 2012. Lanyon Bowdler raised the issue of its having been stamped “Draft” and asked for confirmation that it was a formal letter. They continued by denying that the contract could be terminated by one month’s notice. They also contended that the EPH could not continue beyond the termination date of the contract and that, accordingly, notice of the period had been given too late. Significantly, they also went on to contend that the old TOB “have been replaced and these were forwarded to you and accepted by you on 24.11.11.”. Under these new TOB, Lanyon Bowdler continued, a notice period of two weeks was required to invoke extended hire, and the EPH was 48 weeks.

Mr Williams responded to this letter on 5 July 2012. He stated that the issue of the termination date of the contract (i.e. the issue of one month’s notice of termination) would be left on one side as it was “probably not the key point at this stage”. Mr Williams went on to say that DMUK contended that the contractual EPH was 12 weeks, and that it could run notwithstanding the termination of the contract in the meantime. He stated:

“In addition to that, legally there is no doubt that the new Mploy Terms and Conditions have never been accepted by our company and cannot therefore be considered applicable to our case. In light of our abovementioned opinion, we insist on our request to Mploy to carry out the required services during the Extended Hire period…”.

Further correspondence between the parties ensued, in which there were some attempts to find a solution acceptable to both parties. These were not successful. On 21 August 2012 Mr Williams sent a letter giving a new “Notice of Extended Hire”. The letter stated:

“In accordance with the contract between Mploy Group Limited (Mploy) and DENSO UK Manufacturing Limited (DMUK) for the supply of temporary and permanent staff, dated December 2009 (the Contract) as subsequently extended by letters and e-mails dated 1 December 2011, 2 February 2012, 14 May 2012 and 18 May 2012.

DMUK hereby gives 5 days notice of its decision to elect for an extended period of hire in respect of the temporary workers currently supplied by Mploy to DMUK as named in the Appendix to this letter pursuant to clause 7.1 of Mploy’s standard Supply of Temporary Staff Services Client Terms of Business, attached as appendix 11 to the Contract.

Although DMUK will endeavour to maintain a stable working environment during the extended hire period, as per normal operations at DMUK, work availability and patterns will be governed by customer and production requirements.

Accordingly DMUK shall have no liability to pay Mploy transfer fees in respect of the temporary workers in the circumstances described in clause 7.1 above nor shall Mploy reintroduce additional charges for short week orders.

Pursuant to clause 7.1 the period of extended hire will commence on 1^st September 2012 and will continue for 12 weeks up to and including 23^rd November 2012.”

The Appendix to this letter contained the names of 104 workers. This was then revised twice further before 1 September, the revision on 31 August containing the names of 109 workers.

In the meantime, in the period from about 25 June 2012 onwards, Prime Time began entering into contracts with the temporary workers supplied by MGL to DMUK. These so-called Mobile Worker Agreements contained a number of provisions to which reference was made by the parties. These include, in particular, the following:

“1 DEFINITIONS

1.1.

‘Assignment’ means the period during which the Mobile Worker, hereto referred to as the ‘Employee’, is supplied to render services to a Client. Assignments may be on a day-to-day basis dependent on client requirements. Each Assignment period will end when the Employee ceases to be supplied to a client or be available to work except where this relates to normal shift breaks or approved absences/leave…

…

‘Company’ means [Prime Time]…

2.

THE CONTRACT

2.1

This Agreement constitutes a Contract of Employment between the Company and the Employee and governs the employment of the Employee and by mutual consent replaces any previous contract or agreement between the Employee and the Company.

2.2

The Employee’s employment will commence on the day the Employee commences his/her first Assignment with the Company, such date to be confirmed on the first payslip, which shall be the date used for the purposes of calculating the Employee’s continuous employment. …

3.

JOB TITLE, DUTIES AND ASSIGNMENTS

…

3.2

The Company shall endeavour to obtain and provide suitable Assignments to the Employee but in any event promises to make available for the Employee a minimum of 336 hours of work … in a year.”

Although, as will be seen, MGL relies upon the entry into of these contracts as being the “engagement” of the workers by Prime Time, it is not contended that any of the temporary workers were actually supplied by Prime Time to DMUK, or to any one else, before 24 November 2012, by when, on DMUK’s case, the EPH had come to an end.

From 1 September, for a period of 12 weeks, DMUK ordered the temporary workers who had been on the list that DMUK had supplied. Two points should be noted. First, a small number of workers, as I understand it two in all, stopped working for DMUK during the 12 week period, through no fault of MGL (or DMUK). These workers were called “Drop Out Workers” by the parties. Secondly, a much larger number of workers were ordered for periods which did not amount to 12 weeks of 37.5 hours per week, although the majority of workers were utilised for over 90% of that time. These workers have been referred to as “Reduced Hours Workers”.

Save in respect of an admitted amount of £3797.37, DMUK paid the amounts due in respect of the hours actually worked by MGL’s temporary workers during the 12 week EPH, including in respect of MGL’s management fee, albeit with no uplift of the management fee for orders of less than a full week.

After 24 November 2014, the temporary workers were supplied to DMUK by Prime Time, and all arrangements for their remuneration were made through Prime Time.

On 3 December 2012, for the first time, MGL raised the issue of the Qualdep Contract. In a letter from Ms Welding to Mr Williams, it was stated that this contract had not come to an end; and that DMUK had already been supplied with temporary staff for the Quality Department by Prime Time in breach of that contract. The letter asked as to DMUK’s intentions regarding the Qualdep Contract.

On 2 January 2013 Mr Williams responded to Ms Welding’s letter. In his letter he said that the Qualdep Contract had been terminated by the inclusion of Quality Department personnel in the list of workers for whom an EPH was elected which had been sent to MGL on 21 August 2012. Without prejudice to that position, DMUK gave three months’ Notice of Termination of the Qualdep Contract. On any view, therefore, the Qualdep Contract had ended by 2 April 2013.

MGL makes a number of claims against DMUK as a result of the facts which I have sought to summarise. As clarified at the hearing, those claims are as follows:

DMUK denies liability for all these claims, except the last. It makes a counterclaim based on MGL’s rejection of the notification of an EPH on 20 June 2012, which would have ended on 18 September 2012. It is said that this was wrongful, and that DMUK is entitled to claim the difference in the margin which would have been payable to Prime Time rather than to MGL in the period between 18 September 2012 and 23 November 2012, as damages for breach of contract or pursuant to Regulation 30 of the Conduct Regulations. This claim is quantified in an amount of £22,500.

Before considering the merits of these claims, it is necessary to address two further aspects of the case.

The APW Contract itself contains reference to the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (SI 2003/3319). These Regulations (“the Conduct Regulations”) were made pursuant to an enabling power in s. 5 Employment Agencies Act 1973, which gave the Secretary of State the power to “make regulations to secure the proper conduct of employment agencies and employment businesses and to protect the interests of persons availing themselves of the services of such agencies and businesses”. One of the specific matters on which regulations might be made under this power was provision for “restricting or regulating the charging of fees by persons carrying on such agencies and businesses.”

It is necessary to have regard to the Conduct Regulations fully to understand the provisions of the APW Contract, and some of the issues which have arisen in this case. Of particular importance is Regulation 10, which is headed “Restriction on charges to hirers”. Regulation 10 provides:

“10.

(1) Any term of a contract between an employment business and a hirer which is contingent on a work-seeker taking up employment with the hirer or working for the hirer pursuant to being supplied by another employment business is unenforceable by the employment business in relation to that work-seeker unless the contract provides that instead of a transfer fee the hirer may by notice to the employment business elect for a hire period of such length as is specified in the contract during which the work-seeker will be supplied to the hirer-

(a)

In a case where there has been no supply, on the terms specified in the contract; or

(b)

In any other case, on terms no less favourable to the hirer than those which applied immediately before the employment business received the notice.

(2)

In paragraph (1), ‘transfer fee’ means any payment in connection with the work-seeker taking up employment with the hirer or in connection with the work-seeker working for the hirer pursuant to being supplied by another employment business.

(3)

Any term as mentioned in paragraph (1) is unenforceable where the employment business does not supply the work-seeker to the hirer, in accordance with the contract, for the duration of the hire period referred to in paragraph (1) unless the employment business is in no way at fault.

(4)

Any term of a contract between an employment business and a hirer which is contingent on any of the following events, namely a work-seeker-

(a)

taking up employment with the hirer;

(b)

taking up employment with any person (other than the hirer) to whom the hirer has introduced him; or

(c)

working for the hirer pursuant to being supplied by another employment business,

Is unenforceable by the employment business in relation to the event concerned where the work-seeker begins such employment or begins working for the hirer pursuant to being supplied by another employment business, as the case may be, after the end of the relevant period.

(5)

In paragraph (4), ‘the relevant period’ means whichever of the following periods ends later, namely-

(a)

the period of 8 weeks commencing on the day after the day on which the work-seeker last worked for the hirer pursuant to being supplied by the employment business; or

(b)

subject to paragraph (6), the period of 14 weeks commencing on the first day on which the work-seeker worked for the hirer pursuant to the supply of that work-seeker to that hirer by the employment business.

(6)

In determining for the purposes of paragraph 5(b) the first day on which the work-seeker worked for the hirer pursuant to the supply of that work-seeker to that hirer by the employment business, no account shall be taken of any supply that occurred prior to a period of more than 42 days during which that work-seeker did not work for that hirer pursuant to being supplied by that employment business.

(7)

An employment business shall not-

(a)

seek to enforce against the hirer, or otherwise seek to give effect to, any term of a contract which is unenforceable by virtue of paragraph (1), (3) or (4); or

(b)

otherwise directly or indirectly request a payment to which by virtue of this regulation the employment business is not entitled.”

Regulation 30 of the Conduct Regulations provides:

“(1)

Without prejudice to-

(a)

Any right of action; and

(b)

any defence,

which exists or may be available apart from the provisions of the Act and these Regulations, contravention of, or failure to comply with, any of the provisions of the Act or of these Regulations by an agency or employment business shall, so far as it causes damage, be actionable.”

The Conduct Regulations were the subject of Guidance issued by the Department of Trade and Industry (“DTI”) (as it then was) in association with the Recruitment and Employment Confederation (“REC”) and Equity, in January 2004. It is to be noted that MGL was a member of REC. This material was shown to me by Mr Brown for DMUK without objection from Mr Sullivan for MGL. As I will explain later, it appears to me that it is both admissible and relevant material in construing the APW Contract.

The DTI Guidance in relation to Regulation 10 stated, in part:

“The purpose of regulation 10 is to ensure that employment businesses do not use transfer fees unreasonably as a means of discouraging or deterring hirers from offering permanent work to temporary workers, having those workers supplied through a different employment business, or introducing them to a third party to be employed by that party. Nevertheless this regulation should allow employment businesses to protect their legitimate business interests.

Regulation 10 is complex, but can be summarised as applying differently in 3 distinct scenarios; first where there has been an introduction to a client/ hirer but no supply; secondly where there has been a supply and the fee is in relation to temp-to-perm or temp-to-temp engagements following such supply; and thirdly temp-to-third party fees where there has been a supply to a client and the client has introduced the work-seeker to a third party. Temp-to-third party fees where there has been no supply are not covered by this regulation and fees in this regard can be charged without restriction.

The expressions ‘temp-to-perm’, ‘temp-to-temp’ and ‘temp-to-third-party’ are not used in the Regulations but are the terms commonly used to describe the following situations:

‘Temp-to-Perm’: where a temporary worker supplied by an employment business either transfers or is subsequently taken on directly by the hirer to whom s/he has been supplied. The words do not mean that employment by the hirer must be permanent but simply that the worker has a direct contractual relationship with the hirer.

‘Temp-to-Temp’: where the worker is supplied to the same hirer by a different employment business. This frequently happens where the client puts the work out to tender and requires workers currently supplied by one employment business to transfer to the books of another employment business whose tender was accepted.

‘Temp-to-Third Party’: where a client/hirer introduces workers to another person who employs a worker directly. This may be an individual employer, a subsidiary or parent company or even another employment business.

Situations where there has been an introduction of a temporary worker but no supply

Regulation 10(1) and (2) provide, where there has been no supply, that any term in a contract between an employment business and a hirer in which it is seeking to charge a transfer fee in a temp-to-perm or temp-to-temp situation will be unenforceable, unless that contract also contains a term giving the hirer the option, instead of paying a fee, to choose to have that worker supplied by it for a specified extended period of hire at the end of which s/he will transfer without charge.

There is no limit on the agreed period of hire referred to here or the level of the transfer fee. These are matters that will need to be agreed in the contract between the employment business and the hirer at the outset of their business relationship. However where the hirer has opted for an extended period of hire, the employment business must supply the worker for the entirety of that period, on the terms specified in the contract between it and the hirer (see regulation 10(1)(a)), unless the employment business is prevented from supplying that worker in circumstances where it is not at fault (regulation 10(3)). Where there has been no supply the transfer fee is often referred to as an introduction fee.

Situations where there has been a supply and there is an engagement of the temporary worker directly by the client or through another employment business (temp-to-perm & temp-to-temp):

Where there has been a supply, the position is broadly similar except that additional restrictions apply, see regulations 10(4), (5) and (6).

An employment business, where there has been a supply, can charge, and therefore set out in its agreement the method for calculating, a transfer fee in temp-to-perm and temp-to-temp situations provided:

The hirer is given the option to have the worker supplied for a specified extended period of hire, at the end of which the worker will transfer without charge instead of paying the transfer fee. Where the hirer has opted for an extended period of hire, the employment business must supply the worker for the entirety of that period, (unless it is prevented from so doing in circumstances where it is not at fault (regulation 10(3)) on terms no less favourable to the hirer than those which applied between the employment business and the hirer before it received notice that the hirer wished to opt for the extended hire period – regulation 10(1)(b); and

The transfer takes place within either 14 weeks of the start of the first assignment or within 8 weeks of the end of any assignment, whichever period ends later. The 14-week period is measured from the start of the first assignment with the hirer. …

Situations where there has been a supply and there is an engagement of the temporary worker by a third party to whom the client has introduced them (temp-to-third party)

Where there has been a supply the position is different because although the additional restrictions of regulation 10(4), (5) and (6) apply there is no requirement to offer the client a choice between the transfer fee and an extended period of hire, see regulation 10(1).

An employment business, where there has been a supply, can charge a transfer fee, and therefore must set out in its agreement the method for calculating a transfer fee in temp-to-third party situations provided the transfer takes place within, either 14 weeks of the start of the first assignment, or within 8 weeks of the end of any assignment, whichever period ends later. …

Regulation 10(7) makes it unlawful to seek to enforce any contractual term, which is unenforceable under the provisions of the regulation, or otherwise directly or indirectly request a payment in these situations. In the event of money being paid by a hirer in respect of an unenforceable term, regulation 31 provides that the hirer is entitled to recover that money….”

I heard evidence from 7 witnesses. Those witnesses called by MGL were as follows:

The witnesses called by DMUK were:

I considered all these witnesses to be honest witnesses, who were attempting to give what they believed to be a truthful account to the court.

The main disputed issues of fact involved the evidence of Ms Welding, Mr Williams and Mr Trennan. In relation to these witnesses, the particular impressions which I formed were as follows:

More generally, my approach to the disputed issues of fact in this case has been to give particular weight to the documentary evidence, and to consider the consistency or otherwise of the oral evidence with the contemporary documents.

I now turn to consider the issues which arise. While the parties prepared a list of issues, the cases developed at the hearing were not, in all respects, fully captured by the issues on that list. Nevertheless in dealing with the matters which arise I will identify the corresponding issues from the list.

It is DMUK’s case that the Terms of Business applicable to the APW Contract were, at all material times, the old TOB. It contends that it was those terms which were incorporated into, and appended to, the APW Contract and were applicable to it; and that there was no agreement which altered that position. The extensions of the term of the APW Contract were on the basis that its terms remained the same and that, DMUK says, included the old TOB.

MGL contends, by contrast, that the Terms of Business applicable to the parties’ relationship at the material times were the new TOB, and that they had become the relevant terms in October or November 2011, or on any view before the events of 2012 which give rise to its claims in the present proceedings.

In opening, MGL put forward 5 ways in which it contended that the new TOB had been made applicable. In closing, Mr Sullivan narrowed these 5 ways to 3, which I will consider in turn.

The first contention is that the APW Contract, on its true construction, provided for the application of MGL’s terms of business in force from time to time, rather than the particular version of MGL’s terms of business in force as at the date on which the APW Contract was entered into. Mr Sullivan accepted that notice of any amendment to MGL’s terms and conditions had to be provided to DMUK before those terms and conditions took effect as part of the contract, but submitted that, following notice, no further communication of agreement was required from DMUK, because it had agreed to such changes in advance. MGL’s case was that the relevant notice was given by Ms Welding’s handing over the new TOB to Ms Le Gros on 12 October 2011, or at latest by the provision of the new TOB to Mr Trennan by email on 24 November 2011.

I do not accept this analysis. Clause 1.3 of the APW Contract provides that it is the GTCB which are attached as Appendix 11 which are to apply. Those attached terms, namely the old TOB, are an integral part of the contract. The contract does not contain any wording to the effect that it is MGL’s terms and conditions “in force from time to time” which are applicable, and I do not consider that such words can be read into Clause 1.3, especially in the face of the specific identification of the GTCB as being those in Appendix 11. A fortiori, I do not consider that it is possible to read into Clause 1.3 the more elaborate provision that the applicable terms will be MGL’s standard terms from time to time of which notice has been given to DMUK.

It was, correctly, accepted by DMUK that it is possible for parties to a contract to agree that terms adopted by one of the parties from time to time will apply to their relationship, or to include an express power on one party to vary the contract. DMUK submitted, however, that clear language would be required for a contract to be construed as having such an effect, and a term which would have such an effect will not generally be implied. I accept this submission. I also consider that some support for this approach is provided by Wandsworth v Da Silva [1998] IRLR 193, per Lord Woolf MR at [31], which, albeit obiter, is germane; and by Security and Facilities Division v Hayes [2001] IRLR 81. Both those are cases about employment contracts, but I consider that there is no reason why a similar approach is not warranted in the present context.

Applying such an approach to the present case, there was no clear or unambiguous language providing for the application of MGL’s terms of business applicable from time to time. I find this unsurprising, as a provision such as that for which MGL contends would be open to abuse, and would be one which a commercial party such as DMUK would be unlikely to accept.

Given my conclusions on this point, it is not strictly necessary to resolve the issue of whether the new TOB were handed over to Ms Le Gros on 12 October 2011, because the APW Contract did not provide for their application simply by notification of the new terms. Nevertheless, I should record that I was not persuaded that the new TOB had been handed over on that date. Even if they were handed over, I find that there was no comment then made about them or about their applicability to the contract. I accept Ms Le Gros’s evidence that, had there been a such a comment, even if made before the meeting got properly underway, it would have been brought up in the course of the meeting itself, and that there was no such discussion at the meeting. It is notable that the minutes of the meeting do not include any mention of such a discussion.

The secondary case advanced by MGL as to the applicability of the new TOB is one of express agreement to a variation of the APW Contract to provide for their application. The case made by MGL at the trial was that this had been agreed on the telephone between Ms Welding and Mr Trennan on 29 November 2011, as part of their agreement for the first extension of the term of the APW Contract, and that those Terms of Business accordingly applied going forwards and were applicable to the contract as extended by the second and third extensions.

Mr Brown for DMUK submitted at the outset of the trial that the allegation of express variation had not been adequately pleaded. It is true to say that the pleading on this point is unspecific, and there is no plea of the exact words used. What paragraphs 17 and 18 of the Particulars of Claim say is simply that there was an oral agreement of an extension of the term of the APW Contract on 29 November 2011 and, “for the avoidance of doubt”, that this extension “incorporated [the new TOB] expressly, alternatively by reference … alternatively by notice”. There is no reference in the list of issues to an express oral agreement to the application of the new TOB on 29 November 2011. I nevertheless concluded that the case of an express incorporation, though inadequately particularised, was one which MGL could pursue.

At the trial, the evidence in relation to this allegation was given by Ms Welding and by Mr Trennan. Ms Welding’s account in her witness statement (paragraph 38) was that Mr Trennan had rung her on 29 November 2011 and had advised her that DMUK wished to extend the APW Contract for a period of 3 months “on the basis of current terms”. She said that she had queried what he meant by this and had “pointed out that although the APW Contract was the same the New Terms applied. Mr Trennan acknowledged my comment and I responded by expressing how pleased I was that we had reached agreement…”

In her oral evidence, Ms Welding added that the call had come through to her while shopping, and that she had been standing in a snowstorm outside Boots. She said that Mr Trennan had said that the extended contract would be on current terms, but she had said the new terms, meaning the new TOB, would apply.

Mr Trennan’s evidence was that he did not recall there having been any discussion of new terms of business on the telephone call. He said that had there been such a discussion, he would have mentioned it to Mr Williams, and it would have been in the letter which Mr Williams wrote on 1 December 2011, which it was not.

I prefer Mr Trennan’s evidence on this point, and find that there was no discussion or agreement of the new TOB during the telephone conversation of 29 November. Of particular significance are the terms of the letter of 1 December, which I have set out above. Had there been a discussion of and agreement to the new TOB, then one would have expected that to be mentioned in the letter which Mr Williams wrote based on what Mr Trennan had told him. Not only is there no mention of the application of the new terms, but it is stated that “all other contract terms will remain the same”. That is inconsistent with an agreement to vary the terms of business. Furthermore, there was no reply from MGL suggesting that the letter of 1 December 2011 was incomplete or inaccurate. I consider that, had the issue of the application of the new TOB been considered important enough for Ms Welding to have mentioned it during the telephone conversation on 29 November, and had Mr Trennan then agreed to the new TOB, Ms Welding would have pointed out the omission of the matter from the letter of 1 December 2011. I conclude that it was not mentioned in the letter, and there was no objection to the contents of the letter, because it was not discussed on 29 November 2011.

I should add in this regard that the early communications from MGL stating how it contended that the new TOB had become applicable did not allege any express agreement by Mr Trennan to such terms on 29 November 2011. This is notwithstanding that, if he had actually then expressly agreed to their application, that would have been a very easy and clear explanation for MGL to have given as to why they applied. Thus, neither the letter from MGL’s then solicitors Lanyon Bowdler of 26 June 2012, nor Ms Welding’s own letters and emails to DMUK of 12 July 2012, 1 August 2012, 23 August and 24 August 2012 mentions an express agreement by Mr Trennan to the new TOB, orally, on 29 November 2011. Equally, there is no mention of an express oral agreement on that date in the letter of claim sent by Debenhams Ottaway, on behalf of MGL, on 8 November 2012. These matters reinforce my conclusion that this is an area in which Ms Welding has, as time has passed, convinced herself that something occurred which did not.

No case was made by MGL that there had been any separate discussion of which terms of business were applicable at the time of the second and third extensions of the term of the APW Contract. Accordingly, my conclusion that there was no agreement to the incorporation of the new TOB on 29 November 2011 is sufficient to dispose of this second way in which MGL puts its case as to their applicability.

That conclusion also renders it unnecessary to consider in detail the parties’ respective submissions as to the significance or otherwise of Clauses 2.2 and 2.3 of the APW Contract. There was debate as to whether, even if there had been something which might otherwise have constituted an agreement to the new TOB, a contractual agreement should not be found to have been made because of those clauses; and as to whether DMUK was estopped by convention from relying on those clauses because other variations to the APW Contract had, on occasion, been made without compliance with their terms.

In my judgment the evidence did not establish any estoppel which could mean that DMUK was precluded from relying on Clauses 2.2 and 2.3 for whatever might be their true effect. MGL referred to various instances of alleged variations which had not, it contended, complied with the requirements of those clauses. By and large, however, it appeared that the parties had followed the formalities at least to the extent of reducing agreed variations to writing, and I found it impossible to conclude that the parties had established any convention that compliance with the formalities was never necessary.

The existence of Clauses 2.2 and 2.3 means, at least, that the contention that there was a contractually binding oral variation of a significant term of the contract has to be looked at very closely, and the evidence in support of the contention has to be scrutinised with particular care: see Virulite LLC v Virulite Distribution Ltd [2014] EWHC 366 (QB) at [58]-[60]. Applying this approach simply reinforces my conclusion that MGL has not adduced sufficient evidence to demonstrate that the parties intended to vary the contract in the way for which it contends.

MGL’s tertiary case as to the applicability of the new TOB is that, as a matter of construction, the three extensions of the APW Contract comprised agreements that the new TOB, rather than the old TOB, were incorporated. The basis for this way of putting the case is that Ms Welding had informed Mr Trennan in August 2011 that MGL had new terms of business taking account of AWR which its membership of REC required it to use; and that MGL had supplied a copy of those terms to DMUK before the first agreement on the extension of the period of the contract. In the circumstances, it is said, the definition of “GTCB” in the APW Contract as extended can only have been a reference to the new TOB, and no reasonable person on 29 November (or 1 December) 2011 would have construed it as being a reference to the old TOB.

I consider that this tertiary case also fails. Given the fact of the identification, in the written APW Contract, of the relevant terms of business as being those attached as Appendix 11, and there having, on the hypothesis relevant to this tertiary case, been no express agreement to the new TOB, I do not consider that it is possible to construe the reference to “GTCB” in the APW Contract, as extended, as being a reference to anything other than the old TOB.

Furthermore, if one asks what a reasonable person would have considered that the parties meant on 29 November (or 1 December) 2011 by “GTCB”, it would be relevant to consider the known commercial position of both parties, as part of the “factual matrix” of the agreement to extend the APW Contract. At that juncture, DMUK had already indicated that it wished to put the supply of temporary workers out to tender, and had issued Invitations to Tender, including to MGL. DMUK would have been most unlikely to have wanted to agree any terms for the extension of the APW Contract which would have made a transfer of the business more difficult or costly. That, however, would have been the effect of agreeing a 48 week EPH. Accordingly, while a reasonable person might have concluded that MGL would have wanted its new TOB to apply, she would also have concluded that DMUK would not have wanted that. Faced with that disparity of interests, there is no basis for considering that the term “GTCB”, as used in the APW Contract as extended, had to be given any meaning other than that provided for in the agreement itself, namely the old TOB annexed as Appendix 11.

The fact that the parties knew that AWR had come into effect, and were not dealt with in the old TOB does not, in my view, compel any other conclusion. On any of MGL’s 3 cases on incorporation, the APW Contract operated for at least some time during which AWR were in effect but the new TOB were not applicable. This is because AWR came into effect on 1 October 2011, and the earliest notification to DMUK of the new TOB for which MGL contends was on 12 October 2011. On MGL’s other cases the new TOB only became applicable in November 2011. It could not have been plausibly suggested that, in such periods, the APW Contract was unworkable. Compliance with AWR by DMUK was, moreover, mandated by law and required by Clause 16.2 of the APW Contract.

Chronologically, the issues relating to the alleged misrepresentation arise next.

MGL’s pleaded case is that, on 9 May 2012, Mr Williams stated that no decision on the tender process for the new long term contract would be made by 31 May 2012 and that, accordingly, it would be necessary to extend the existing APW Contract. This, it is alleged, constituted an express or implied representation that MGL was, at that time, “in the running” to be selected as the provider under the new long term contract. It is alleged that that representation was made fraudulently, alternatively negligently, in that the decision had already been taken that Prime Time would be awarded the new contract. By the conclusion of the hearing it appeared to be common ground that there was no real possibility that, if a misrepresentation was made, it was negligent as opposed to fraudulent. The allegation is, accordingly, a serious one.

As I have set out above, MGL further alleges that it was in reliance on this misrepresentation that it entered into the third extension of the APW Contract.

The first issue which arises is as to what was represented. Ms Welding, in her witness statement, says that Mr Williams, at the meeting, had advised MGL that Mark Hayward, DMUK’s Managing Director, had a number of outstanding questions in respect of MGL’s proposition regarding training of temporary workers and the timing and potential cost of other improvements which MGL had proposed. She said that the phrase in Mr Poole’s notes of the meeting - “Mark – Not 100% clear what Ian wants to do” – was a reference to these questions. Ms Welding’s evidence was, further, that Mr Williams stated that it was this which was holding up DMUK’s decision; that Mr Williams had said that DMUK would have to have another contract extension; and that he had said that he had a one month extension in mind.

Mr Williams’ evidence was that Mr Hayward had indeed been interested in MGL’s proposals for training, and that he and Mr Trennan had asked MGL at the meeting on 9 May to prepare such proposals. He said that it was clear that MGL would need some more time to do that, although he did not consider that it would take very long for MGL to deal with that and close off all remaining points. He had thought a month’s extension would be long enough. His evidence was that he had not said that no decision would be made by 31 May 2012, because he had not known when a decision would be made.

I find that Mr Williams did indicate at the meeting on 9 May 2012 that no decision had been taken, and that DMUK wished to have MGL’s proposals as to training in order to consider them for the purposes of coming to a decision. At least implicitly it was represented that there was a possibility that MGL might be awarded the long term contract.

It is not alleged in MGL’s pleading that the phrase “in the running” was actually used – as opposed to an allegation that it was the effect of what was said - and in any event I find that that phrase was not used. I also find that Mr Williams did not say that no decision would be made by 31 May 2012.

Was the representation which was made, described in paragraph 88, false? The evidence of DMUK’s witnesses was that it was not. Mr Williams said that the decision on the tender needed the agreement of himself, Mr Trennan, and the Managing Director Mark Hayward. He said that Mr Hayward was nervous about making a change of supplier because of the potential effect on the plant, and during the process had been asking a considerable number of questions. As at 9 May, Mr Hayward was interested in training schemes at DMUK, and was interested to hear of MGL’s proposals for training which might have been incorporated into his wider plans. It was accordingly correct, as at that date, that no decision had been made. Depending in part on MGL’s proposals in relation to training, and on whether MGL could further improve its service levels by comparison with the APW Contract, it remained a possibility that MGL would be chosen. The decision for Prime Time was only finally made after confidence in MGL had been shaken by the incident of the worker on methodone.

I accept this evidence of Mr Williams, and the similar evidence of Mr Trennan and Ms Le Gros. In accepting it, I have considered the strong challenge to it which was made by Mr Sullivan, in particular by reference to a note of Ms Higgins of DMUK dated 12 April 2012, an email from Wayne Shaw of Prime Time of 25 April 2012, and an email from Mr Manson of Prime Time dated 4 May 2012. I accept what Mr Williams said about the Higgins note, namely that he had not commissioned it, and that it did not indicate that a decision had been made at that time because at that stage, as he put it, there were a number of outstanding points and open items. The Shaw and Manson emails certainly seem to indicate that encouraging noises had been made to Prime Time by 4 May 2012. Mr Williams said, however, that it is quite usual when a contract is put out for tender for two tenderers to be encouraged, and for the decision to be made at a very late stage. That, and Prime Time’s (especially Mr Manson’s) enthusiasm to clinch the business, can, in my view, account for the emails of 25 April and 4 May 2012, and they do not compel the rejection of the evidence of the DMUK witnesses that a final decision had not been reached.

Mr Sullivan submitted that it should be inferred from the absence of any minutes or other documentation recording precisely when and how the decision was made, that a record was deliberately not kept, or that any such documentation has been suppressed, in order to conceal the fact that the decision to award the contract to Prime Time was taken at an earlier stage than is consistent with DMUK’s case in these proceedings.

I am unable to draw the inference which Mr Sullivan invites me to draw from the absence of documentation. The suggestion that there was a deliberate policy not to have records of the decision-making process in order to conceal that Prime Time had been chosen, was denied by Mr Williams. He said that DMUK was trying to restrict email, had an open plan office, and held many meetings, and that these matters probably accounted for the absence of further records. It also appears to me implausible that such a policy would have been adopted, presumably at an early stage in the process, simply to cover up the timing of a decision on a relatively routine, albeit significant, tendering exercise which DMUK was fully entitled to carry out. Nor is there any sufficient basis for me to conclude that DMUK has not complied with its disclosure obligations. Indeed, the fact that, for example, Mr Manson’s email of 4 May 2012 has been disclosed, suggests that DMUK has produced material which might be regarded as potentially damaging to its case.

Mr Williams gave what was, to my mind, convincing evidence when he said that, had DMUK reached a decision to award the contract to Prime Time by 9 May 2012, then it would have said just that, and there would have been no reason to agree on any further extension of the APW Contract. Mr Sullivan suggested that that evidence was not correct, and that DMUK must have wanted the extension because it was not ready to move ahead with awarding the contract to Prime Time by that date, and wanted more time to prepare. The only basis, however, which Mr Sullivan identified for the suggestion that DMUK was not, at that juncture, ready to move ahead with the Prime Time contract was that DMUK sought an extension of the contract with MGL. That is an essentially circular argument, which provides no independent grounds for doubting Mr Williams’ evidence that, if DMUK had already decided on Prime Time by 9 May 2012, it would have said so.

I have thus concluded that what was represented on 9 May 2012 was not false, and the misrepresentation claim fails for this reason. I should add that, even had I been persuaded that there was a misrepresentation and that it had induced the third extension of the APW Contract, I would not have upheld the claim for damages, save to the extent that it related to the costs of the preparation of MGL’s Training Academy proposals which, on this hypothesis, DMUK did not challenge. The reason why I would have rejected the remainder of the claim for damages is that it is premised on the assumption that, had there not been an extension of the APW Contract, DMUK would have paid transfer fees. However, Mr Williams’ evidence was that, had there been no extension, DMUK would have elected for an EPH. I accept that evidence, which is plausible in the light of what actually happened in June 2012.

On the basis, as I have held to be the case, that the relevant terms of business were the old TOB, then there was, as I understood it, no contention that the 21 August 2012 notice election of an EPH was not validly given (there remains an issue, to which I will come, as to whether the EPH was validly completed.)

This being the case, the question of whether the notice of an EPH given on 20 June 2012 was valid is only of potential relevance to the Counterclaim. It is, however, convenient for me to set out here my conclusions on the issues as to the validity of that notice.

In this context, MGL raised a number of arguments in support of its contention that the notice was invalid. Most of these relied on the assertion that it was the new rather than the old TOB which were applicable, and that, by referring to the latter, the notice was rendered invalid. I have found that it was the old TOB which were applicable, and those objections accordingly fall away. Two other points were, however, also raised.

The first was MGL’s contention that at the meeting between MGL and DMUK on 13 June 2012 Mr Williams and Mr Trennan had said that DMUK would pay transfer fees pursuant to clause 8 of the APW Contract. Even had this been the case, however, I do not consider that this could have given rise to any binding commitment that DMUK would not subsequently serve a notice of an EPH in relation to workers it wished to continue to engage.

In any event, I accept the evidence of Mr Williams that there was no statement by DMUK that transfer fees would be paid. His evidence was that, at that juncture, DMUK was aware of the possibility of an EPH election; and that he would have been careful not to say anything potentially inconsistent with the choice of an EPH. He told me that what he had said was that DMUK would honour its contractual obligations. This account of what was said is consistent with the minutes of the meeting, which do not record any statement that transfer fees would be paid. It is also notable that Mr Poole’s email to Mr Trennan of 15 June 2012 and Ms Welding’s to Mr Trennan of 19 June 2012 are consistent with no agreement having been reached at the meeting on 13 June 2012.

The second point, which was raised during Ms Welding’s evidence, was that the letter of 20 June 2012 was marked “Draft”. I do not consider that this invalidated the letter as a notice of an election of an EPH. It was a letter under DMUK’s company letterhead, signed by Mr Williams over his job title, which was addressed to Ms Welding in her capacity as Managing Director, and which was handed to MGL in a formal meeting. MGL treated it as a formal document by giving it to external solicitors and by giving a formal response to it. Accordingly, I consider that the marking on the letter did not mean that it was not a notice of election of an EPH, and that a reasonable recipient, in the circumstances, would have regarded it as such an election. In any event, any doubt arising from the marking was clarified, in response to Lanyon Bowdler’s letter of 26 June 2013, by Mr Williams’ letter of 5 July 2012, which confirmed that DMUK were insisting on an EPH.

MGL’s claim for “Introduction Fees” if the old TOB were found to be applicable, as I have held to be the case, was put on the basis of clause 7.5 of those terms of business. Even though the fees payable under that clause are described as “Transfer Fees”, Mr Sullivan said that they were fees for an introduction, and accordingly could be conveniently described as “Introduction Fees”. DMUK had introduced workers to Prime Time, which was a third party for these purposes, and which had “engaged” those workers by entering into Mobile Worker Agreements with them. This constituted an “Engagement” for the purposes of clause 7.5. There was accordingly an obligation on DMUK to pay fees under that clause.

MGL’s case was accordingly that the present situation fell both within clause 7.1 and 7.5. It fell within clause 7.1 because this was a case of temporary workers supplied by it to DMUK then being engaged by DMUK pursuant to being supplied by another employment business (Prime Time), and also within 7.5 on the basis I have set out.

In my judgment this claim is ill-founded for a number of reasons, and clause 7.5 is of no application in a situation such as the present.

The starting point is to consider the structure of clause 7 of the old TOB. I consider that those terms provide, in 7.1, 7.2, 7.5 and 7.6 for four separate situations. Clause 7.1 deals with the situation in which there has been a supply of workers to the client by MGL, and then those workers are engaged within the stipulated period by the client either directly or through another employment agency. In such circumstances, the option for an EPH makes good sense: the client will be engaging the workers, and therefore there can be a period of hire. Clause 7.2 deals with the situation where there has been no supply of the workers to the client, but MGL introduces workers to the client which the client goes on to engage, directly or through another employment agency. Again, in such circumstances, the option for an EPH makes good sense, as the client will be engaging the workers going forwards. Clause 7.5 is intended to deal with a different situation, and one where the client will not be engaging the workers going forwards. It deals with the case where workers who have been supplied to the client by MGL are then introduced by the client to some other person or entity who goes on to engage them. No option for an EPH is provided because it is envisaged that the new engagement of the workers will be with someone other than the client, and accordingly a stipulation for an EPH with the client would not make sense. Clause 7.6 deals with an introduction by the client of workers who have not been supplied to it by MGL to some other person or entity. Accordingly, it is similar to 7.5, but where there has been no supply.

Thus, I consider that clause 7.5 is concerned only with a situation where the new engagement will not be with the client. Furthermore, I consider that clause 7.5 is not applicable if the new engagement is with the client, even though the workers might now be supplied to it by another employment agency. If this were not the case, clause 7.5 would simply overlap clause 7.1 in the case of a transfer of the supply of workers from one employment business to another and mean a duplication of liabilities on the hirer for what is essentially one transaction. That is not a commercially likely agreement for the parties to have made, as I understood Ms Welding herself to accept. Another employment business which is acting in that capacity, with a view to supplying the workers to the client is not, accordingly, within the meaning of “third party” in clause 7.5.

I consider that this interpretation gains support when the old TOB are considered in the light of the Conduct Regulations and the DTI Guidance. It is clearly necessary to consider clause 7 in the context of the Conduct Regulations, as it was drafted to attempt to ensure compliance with those Regulation. I also consider that the DTI Guidance forms a part of the admissible material, or “factual matrix”, against which the APW Contract should be construed. This is not only because REC was involved in the production of the DTI Guidance, but also because the DTI Guidance was clearly available to the parties when they entered into the APW Contract, and was highly germane to its terms.

The Guidance provides three “definitions” of the terms “temp-to-perm”, “temp-to-temp” and “temp-to-third party”. It then has guidance in relation to three distinct sets of “Situations”. These Situations are provided for separately in clause 7 of the old TOB. Thus, the second “Situation”, namely “temp-to-perm” and “temp-to-temp” situations where there has been a supply and an engagement of the temporary worker directly or through another employment business, are dealt with in clause 7.1. The first “Situation”, namely where there has been an introduction to a client/hirer, but where there has been no supply of the worker to the client/hirer by the employment business, is dealt with by clause 7.2. The third “Situation”, namely where there has been a supply and an introduction to a third party which results in an engagement by the third party, is dealt with in clause 7.5.

As the DTI Guidance states in its “definition” of “temp-to-temp” transfers, these often involve the client putting out the work to tender and requiring workers to transfer from the books of one employment business to those of another. Accordingly the present case is, in terms of the Guidance, a paradigmatic “temp-to-temp” transfer. Furthermore, the Guidance specifically contrasts such a “temp-to-temp” situation with a “temp-to-third party” transfer. In terms of the Guidance, therefore, the present is not regarded as a “temp-to-third party” transfer. In my view, clause 7.5 was intended to and does deal with “temp-to-third party” of the type referred to in the Guidance, and not with what the Guidance regards as the distinct “temp-to-temp” position.

Furthermore, in cases of a transfer of workers from one employment business to another, there has, by reason of Regulation 10(1), to be the option of an EPH. But it is clear, and the evidence in the present case indicated, that during an EPH the new supplier would very often need to make arrangements to engage the workers, so that they can continue employment through the new supplier at the end of the EPH, without interruption. Yet, on MGL’s case, this would be very difficult, if not impossible, to achieve without triggering a further liability for an “introduction fee” under clause 7.5. This cannot have been the intention of the Regulations in requiring there to be an option of an EPH, nor to my mind is it the proper interpretation of the old TOB whose terms were informed by the content of the Conduct Regulations.

MGL relies on the width of the undefined term “third party” in clause 7.5, and contends that there is no reason why this should not apply to another employment business. I accept that another employment business could be a “third party” for the purposes of clause 7.5 if itself acting as an employer, or as an employment business which supplies the worker to someone else. But given that an employment business acting as such for the purpose of supplying temporary workers to the hirer is referred to in clauses 7.1, 7.2 and 7.4 as “another employment business”, and given the overall structure of clause 7, I do not consider that an employment business acting in that capacity is within the meaning of the term “third party” in clause 7.5.

I also accept Mr Brown’s submission that the entry into of the Mobile Worker contracts by Prime Time did not constitute the “Engagement” of the temporary workers for the purposes of clause 7.5. It is true that “Engagement” is defined to mean “engagement, employment or use”, and Mr Sullivan submitted that the entry into of the Mobile Worker agreements constituted the “employment” of the temporary workers, or, even if that were not the case, constituted their “engagement”. However, I consider that, in the definition of “Engagement”, the terms “engagement, employment or use” mean some actual use or employment of the worker, in the sense of services being rendered by him or her. I consider that this is the natural meaning of “employment or use”. The undefined (and uncapitalised) word “engagement” can also have a very similar meaning as a matter of ordinary usage: “engagement” can mean the action of occupying or employing something or someone. That meaning is indicated by the juxtaposition of the terms. Construed as I have suggested, there is no “Engagement” simply because of the entry into of a contract which permits employment and use at a future date where no services are rendered in the meantime.

On the basis that, as I have held, the relevant TOB were the old TOB, and that a valid EPH was elected and commenced, MGL’s claims for transfer fees are based on the contention that a number of the workers either dropped out, or did not complete the full period of an EPH. In each case the claim is for the full amount of the transfer fees, reduced pro rata to take account of the period of EPH properly completed.

As to Drop Out Workers, I understood MGL to rely on clause 7.4 of the old TOB: see MGL’s Opening Submissions paragraph 76. Confusingly, clause 7.4 refers to an “Introduction Fee” being payable, whereas MGL claimed this as a transfer fee. In any event, as I understood it, MGL’s submission is that the following words of the clause govern the position of Drop Out Workers: “If the Client elects for a period of hire, as set out above, but before the end of such period … the Temporary Worker chooses not to be supplied for a period of hire, the Introduction Fee calculated in accordance with 7.2(b) may be charged, reduced by such percentage to reflect the period of extended hire already undertaken by the Temporary Worker and paid for by the Client.”

DMUK’s answer was to contend that clause 7.4 is only applicable where the worker “is not supplied by the original agency during the EPH, but is supplied by the new agency” (DMUK Closing Submissions, paragraph 123). Another formulation of DMUK’s case was that clause 7.4 was only applicable if the worker “returned to DMUK” (DMUK Closing Submissions, paragraph 38.1). It is said that there is no commercial rationale for the payment of a fee in circumstances where the worker has not subsequently entered employment with DMUK.

While the commercial rationale of the relevant provision is, perhaps, doubtful, I consider that clause 7.4 is clear in its terms. It applies when the Client has elected a period of hire “as set out above”, which must mean a period under 7.1(a) or 7.2(a). Further, one of the cases in which it applies is where a worker “chooses not to be supplied for a period of hire”. In this regard, it is clear that this “choice” may relate to part only of the full period of extended hire, given the pro rata provision at the end of the clause.

The case of a Drop Out Worker is, to my mind, one which falls within the terms of clause 7.4 to which I have referred. Furthermore, I cannot accept that clause 7.4 is confined to a situation in which the worker returns to DMUK, or is subsequently supplied to DMUK by a new agency. That does not give proper effect to the part of the clause, quoted above, which refers to workers choosing not to be supplied for a period of hire.

In the circumstances, I conclude that the claim for a fee for Drop Out Workers under clause 7.4 is made out. My understanding from MGL’s Closing Submissions is that, on the basis of the old TOB being relevant, this would apply only to two workers, and that the amount claimed in relation to them would be a sum of £2013.37.

As regards the Reduced Hours Workers, this claim was based on the contention that, during the EPH, the workers ought to have been engaged for 12 full weeks, and MGL contended that full weeks were weeks of 37.5 hours. DMUK disputed that under the old TOB there was any requirement that the EPH should be on terms that the hire should be for full weeks.

There was also considerable debate as to whether, under the APW Contract, DMUK had been permitted to place orders for less than full weeks. This involved consideration of the terms of clause 13 and of Section 3 of Appendix 1 of the APW Contract.

As to these issues, the starting point is that clause 7.1 (and clause 7.2) of the old TOB provide that the hirer is to be liable either for a transfer fee or for a period of hire of the Temporary Worker “being 12 weeks”. I consider that a period of hire of 12 weeks means a period of 12 weeks of hire on the same basis as appertained under the contract for hire before the extended period. It is because it is implicit that the hire will be on the same terms as before that the clause can provide without elaboration for there being “a period of hire” for “12 weeks”.

As to what was required by the contract for periods of hire, different terms were relied upon by the parties in support of their differing positions. DMUK relied upon Clause 13.2.3 of the APW Contract; MGL relied in particular on Clause 13.2.2 and clauses 3.2.8 and 3.2.9 of Appendix 1. I conclude that the APW Contract provided that “ordinary orders”, namely orders made pursuant to Clause 13.2.1 of the Contract and clauses 3.2.4 and 3.2.5 of Appendix 1 thereto, should be made for periods of at least a full week. Clause 13.2.3 allowed for the making of orders for less than a week, but I consider that this was intended to be exceptional, and to apply only in circumstances where there had not been an order on the Friday preceding the week in which the worker was required. It was not intended to allow for a departure from the requirements of whole week ordering whenever DMUK wanted one. Such an interpretation would not give proper effect to the provisions of Appendix 1, which, as clause 3.1 thereof states, was intended to be a “strict system” to which DMUK was to adhere.

Given that an election for an EPH implies that it is known, at the outset, that the worker would be required for 12 weeks, it would have been possible for an order to have been given, at the outset, for that whole period under clause 3.2.8 of Appendix 1. Even if an order was not made for the full period, I do not see why, given an election for a 12 week EPH at the outset, there was any question of a need for an exceptional departure from the “strict system” involving full week orders. An order could have been placed for each of the workers involved, on the Friday of the preceding week, and DMUK would then have been committed to keeping the worker for the full week under Clause 13.2.2 and clause 3.2.9 of Appendix 1.

Thus far I accept MGL’s arguments in relation to the Reduced Hours Workers. The next step, however, is that MGL contends that, if a worker is not employed for 12 full weeks, that triggers a claim in debt for the full transfer fee, albeit MGL accepts that this would require to be reduced pro rata for the amount of the EPH actually worked by each worker.

Neither clause 7.1 of the old TOB, nor any other provision of the APW Contract provides for the payment of a Transfer Fee in this situation. Under clause 7.1, an EPH is an alternative to a transfer fee. The transfer fee is not specified in clause 7.1 as a charge which is to apply if the EPH is not performed in full.

The only circumstances in which, an EPH having been elected, a fee is nevertheless specified as payable are those provided for by clause 7.4. The case of Reduced Hours Workers is not amongst them. Nor do I consider that there can be said to be an implied term whereby the case of Reduced Hours Workers is added to the situations referred to in clause 7.4 in which a fee is payable. Instead, the terms of clause 7.4 tell against MGL’s case that a transfer fee is payable in the case of Reduced Hours Workers. Clause 7.4 indicates that, where it was intended that a fee should be payable, reduced pro rata when an EPH had been partly performed, this was provided for.

DMUK submitted that, if there were a remedy for a failure on the part of the hirer to engage the relevant workers for the full period of an EPH, it would be one in damages. I consider that that is correct. Because of my conclusions as to what the EPH should have consisted of, I consider that in this case a claim for damages is made out. Those damages should, it seems to me, be quantified by the difference between the margin which would have been earned by MGL had the temporary workers been engaged for 12 full weeks less the margin which was in fact earned by MGL.

I have considered whether MGL’s claim in relation to the Drop Out Workers should be dismissed on the ground that it has not been made on this basis. I consider that that would be too technical an approach. This is especially so as I suspect that there may not be a great difference between the figure for damages on the correct basis, and the figure claimed by MGL under this head on the assumption that the old TOB were applicable.

I trust that the parties can agree the relevant figure by way of damages, on the basis I have set out above. If they cannot, there will have to be further argument on this point.

Under Clause 9.1 of the APW Contract, DMUK was to make available to MGL details of permanent and temporary vacancies, up to and including senior executive level, to allow MGL the opportunity to supply workers for such positions. There has been no dispute that DMUK was in breach of that obligation in relation to permanent vacancies. Only on one occasion was MGL given the opportunity to introduce permanent staff during the course of the APW Contract.

The main issue has been as to whether, had DMUK made such details available, MGL would have had any prospect of introducing successful candidates for such vacancies. Ms Welding produced a list of cases in which DMUK had used other employment agencies to introduce permanent staff. In his evidence, Mr Taylor identified three of these vacancies as ones which, he believed, MGL would have had a reasonable prospect of filling had it been given the opportunity to do so.

Mr Trennan, for his part, stated that it was unlikely that MGL would have been able to fill any of these positions. MGL, he stated, specialised in “blue collar direct” workers, namely non-professional roles largely focused on manufacturing operations, while the permanent positions were generally managerial posts which were recruited through specialist agencies. Of the positions which were put to him as ones which MGL might have filled, he accepted in only one case that there was there any real prospect of MGL’s having introduced the successful candidate, though even in that case he said that he thought that other agencies were more likely to have been successful.

I considered Mr Trennan’s explanations as to why MGL would have had no real prospect of supplying the successful candidate for the other positions to be convincing. Accordingly, the only case in which there was such a real prospect was the position of Logistics Controller (line 69 on page 1551a). Clearly, however, there was the possibility that other agencies would have supplied the successful candidate. I accept MGL’s argument that it is appropriate to assess the prospects of MGL’s having successfully filled this position at 50%. Accordingly, MGL is entitled to damages in the amount of 50% of the fee which it would have been entitled to charge if it had filled this vacancy. According to the APW Contract, that fee would have been 9.5% of the anticipated first year remuneration figure (Appendix 2, clause 1.1). MGL contends however that inadequate disclosure has been given by DMUK of the relevant salary figure, and that in the circumstances the appropriate course is to base its claim on the fee which the successful agency in fact charged. I accept that approach in the circumstances, and assess the damages as 50% of £4770.

MGL’s claim in respect of the Qualdep Contract is based on what it contends was the breach by DMUK of Section 1a of that contract. MGL contends that that provision obliged DMUK to use MGL as the sole supplier of temporary staff to the Quality Incoming Inspection department; that the Qualdep Contract had not been terminated at the same time as the APW Contract; and that it is entitled to damages in the amount of the margin it would have been paid had it been used as supplier of temporary staff to the Quality Department until 2 April 2013.

DMUK puts forward two answers to this claim. Logically the first is its denial that there was any obligation on DMUK under the Qualdep Contract only to use MGL as the supplier of staff for the Quality Department. It contended that the word “sole” could qualify the scope of the services which are within the scope of the agreement: in other words, that the terms and conditions are “solely” relevant to the supply of temporary staff to DMUK’s Quality Department. I reject this argument. The natural meaning of section 1a is that the parties have agreed that the sole supply of temporary staff for the Quality Department shall be provided by MGL. The wording of the clause is not consistent with its meaning that the contract relates “solely” to the supply of workers for that department. Had that been the intended meaning, the clause would have been worded “This contract is solely for the supply …”, or equivalent.

In this context, it may also be noted that Section 1a of the Qualdep Contract is mirrored in the terms of Clause 3 of the APW Contract, which was undoubtedly an exclusive supply arrangement.

DMUK also contends that MGL “waived” any supply entitlement under the Qualdep Contract.

In relation to this contention, it is important to note that DMUK did not plead a case that the Qualdep Contract was actually terminated prior to 2 April 2013. Indeed, Mr Sullivan is, I consider, probably correct to say that, pursuant to CPR 16.5(5), DMUK’s failure to deal with MGL’s allegations as to the termination of the contract on 2 April 2013 amount to an admission of those allegations. Furthermore, I did not understand Mr Brown to pursue an argument that there had in fact been a termination of the contract before that date.

The case is accordingly one that, notwithstanding that the contract remained on foot, MGL had “waived” its right to sole supply thereunder. In this context, a “waiver” must mean an estoppel. I do not consider that DMUK has made out the ingredients of an estoppel. The only matter relied upon in its Defence is that MGL accepted an EPH list which had the Qualdep workers on it. I do not see how this establishes the “waiver” contended for. The election of an EPH did not, of itself, bring the APW Contract to an end, and still less the Qualdep Contract. No clear answer was given as to why, if the Qualdep Contract was not ended, the fact that certain workers had been engaged for an EPH should mean that MGL could not, thereafter, assert its rights to be the sole supplier of workers under that Contact. In any event, MGL did not voluntarily accept either election of an EPH, and protested the terms of each. I do not consider that this amounts to an estoppel, or a waiver, which prevents MGL from asserting its “sole supply” rights under the Qualdep Contract.

Mr Brown also sought to undermine MGL’s claim for damages under this head, suggesting that the continued performance of the Qualdep Contract would have involved significant costs. Ms Welding’s evidence was, however, that the continued servicing of the Qualdep Contract would not have involved anyone being on site. She said that the annual software licence could have been used for another client; and that the statistics and reporting obligation could have been performed by someone other than Mr Welding or Ms Evans, probably Mr Poole, for no additional salary. I considered that this evidence was reliable.

In the circumstances, I consider that MGL’s claim, based on the margin rate of £3 per hour set out in the Qualdep Contract, and the agreed payroll spreadsheet, is made out. The damages under this head are the sum of £20,196.15.

DMUK’s counterclaim is, as I have said, based on the allegation that, by rejecting the first notice of EPH – namely that of 20 June 2012 – MGL was in breach of contract or had acted in contravention of the Conduct Regulations, and that as a result of that conduct DMUK continued to employ workers through MGL until the end of the expiry of the second EPH, notified on 21 August 2012. DMUK claims the difference in the margin which would have been payable to Prime Time rather than to MGL in the period between 18 September 2012 and 23 November 2012.

I have doubts as to whether there was a breach of contract or contravention of the Regulations simply by reason of MGL’s contending that the notice of 20 June 2012 was invalid, in circumstances where there was no failure on MGL’s part to supply workers during the period of EPH notified on that date.

In any event, I do not accept that any breach of contract or contravention of the Conduct Regulations, if there was one, caused DMUK any loss. I consider that DMUK made a deliberate decision not to insist on the validity of its first notice of EPH, but instead to serve a new notice of EPH, which was to commence on 1 September 2012. DMUK did not decide how to conduct its dealings or what to regard as its contractual entitlements by reference to what it was told by MGL. It was aware of its ability to enforce its election of EPH on 20 June 2012 if it wished to do so, as is shown by the terms of Mr Williams’ letter to Lanyon Bowdler of 5 July 2012. It decided not to do so. That was the cause of margin being payable to MGL in the period between 18 September and 23 November.

DMUK’s counterclaim will, accordingly, be dismissed.

DMUK admits that a sum of £3797.37 is due by way of fees under the APW Contract. It had sought to set this sum off against the damages which it claimed by way of its counterclaim. As the counterclaim fails, this sum is due.

For the reasons set out above:

I invite the parties to agree the terms of an order embodying the above.