A case that went to the Court of Appeal a couple of weeks ago shows the kind of mess that parties get into. In AL Barnes Ltd vs Time Talk (UK) Ltd, a mobile phone retailer – Time Talk – was apparently content to engage a shopfitting contractor to work on particular sites without agreeing a price for that work. Unsurprisingly, a contract lacking such fundamental terms soon got into trouble, and within a few months Time Talk had concluded that this form of procurement was not a success.
Time Talk's response was to employ a firm of quantity surveyors to review Barnes' work. What the QSs discovered indicates why such loose commercial arrangements are fraught with difficulty and liable to abuse.
What happened, apparently, was that a project manager retained and paid by Time Talk was also receiving payment from Barnes, which Barnes was then invoicing for. The upshot was that the employer was paying twice for the same services.
By this time the relationship between the parties had, unsurprisingly, broken down and court proceedings ensued as Barnes sought to recover fees it believed were due from Time Talk for the work done on a quantum meruit basis.
The willingness to proceed without price certainty will keep the courts busy with quantum meruit disputes in the future
Barnes' position was subject to some scrutiny and the judge found at first instance that a director of Barnes had dishonestly assisted in the breaches of trust by Time Talk's project manager. He had, it seems, had a hand in the payment arrangements for project management fees.
Time Talk sought to recover the project management fees it had paid and was successful at first instance in that claim. However, Time Talk considered that the dishonesty of Barnes' director was such it should not have to pay anything. The court at first instance and the Court of Appeal disagreed with this. The contract itself was not criminal in nature – had it been, it would have rendered the parties' agreement unenforceable. The "arrangement" whereby the project manager contrived to be paid twice was not an integral part of the contract. Barnes was not therefore claiming in relation to an illegal activity. It was a straightforward claim for money for work done against which Time Talk was entitled to set off money that it had overpaid. In fact, the Court of Appeal had previously decided in a case involving a related Time company, Time Group, that a quantum meruit claim was still enforceable despite similar arrangements for paying project management fees.
At the end of the day, the issue that required resolution was the commercial balance between the two parties; that is, the value of the works done against the overpaid project management fees. On that basis, Barnes, despite the activities of its director, was the winner in the court proceedings.
The judge at first instance had denied Barnes' claim for recovery of its costs and instead given Time Talk 50% of its costs. This was the only element of the judge's decision with which the Court of Appeal disagreed. It decided that, as Barnes had been successful on the balance of claim and counterclaim, it was entitled to costs, save that they would be limited to 25% to reflect the amount of time spent at the trial on the issue of Barnes' director's dishonesty.
James Bessey is a partner specialising in construction dispute resolution at Hammond Suddards Edge, Birmingham.