Whittle Movers Ltd v Hollywood Express Ltd [2009] EWCA Civ 1189

[2009] EWCA Civ 1189

Case No A3/2009/0237

IN THE HIGH COURT OF JUSTICE

COURT OF APPEAL (CIVIL DIVISION)

Venue ON APPEAL FROM MANCHESTER DISTRICT REGISTRY

MERCANTILE COURT

His Honour Judge Raynor QC (sitting as a High Court Judge)

7 MA 40020

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 11/11/2009

Before

LORD JUSTICE WALLER

Vice-President of the Court of Appeal, Civil Division

LORD JUSTICE DYSON

LORD JUSTICE LLOYD

Between

Whittle Movers LtdAppellants

Hollywood Express LtdRespondents

(Transcript of the Handed Down Judgment of

WordWave International Limited

A Merrill Communications Company

165 Fleet Street, London EC4A 2DY

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Official Shorthand Writers to the Court)

Mr Edward Bartley Jones QC (instructed by Beachcroft LLP) for Appellant

Mr Paul Chaisty QC (instructed by Nexus Solicitors) for Respondent

Hearing Hearing date : 14 th October 2009

Judgment

Lord Justice Waller :

[1]Once again there is before the court a case in which the parties, in contemplation of the signing of a formal written long term contract, have commenced operating on the basis that the contract will be signed - performing services as contemplated by the terms being negotiated and being remunerated by a price contemplated by the terms being negotiated.

[2]At the trial before His Honour Judge Raynor QC the appellants (Whittle) were primarily contending that by conduct the parties had actually entered into the long term contract; the respondents (Hollywood) were primarily contending that by conduct the parties had entered into an interim contract terminable on 6 months’ notice. Neither put as their primary case the possibility that there was no contract with the consequences that would flow from that, although the possibility of no contract was raised from time to time as will appear hereafter. His Honour Judge Raynor QC, by a judgment handed down on 22nd December 2008, found that no long term contract had been entered into, and found that the parties had by conduct concluded an interim contract terminable on six months’ notice. He found Whittle bound by the prices negotiated for the long term contract.

[3]Whittle appeal and seek to challenge the finding of no long term contract with, it should be said, little enthusiasm. More forcefully they seek to set aside the finding of an interim contract. They seek a declaration that no contract was concluded, and that Whittle are entitled to a restitutionary remedy. They claim that Hollywood has been unjustly enriched by only having paid prices fixed by reference to a long term contract during the relatively short period for which Whittle supplied services.

[4]The respondents (Hollywood) through Mr Chaisty QC(a) seek to uphold the judge’s finding that no long term contract was entered into;

(b) seek to uphold the judge’s finding of an interim contract; and

(c) maintain that it is not open to Whittle to contend for “no contract” and a restitutionary remedy in that (it is said) their case at the trial was that there was a contract and they should not be allowed to change tack now.

The Facts

[5]There is no challenge to the judge’s findings of fact and the documents speak for themselves. It is possible to summarise the position as follows:- i) Hollywood were a subsidiary of United Cinemas International (UK) Limited (UCI) and prior to January 2006 undertook the distribution and warehousing services for the UCI cinema chain and Blockbuster Stores in relation principally to food and drink products and subcontracted the same to Trailers Limited (Trailers). In 2004 the Terra Firma Group purchased the UCI and Odeon cinema chains. Odeon products were distributed differently from those of UCI and what was envisaged was an integration of the operations. ii) The decision was that the distribution would take place through Hollywood, with Hollywood subcontracting the same to a third party. Hollywood thus invited tenders from entities including Whittle and Whittle were the successful tenderers. The invitation to tender was expressed to be “subject to contract” and clearly contemplated the preparation and execution of a formal written agreement. Express terms of the tender included the following:- Clause 2.4 headed ‘Acceptance of the Tender Response’ included the following:

“Tenderers will be notified by the Joint Procurement team of the outcome of the tender process at the earliest opportunity. An initial draft of a formal contract is referred to in Appendix 6 and included with this tender. The successful tenderer will receive as a part of this tender process, the final draft of the contract, which Odeon or UCI would like to enter into. Prior to completion of this contract a non binding ‘Letter of Intent’ confirming that Odeon and UCI wish to award a contract to the winning tenderer and a time line to complete the contractual negotiations, will be issued. Odeon and UCI may require the successful tenderer to start supplying products and services before these contractual negotiations are completed. The winning tenderer will be asked to finalise its suggested delivery schedule with the Odeon and UCI Senior Ops team prior to commencement date. The terms of such supply, however, will be subject to contract. The commencement date we are aiming for will be the second week in January 2006, subject to confirmation from the winning tenderer that all discussions with the present provider is completed with special reference to TUPE.”

In clause 2.6.2 it was provided:- “This tender creates no obligation upon Odeon and UCI to enter into any contract with any tenderer or any other person, and Odeon and UCI reserve their right to withdraw this tender at any time, without providing any reason to prospective tenderers . . .” Clause 2.6.3 stated:- “Following the non-binding Letter of Intent referred to in 2.4 above, a formal contract incorporating the terms of the successful Tender Response will be finalised, and once signed this Tender contract will supersede all prior documents and discussions in respect of the supply of logistics including this Tender and the Tender Response.” Clause 2.6.4 “The contract will be governed by English law, and will contain terms, conditions and warranties that address the topics normally covered in a long term supply agreement, including without limitation, maintenance of standards, termination, insurance, etc.” Clause 2.4 headed ‘Acceptance of the Tender Response’ included the following: In clause 2.6.2 it was provided:- Clause 2.6.3 stated:- Clause 2.6.4 iii) The judge described other terms of the invitation to tender and the Whittle’s tender in the following way:- “14….(c) It was stated in clause 1.2 that a one, three or five year contract would be awarded to the winning tenderer. (d) The tenderers were instructed to base their tenders on six specified assumptions relating to volumes and percentages of frozen products, although in the event the claimant never undertook the distribution of frozen products. They were asked to set out a separate structure for one, three and five year options. (e) Appendix 2 set out full particulars of over 130 cinemas in the UK and the Republic of Ireland for which deliveries were to be made, plus 4 Blockbuster sites. Appendix 3 listed the product lines. (f) Appendix 6 contained an initial draft of the formal contract, which was stated to form the “basis for contract negotiations”. Clause 8.1 of that draft made provision for a fixed fee per contract year, and clause 8.2 made provision for an increase or decrease in that fee, consequent upon increase or decrease in the number of delivery points. 15. On 28 October 2005 the claimant submitted its written response to the invitation. This again was expressed to be “Subject to Contract”, and the following were its principal features:- (a) In its appendices were set out what were described as the claimant’s “Fixed price matrices for a dedicated distribution service for 1, 3 and 5 year contracts”. (b) It was stated that if successful, the claimant would hope to employ all Trailers’ operating management and staff, making for a “seamless transition” in the distribution arrangements, the claimant stating as well that it would comply with the TUPE regulations (clause 2.1). (c) Appendix 1.2 set out the 5 year contract pallet rates, which are the most material for present purposes, by reference to annual volumes of 10,000, 15,000, 20,000 and 25,000 pallets, the pallet rate for 20,000 pallets being £46 or £920,000 per annum, and for 25,000 £44 per pallet of £1.1m per annum, this being the only instance of a £44 rate being quoted in the appendices, although £46 was also quoted as the pallet rate applicable to an annual volume of 25,000 for a three year contract. It will thus be seen that, not surprisingly, increases in volume and contract length resulted in lower tendered pallet prices. It was made clear in the appendices that the quoted prices were variable, having regard to changes in number of sites and product volumes.” iv) There were negotiations during November 2005 during which Whittle were persuaded to tender for a six year contract and on a basis that involved undertaking to distribute the Blockbuster products for one year free of charge. v) Further negotiations took place and ultimately on 29th November 2005 a letter of intent was issued in the following terms:- “Letter of intent between Hollywood Express Limited (“HE”) and Whittles Movers Limited (“Whittles”) regarding provision of distribution services Please accept this letter as confirmation of HE’s intention to enter into contract with Whittles for the supply of distribution services. The implementation of this letter of intent is subject to the negotiation and execution of mutually satisfactory and legally binding documentation. The contract will be on the terms of the draft contract attached to HE’s invitation to tender, amended to take into account the commercial details agreed during the tender process. The first draft of the contract will be issued by HE’s legal team. For the avoidance of doubt, this letter of intent does not bind either party to enter into a contract for supply of distribution services, and any work undertaken by either party in anticipation of such contract shall be at that party’s cost and risk . . .” vi) Mr Fleetwood for Whittle signed that letter. At this stage the date for commencement of the long term contract was 9th January 2006. [At the trial Mr Fleetwood gave evidence that he thought a long term contract had come into existence on 29th November. That evidence was unsurprisingly rejected]. vii) In December 2005 Mr Hobbs for Hollywood told Mr Fleetwood that Whittle could proceed with arrangements under “TUPE” for taking over the Trailer contracts. Although Mr Fleetwood’s evidence was to the contrary, the judge found he agreed that this was at Whittle’s risk and this is consistent with the letter of intent. viii) On 2nd December there was faxed to Whittle a written “interim agreement” relating to distribution services previously carried out by Trailers in relation to 36 UCI cinemas and 4 Blockbusters and that is in contrast to the approximately 130 cinemas the subject of Whittle’s tender. The interim agreement, which was signed and returned by Mr Fleetwood, provided as follows:- “We write further to our letter of intent of 29 November 2005. That letter related to the tendered business of providing distribution services to the UCI/Odeon combined circuit. It is our present intention that this service will commence on 23 January 2006. As you are aware, HE’s present provider of distribution services, Trailers limited, has given notice of termination to expire on 16 December 2005. This letter is to confirm our request that Whittles provides to HE an interim service between 16 December and the start of the new contract on the terms of the current agreement between Trailers Limited and HE as attached, save as follows.” Four terms were then stated, and the document concluded:

“This letter contains the entire agreement between us with respect to its subject matter and supersedes and cancels any prior representation, understanding and commitment (whether oral or written) between us with respect to its subject matter . . . If the above terms are acceptable, please countersign this letter agreement in the space provided below and fax it back to Samantha Barr, Commercial Counsel . . .”

On 5 December 2005 Mr Fleetwood signed and returned the document, thereby again expressly confirming his agreement to its terms (p 200). “This letter contains the entire agreement between us with respect to its subject matter and supersedes and cancels any prior representation, understanding and commitment (whether oral or written) between us with respect to its subject matter . . . If the above terms are acceptable, please countersign this letter agreement in the space provided below and fax it back to Samantha Barr, Commercial Counsel . . .” ix) During December 2005 and January 2006 the drafting of the long term contract was continuing within UCI/Odeon/Hollywood and Whittle were supplying answers to points as they arose. At a meeting on 17th January delivery and loading schedules were agreed and Mr Fleetwood was told the draft contract should be agreed by Odeon/UCI that week. x) On 18th January Mr Fleetwood was notified that a Mr Roberts had now “picked up” the contract negotiations and he asked for a meeting on 27th January, i.e. four days after the contract as it then was in draft provided for commencement. A meeting was in fact arranged for 3rd February at which Mr Roberts was to seek to understand “the commercial points before issuing the first draft of the contract.” On 20th January or thereabouts it was appreciated within UCI/Odeon/Hollywood that because of the termination of Hollywood’s lease the contract would not be for the full six years. xi) On 23rd January, notwithstanding the lack of any written contract or indeed any draft contract, Whittle commenced performing the services that were the subject of their tender. The judge found that at this stage the contract terms were still being negotiated relying on correspondence dealing among other things with the fact that a six year contract was no longer on the cards. He indeed sets out matters still being negotiated in February and March. xii) On 29th March the pallet volume was renegotiated to 22,500 at a price of £46 per pallet for a five and a half year contract. xiii) Whittle had originally invoiced on the basis of what they thought was agreed as at 23rd January, i.e. a volume of 25,000 pallets at £44 per pallet, with Blockbusters free of charge for a year, a 2% tolerance over 25,000 and additional pallets at £41 per pallet. Following the meeting on 29th March the appellants varied their invoices to reflect what had by then been negotiated, i.e. 22,500 at £46 per pallet for a five and a half year contract and Blockbusters to be charged for. xiv) A draft contract was only finally supplied by the respondents on 8th May 2006. The terms of that contract were then the subject of negotiation. There was a hiatus described by the judge in paragraph 67 and negotiations resumed in July. The detail of the negotiation is set out in the judge’s judgment. It suffices to say that the judge accepted and it is not challenged that in a conversation on 27th or 28th September 2006 the parties were agreed as to all matters to be contained in the contract and on 3rd October Mr Fleetwood emailed Mr Roberts asking him to email “the proposed contract” to him for checking over. Mr Fleetwood chased for that contract by email of 17th October. xv) No contract came because Odeon/UCI had decided to put Hollywood up for sale. Whittle were invited to submit a proposal for acquisition but that came to nothing. xvi) By e-mail of 19th January Odeon/UCI told Whittle that “the contract had not been signed, only a letter of intent and an interim agreement at the end of 2005. The interim agreement was based on the old Trailers’ contract which could be terminated by either side based on 6 months notice.” On 24th January 2007 Mr Fleetwood protested, stating that as far as Whittle were concerned “a contract came into existence on 23rd January 2006 which replaced the interim arrangement . . . and we have been trading in accordance with the terms of that contract since that date . . . ”. xvii) Solicitors’ letters were exchanged to which I will return. Ultimately by letter of 22nd May 2007, Hollywood gave six months’ notice determining the interim agreement dated 5th December, the agreement they were asserting covered the relationship under which the appellants had been acting since the 23rd January 2006. The judge’s approach

Clause 2.6.4

[6]The judge set out the legal principles he was to apply in paragraphs 87 to 91. He deals with the cases where the negotiations have been “subject to contract” and says:- “89. In this case I find that the intention of the parties at the time of the submission of the tender documents was that there should not be a legally binding contract for the tendered distribution services until the formal contract document had been drawn up, agreed and executed on behalf of the parties. So much it seems to me is plain from the express terms of paragraphs 2.4 and 2.6 of the Invitation to Tender, as confirmed by the terms of the letter of intent signed on behalf of the parties. That result indeed accords to my mind with common sense. What was contemplated was a long term contract worth millions of pounds, to be entered into by on one side with a subsidiary of a very substantial commercial organisation, the Odeon and UCI Group. It would be extraordinary, but not impossible, for such an arrangement to be made informally. The formal contract was of course never executed, and in those circumstances, there being no doubt about the initial intention, it seems to me that for there to be found to be a legally binding contract, it would have to be established that either it can be objectively ascertained that the initial intention has changed, or subsequent events have occurred whereby the non-executing party is estopped from relying upon the lack of execution. 90. A similar result would follow simply from the fact that the parties were agreed that negotiations were “subject to contract”, that of course being a term of art. In that context, passages in the judgment of Lewison J in Confetti Records v Warner Music UK

[2003] All ER (D) 61

are instructive. In paragraph 66 he stated:- “In my judgment, the words ‘subject to contract’, at least in the field of land law, do have a definite and ascertained legal meaning. They are relied on everyday to prevent contracts coming into existence . . . although the phrase may have originated in the context of sales and leases of land, it has a more general application in commerce generally.” In paragraph 100 he stated:- “In the ordinary way, once negotiations have begun ‘subject to contract’ that label governs all subsequent communications between the parties unless the label is expunged by express agreement or necessary implication.” The question thus on that basis is: has the claimant shown that the ‘subject to contract’ label has been expunged by express agreement or necessary implication.” “In my judgment, the words ‘subject to contract’, at least in the field of land law, do have a definite and ascertained legal meaning. They are relied on everyday to prevent contracts coming into existence . . . although the phrase may have originated in the context of sales and leases of land, it has a more general application in commerce generally.” “In the ordinary way, once negotiations have begun ‘subject to contract’ that label governs all subsequent communications between the parties unless the label is expunged by express agreement or necessary implication.”

[7]He then identified the issues he had to determine in this way:- “92. It seems to me that there are five issues that fall to me to be determined:(a) Was a fixed term six year contract concluded on 23 January 2006?

(b) Alternatively, was a fixed term five and a half year contract concluded on 27 or 28 September 2006?

(d) Absent a fixed term contract, what was the legal relationship governing the dealings of the parties after 23 January 2006? And

(e) If their dealings were carried out under an interim contract, how was it determinable, and, if on notice, was six months notice inadequate?” (a) Was a fixed term six year contract concluded on 23 January 2006? (b) Alternatively, was a fixed term five and a half year contract concluded on 27 or 28 September 2006? (d) Absent a fixed term contract, what was the legal relationship governing the dealings of the parties after 23 January 2006? And (e) If their dealings were carried out under an interim contract, how was it determinable, and, if on notice, was six months notice inadequate?”

[8]Thereafter he determined first that no fixed term contract had been concluded as at 23rd January in these terms:- “95. I am afraid that I regard the claimant’s case in this regard as highly implausible and I reject it for the following reasons: first I am perfectly satisfied that there was no concluded fixed term contract on 23 January 2006. The formal contract envisaged by the tender documents had not been produced, and it is impossible to find that the intention that a formal fixed term contract should be executed before the parties would be bound had changed. There was no such agreement made expressly or, in my judgment, by necessary implication. On the contrary, the conduct of the parties after 23 January 2006 is consistent only, in my judgment, with the realisation that no such contract had been agreed and executed, and that it needed to be. I refer to Mr Fleetwood’s memorandum of 2 February and the continuing negotiations thereafter, which are to my mind wholly inconsistent with there being already a binding six year contract as alleged, with merely voluntary concessions on the part of the claimant being given in order to keep good relations with the defendant so as to obtain a definitive document.96. Nor am I satisfied that the parties, when viewed objectively, were agreed, even subject to contract, as alleged by the claimant. True it is that the essential terms of the claimant’s offer were known, and that there was an agreement in principle regarding the first year volumes. However, I do not believe that on 23 January 2006 the defendant’s representatives had ever agreed that the minimum volume, come what may over the following six years, would be 25,000. Mr Hobbs in paragraph 52 of his witness statement refers to the Odeon/UCI business as follows:- “We were hoping for an agreement on a scale basis where things could be adjusted up or down giving us complete flexibility. The business did not stay static – we had cinemas closing, others opening, so it would never suit our business model simply to agree to any level of service that was set in stone.”

97. In addition, I note that on 11 January 2006 Mr Fleetwood, at Mr Blackburn’s request, supplied the completed spreadsheet details at page 1/309, which included pricing information in respect of volumes from 15,000 to 22,500 inclusive. Whilst I recognise that an agreement was eventually reached (I find subject to the execution of a formal contract) for a minimum fixed fee of £920,000 over the term of the agreement, based on a minimum volume of 20,000 pallets, I find that no such agreement had been reached in respect of a volume of 25,000 prior to or by 23 January 2006. As will be seen, I find that a perfectly workable interim contractual arrangement was entered into between the parties on 23 January, and I will set out its terms in due course.” “We were hoping for an agreement on a scale basis where things could be adjusted up or down giving us complete flexibility. The business did not stay static – we had cinemas closing, others opening, so it would never suit our business model simply to agree to any level of service that was set in stone.”

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

[9]- “99. Again I reject this case. I find that at all times, viewed objectively, the parties proceeded on the basis that a formal fixed term contract had to be executed before the parties would be bound by such an arrangement. I find nothing in the evidence which would justify a finding that their initial intention had changed by the end of September, nor as will be seen, does estoppel assist the claimant here. All that occurred on 27 September was that the parties entrusted with the negotiations reached an agreement, but that I find was still subject to the execution of a formal contract, as I find Mr Fleetwood recognised when he asked for the “proposed contract” and chased for it thereafter on 17 October 2006.”

Was the judge right in his conclusions as to long term contract?

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

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

Was there some other contract governing the period 23rd January 2006 to 24th November 2007?

[12]The judge’s approach was as follows:- “I now deal with what was the legal relationship governing the dealings of the parties from 23 January 2006 to 24 November 2007. The defendant (Hollywood)’s pleaded case is that the parties operated under the terms of the interim agreement dated 2 December 2005, varied so as to incorporate the actual pricing and service specifications agreed between them. Alternatively, they say that there was no contract in existence between the parties, but accept that the claimant was entitled to reasonable remuneration and on this basis say that the arrangement was either determinable forthwith or upon reasonable notice not being longer than six months. ”

Criticism of the judge’s approach

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

[14]Furthermore although the judge was referred to British Steel Corporation v Cleveland Bridge and Engineering Co Ltd

[1984] 1 All ER 504

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

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

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

[17]Mr Chaisty having not pressed the application of the interim contract of 5th December 2005, did not before the judge or before us suggest any other express agreement for the period post-23rd January 2006. His argument was that such an agreement was made by implication. The difficulty with that contention is that no contract will be implied unless it is necessary to do so [see Baird Textile Holdings v Marks and Spencer

[2001] EWCA Civ 274

paragraph 18]. In that paragraph is cited a passage from a judgment of Bingham LJ in The Aramis [1989] 1 Ll L R 213 at 224 which puts the matter in this way:- “. . . it would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied upon is no more consistent with an intention to contract than with an intention not to contract. It must, surely, be necessary to identify conduct referable to the contract contended for or, at the very least, conduct inconsistent with there being no contract made between the parties. Put another way, I think it must be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract.”

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

[19]In my view not only was there no necessity to find some executory contract, there was a difficulty and thus no necessity in finding even what Goff J called an “if “ contract because terms as to performance were still under negotiation. All negotiations were subject to contract and no binding arrangement was to come into existence until a formal document was signed.

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

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

Was it arguable that Hollywood had been unjustly enriched?

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

[23]In my view Mr Chaisty was correct in what I understood to be his position. Both parties were in one sense taking the risk that a long term contract would not be signed but Hollywood wanted services before that contract had concluded, accepted those services and were bound to pay a reasonable sum for them. If the sum received was reasonable then Hollywood would not have been unjustly enriched but if Whittle received less than a reasonable price then Hollywood would have been unjustly enriched. It appears at least arguable that Whittle may have received less than a reasonable price. Is it open to Whittle to assert in the court of appeal “no contract” and seek a restitutionary remedy?

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

[25]Prior to commencement of proceedings, Whittle contended primarily that the service which they had provided had been provided under a long term contract, albeit unsigned. But, at the conclusion of the letter of 26th February 2007 written by their solicitors, the assertion was as follows:- “If quasi contract were relevant (which it is not) then Whittle will be entitled to recharge for all the services it provided to your client at a proper rate (reflecting on this hypothesis the fact that there was no fixed term contract in existence expiring on 19th June 2011 at the earliest) and to recover damages to reflect proper amortisation of the capital costs incurred by Whittle (on the basis that the contract extended to 19th June 2011). Put simply, on your client’s version of events, it has been grossly “unjustly enriched”.” (See page 740).

[26]In their points of claim, once proceedings commenced, Whittle asserted that it was common ground that there was a contract and asserted that a long term contract had come into existence. Alternatively it asserted that a contract had come into existence only terminable on notice, such notice to be sufficient to enable Whittle to amortise the capital cost and risk it took in gearing up. That there was a long term contract was very much their primary case, as appears from the different alternative bases on which they asserted that it was made. But, in paragraph 51 it was pleaded as a further alternative that:- “Whittle must be entitled to charge Hollywood for the difference between what Hollywood has presently paid since the commencement of delivery services to it on 23rd January 2006 and what would be the true market cost of those services were the contract one terminable on six months (or some longer period) of notice.” On being asked for further information in relation to that plea, Whittle’s response was:- “This is a quantum meruit or restitutionary claim based upon Hollywood having received services at below what should have been the true market cost of those services, were the arrangements between the parties truly terminable on six months’ (or some longer) period of notice. In these circumstances Hollywood has been unjustly enriched by receiving delivery services at below their true market cost.” (See page 195/6 of the bundle)

[27]In his skeleton argument on behalf of Whittle for the trial, Mr Bartley Jones identified the issues in the case. The first issue raised the question whether there was a fixed term contract expiring on 19th June 2011 or alternatively 23rd January 2012. Paragraphs 2 and 3 of the opening read as follows:- “2. A secondary issue may be, on Hollywood’s case, whether there was any contract at all. However Hollywood’s primary case appears to be that there was a contract – albeit one which Hollywood could terminate in manner in which it did. 3. In the alternative to its primary case, Whittle advances cases based upon(a) the proposition that any contract between the parties could only be terminated on reasonable notice and that six months’ notice was most certainly not reasonable and

(b) a quasi-contractual entitlement (it being Whittle’s case that it supplied delivery services at a rate per pallet, which was appropriate only to a fixed term contract for at least five years, and that a far higher rate per pallet would properly have been chargeable had the relationship between the parties been one which could be terminated immediately or on six months’ notice).”

[28]That opening skeleton referred, in paragraph 98, to what it described as:- “Finally there is the quasi-contractual claim. If there was no contract at all then this is a case of “anticipated contract” which did not materialise. Services have undoubtedly been delivered to and accepted by Hollywood. As indicated in Goff and Jones,The Law of Restitution 7th Ed 2007 at 26-007, the court, in these circumstances can order the recipient of the services to pay their proper value (see in particular the decision of Robert Goff J in British Steel Corporation v Cleveland Bridge & Engineering Co Ltd. . .). Hollywood must pay for the delivery it has received on a quantum meruit. A reasonable sum for the work done on the assumption there was no contract would, Whittle says, be £58 per pallet. In fact Hollywood paid a lesser rate . . . .”

[29]Mr Chaisty in his skeleton prior to the commencement of the trial essentially took the point that no long term contract had been agreed and ultimately in paragraph 11 said this:- “In short, C cannot establish that a contract was entered into between C and D beyond the initial interim agreement. Services were provided by C after 23/1/06 in the hope that a contract would be finally agreed. It was at all times clear that either party would be free to withdraw from the negotiations. C acted at its own risk. The risk was a commercial one which C was willing to take. The approach reflected in the early correspondence in November 2005 from C seems to have affected its overall attitude. C has seen a contract when no contract exists. It has chosen to ignore the basis on which it agreed that negotiations would proceed and the communications which have taken place.”

[30]In paragraph 13 Mr Chaisty described Hollywood’s position as follows:- “As at May 2007 D was entitled to bring the relationship to an end. So far as the interim agreement continued to apply to UCI Cinemas it could do so on six months’ notice. Further, generally no contract existed between the parties, which prevented D from terminating the relationship. The parties knew and proceeded on the basis that no contract had come into operation. Either the six month term from the interim agreement was impliedly agreed or such a term arose from the convention of the parties. Any written interim agreement for the supply of services after 22/1/06 would be subject to an implied term of termination by reasonable notice. Six months was the agreed period for the interim agreement. There is no basis for C to fairly contend that longer than six months was appropriate. . . .”

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

[32]When final speeches began Mr Bartley Jones commenced by referring to the fact that Whittle had charged only £44 a pallet, a price fixed by reference to a long term contract. He then said:- “That . . . informs a number of issues . . . It informs the issue: was there a fixed term contract? It informs the issue, if my lord were not to find there was a fixed term contract but some other contract of the issue of reasonability of notice and if my lord were to find there was no contract at all – ” at which stage

the judge intervened to say:

“I will not find that.”

[33]Mr Bartley Jones responded: “Right, but can I just remind you, just for the avoidance of doubt for that final paragraph in the judgment that we bring the argument that we have a default of restitution, if I may? [The transcription, as Mr Bartley Jones submitted to us, appears to be a little garbled, but the sense is clear.]

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

[35]There is then an interchange on which Mr Chaisty relied at page 1105. The interchange is recorded as follows:- “Mr Bartley Jones: Some other contract, yes, interim contract, to which we would ask two questions: Why and does it matter, because if there is that interim contract then the first theme I indicated means they are taking the price on the basis of a fixed term and I will come back to that. And the fourth possibility of course is there is no contract at all. Now – The judge – nobody is going to be arguing for that. Mr Bartley Jones: Nobody is going to be arguing that, though I would make the forensic point that the defendants’ case does seem to have varied from time to time and The judge: well I do not think it lies in your mouth necessarily to say that. Mr Bartley Jones: Well my lord it does actually . . .” Mr Bartley Jones: Well my lord it does actually . . .”

[36]Further at 1106, again

the judge said:

“I’m going to find there is a contract Mr Bartley Jones: Mm The judge: I’m going to find that a contract came into existence on 23rd January and that, I think, is going to be now – Mr Bartley Jones: Yes The judge: - common ground, and the question is what are the terms of - Mr Bartley Jones ‘yes’, The judge - that contract, and then the question is - is there agreement of all the other terms, has that got any and if so what force. Mr Bartley Jones: Yes The judge: and that agreement crystalises at the end of September. Mr Bartley Jones: Yes The judge: That is the way I look at it. Mr Bartley Jones: Yes, and that is the way my submissions are going to be framed, my lord. On the law, the self-evident point is that whether a contract has or has not arisen is a matter to be analysed objectively. . . . .”

Mr Bartley Jones: Mm Mr Bartley Jones: Yes Mr Bartley Jones: Yes

Mr Bartley Jones: Yes

[37]Later at 1121 the transcript records, again, the judge saying:- “I agree, and it is common ground now between you and Mr Chaisty that a contract came into existence, not in the terms of the letter of intent, on 23rd January 2006. Mr Bartley Jones: Yes, by what happened. The judge: And I think it is going to be common ground as well that a contract came into existence on 23rd January, not in the terms of the interim agreement. Mr Chaisty is going to say that it was an interim contract but it is not on the terms set out in that document. Mr Bartley Jones: Can I just finish here on the law, . . . .” Mr Bartley Jones: Can I just finish here on the law, . . . .”

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

[39]When Mr Chaisty came to make his final submissions, he started as follows:- “My lord, the bullet points to start with before I go into the detail of our submissions is that there is no fixed term contract. Either between 23rd January and the end of November 2007 there was no contract or there was an interim contract, i.e. a contract which was pending the negotiations between the parties – The judge: well, I’m going to find there was a contract. Mr Chaisty – the formation of a fixed contract The judge – I’m going to find there was a contract. Mr Chaisty – well (inaudible) – The judge: I’m open to the persuasion . . . well, I’m open to the argument that it was an interim contract. Mr Chaisty: Yes . . .” (see page 1158 F-H) Mr Chaisty – the formation of a fixed contract Mr Chaisty – well (inaudible) –

Mr Chaisty: Yes . . .” (see page 1158 F-H)

[40]Immediately thereafter, at 1159B, Mr Chaisty is recorded as saying:- “Well, either there was no contract and your lordship has made that point, with respect, or there was an interim contract pending negotiations of the kind it is clear what I mean by that. The judge: An interim agreement for the provision of services – Mr Chaisty: Yes. . .” Mr Chaisty: Yes. . .”

[41]Towards the conclusion of his submissions Mr Chaisty is recorded as saying:- “That leaves only in our submission what is there in the middle of all of this after the 23rd January because we say there certainly was not a fixed term contract on any analysis. At best, either there was no contract, and the invitation to tender does say that the supply will be subject to contract, which might lead to the proposition that there is not a contract, or there is a contract and then the question is is it terminable, does it require notice? The words “subject to contract” in the tender might suggest that not even any notice is required, but I do not really need to argue that because we did give six months. We say we were not necessarily obliged to do so – we could probably have given a month or two months, but we gave six months.”

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

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

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

Conclusion

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

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

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

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

Lord Justice Dyson :

[49]I agree.

Lord Justice Lloyd :

[50]I also agree.