“We have deliberated at considerable length on how best to secure the reassurance needed. Our suggestion is that the governing body (or Pat Goodhead on its behalf) should write to the Council/Steve Beynon requesting confirmation on certain matters”
“You have requested that we provide an indication of our position should you wish to terminate the Contract and to purchase the Equipment ... We would be willing to consider such a request (without any obligation to accept) and, in our current opinion, acceptance of such a request by us would likely require you to pay to us: (a) a sum equal to the aggregate of all the Hire Charges (as defined) remaining to be paid up to the Expiry Date, discounted at a percentage rate to be agreed between us for accelerated payment; plus (b) a sum as may be agreed between us that represents the anticipated value of the equipment as at the Expiry Date, discounted at a percentage rate to be agreed between us to reflect early receipt; plus all applicable VAT, costs and expenses”
“those accounting practices which a local authority are required to follow by virtue of any enactment, or which, so far as they are consistent with any such enactment are generally regarded, whether by reference to any generally recognised published code or otherwise, as proper accounting practices to be followed in the keeping of the accounts of local authorities, either generally or of the description concerned”
“A purported lawful authority to detain may be impugned either because the defendant acted in excess of jurisdiction (in the narrow sense of jurisdiction) or because such jurisdiction was wrongly exercised. Anisminic establishes that both species of error render an executive act ultra vires, unlawful and a nullity. In the present context, there is in principle no difference between (i) a detention which is unlawful because there is no power to detain and (ii) a detention which is unlawful because the decision to detain, although authorised by state, was made in breach of a rule of public law. For example, if the decision to detain is unreasonable in the Wednesbury sense, it is unlawful and a nullity. The importance of Anisminic is that it established that there was a single category of errors of law, all of which rendered a decision ultra vires.”
“The reason why a transaction entered into beyond the powers of a public body is properly described as a nullity is because such a body has no capacity in law to act beyond the powers given to it by statute. Those powers comprehend not only what the subject-matter of its decisions may be, but, by implication, how its decisions on the permissible subject-matter should be taken.”
“Whatever the answer to that question, there is clearly a real and urgent need in the interests of the continuation of dealings between banks, credit providing institutions and local authorities for a solution to this problem to be found. Whether that solution should be one analogous to the principles which apply to third parties dealing with the directors of companies but in ignorance of their excess of actual authority, as identified in the Rolled Steel case, or one which is based on the flexibility of remedy available in judicial review proceedings, or some other solution, may be a matter for debate, but, as English law on the exercise of powers by public bodies has now developed, it is certainly a matter for Parliament and not for the Courts.”
“In my judgment, much of the confusion that has crept into the law flows from the use of the phrase ‘ultra vires’ in different senses in different contexts. The reconciliation of the authorities can only be achieved if one first defines the sense in which one is using the words ‘ultra vires.’ Because the literal translation of the words is ‘beyond the powers,’ there are many cases in which the words have been applied to transactions which, although within the capacity of the company, are carried out otherwise than through the correct exercise of the powers of the company by its officers; indeed, that is the sense in which the judge seems to have used the words in this case. For reasons which will appear, in my judgment, the use of the phrase ‘ultra vires’ should be restricted to those cases where the transaction is beyond the capacity of the company and therefore wholly void. A company, being an artificial person, has no capacity to do anything outside the objects specified in its memorandum of association. If the transaction is outside the objects, in law it is wholly void. But the object of a company and the powers conferred on a company to carry out those objects are two different things . . . If the concept that a company cannot do anything which is not authorised by law had been pursued with ruthless logic, the result might have been reached that a company could not (i.e., had no capacity) to do anything otherwise than in due exercise of its powers. But such ruthless logic has not been pursued and it is clear that a transaction falling within the objects of the company is capable of conferring rights on third parties even though the transaction was an abuse of the powers of the company: see, for example, In re David Payne & Co Ltd[1904] 2 Ch 608 . It is therefore established that a company has capacity to carry out a transaction which falls within its objects even though carried out by the wrongful exercise of its powers. If the transaction is beyond the capacity of the company it is in any event a nullity and wholly void: whether or not the third party had notice of the invalidity, property transferred or money paid under such a transaction will be recoverable from the third party. If, on the other hand, the transaction (although in excess or abuse of powers) is within the capacity of the company, the position of the third party depends on whether or not he had notice that the transaction was in excess or abuse of the powers of the company.”
“I know of no authority for the proposition that the ultra vires decisions of local authorities can be classified into categories of invalidity. I do not think that it is open to this court to introduce such a classification. Where a public authority acts outside its jurisdiction in any of the ways indicated by Lord Reid in Anisminic Ltd v Foreign Compensation Commission[1969] 2 AC 147 , 171 the decision is void. In the case of a decision to enter into a contract of guarantee the consequences in private law are those which flow where one of the parties to a contract lacks capacity. I see no escape from this conclusion. Furthermore this conclusion seems to me to accord with the decision of the House of Lords in Wandsworth London Borough Council vWinder[1985] AC 461 . …… I do not consider the present law to be satisfactory. I say nothing about the merits of this case which have not been investigated. But there may be cases where it is beyond argument that a third party has entered into a contract with a public body in ignorance of any procedural defect which may later entitle the public body to claim that the contract was made ultra vires and so reject liability under it. But if, as I believe there to be, there is only one category of ultra vires decisions where a local authority is concerned I see no room for a judicial discretion”
“Before using the phrase ‘ultra vires’ or the words ‘void’ and ‘nullity’, it is necessary to pause and consider the breadth of the meaning which one is giving them. It is not correct to take terminology from administrative law and apply it without the necessary adjustment and refinement of meaning to private law. Where private law rights are concerned, as in the present case, the terminology must be used in the sense which is appropriate to private law …. Private law issues must be decided in accordance with the rules of private law. The broader and less rigorous rules of administrative law should not without adjustment be applied to the resolution of private law disputes in civil proceedings. Public law, that is to say, the law governing public law entities and their activities, is a primary source of the principles applied in administrative law proceedings. The decisions of such entities are the normal subject matter of applications for judicial review. When the activities of a public law body, or individual, are relevant to a private law dispute in civil proceedings, public law may in a similar way provide answers which are relevant to the resolution of the private law issue. But after taking into account the applicable public law, the civil proceedings have to be decided as a matter of private law. The issue does not become an administrative law issue; administrative law remedies are irrelevant.”
“I can see no sound reason why the position should be any different where what is in issue is the validity of a commercial private law transaction between a corporation which is a public body and a third party. The existence of public law remedies for breach of public law duties should make no difference to the private law consequences of ultra vires (want of capacity), on the one hand, and breach of duty in respect of a transaction within the capacity of the corporation, on the other hand”
“one may safely assume that no court is going to be astute to allow public authorities to escape too easily from their commercial commitments. That should particularly be the case where, as here, legitimate expectations have been aroused in the other party (who clearly entered the contract in good faith), where the relationship between the parties is essentially of a private law character, where it is the authority itself which is seeking to assert and pray in aid its own lack of vires, and where that lack of vires is suggested to result not from the true construction of its statutory powers but rather from its own Wednesbury irrationality. The burden upon the authority in such a case must be a heavy one indeed. It does not seem to me that the council came within measurable distance of discharging it here.”
“instances where a local authority unlawfully sought to set in place arrangements which would allow it to make payments above a permitted statutory maximum.”
“Ultra vires is not, of course, the only ground on which a court may quash an administrative decision, but it would be wrong for a court to do so in such a way as to nullify a contract made between a public body pursuant to a legal power and a person acting in good faith, except possibly on terms which adequately protect that person’s interest.”
“Where a lease is classified as a finance lease, then the substance of the transaction is considered to be the same as if the authority had purchased the asset and financed it through taking out a loan. The authority therefore recognises its interest in the asset together with a liability for the same amount. The lease payments are then treated in a similar way to loan repayments, being split between the repayments of the liability and a finance charge.”
“One of the key tests for classification of finance leases is that lease payments are substantially all of the fair value of the asset. The council has defined substantial as being where minimum lease payments are at least 70% of the fair value of the leased asset. All other leases are classified as operating leases.”
“It is highly uncertain whether the building could be sold or re-let on terms that would represent a value equivalent to the lost income stream and, in any event, the lead time required to identify a subsequent user of modular buildings to a compatible design, which would allow the building to be re-utilised without major refurbishment, would be very substantial, if it could be achieved at all”
“the lease term is for the major part of the economic life of the asset even if title is not transferred”
“the leased assets are of such a specialised nature that only the lessee can use them without major modifications”
“In the present case, the agreement dated7 March 1983 professed an intention by both parties to create a licence and their belief that they had in fact created a licence. It was submitted on behalf of Mr. Street that the court cannot in these circumstances decide that the agreement created a tenancy without interfering with the freedom of contract enjoyed by both parties. My Lords, Mr. Street enjoyed freedom to offer Mrs. Mountford the right to occupy the rooms comprised in the agreement on such lawful terms as Mr. Street pleased. Mrs. Mountford enjoyed freedom to negotiate with Mr. Street to obtain different terms. Both parties enjoyed freedom to contract or not to contract and both parties exercised that freedom by contracting on the terms set forth in the written agreement and on no other terms. But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a fivepronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade.”
“A person entering into a contract with a local authority shall not be bound to inquire whether the standing orders of the authority which apply to the contract have been complied with, and non-compliance with such orders shall not invalidate any contract entered into by or on behalf of the authority.”
“It begins to explain why the governing body continued to believe that the right – the truth would out, as it were, and we would receive appropriate funding, equal to other schools”
“For the court to invalidate a contract entered into between a public body and a party acting in good faith, by reason of a procedural defect in the contractual process, and moreover to do so without compensation (for it is not obvious what compensation would be available), would be a serious denial of that person's rights. It would offend against orthodox principles of private law (contractual rights) and public law (the right not to be deprived of property without compensation)”
“I certify to you as follows: 1. The School is a maintained school for the purpose of theSchool Standards and Framework Act 1998 (as from time to time amended, varied or re-enacted) and has the power and capacity to enter into leases and lease assets of the type represented by the Asset on the terms set out in the Lease by virtue of the budget delegated to it by The Isle of Wight Council and the expenditure will fall within that budget. 2. The Governing Body has taken all necessary corporate and other action required by applicable law or regulations to authorise the execution of and performance under the Lease. 3. In my view and that of the Governing Body, the transaction embodied in the Lease is not one which will result in the School being required, in accordance with proper practice, to recognise a fixed asset in any balance sheet, the Governing Body having concluded that the Lease is ‘an operating lease’ for the purposes of applicable guidance and standards. Accordingly, the School will not by entering into and performing its obligations under the Lease be in breach of any restriction upon its power to incur capital expenditure or expenditure on capital financing. 4. So far as the Governing Body is aware, all relevant provisions in theEducation Act 2002 and theSchools Finance (England) Regulations 2012 (as from time to time amended, varied or re-enacted) and all other relevant legislation and regulations, together with the Isle of Wight Scheme for Financing Schools (revised April 2012) have been and are being complied with by the School; 5. To the extent applicable, all legislative and/or regulatory requirements relating to competition have been complied with in approving the Lease; and 6. The leasing of the Asset under the Lease will facilitate or is conducive or incidental to discharge the statutory function(s) of the School. I am sending you under cover of this Certificate copies of the minutes of the Governing Body authorising the execution and delivery on behalf of the School of the Lease and Certificate …. I have made all enquiries and obtained all advice necessary to enable me to issue this Certificate to you. I acknowledge that if you enter into the lease you may do so in full reliance upon this Certificate.” 348. The Council’s Letter provided: “1. The Council agrees that the expenditure to be incurred by the Governing Body under the Hire Contract and otherwise in connection with the project falls within the delegated budget and is not the responsibility of the Council under theSchools and Standards Framework Act 1998 , or otherwise. Lease; and I am sending you under cover of this Certificate copies of the minutes of the “1. The Council agrees that the expenditure to be incurred by the Governing Body under the Hire Contract and otherwise in connection with the project falls within the delegated budget and is not the responsibility of the Council under theSchools and Standards Framework Act 1998 , or otherwise. 2. The Council is satisfied that the Governing Body has complied with the requirements of the Council’s Scheme for Financing Schools in relation to the procurement of the project. 3. The Council accepts and agrees the Governing Body’s assessment of the Hire Contract as an ‘operating lease’ for the purposes of applicable guidance and standards. 4. The Council approves the entry into the Hire Contract by the Governing Body and agrees that the same will not cause the Governing Body to be in breach of any restrictions or obligations stated in the Scheme for Financing Schools or exceed any limitations on the powers of the Governing Body stated in theSchools and Standards Framework Act 1998 . … The Council.…have no objection to the Governing Body providing a copy of the letter to BOSHire Limited.”
“The Claimants would have entered into an agreement for, substantially if not the exact, same value, as the Agreement in question. Asking the Court to find that a commercial party whose very business is in the design, manufacture and funding of relocatable modular hire, that it would simply have done nothing at all, flies in the face of commercial common sense and reality. Obviously, BOSHire was ‘in the market’ to do a deal, in joint venture with Built Offsite, to the tune of the value of the Agreement. The Claimants plainly suffer an evidential disadvantage in demonstrating that they would have entered into the Agreement with a party with capacity, because it did engage, for a lengthy period of time, with the College and so no evidence can really be adduced that a third party was waiting in the wings, as business resources were directed towards the Agreement. Obviously, if that had not been the case and the College and Council had not been prepared to provide the relevant assurances then BOSHire would have directed those resources to the hypothetical third party. This ought not to pose a difficulty for the Court. The notion of a ‘fair wind’ is now well-established in the case law. The basic justification for the fair wind principle is that, because it is the Defendants’ fault that the Claimants have lost the opportunity of entering into the Agreement, the burden falls to them to demonstrate that no loss is really caused thereby. This works to give the Claimants a fair wind in terms of the value of what they have lost. It is submitted that, in this case, that fair wind should operate such as to encompass the lost Hire Charges that would have been recovered over the Minimum Hire Period from the Defendants. That is what would have been recovered had the Claimants not relied upon the Defendants’ misrepresentations, albeit that the specific quantum looks like an expectation measure …”
“It would destroy the necessity of ever obtaining consent if a statutory body omitting to obtain it could thereafter be held estopped. Such a body could by these means confer on itself a power which it had not got, and the ultra vires doctrine would be reduced to a nullity.”
“Q Yes, and of course it’s open to you to be very cautious and to make sure you don’t get anywhere near whatever you think the PVLMP bright line is; correct? A. Correct, yes. But of course, the more cautious I am, the less financial reward there is. It’s a typical customer/supplier quandary or conflict, which is where – you know, my duty to my shareholders is to get the best price and the customer is always looking at the best price for them. Q. So it’s a commercial decision? A. Yes”
“What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of a statement or giver of advice (‘the adviser’) and the recipient who acts in reliance upon it (‘the advisee’) may typically be held to exist where: (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment.”
“If it is not reasonable for a representee to have relied on a representation and for the representor to have foreseen that he would do so, it is difficult to imagine that the latter will have assumed responsibility for it. If it is not reasonable for a representee to have relied on a representation, it may often follow that it is not reasonable for the representor to have foreseen that he would do so. But the two inquiries remain distinct.”
“One should therefore consider whether and to what extent the advisee was entitled to rely on the statement to take the action that he did take. It is also necessary to consider whether he did in fact rely on the statement, whether he did use or should have used his own judgment and whether he did seek or should have sought independent advice. In business transactions conducted at arms’ length it may sometimes be difficult for an advisee to prove that he was entitled to act on a statement without taking any independent advice or to prove that the adviser knew, actually or inferentially, that he would act without taking such advice.”
“[I]n the absence of any other evidence or any good reason to the contrary, where two parties agree, at arm’s length, that one of them will pay a certain sum, or at a certain rate, for a type of benefit to be provided by the other, there must be a prima facie presumption that that amount is, or at least is good evidence of, the market value of that type of benefit.”
“A The two payments under 242 – invoice numbers 2424 and 2425 – were – they ended up with BOSHire, but they were actually --- or they ended up with SFM rather. Q When you say ‘ended up’, do you mean? A Well, because I think Built Offshore actually – Q -- paid by them or – A Yes, but BOSHire ended up with the money or SFM received the benefit of the cash but I think the invoicing was done on those two payments by Built Offshore, just as an accident of the way the administration worked”
“Hire charge for period from 05.09.13 to 04.09.14 due from Christ the King under Hire contract ref 1022 – invoiced by Built Offshore as agent”. ii) As this invoice suggests, invoice D is in the amount of the first hire payment as set out in the September 2013 supplement to the Contract. iii) At the date this payment was made, BOS had no entitlement to it (because it was never a payee under the Contract) and BOSHire had no right to it because it had assigned its right to rent to SFM, and the College had been notified of that assignment. iv) The evidence of Mr Spring, with which the invoice produced by the Claimants following the trial is consistent, is that this amount found its way to SFM. v) In these circumstances, I reached the provisional conclusion that invoice D was paid by the College to BOS who received it as agent for and accounted for it to SFM. However, given that the fact and transmission of the payments ought to be matters of record, I decided to allow the Claimants and the College the opportunity to check the position before reaching a final conclusion. After checking the position, the College confirmed that invoice D had indeed been paid to BOS, with the College’s accounting system showing that credit note E came from “Built Offsite Ltd” and that invoice D was paid to “Built Offsite Ltd”
“In my judgment in circumstances such as these the bank is not entitled to rely upon the underlying validity of the transaction either in support of a plea of estoppel or in support of a defence of change of position. That is because the transaction is ultra vires and void. It is for that reason that in a case of this kind, save perhaps in exceptional circumstances, the defence of change of position is in principle confined to changes which take place after receipt of the money. Otherwise the bank would in effect be relying upon the supposed validity of a void transaction … It does not however follow that the defence of change of position can never succeed where the alleged change occurs before receipt of the money …”
“Since ex hypothesi the defendant will in fact have received the expected payment, there is no question of the defendant using the defence of change of position to enforce, directly or indirectly, a claim to that money.”
“… It may be relevant to consider whether the expenditure or loss relied upon is reversible, and (if so) how easily the defendant could take steps to reverse it … But it would be wrong to elevate this consideration into a general test of irretrievability. Expenditure may well be irretrievable, for example because it is immediately consumed, or for some other reason cannot be recouped from the payee, but that fact alone does not stamp the expenditure as a relevant disenrichment. Among other things, it also has to satisfy the causal ‘but for’ test if the defence is to be made out.”