JBW Group Ltd v Westminster City Council [2009] EWHC 2697 (QB)

[2009] EWHC 2697 (QB)Case No 09X01189
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/11/2009
Before
MR JUSTICE JACK
Between
JBW GROUP LIMITEDClaimantWESTMINSTER CITY COUNCILDefendant
Mr Peter Knox QC (instructed by Oury Clark) for ClaimantMr Peter Susman QC and Miss Hannah Wilson (instructed by Sharpe Pritchard) for DefendantHearing Hearing dates: 26 & 27 October 2009
JudgmentMr Justice Jack :
[1]The claimants, JBW Group Limited, carry on business in the supply to local authorities and government departments of services by way of the collection of debts by certificated bailiffs following the issue of warrants of execution. A substantial part of this work relates to the collection of parking fines. On 5 March 2007 a contract was entered into between JBW and the defendants, Westminster City Council, for the provision of such services in relation to unpaid parking fines issued by the Council. The contract was to run until 31 August 2007, but was extended to 31 August 2008 by a deed of variation dated 12 September 2007. So what was a 6 month contract became an 18 month contract. The dispute between the parties relates to the position as to warrants which were provided by the Council to JBW within the contract period and in respect of which fees accrued collectable by JBW but which were not collected during the period of the contract. This judgment is concerned with liability only. If the contract is to be construed in a way favourable to JBW, there will need to be a further hearing to determine the amount of the Council’s liability.

The legal framework

[2]The primary legislation relating to parking fines and their collection was provided by the Road Traffic Act 1991 prior to 31 March 2008, and thereafter by the Traffic Management Act 2004. It is not suggested that the two Acts are different in any way which affects the issues I have to decide. Each Act provided for subsidiary legislation. Regulation 22 of the Civil Enforcement of Parking Contraventions (England) General Regulations 2007, SI 2007 No 3483, provides that where a ‘charge certificate’ is unpaid ‘the enforcement authority may, if a county court so orders, recover the increased charge as if it were payable under a county court order’. The Enforcement of Road Traffic Debts (Certificated Bailiffs) Regulations 1993, SI 1993 No 2072, made under the 1991 Act and continued by the 2004 Act provided that the Distress for Rent Rules 1988 should apply to the execution of warrants of execution by bailiffs under section of the 1991 Act as they applied to the levy of distress for rent. Schedule 1 set out the fees that might be charged. Thus £20 was provided ‘for preparing and sending a letter advising the debtor that a warrant is with the bailiff and requesting the total sum due’. Figures were provided for levying distress and taking possession, and ‘reasonable charges’ were stated to be chargeable in some situations. The figures have been amended from time to time. Regulation 10 of the Distress for Rent Rules provides that ‘No person shall be entitled to charge, or recover from, a tenant any fees, charges or expenses for levying a distress, or for doing any act or thing in relation thereto, other than those authorised by the tables in Appendix 1 to these Rules.’[3]This summary of the legislation though incomplete is, I hope, sufficient for the purpose of the resolution of the contractual dispute. The scheme is reasonably clear. When a parking fine has remained unpaid for a sufficient period, the local authority to which it is due may apply to the county court for a warrant. (As a matter of administrative arrangement all parking fines are dealt with through the Northampton County Court.) The warrant is then supplied to a certificated bailiff for enforcement. The bailiff begins the process by writing a letter as provided for in the first item in the charges schedule. He may then take possession of goods. If the debtor continues not to pay, his goods are sold and the fine and the charges which have accrued are collected in that way. The only way in which the charges can be recovered is through voluntary payment by the debtor or by sale of his goods. They become payable but are not a debt like other debts. In re Long, ex parte Cuddeford (1888) 20 QBD 316 a judgment debtor sought to add the costs of an abortive execution to the judgment debt to reach the £50 necessary to support a petition for bankruptcy. It was held he could not do so. Lord Esher MR relied on the case of The Marquis of Salisbury v Ray (1860) 8 CB(NS) 193, but that case is not helpful here, I think, as it turned on whether under section 123 of the Common Law Procedure Act 1852 the expenses of a previous execution by fi. fa. could be added to those of an execution by ca.sa., it being held they could not. But Fry LJ stated:
“It seems to me that these costs can only be recovered out of a particular fund, viz., the fruits of the particular execution, and that the debtor is under no personal liability for them.”
Thus the bailiff gets paid only through the process of execution: if he becomes entitled to charge fees, but does not continue with the execution process, he will not recover them and he cannot sue the debtor for them.[4]I was told by Mr Peter Knox QC on the instructions of his clients, JBW, that if no recovery of charges is made through the execution process a certificated bailiff has in practice no right to recover anything from the judgment creditor who instructs him. No authority for that was cited by counsel, but it may correctly reflect the position where a certificated bailiff is employed and there is no express agreement for him to recover his fees from the judgment creditor if the execution fails. I am not concerned with executions carried out through a sheriff or under the direction of a county court, nor with the provisions of Part 3 of the Tribunals, Courts and Enforcement Act 2007. An exception to the bailiff being unable to recover fees from the judgment creditor must be where the judgment creditor is paid directly by the debtor, when the creditor must hold for the bailiff that part which represents the bailiff’s fees. It is to be borne in mind that it is only the holder of a warrant who can execute it. That is because, inter alia, the bailiff must be able to produce it to the debtor.

The dispute

[5]The dispute between JBW and the Council has arisen in this way. When the contract ended JBW had about 9,400 warrants which had been delivered by the Council to them for execution on which no recovery had been made. Nonetheless fees totalling £1,871,072 were chargeable in respect of actions taken by JBW towards the execution of those warrants. When the contract ended the Council required the warrants to be handed back to them. Had JBW been able to continue with them, JBW say that about 24% of those fees would have been recovered, that is £455,044. Following the ending of the contract the warrants were given by the Council to another company, Phillips Collection Services Limited. Phillips were instructed that they should commence afresh, and should ignore any steps taken by JBW. So nothing has been done to collect the fees which it would otherwise have been open to JBW to try to collect had the agreement not ended and the warrants handed back. This is in the context that JBW received 19,881 warrants for execution over the period of the contract, which attracted total fees of £5,296,685, of which £598,654 was recovered. I was told also that the average time for JBW to get a payment under a warrant was 156 days. I understood that this was a figure for JBW’s business overall. These figures refer to the performance of the contract. They emerged because I wanted to get an idea of how the sum claimed related to the total earnings under the contract. They are irrelevant to the contract’s construction. They do show why the uncollected fees are important to JBW in the context of the whole. The average collection period of 156 days shows that the original 6 month contract must have been taken on very much in the belief that an extension would be granted.

The terms of the contract

[6]Clause 9 is headed ‘Commencement and contract period’. Clause 9(1) provided:
“The Contract shall commence on the Commencement Date and the Contractor shall provide the Services in accordance with any Warrants issued to the Contract Standard until the end of the Contract Period unless the Contract is terminated sooner in accordance with these Conditions or in accordance with common law or statute.”
By clause 1(1) ‘Services means the services, works and obligations of the Contractor as set out in or reasonably implied by the Contract Documents’. Somewhat curiously ‘Warrant means a written document issued by the City Council to the Contractor authorising the enforcement of an action for recovery of a parking debt.’ It is not however suggested that the consequence is other than to refer to a warrant as issued by the Northampton County Court.[7]Clause 10 provided that the contract was not to be exclusive and that there was no guarantee as to what warrants if any would be given to JBW for enforcement.[8]Clause 14 provided: “14.1. From time to time the City Council may submit a Warrant or Warrants to the Contractor for execution. 14.2. The Warrants issued in accordance with Condition14.1 may be new Warrants or Warrants under which a previous attempt to execute has been made by or on behalf of the City Council. 14.3. The Contractor shall acknowledge receipt of the Warrant or Warrants and shall execute the Warrants in accordance with the Specification and relevant Legislation and guidance. It is of relevance that under clause14.2 JBW may be required to execute warrants that have been first supplied to a previous bailiff company. Clause14.3 provides the duty to execute warrants.[9]Clause 25 is headed ‘Collection of fees and debts’. By clause 1(1) ‘Fee means the Reasonable Charges set by the City Council, which the Contractor shall be entitled to charge a debtor in relation to actions taken under a Warrant.’ Likewise ‘Reasonable Charges means the reasonable rates set by the City Council, which may be amended from time to time, and which the Contractor shall be entitled to charge a debtor in relation to actions taken under a Warrant’. The effect is that the fees chargeable by JBW shall be as set by the Council but that they shall not exceed the rates set by the Regulations. Clause 25 then provided:
“25.1. The Contractor shall not be entitled to any payment from the City Council for the Services. 25.2. The Contractor shall be entitled to retain the Fee (as specified by City Council as Reasonable Charges) paid by the Debtor in relation to Warrants on which the Contractor has been instructed to act, although if insufficient monies are retrieved to pay the Fee, the Contractor will remit all monies to the City Council to cover the debt. For the avoidance of doubt the Contractor shall be wholly responsible for the collection of the Fees. 25.3. Where payments for Warrants are submitted direct to the City Council by the Debtor the City Council shall take no responsibility for acceptance of any payment save for those owing to the City Council and shall, if possible, direct payments to Fees to the Contractor. 25.4. The City Council shall not be liable for any Fees incurred by the Contractor if a Warrant needs to be withdrawn before or after it has been executed. The City Council also reserves the right to instruct the Contractor to refund any Fees paid by a Debtor if a Warrant is recalled after execution.”
Clause 25.2 thus provides that JBW only gets the fees, which is as one would expect, and that the debt owed to the Council comes out of what is collected first. Clause 25.3 covers the position where the debtor submits payment to the Council, and in that case the Council shall, if possible, direct payment of fees to JBW. Clause 25.5 and following provided mechanics for payment to the Council of money collected as payment of debts, which meant the actual parking fines. The provisions are not well drafted, but the terms are immaterial.[10]Clause 30 headed ‘Termination’ entitled the Council to terminate the contract if a number of matters occurred, including corruption, insolvency and a substantial and material breach of contract. ‘Termination’ is however defined in clause 1(1) in wider terms than might be expected from clause 30. For ‘Termination means termination or expiry of the Contract in accordance with its terms, in common law or statute.’ So ‘termination’ was not limited to termination by the Council under clause 30, but included the expiry of the contract at the end of the contract period.[11]Clause 31 is headed ‘Consequences of termination’. It will be seen to refer to ‘Termination or expiration’ and ‘Termination or expiry’. So there is no doubt that it covers the contract ending at the end of its period. It provides:
“31.1 Termination shall be without prejudice to the rights and remedies of the Contractor and the City Council accrued before such Termination or expiration and nothing in the Contract shall prejudice the right of either party to recover any amount outstanding as at the date of such Termination or expiry. 31.2. Upon Termination (for whatever reason) the Contractor shall:- 31.2.1 forthwith cease to provide the Services; 31.2.2 without prejudice to the City Council’s other rights under these Conditions within 10 (ten) calendar days of Termination at the Contractor’s own cost return to the City Council or otherwise dispose of in accordance with the City Council’s instructions all and any:- 31.2.2.1. documents and other information and materials relating to the Services; 31.2.2.2. Data (which data shall if necessary upon the City Council’s request be transferred in compatible form on to such computer system as the City Council may request); 31.2.2.3. other property and software belonging to the City Council which may be in the possession or under the control of the Contractor;” 31.2.1 forthwith cease to provide the Services; 31.2.2 without prejudice to the City Council’s other rights under these Conditions within 10 (ten) calendar days of Termination at the Contractor’s own cost return to the City Council or otherwise dispose of in accordance with the City Council’s instructions all and any:- 31.2.2.1. documents and other information and materials relating to the Services; 31.2.2.2. Data (which data shall if necessary upon the City Council’s request be transferred in compatible form on to such computer system as the City Council may request); 31.2.2.3. other property and software belonging to the City Council which may be in the possession or under the control of the Contractor;”
[12]Clause 33 obliged JBW to have insurance as there set out ‘throughout the Contract Period’.[13]Schedule 1 was headed ‘Specification for provision of bailiff services in the recovery of road traffic debts’. Paragraph 7 required JBW to take all appropriate steps to execute a warrant and/or levy distress in respect of debts when instructed. Paragraph 17.7 required JBW to cease work on a case and to return papers, when instructed. Paragraph 7.18 required JBW to accept instructions in respect of warrants which had been the subject of prior attempted execution by another contractor to the Council. Paragraph 4.3 of the Persistent Evaders Service Requirements in Schedule 2 is of importance. It provided:
“4.3 On re-allocation, any fees added to the warrant by the original bailiff will be written off. The warrant will be passed to the PE service provider as if it were a newly allocated warrant.”

JBW’s claims and the construction of the contract

[14]Mr Peter Susman QC submitted on behalf of the Council that clause 31 which deals with what happened when the contract came to an end was clear. He submitted that JBW was required to cease work (clause 31.2.10) and to return to the Council all warrants and associated paper work (clause 31.2.2). He submitted that ‘documents’ in clause 31.2.2.1 included warrants, because the definition in clause 1(1) began ‘Warrant means a written document …’. So, he submitted, JBW had no further duties or rights in respect of warrants under which full collection had not been made. If fees had not been collected, that was the end of it: there was no provision which gave JBW any rights in respect of warrants in respect of which fees were chargeable but which fees had not been paid. They were not entitled to continue to pursue payment. He excepted from that fees which happened to be paid to JBW after the contract ended, which they could retain. Such fees would be paid with the amount due to the Council, and the Council would first be entitled to that. But JBW had no right to require any monies to be paid to them after the end of the contract.[15]Mr Knox advanced three claims on behalf of JBW. The first is for an account of fees received by the Council from debtors on the warrants handed back by JBW and transferred by the Council to Phillips ‘to the extent of the fees owed to [JBW] for its work up to 31 August 2008’ – amended particulars of claim, paragraph 20(2).[16]Mr Knox’s first way of putting this claim was that the right to charge debtors fees had been assigned by way of an equitable assignment to JBW. He said that alternatively it was a right vested in JBW under the legislation. He submitted that the assignment was necessarily to be implied from the express terms of the contract. The contract expressly provided that JBW should be entitled to charge the fees: I refer to the definition of ‘Reasonable Charges’. The fees were not debts in the usual sense: they were sums which might be recovered by JBW through the process of the execution of the warrant ending, if necessary, in the sale of the debtor’s gods. No question of any assignment arises.[17]As I have said, the contract gave the right to charge the fees to JBW. If, during the currency of the contract, money was paid to the Council by a debtor in respect of JBW’s fees, the Council would, in my view, be accountable to JBW for that money. For as a matter of general agency law, if a principal agrees that his agent is to be rewarded with particular monies and those monies come into the hands of the principal, the agent must be entitled to them. Clause 25.3 provided that where direct payment was made to the Council, the Council took no responsibility for fees owed to JBW, and should if possible direct payment of fees to JBW. In my view that is to be construed as meaning that the Council had no duty to accept fees due to JBW but should direct the debtor to pay the fees to JBW. But if the Council did accept fees due to JBW, the Council would be accountable as I have stated.[18]What happens after the contract has ended? What is the position if an agent of the Council such as Phillips receives fees which are chargeable in respect of work carried out by JBW? In my judgment the Council would be accountable for those fees unless the contract provides otherwise. The same principle would apply as during the period of the contract. The problem for JBW with this way of putting its case is that the Council have not in fact received any monies on account of JBW’s work because the Council instructed Philips to ignore what had been done by JBW. So, even if JBW are right in law, it fails on the facts. I will revert to the hypothetical question whether the terms of the contract relating to termination are such as to negate such a right when I have considered JBW’s other claims and the terms of the contract relevant to them.[19]JBW’s second claim is for damages and was initially on either of two bases. But in his closing submissions Mr Knox stated that he was not pursuing the second - which relied on the terms of JBW’s letter returning the warrants to the Council. Mr Knox submitted that there was either an implied term that after termination JBW would be able to complete execution of warrants on which it had started, or an implied term that the Council would instruct JBW’s successor, here Phillips, to recover the fees and to account for them. It was said that on either basis the term had been broken and JBW was entitled to damages.[20]The terms of the contract are plainly inconsistent with a right for JBW to continue to execute the warrants in respect of which it was entitled to charge at the termination of the contract. Clause 31.2.1 states that on termination JBW shall cease to provide services under the contract. Clause 31.2.2.1 provides for JBW to return all documents, and that must include warrants - in particular because of the definition of ‘Warrant’ in clause 1.1. Mr Knox submitted that clause 31.1 assisted him because it preserved the right of JBW to recover amounts outstanding from debtors. I do not consider that the clause does that. What it is doing is to preserve any amounts which have become due between the parties to the contract, the Council and JBW, prior to termination. It does not relate to amounts which JBW might be able to recover from a debtor in an on-going execution.[21]The suggested alternative, an implied term that the Council would instruct a company taking over warrants formerly given for execution to JBW that the company should pursue fees due to JBW, would require the writing into the contract of an obligation which the parties might have included but did not. It is an obligation which in the context of the contract one would expect to see expressed if it was intended. It cannot be said that the parties must have intended such a term. If the question posed by Lord Hoffman in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 in paragraph 21, ‘is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?’, the answer is no. Clause 31 provides in its express terms for the delivery up of outstanding warrants. It is plainly to be expected that such warrants will be given to another contractor, yet the contract is silent as to the consequences of that as regards JBW. Paragraph 7.18 of Schedule 1 had obliged JBW to take warrants which had been previously allocated to another contractor. It was silent as to the terms on which they would do so. But paragraph 4.3 of the Persistent Evaders Service Requirements in Schedule 2 is an express provision in relation to earlier contractors, which is to the opposite effect to that which JBW submit should be implied in its favour. That makes it more difficult to say that here is a gap in clause 31, which must be filled in the way favourable to JBW. In my view the contract works without the suggested implied term. The fact that if the term was implied the outcome might seem more reasonably to reflect the work JBW had done is not enough to result in its implication. Further, there may well have been good reasons for the Council to want to start with a clean sheet, as it were, for the contractor to whom it allocated warrants previously given to JBW.[22]The third claim builds on the first way of putting the second claim, and so fails with it. The claim is for loss of profit arising from loss of the further fees which would have become chargeable if JBW had been able to continue to work on warrants which JBW handed over following the contract’s end.[23]I return to the question which I left over in paragraph 18, namely whether, if Phillips had collected fees relating to work carried out by JBW, the Council would be liable to account for those fees. My analysis of the terms of the contract in the context of JBW’s alternative claims provides the further context for this question. The right of JBW to have fees relating to its work which come into the hands of the Council during the Contract arises as a matter of agency law applied to the situation created by the contract rather than from an express term of the contract. There is certainly nothing to negate that right during the contract period: I refer to my comments on clause 25.2 in paragraph 9 above. But once the contract has come to an end, JBW no longer has a right to collect its fees and the contract provides no express mechanism for them to be provided to JBW in any circumstances. The tenor of the contract is that when its period is over a line is drawn and there are no ongoing obligations save as to amounts which have become outstanding during its duration. I conclude that, if a subsequent contractor had collected fees arising on warrants in respect of work done by JBW, the right of JBW to receive those fees is negated by the terms of the contract.

Outcome

[24]I conclude that the termination of the contract has not resulted in any liability of the Council in relation to warrants delivered back by JBW on which JBW were entitled to collect fees or charges from the debtors while JBW held the warrants.