West Law Report

Misrepresentation needed to make contract illegal

Posted in illegality (contract), Misrepresentation, Times Law Report by mrkooenglish on June 9, 2008

From The TimesJune 2, 2008

Misrepresentation needed to make contract illegal
Court of Appeal

Published June 2, 2008

Enfield Technical Services Ltd v Payne Grace v B. F. Components Ltd

Before Lord Justice Pill, Lord Justice Maurice Kay and Lord Justice Lloyd

Judgment April 22, 2008

Where an employee had been treated as self-employed but was later found to have been employed, he was not necessarily precluded from claiming unfair dismissal on the ground of illegality, since in order for a contract of employment to be unlawfully performed there had to be some form of misrepresentation as to the facts.

The Court of Appeal so held in two cases heard together when dismissing appeals by the employers, Enfield Technical Services Ltd and B. F. Components Ltd, against the Employment Appeal Tribunal (Mr Justice Elias, President, Mrs J. M. Matthias, and Mr D. Norman) ([2008] ICR 30) which: (i) dismissed Enfield’s appeal against the decision of a Reading employment tribunal that the claimant employee, Mr Ray Payne, was not precluded from making a claim for unfair dismissal since he was an employee whose contract of employment was not illegal; and (ii) allowed the appeal of the claimant employee, Mr Ian Grace, against the decision of a Brighton employment tribunal which held that he was precluded from making a claim for unfair dismissal since his contract of employment was illegal.

In both cases, the claimants had started work on a self-employed basis and the Inland Revenue had treated them as such for tax purposes. Subsequently, however, their respective employers indicated that they were employed. On being dismissed from employment, the claimants brought claims for unfair dismissal.

The employers in each case argued that the claimants were precluded from making such claims since they were unable to establish a continuous period of employment of not less than one year. Alternatively, they argued, any contract of employment that did exist could not be relied on since it was tainted with illegality on the ground that the parties had represented to the Inland Revenue that they were self-employed for tax purposes.

Mr Marcus Pilgerstorfer for both employers; Mr Stephen Roberts for Mr Payne; Mr Thomas Kibling for Mr Grace.

LORD JUSTICE PILL said that the appeal tribunal was correct when it stated that the essential feature of all the previous cases where contracts of employment were found to be illegal was that the parties had knowingly entered into arrangements which had, to their knowledge, misrepresented the facts of the employment relationship.

There had to be some from of misrepresentation, an attempt to conceal the true facts of the relationship, before the contract was rendered illegal.

Although there could be tax advantages for the claimants in claiming to have self-employed status, that of itself did not render a contract, subsequently found to have been a contract of employment, unlawfully performed.

A contract which was unlawfully performed due to misrepresentation was distinguishable from the situation in which there had been an error of categorisation, as in the instant cases, unaccompanied by such false representations even if the employee had claimed the advantages of self-employment before the dispute arose.

Lord Justice Maurice Kay agreed and Lord Justice Lloyd delivering a concurring judgment.

Solicitors: Natwest Mentor Services, Solihull, and Rice-Jones & Smiths; Berry Smith LLP, Bar Pro Bono Unit.

Excluding fraud-based claims

Posted in Contract terms, Times Law Report by mrkooenglish on May 30, 2008

From The TimesMay 27, 2008

Excluding fraud-based claims
Court of Appeal

Published May 27, 2008

Satyam Computer Services Ltd v Upaid Systems Ltd

It would only be through the use of the clearest possible specific language that parties to a settlement would be taken to have excluded fraud-based claims.

The Court of Appeal (Lord Justice Waller, Lord Justice Lawrence Collins and Lord Justice Rimer) stated on May 9, 2007, when dismissing the appeal of Satyam Computers Services Ltd against a decision by Mr Justice Flaux in the Queen’s Bench Division ([2008] 1 All ER (Comm) 737) on preliminary issues of interpretation of commercial agreements between Satyam and Upaid Systems Ltd.

LORD JUSTICE LAWRENCE COLLINS said that it would only be through using the clearest possible specific language that parties to a settlement agreement would be taken to have excluded fraud-based claims. The principle extended to causes of action of which dishonesty was not a necessary ingredient but which had been committed dishonestly.

Where the claims in question were based on fraud or involved allegations of dishonesty, very clear and specific language in an agreement was required to settle such claims or exclude their subsequent pursuit, a fortiori, if they were unknown at the time that the settlement agreement was entered into.


Posted in Existence of agreement, Westlaw Reports by mrkooenglish on May 17, 2008

Last Updated: 7:19PM BST 07/05/2008
Queen’s Bench Division

HHJ Richard Seymour QC

April 21, 2008

Agreements – Client relationship management – Fees – Individual’s personal liability for solicitor’s fees relating to work for companies – Existence of agreement


The claimant former solicitor (L) claimed against the defendant (D) for unpaid professional fees. L had done legal work for D in respect of private matters and matters concerning various companies with which D was involved and for which he gave instructions to L. L asserted that he and D had entered into a specific agreement at the start of their dealings, whereby D agreed to be personally liable for payment for work done by L either for D personally or for his commercial interests. D accepted that he had agreed to be personally liable for private matters but not for anything relating to any companies. The alleged costs of the work done amounted to £150,000 but L deducted £91,000 in respect of payments on account. D asserted that he had paid all monies owed to L. L submitted that D was liable for the sum of £59,000 in relation to both private and commercial matters. D submitted that he was liable only for the private work carried out by L and that if the court agreed L’s claim should be dismissed. D argued that the total amounts claimed by L in relation to the private work were less than the amount that he had already received.


Whether D was liable for the sum of £59,000 in relation to both private and commercial matters.

HELD (judgment for defendant)

D appeared to be transparently honest and had sought to assist the court as much as possible when giving evidence. In contrast, much of L’s evidence on the contentious matters had been troubling. His assertion that D had accepted liability not only for the costs of the private work but also for the costs of the corporate work was not obviously plausible. It was not the sort of agreement that a person in D’s position would be expected to have made. An individual who instructed solicitors to act on behalf of a company did not ordinarily accept personal liability to discharge the solicitors’ costs for acting on those instructions. Since the agreement for which L contended was such an unusual one, and given his legal knowledge as a solicitor, it was surprising that he had not ensured the agreement was either made in writing or at least clearly evidenced in writing. The only written evidence relied upon by L was at best equivocal and at worst adverse to his case. Further, L was unable to identify at what point in time the alleged agreement was made and accordingly his evidence was rejected. Therefore, in principle, D was liable to L only for the private work. On the evidence, D was personally liable to pay L his proper costs in relation to a small number of the matters in respect of which L had claimed. However, the sums already paid to L exceeded the amount that D owed and therefore L’s claim failed.

Adrian Davies (instructed by Walkers) for the claimant. Stuart Cakebread (instructed by Scanlan & Co) for the defendant.


Posted in Contract terms, Implied terms, Westlaw Reports by mrkooenglish on May 8, 2008

Last updated: 7:17 PM BST 07/05/2008
Court of Appeal (Civil Division)

Waller, Rix LJJ and Lord Neuberger of Abbotsbury

April 23, 2008

Commission – Contract terms – Estate agents – Implied terms – Purchasers – Sale of property – Entitlement to commission if contracts exchanged with purchaser introduced by agent – Estate Agents (Provision of Information) Regulations 1991


The appellant (B) appealed against a decision that she was liable to pay the respondent estate agent (F) commission on the sale of her house. B had appointed F on a sole agency basis to sell her house. F’s terms of business made B liable to pay commission if at any time contracts were exchanged with a purchaser introduced by F during the period of the sole agency or with whom F had had negotiations during that period. That wording reflected the terms of the Estate Agents (Provision of Information) Regulations 1991. F showed the house twice to a person (L) who was looking for a house on behalf of his former wife (K). K visited the house after F’s sole agency had been terminated and F was acting under a multiple agency agreement. K did not like the house. Three months later K visited the house again by arrangement with another estate agent. K offered to buy the house and the purchase was completed. B paid commission to the other agent. F began proceedings to recover its commission. The judge held that the words “at any time” negated any implication that F had to be the effective cause of the sale, and that in any event F was the effective cause of the sale to K. B submitted that the expression “a purchaser” in the phrase “a purchaser introduced by” F did not mean “a person who at some time in the future becomes a purchaser”, as the judge had held, but “a person who becomes a purchaser as a result of” F’s introduction.


Whether the expression “a purchaser” in the phrase “a purchaser introduced by” F did not mean “a person who at some time in the future becomes a purchaser”, as the judge had held, but “a person who becomes a purchaser as a result of” F’s introduction.

HELD (appeal allowed)

(1) The interpretation of the term “a purchaser” put forward by B, which required F to have introduced the person to the purchase rather than to the property, was to be preferred. That interpretation was in accord with the main principles which could be extracted from the decided cases, John D Wood & Co v Dantata (1987) 283 EG 314 CA (Civ Div) applied. The notion that an estate agent could only recover commission if he introduced someone who became a purchaser as a result of the introduction sat well with the normal principle that an agent, whose commission was received on the basis of a successful transaction, must normally be the effective cause of the transaction if he was to receive his commission. It was not apparent why an agent should be entitled to commission on a purchase for which he had no responsibility and which effectively originated after the sole agency had terminated. On B’s interpretation it was much less likely that a client who had instructed more than one agent would be liable for more than one commission. The fact that there was no connection between F’s efforts and an ultimate sale would be irrelevant, on F’s interpretation, as would the passage of time. In order to be entitled to a commission under its standard terms for having introduced a purchaser, F had to show that it had introduced the person concerned as the eventual purchaser or in other words that F had introduced the purchaser to the purchase and not merely to the property. It followed that there was no question of implying into the terms a requirement that F must have been the, or an, effective cause of the purchase.

(2) On a proper analysis of the facts, the judge’s conclusion that F was the effective cause of the sale of the house to K, which was tantamount to concluding that K was a purchaser introduced by F, was not justifiable. K was plainly not interested in purchasing the house after her first visit. That meant that L, who acted as her agent, was not interested either. There was nothing to suggest that K’s interest in the house some ten weeks later was based on F’s earlier activities. In the circumstances F failed to show that it had introduced K to the purchase or as the eventual purchaser.

Patrick Blakesley (instructed by in-house solicitor) for the respondent. Clive H Jones (instructed by Blake Lapthorn Tarlo Lyons, Portsmouth) for the appellant.