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A L Barnes Ltd v Time Talk (UK) Ltd

[2003] EWCA Civ 402, [2003] BLR 331, (2003) Times, 9 April, 147 Sol Jo LB 385, [2003] All ER (D) 391 (Mar)

Court: CA

Judgment Date: 26/03/2003

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CONTRACT - ILLEGALITY - EFFECT ON CONTRACT - ILLEGALITY IN PERFORMANCE

The defendant engaged the claimant as a shop fitting contractor. No agreement was made as to price. The claimant brought a claim for unpaid invoices on a quantum meruit basis. The defendant contended, inter alia, that its relationship with one of its directors had been a fiduciary relationship, that the director had breached that fiduciary relationship by enabling a project manager to be paid twice for the same work, and that G, a director of the claimant, had dishonestly assisted in that breach of trust. The judge accepted that contention, and concluded that whilst the quantum meruit claim for work actually done and accepted by the defendant succeeded, the claimant could not recover that part of its claim which included any project management fees element. The defendant had made a number of offers prior to trial at lower levels than that eventually awarded to the claimant. The judge ordered that the claimant pay 50% of the defendant's costs after segregation of the costs associated with experts. The defendant appealed on the ground that the judge had been wrong to hold that the claimant could succeed on its claim for work actually done, since G's dishonest assistance in the breach of trust prevented recovery. The claimant cross-appealed against the judge's order for costs, on the ground that it was outside the realm of the judge's discretion, or betrayed an error of principle.
Held - The appeal would be dismissed. The cross-appeal would be allowed.
(1) The contracts in the present case were not contracts with an illegal purpose. It so happened that the mode of performing the contracts entailed a breach of fiduciary duty, but illegality in performance was not, in itself, enough to render the contract unenforceable unless the contract had been made with the purpose of doing an unlawful act or an act contrary to public purpose. Moreover, even had the judge found that G had intended to perform the contract in an illegal manner or had had the purpose that it be so performed, it would still be a major question of mixed fact and law, that had never been addressed by the judge, whether such intention or purpose was to be attributed to the claimant. The private arrangement between the director and the project manager to which G had dishonestly lent his assistance was not an integral (or, indeed, any) part of the contract made between their principles. Accordingly, the appeal had to be dismissed.
(2) In what might generally be called commercial litigation, the disputes were ultimately about money. In deciding who was the successful party the most important thing was to identify the party who was to pay money to the other. That was the surest indication of success and failure. Furthermore, the judge had been wrong in segregating the costs associated with experts, and thus most of the costs of proving the claim. For those two reasons, the exercise of discretion by the judge had been vitiated by an error of principle. Before segregation of the effective costs of proving the claim, the successful party was the claimant, which had recovered more than the defendants had ever offered. On the facts, the claimant was entitled to receive 25% of its total costs.