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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> CPA On-Line Ltd v Guest Motors Ltd [2001] EWCA Civ 1774 (23 October 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1774.html Cite as: [2001] EWCA Civ 1774

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR PERMISSION TO APPEAL

		Royal Courts of Justice Strand London WC2 Tuesday, 23rd October 2001

1. LORD JUSTICE TUCKEY: This is a renewed application by the claimants in these proceedings, CPA On-Line Limited, for permission to appeal from a judgment of Judge Hutton, sitting as a Deputy High Court Judge, who dismissed CPA's claim against the defendants, Guest Motors Limited.
2. CPA provide debt collection services to businesses in respect of overdue accounts and dishonoured cheques. This claim concerns Guest's overdue accounts. The service upon which CPA make their money involves sending up to three letters of increasing hostility to their clients' defaulting customers. The three letters are described as a block and are sold to the client at a unit price per block.
3. The two contracts concerned in this case, which are contained in CPA's purchase orders of 6th December 1995 and 14th May 1996, were each for the sale of 500 blocks at £6.50 per block for the first contract and a bit more for the second. Each was subject to the same standard terms as far as relevant to this case which involved a dispute about what Guest should pay for an additional service provided by CPA where, before using the block letters, it sent out a demand on the client's own letter head with a facsimile signature on it. The relevant terms relating to this service are as follows:

"(a) In addition to but without prejudice to the terms and conditions below the use of the client's own facsimile letter service will be invoiced to the client each at a sum equal to twice the prevailing rate of 1st class postage (plus VAT) at the time of despatch in arrears as an additional charge payable within 28 days .....

(b) Where the client instructs the company to despatch clients' own facsimile letters in a ratio exceeding 150% of the related units, the client will be invoiced for each additional letter at the price shown overleaf as the individual unit price of the allocation."

4. It is tolerably clear that the words "the price shown overleaf as the individual unit price of the allocation" is a reference to the unit price per block. But the words "related units" are not defined by the contract. CPA contend that this a reference to the number of blocks - units - the subject of the contract and the word "related" is used to make it clear that this is a reference to units of the relevant service, that is to say, overdue accounts or dishonoured cheques. So they say that for the first 750 client's own letters which Guest asked them to send they were to be paid twice first class post per letter, but after that it was £6.50 per letter. This was to discourage excessive use of client's own letters.
5. What happened was that under each contract Guest asked for many more than 750 client's own letters - in fact, over 18,000 - to be sent, but at first they were only billed and paid twice first class rate. When CPA realised their mistake in May 2000 they sent Guest a further bill for over £140,000 which Guest refused to pay. Their defence said that the words "related units" were meaningless and so the claimants could not establish any claim under the contract. Alternatively, they raised a number of defences based on the fact that they had been billed and paid the lesser amount.
6. At trial CPA called their sales manager, Mr Amor, who said he visited Guest several times before any contract was made and had explained fully and carefully to the staff in Guest's credit control department among others how the contract worked including what they would have to pay for client's own letters. The judge rejected this evidence, contradicted as it was by the evidence of Guest's staff who said they had never met Mr Amor. The judge's main reason for dismissing the claim was as follows:

"I find that the actual meaning of the clause is unclear as one of the material phrases, namely `related units', is nowhere defined in the document. As an unclear term must be construed against the claimant, which is seeking to rely upon it, that finding is sufficient to dismiss this claim, without considering the further defences ..... unless the situation is as the claimant alleges, that the disputed clause was fully explained to the defendant, before it entered into the contract."

7. He rejected this allegation because he did not accept Mr Amor's evidence, as I have already explained.
8. When I dismissed the application for permission on paper I said:

"The judge's finding that the clause was unclear because `related units' was not defined by the contract (which was an entire contract [see] (clause 1)) was fatal to the claim. I can see no real prospect of this court interfering with this finding irrespective of the merits of the other points raised."

9. Mr Hollander QC, who appears for CPA, says that the judge and to a lesser extent I - although he is polite about it - missed the point as to what CPA's case is and was. It was not that the contact was unclear but had been explained to Guest, but that the contracts did mean what they said simply by looking at the words used. Alternatively, the parties must have understood that it had this meaning having regard to all the background knowledge that would reasonably have been available to them at the time they made these contracts.
10. Of course it is right that the court should try to give meaning to all the words used in the contract. I have already rehearsed the way CPA puts its case on the meaning of the words "related units".
11. On further consideration I think there is substance in the points made by Mr Hollander. The judge's conclusion is not fortified by the fact that he thought Clause 3 (b) was a penalty clause and, to use his words, "in the nature of a trap", neither of which appear to me to be tenable views. Nor do I think, on reflection, the contra preferentem rule is the answer to CPA's argument. If the clause is meaningless it cannot form the basis of a contractual claim. That is what Guest was saying. They did not say the clause was ambiguous. For these reasons I will grant permision to appeal.
12. I am less impressed with the argument about the alternative argument based on the matrix of facts since this appears to re-introduce the rejected evidence of Mr Amor in a different guise. Nevertheless CPA may argue this point on appeal as well.
13. Mr Hollander acknowledges that if the appeal succeeds there will have to be a retrial since the judge did not decide any of the issues raised by Guest's other defences. This has made me wonder whether this is not a case in which the parties would not be well advised to try ADR. This court runs an ADR scheme. Mr Hollander welcomed my suggestion. I hope it will be pursued since although the amount at stake is not small, if the appeal is successful and there was to be a re-trial, the costs of this litigation are likely to exceed the amount at stake.
14. For these reasons I will grant permission to appeal and encourage the parties to seek ADR through the voluntary scheme operated by this court.
Order: Application allowed with costs to be in the appeal