Edwin Dyson & Sons Ltd v Time Group Ltd

On an application for summary judgment, a defence has a real prospect of success if it is not fanciful. Cumulative circumstantial evidence may require a trial of an allegation that a contractor knowingly paid secret commissions to the principal’s agent, even where each circumstance may admit of an innocent explanation.

A viable cross-claim concerning those payments may be raised by set-off under CPR 16.6. However, the alleged arrangement does not, without more, make the contractor’s entire quantum meruit claim unenforceable. Summary judgment may therefore be entered for a separable balance where allegations of further invoice inflation are unsupported by evidence.

Time engaged Dyson to undertake shopfitting work for a rapid programme of mobile-phone retail outlets. No price was agreed, so Dyson claimed a reasonable sum for the work. The disputed items included project-management fees paid by Dyson to Craftwork Retail Building Consultants, the project manager used by Time.

Time alleged that the payments were secret commissions or bribes, and sought to advance cross-claims in conspiracy, restitution and mistake by way of set-off. His Honour Judge McGonigal gave Dyson summary judgment for £283,615.87 inclusive of interest, while refusing summary judgment for £31,412.

With permission, Time appealed. The central issues were whether its allegations gave it a real prospect of success and, if so, whether it could set off its proposed cross-claim against Dyson’s quantum meruit claim.

Disposition

1. The Court of Appeal unanimously allowed the appeal. Lady Justice Arden gave the principal judgment. Lord Justice Aldous agreed, and Lord Justice Sedley agreed subject to serious reservations about the eventual prospects of the proposed fraud claim.

2. The applicable summary-judgment question was whether Time’s defence was more than fanciful. The fuller evidential picture gave Time a real prospect of proving at trial that secret commissions had been paid to Craft with Dyson’s knowledge. Relevant matters included the unusual indirect payment route, the absence of general disclosure on invoices, unexplained gaps in Dyson’s evidence, and the personal links between the individuals concerned. Each matter might ultimately be explained, but their combined effect required a trial.

3. Set-off was available under CPR 16.6 in relation to the management-fee payments and the alleged mistaken payments, provided the intended cross-action was viable. The court therefore permitted Time to defend and pursue its cross-claim in respect of £146,860.18.

4. The alleged secret-commission arrangement did not make Dyson’s whole quantum meruit claim unenforceable. If Time’s employee had participated, his knowledge would not be imputed to Time; if he had not participated, the conclusion was stronger still. Time’s unsupported concern that other invoices might be inflated did not provide a basis to withhold the remaining balance.

5. The court substituted judgment for Dyson for £156,080.26, plus the specified interest. It granted leave to defend in respect of the cross-claim and remitted the action to the Mercantile Court for case management.

• Court of Appeal (Civil Division) — allowed Time’s appeal and substituted partial judgment for Dyson: [2001] EWCA Civ 1845.

• Mercantile Court at Leeds — His Honour Judge McGonigal gave Dyson summary judgment for £283,615.87 inclusive of interest, but refused summary judgment for a further £31,412.