Latchin (t/a Dinkha Latchin Associates) v General Mediterranean Holdings SA & Anor

An implied contract inferred from conduct requires necessity. Conduct equally consistent with work being done without a contract is insufficient. Where a professional is instructed to carry out substantial work and incur expense, the normal implication is an obligation to pay reasonable remuneration, unless a contrary arrangement rebuts it. An initial speculative phase may end when the work becomes instructed and sufficiently developed. The point at which the obligation arises is an evaluative judgment for the trial judge. On appeal, intervention requires an error of principle. Where an agent acts for an undisclosed company, the company may be the contractual counterparty if the evidence establishes that agency and the other party was content to deal with any company. The agent is not personally liable merely because the principal was undisclosed.

The claimant, an architect, sought remuneration for design work on four Tangiers projects. The Technology and Construction Court found no express agreement but implied contracts for reasonable remuneration from 1 September 1994. It held that General Mediterranean Holdings SA and the second defendant were contractual counterparties for Projects 2, 1 and 3, and that the second defendant was personally liable for Project 4.

The claimant appealed the preliminary findings concerning the existence and terms of the contracts, including the identity of the counterparties. The central issues were whether the parties’ conduct made it necessary to imply contracts and whether the evidence supported personal contractual liability on the part of the agent.

1. The appeal was dismissed save that the finding that Mr Auchi personally entered binding contracts for Projects 2, 1 and 3 was set aside. The preliminary answers were varied accordingly.

2. The Court adopted the principles summarised in Baird Textiles Holdings v Marks & Spencer [2001] EWCA Civ 274. An implied contract requires sufficient certainty, an intention to create legal relations and, where the contract is inferred from conduct, necessity. The court must ask whether the parties would or might have acted as they did without a contract. Ambiguous conduct is insufficient.

3. The trial judge correctly applied the necessity and officious-bystander inquiries. Giving instructions to a professional and carrying out substantial work, including expenditure on a significant trip, normally implies an obligation to pay reasonable remuneration unless a contrary arrangement is shown. The legal burden remained on the claimant, but the evidential burden shifted to the defendants to rebut the normal implication. An initial understanding that work was speculative or unremunerated did not continue indefinitely. The judge was entitled to find that the line was crossed on 1 September 1994, when the work moved into a more detailed instructed phase. His overall evaluation of the evidence could not be disturbed absent an error of principle.

4. For Projects 2, 1 and 3, the evidence established that Mr Auchi acted for GMH and that the claimant was content to deal with any company he represented. GMH was therefore the undisclosed contractual principal. There was no evidence that Mr Auchi was intended to be a personal contracting party. Tehran-Europe v ST Belton [1968] 2 QB 545 did not establish that an agent is personally liable as a contractual party merely because the principal is undisclosed. Project 4, concerning Mr Auchi’s personal villa, was properly treated as a personal contract.

5. The contractual terms entitled the claimant to reasonable remuneration for instructed work, except that no remuneration was payable for work on Projects 2 and 1 before 1 September 1994. Written submissions on costs were ordered, together with interim payments of £120,000 for costs below and £40,000 for the appeal.

1. Court of Appeal (Civil Division): In [2003] EWCA Civ 1786, the appeal was dismissed save for the finding of Mr Auchi’s personal liability for Projects 2, 1 and 3. The preliminary answers were varied.

2. Queen’s Bench Division, Technology and Construction Court: Mr Recorder Uff QC found implied contracts for reasonable remuneration from 1 September 1994, with GMH and Mr Auchi as counterparties for Projects 2, 1 and 3, and Mr Auchi personally for Project 4.