Clarke & Ors v Get Training Ltd

Where a service contract is varied so that a finance provider pays the supplier, payment by the finance provider discharges the customer’s payment obligation under the varied contract. The supplier may owe an implied term not to misrepresent the purpose of the finance in a way that makes the finance agreement voidable or terminable. If the supplier’s own misrepresentation gives the lender a right to avoid or terminate, the supplier cannot unilaterally repay the advance and then revive the customer’s liability for the service charges. Any distinct remedy must be pursued on a properly pleaded cause of action. On a small-claims appeal, costs remain subject to the applicable exception for unreasonable behaviour.

The appellants contracted with Get Training Ltd for vocational training and initially paid the course charges. The contracts were then varied so that GE Money would finance the charges. The company completed loan applications which incorrectly stated that the loans were for central-heating work. GE Money paid the course charges to the company, which refunded the appellants’ direct payments and later repaid GE Money without consulting them.

The company subsequently sued for the course charges. District Judges entered judgment for the company, and HHJ Gregory dismissed the appellants’ appeals in the Walsall County Court on 13 July 2009. The central issues were whether the appellants remained liable under the varied training contracts and whether the Consumer Credit Act 1974 affected the claims.

1. Appeals allowed. The orders requiring payment of the course charges were set aside, as was HHJ Gregory’s order dismissing the appeals.
2. The original training contracts required the appellants to pay the course charges. They were subsequently varied by agreement so that the charges would be paid from sums advanced by GE Money. The appellants’ agreement to complete the finance applications and enter into loan agreements supplied consideration for the variation.
3. The legal effect of the variation was that payment by GE Money discharged the appellants’ contractual obligation to pay the company. Their remaining financial obligation was to GE Money under the loan agreements.
4. It was an implied term of the varied agreements that the company, when completing the applications on the appellants’ behalf, would not misrepresent the purpose of the loans in a way that made the loan agreements voidable or liable to cancellation. The company breached that term by stating that the loans were for central heating rather than training.
5. GE Money consequently had a right to avoid or terminate the loan agreements. However, the company’s unilateral repayment of the advances to GE Money, without the appellants’ knowledge or consent, did not revive their liability for the course charges. The lower courts’ analysis that the repayment caused consideration for the training contracts to fail was unsound.
6. The company’s late application to amend its pleadings to add unjust enrichment and negligent misstatement was refused because it was made at the hearing without prior notice.
7. The claims had been allocated to the small claims track. Under CPR 27.14(2)(g), costs, including appeal costs, could be ordered in specified circumstances such as unreasonable behaviour. The material did not establish unreasonable behaviour in resisting the appeal. No order for costs of the appeal was therefore made, and the lower courts’ costs decisions were left undisturbed.

1. Court of Appeal (Civil Division) — In [2010] EWCA Civ 1213, the appeals were allowed and the orders for payment were set aside.
2. Walsall County Court — HHJ Gregory dismissed the appeals against the District Judges’ judgments on 13 July 2009 and made no order for the costs of that appeal.
3. County Courts — District Judges at Hereford, Walsall and Wolverhampton entered judgments for Get Training Ltd for the course charges in proceedings allocated to the small claims track.