Osteopathic Education and Research Ltd (t/a European School of Osteopathy) v Purfleet Office Systems Ltd

Contractual wording is construed in its factual matrix, excluding prior negotiations and subjective intentions. A prior course of dealing may form part of the background, but its effect depends on what it objectively establishes. Where an agreement required a supplier to maintain an effective annual rental, subject to usage remaining within a specified range, the obligation could require recurring payments even though the agreement did not expressly state their frequency.

In commercial transactions, “cashback” and “marketing support” ordinarily convey a reduction in the customer's net liability. Describing a financed payment in those terms was misleading where the customer effectively borrowed the payment and repaid it with interest. A supplier who merely completed and forwarded lease documents as the customer's agent did not thereby assume fiduciary duties or a duty to advise on the commercial merits of the transaction.

Osteopathic Education and Research Ltd operated an osteopathy school and clinic and entered into a series of photocopier transactions with NCS Management Ltd, now Purfleet Office Systems Ltd. The arrangements involved leases with finance companies and payments described as “cashback” or “marketing support”.

The final agreement stated that NCS would conduct a review and, subject to no significant change in usage, maintain an effective rental of £28,860. NCS paid an initial marketing-support sum but made no further payments. OER claimed contractual sums and damages for misrepresentation, breach of fiduciary duty and negligence. The central issues were the construction of the final agreement, the operation of its usage condition, the character of the marketing-support representations, and the scope of any agency or tortious duty.

1. Contractual construction. Applying the principles stated by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, the Final Proposal was part of the negotiations and was excluded from the admissible background. The earlier agreements could be considered as part of the factual matrix, but they did not establish that marketing support was payable only once or only if a new lease was entered into.
2. Meaning and operation of Additional Term 1. The term required NCS to pay whatever sum was necessary to maintain OER's net annual cost under the final lease at £28,860, inclusive of VAT. The continuing obligation was conditional on no significant change in photocopying usage of more than 10%. The relevant comparison concerned all machines maintained by NCS. On the evidence, usage had not changed by more than 10%, so the condition was satisfied.
3. Misrepresentation. In the context of these transactions, “cashback” and “marketing support” conveyed an effective reduction in the customer's net liability. In reality, the amounts were included in the sums financed and were repaid by OER with substantial interest. The representations were therefore false and deliberately made to induce OER to believe that its liabilities would be reduced. Damages were assessed to place OER in the position it would have occupied without the misrepresentations, allowing credit for the benefits received.
4. Agency and negligence. NCS acted as OER's agent only in the limited roles of completing and forwarding documents. Those functions could attract duties of reasonable care, but did not impose duties to advise on the wisdom of the transactions, disclose NCS's anticipated profits or act loyally in circumstances of conflict. Nor was it fair, just and reasonable to impose on a commercial salesman a tortious duty positively to advise OER on the merits of each proposal, particularly where OER had experienced business personnel and the law already provided remedies for false statements.
5. Disposition. Judgment was entered for OER in the sum of £661,930.18.