North & Anor v Brown & Anor

The Court of Appeal allowed the appellants' appeal and held that a contract to provide money will ordinarily be capable of performance by procuring the transfer of funds from a third party. The court distinguished vicarious performance from assignment or novation and concluded that the judge at first instance had conflated those concepts. The court relied on the principle that contracts to produce a monetary result are typically obligations to procure a transfer of funds rather than obligations dependent on the obligor's personal performance.

Key legal principles: (i) a contract to pay money is usually a contract to procure a result and therefore can be performed by arranging payment through a third party or bank; (ii) vicarious performance (performance by arranging for another to effect the contractual obligation) is distinct from assignment or substitution of contracting parties; (iii) precedents on non-assignability of contracts for personal service do not automatically extend to contracts to pay money.

Background and facts:

• In 1996 the appellant (then Mr Brown) and Mrs Clothier entered a written loan facility under which Mr Brown undertook to make monthly payments of £200 to Mrs Clothier. Both parties signed the agreement.
• Although the agreement envisaged payments by Mr Brown personally, the monthly sums were actually paid via a company controlled by Mr Brown and his then wife, treated in the company's books as wages. Mrs Clothier was not an employee.
• By the time of Mrs Clothier's death she had received over £18,000. Mr Brown sought repayment from her estate; the estate resisted on the ground that Mr Brown had not personally lent the money and so was not entitled to repayment.

Procedural posture:

• The county court (HHJ Charles Harris QC) found for the estate, holding that the contract required personal performance by Mr Brown and did not permit delegation or vicarious performance.
• The decision was appealed to the Court of Appeal.

Issues framed by the court:

1. Whether the contract for the provision of money required personal performance by Mr Brown such that payments made by a third party could not satisfy the contractual obligation.
2. Whether the county court judge had correctly treated authorities on assignability and personal service contracts as governing vicarious performance in a contract to pay money.

Court's reasoning and decision:

• The Court of Appeal held that money is a depersonalised medium and that obligations to provide money ordinarily involve procuring the transfer of funds rather than reliance on the obligor's unique personal qualities.
• The court emphasised the legal distinction between vicarious performance (where the original contracting party fulfils the obligation by arranging performance by another) and assignment or novation (substituting contracting parties), and found that the county court had failed to draw that distinction.
• The court considered authorities including Nokes v Doncaster Amalgamated Collieries Ltd and British Waggon Co v Lea, concluding that those cases concerning assignability and personal service do not preclude vicarious performance of contracts to pay money.
• The Court allowed the appeal and concluded Mr Brown could have performed his contractual obligation by arranging payment through the company or by bank transfer. The court noted any question of Mr Brown's potential liability to account to the company for a breach of fiduciary duty was a separate matter not decided in this appeal.

Appeal allowed. The Court of Appeal held that a contract to provide money is ordinarily performable by procuring the transfer of funds through a third party or bank; the judge below had erred by conflating vicarious performance with assignment and by treating cases about personal service as dispositive of a contractual obligation to pay money.

Appeal from Oxford County Court (decision of HHJ Charles Harris QC) in which the judge found that the contract required personal performance by Mr Brown and dismissed his claim for repayment; the Court of Appeal allowed the appeal ([2012] EWCA Civ 223).