Arlington House Ltd & Ors v Torbay Care Trust Pt Hd

A contractual power to terminate care contracts in response to an immediate and significant risk must be exercised reasonably in all the circumstances. The decision whether to terminate immediately or on notice is also subject to a requirement of reasonable exercise. A claim for inducing breach of contract must identify the contractual term allegedly breached, the defendant’s knowledge of that term, and steps taken knowingly to procure the breach. A separate duty of care cannot ordinarily be imposed merely by recasting the exercise of an express contractual power. Contractual termination does not deprive the other party of a possession for the purposes of article 1 of the First Protocol where the party retains a claim for damages for breach of contract.

The claimants operated a care home under an umbrella agreement with the defendant, a care trust. Following concerns about the care of residents, the defendant terminated the individual care contracts and the umbrella agreement under clause 25.3.2.

The claimants alleged breach of contract, inducing breaches of third-party contracts, breach of a duty of care, and infringement of their rights under article 1 of the First Protocol to the European Convention on Human Rights. The defendant applied under Civil Procedure Rules 1998, parts 3.4.2(a) and 24.2, seeking strike-out and summary judgment.

1. Contractual termination. The defendant had a wide margin of appreciation under clause 25.3.2, but the power was subject to limits. The defendant had to exercise its discretion reasonably in light of all relevant circumstances, including whether there was a sufficiently immediate and significant risk to a service user’s person, health or wellbeing. The choice between immediate termination and termination on notice also had to be made reasonably.
2. Contract claim. The material relied on by the defendant might support optimism about the eventual trial outcome, but it did not establish that the claimants had no real prospect of success. Summary judgment was therefore refused in relation to the contractual claim.
3. Duty of care. The alleged duty was said to require the defendant either not to exercise the contractual power or to exercise it only when the contractual conditions were met. That proposed duty was untenable. The contractual claim was the appropriate route.
4. Inducing breach of contract. Applying the requirements stated in OBG Ltd v Allan [2008] 1 AC, the claimants had to plead the term allegedly breached, knowledge of that term, and steps taken with that knowledge to induce the breach. The particulars did not do so, and the claim was struck out.
5. Human rights claim. The court doubted that contractual rights constituted possessions under article 1 of the First Protocol. In any event, exercising contractual rights did not deprive the claimants of a possession: they retained a chose in action and, if successful, a claim for damages. That claim was also struck out.
6. Paragraphs 30 to 36 of the particulars of claim were struck out. The application for summary judgment concerning paragraph 28 was dismissed. Costs were reserved to the trial judge.

Not stated in the judgment.