Tallington Lakes Ltd & Ors v Larking Gowen

A fixed price expressly made conditional upon specified accounting records being in order does not govern where that condition fails. If the contract incorporates an express fall-back provision for fees, that provision determines remuneration instead of an implied reasonable-price term under section 15 of the Supply of Goods and Services Act 1982.

Where remuneration is implied, the reasonable fee must be assessed in all the circumstances and by reference to the parties’ objectively ascertained intentions. Time records and ordinary charging rates may be useful evidence, but are not automatically conclusive. A fixed fee may assist in valuing additional work, although it may carry little weight where its condition has failed.

An accountancy firm claimed the unpaid balance of fees for preparing accounts and tax computations for three associated companies. The principal company contended that the engagement was for a fixed fee and that it was not liable for work done for the other companies.

HHJ Birtles, sitting in the Mayor’s and City of London County Court, found that the fixed fee depended on the accounting records being in good order. That condition was not met. He gave judgment for the firm on invoices calculated by time and standard charging rates.

The companies appealed, alleging errors concerning the conditional fixed fee, the calculation of a reasonable fee, incorporation of standard terms, joinder, and apparent judicial pre-judgment or personal animosity.

1. Appeal dismissed. The judge was entitled to find that the quoted fixed fee remained conditional upon the companies’ accounting records being in good order. That condition was not satisfied. The informal indication that the firm might charge “a bit more” did not impose a cap once the basis for the conditional fixed fee had failed.
2. The Court of Appeal accepted that, if the matter depended upon an implied contractual obligation to pay a reasonable fee, the judge’s direct adoption of time records and ordinary charging rates was incomplete. As explained in Benedetti v Sawiris [2013] UKSC 50, contractual reasonable remuneration requires attention to the parties’ objectively ascertained intentions. A prior fixed fee may be relevant when valuing additional work. Time and rate evidence is not invariably decisive.
3. That error did not affect the result. The general terms of engagement accompanied and were incorporated into the signed engagement letters. Once the condition for the fixed fee failed, clause 14 was the parties’ express fall-back fee provision. It required fees to be computed by time spent, skill and responsibility, at the applicable charging rates. It therefore applied instead of an implied reasonable-fee term or section 15 of the Supply of Goods and Services Act 1982.
4. The judge’s tentative alternative view that the companies had breached the clause requiring proper accounting records was wrong. That clause merely preserved the directors’ responsibility for records and did not create a damages claim. It was immaterial to the outcome.
5. The allegations of pre-judgment and personal animosity were unproved. A transcript was the proper evidence of alleged conduct during the hearing. Witness accounts were not an appropriate substitute where a transcript had not even been sought and could reasonably have been obtained.

• Court of Appeal (Civil Division): Dismissed the appeal and upheld the judgment for the accountancy firm: [2014] EWCA Civ 959.
• Mayor’s and City of London County Court: On 24 September 2013, HHJ Birtles gave judgment for the claimant firm for the unpaid balance of its fees, with interest and costs to be assessed.