Worldspreads Ltd v Foley

Where a company pays an individual on behalf of another company under an existing service agreement, the payment arrangement does not by itself vary or novate the agreement, or make the paying company liable for the underlying remuneration. Payments made at the individual’s request, coupled with promises of repayment, may remain debts to the paying company rather than advances of salary. Salary, bonus, expenses and other benefits owed under the service agreement cannot be set off against those debts where they are owed by a different company. Unjust enrichment does not arise merely because one group company receives services which another group company agreed to remunerate. An estoppel by convention requires an evidential foundation showing a shared assumption or representation.

Worldspreads Ltd, an English company in special administration, claimed £309,321.79 from Conor Foley. Over several years, the English company had made payments to Mr Foley or third parties at his request. Mr Foley had repaid part of the total and had generally promised to provide matching cheques.

Mr Foley was employed by the claimant’s Irish parent under a written service agreement. He argued that the payments were made on behalf of the Irish company, or represented salary advances, and sought to set off alleged salary, bonus, severance, expenses, insurance and pension entitlements. He also advanced alternative arguments based on implied contract, novation, variation, estoppel and unjust enrichment. The central issues were the identity of the creditor and whether any of those claims could reduce his liability to the claimant.

Judgment was entered for Worldspreads Ltd for £309,321.79, with interest to be determined after hearing counsel.

1. The Service Agreement remained an agreement between Mr Foley and the Irish company. Clause 2.1 required him to provide services to group companies, including the English company if required. The English company’s administrative role in paying salary on behalf of the Irish company did not vary, novate or replace the Service Agreement.
2. The payments claimed were debts owed to the English company. The first payments were made when no salary arrears were due, and Mr Foley generally offered a cheque in return. That conduct was inconsistent with the payments being salary already due or advances of salary. There was no evidence that the Irish company had exercised its contractual right under clause 7.6 to deduct those debts from remuneration.
3. Any unpaid salary, bonus, severance payment, medical benefit, pension contribution or contractual expense reimbursement was, if due, owed by the Irish company under the Service Agreement. Those claims therefore could not be set off against the English company’s claim. The alleged severance agreement was in any event insufficiently precise and had not received the necessary approval of the Irish company’s board.
4. The estoppel case failed for lack of any pleaded or proved representation, shared assumption or acquiescence by the English company. The implied-contract and novation arguments were unsupported by evidence.
5. The Income Tax (Earnings and Pensions) Act 2003, section 689, explained the English company’s PAYE deductions and the issue of P60 certificates. Those administrative consequences did not identify it as Mr Foley’s contractual employer.
6. The unjust-enrichment claim was unreal. Mr Foley provided services to the English company pursuant to the Irish company’s contractual undertaking to remunerate him. Treating the English company as liable would risk double payment or make it a guarantor of the Irish company’s obligations.