Terry Gregory (Metal Fabrications) Ltd v Wendy Golledge & Ors

In determining whether charges amounted to overcharging in a fraud claim, the court may assess whether they were excessive or unreasonable in the general sense, particularly where the contractual pricing arrangement was informal and no hourly rate had been agreed. A contractual breach does not, without more, establish dishonesty.

Under Ivey, the fact-finder first determines the defendant’s actual knowledge or belief as to the facts. It then assesses whether the defendant’s conduct, viewed in light of that state of mind, was dishonest by the standards of ordinary decent people. The defendant need not appreciate that those standards would regard the conduct as dishonest. An appellate court should also exercise caution before interfering with a trial judge’s evaluative finding on dishonesty.

The claimant company appealed from a decision of ICC Judge Prentis following a trial of preliminary issues concerning alleged fraudulent overcharging by the respondents. The respondents operated a company which supplied services to the claimant, and the appeal concerned additional charges included in invoices for unusually hard work and breaks not taken.

The trial judge found that the charges were contractually permissible, or in any event were not excessive, and that Mr Golledge was not dishonest. The appeal challenged the contractual analysis and the application of the dishonesty test in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67. The central issues were whether the additional charges constituted overcharging and whether their inclusion was dishonest.

1. The appeal was dismissed. The trial judge was entitled to conclude that the additional charges did not constitute overcharging. The contractual arrangement was informal and operated within a family business. There was no agreed hourly rate, and the major part of the invoiced charges was calculated without a formally agreed pricing mechanism.

2. In that context, it was implicit that the charges had to be reasonable. The trial judge had ample evidence that Mr Golledge worked exceptionally long hours, that the additional charges were financially modest, and that the claimant had produced no evidence that the invoices were excessive by reference to market rates, the value of the work or the claimant’s own charges. The longstanding course of trading and payment was relevant, although the conclusion did not depend solely upon incorporation by course of dealing. The charges were therefore reasonable in context and did not amount to overcharging.

3. Because the preliminary issue concerned fraud, “overcharging” was not confined to a strictly contractual analysis. It meant, in the relevant context, levying an excessive or unreasonable charge. In any event, the contractual conclusion was sufficient to dispose of Ground 1.

4. Ground 2 was academic but was addressed. The trial judge had correctly applied Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67. The judge found that Mr Golledge genuinely believed he was entitled to include the charges. The further question was whether that belief, and the conduct viewed through it, would be regarded as dishonest by ordinary decent people. The judge was entitled to find that it would not. The fact that Mr Golledge had not disclosed the practice to Mr Gregory did not make the finding irrational or perverse.

5. A contractual breach and dishonesty are distinct matters. Even if the charges had been unauthorised under the contract, that would not by itself establish dishonesty. Once the correct legal test has been applied, an appellate court should be cautious before interfering with the trial judge’s evaluative assessment of dishonesty, as explained in Prescott v Potaminanos, In re Sprintroom Ltd [2019] EWCA Civ 932 and Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5.

• High Court (Chancery Division): ICC Judge Prentis dismissed the allegations of dishonesty against the respondents following a trial of preliminary issues.
• High Court (Chancery Division): Mr Justice Roth dismissed the claimant’s appeal on both grounds.