IN THE NEWPORT COUNTY COURT
Case No. N1101799
BETWEEN:
MR RICHARD JONES
Claimant
- and -
ISLE OF WIGHT COUNCIL
Defendant
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JUDGMENT
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1. In this case the Claimant Richard Jones seeks to recover from the Social Services and Housing Directorate of the Isle of Wight Council the sum of £2,524.78 in respect of fees which he claims the Council has an obligation to pay.
2. The circumstances in which the claim is brought are helpfully set out in the Skeleton Argument prepared by Counsel for the Council as follows.
(a) Mr Jones is the owner of a residential care home called Eden House. For a number of years he has provided residential care services to individuals placed in Eden House by the Council and of course in return for providing those services has been paid on a monthly basis by the Council.
(b) In March 1998 Mr Jones and the Council entered into a written contract to take effect from 1st April 1998 and continuing until 31st March 2001 under which the Council agreed it would pay to Mr Jones the sums identified in clause 6. On 29th March 2001, Mr Jones agreed to extend the contract until 30th September 2001.
(c) During the summer of 2001, Mr Jones and the Council held a series of meetings at which Mr Jones together with other home owners indicated that he was no longer prepared to provide the service at the price then being paid by the Council and that he proposed to charge a higher rate for his services in the future.
3. It is at this point that the parties' view of the consequences of what was said at those meetings diverges.
4. Mr Jones produced a paper which he had circulated at the meeting with the Council on 20th September 2001. He said that he had given a copy to Mr Waddicor of the Council and that he had read the paper out. In particular Mr Jones referred me to the passage which he described as bullet points on the first page of his paper as follows:
We were willing to negotiate.
If negotiations were satisfactorily concluded by 1st October 2001 we would accept an extension of the existing variation until such time as the new contract could be introduced.
If negotiation failed to resolve our concerns by 1st October 2001 we would invite all Homes to invoice Social Services at a full commercial rate for the care of residents funded by the Local Authority.
As we have not received a response to these proposals I have to pause and ask if this was understood and is this the basis for our meeting today?
Mr Jones said that he read this passage out slowly and asked the question whether this basis of the meeting was understood. He said that although there was no speaking out, his question was acknowledged by head nodding on the part of those present.
5. Mr Jones continued to tell me that his position was that the original contract had ended on 31st March 2001 and a variation had been agreed for a finite period of 30th September 2001. Mr Jones' letter agreeing to the variation appears at page 47 of the Council's bundle. He notes in that letter that the contract variation was received by him three days earlier, that he had been given three days to consider and sign it or risk losing residents and business, that the Council had failed properly to consult with him over the contract terms and that as a matter of commercial necessity he had no alternative other than to sign the contract variation in order to ensure continuity of accommodation for residents and the survival of his business. He felt that the Council had acted unlawfully in relation to the contracting process and that his agreement to the terms had been extracted under duress. It is clear that the conduct of the negotiations for the renewal of the contracts was handled in such a way that the service providers or certainly Mr Jones lost confidence in the good faith of the Council. The contract was extended until 30th September 2001 to enable negotiations to proceed in respect of the terms of the new contract. However, progress was not made and the Council was in a position where at 20th September 2001 it was still having meetings with the service providers with a view to agreeing terms and preparing and signing a contract ready for 1st October 2001.
6. Mr Jones said that the need to increase fees was caused by the increase in the national minimum wage which was substantial. He told me that this would have affected his ability to operate the home in what he considered to be a satisfactory manner. He explained that the wage bill forms between 60% and 70% of the expenses of running a residential home. That was his single biggest reason for seeking an increase in the rate. He said that other reasons were peripheral. Under cross-examination he expressed the view that if he could not increase prices he would have to shut his home.
7. Mr Jones' case is that he told the representatives of the Council at the meeting on 20th September that if a satisfactory new contract could not be agreed by 1st October he would charge a new higher price. It was accepted by the Council that he had given this warning at that meeting.
8. Mr Jones says that the Council could have removed the residents if they were not prepared to pay the increased rates, he having told them that he would be charging increased rates.
9. The claim for £2,524.78 is therefore made up of those charges over and above charges which were made at the rates in the contract.
10. The Council's case is that Mr Jones is not entitled to charge at the higher rates for the following reasons:-
(a) Mr Jones continued to provide services from 1st October 2001 in the full knowledge that the Council had told him at the meeting on 20th September that they would not agree to pay at the higher rate (and Mr Jones accepted under cross-examination that the Council had made it clear it were not prepared to agree the uplifted rate)
(b) In those circumstances either the Council had effectively offered to continue the contract on the original terms which Mr Jones had accepted by his conduct or the Council had offered to enter into a new contract from 1st October 2001 at the original charging rate which Mr Jones had accepted by his conduct or there was no agreement between the parties as to price in which case Mr Jones is entitled to payment on a quantum meruit basis which may not exceed a reasonable sum for the services provided.
11. Essentially the Council says that by continuing to look after the residents placed in his care by the Council, Mr Jones continued to perform the original contract and thus provide services at the original contract rate. The Council says that Mr Jones could have given notice to terminate the contract either without notice by agreement or by giving not less than six months' notice in writing. However, the contract originally was for a fixed term and the variation of the contract was again for a fixed term until 30th September 2001. So the question which arises is: what was the contractual relationship between the parties from 1st October 2001. The existing contract and the extension by variation had expired. However, the Council took no steps to remove their residents from the care of Mr Jones and I conclude that they intended negotiate a new contract and to pay Mr Jones for the service provided since it was clear that Mr Jones would not extend the existing contract. Similarly Mr Jones did not ask the Council to remove the residents but continued to provide the services and expected that the Council would pay for those services. I infer that both parties anticipated that they would in due course agree the terms of the contract.
12. I was referred by Counsel for the Council to passages from Chitty on Contracts and Halsburys Laws on restitution and quantum meruit claims. In particular I was referred to a passage which said that mere receipt of a benefit, when the Defendant had no real option to accept or reject it, does not justify a claim for quantum meruit. Counsel accepted that there was a difficulty in saying that because there were other Homes to which Mr Jones' residents could have been moved but I was urged to look at the statutory framework in which this Defendant operates and to find that moving residents where negotiations are on-going is not reasonable having regard to the residents' rights. I have no hesitation in rejecting that submission. Having regard indeed to the statutory framework in which this Defendant operates I consider that the onus on this Defendant to conduct negotiations promptly and to avoid this kind of dispute was high.
13. Accordingly I find that the circumstances of this claim produce a situation where Mr Jones is entitled to claim for the costs of the services on a quantum meruit basis since there was no agreement between the parties as to price. A quantum meruit payment may not exceed the payment of a reasonable sum for the services provided. Counsel submitted that since Mr Jones had produced no evidence of the reasonableness of the figure he was not entitled to recover anything from the Council. During the hearing I heard evidence from Helen Betts, the Contracts Manager for the Council and (in the absence of Mr Waddicor) Eugenie Cousins, the Head of the Central Support Services accountable to the Director Mr Waddicor. Both witnesses gave evidence on the ability of the Council in the context of the financial restraints placed on it to pay higher rates. The evidence was to the effect that this was impossible because of budgetary constraints. Mr Jones pressed Ms Cousins on the availability of contingency funds comprising a reserve of £2m. Ms Cousins said she could not specifically comment although she knew there was a duty on the Council to have a contingency fund.
14. I also heard evidence from the Council's witnesses on the comparison between the rates paid by the Council and those paid by neighbouring Local Authorities. I accept that this evidence established that the Council's rates appeared to be more generous.
15. I am satisfied that the Council found itself under budgetary restraints in the same way as many Local Authorities and that it was doing its utmost to prevent costs increasing. As I have said above I also accept the evidence that the rates paid by the Council at the time appear to be more generous than those of neighbouring Authorities although I suspect there may be very good reasons for this given the particular circumstances of the Isle of Wight.
16. I am concerned that the amendment to the Defence raising the quantum meruit point for the first time was delivered as a draft to Mr Jones only two or three days before the hearing. At the beginning of the hearing I did ask Mr Jones whether he felt able to deal with the Amended Defence and he assured me that he could but in fact he was not in a position to present evidence to justify his rates on a quantum meruit basis and I am not satisfied that he understood the significance of the amendment.
17. In those circumstances I think it would be unfair to make the finding which Counsel urged me to do that since Mr Jones had given no explanation to justify the increase in his rates it should not be allowed to him. I consider that the best that I can do is to make a declaration that from 1st October 2001 Mr Jones was supplying services to the Council in anticipation of a contract being negotiated and that in the absence of an agreement as to price he is entitled to be remunerated on a quantum meruit basis. I give permission to Mr Jones to apply to the Court in the event that the parties are unable to reach an agreement for the hearing of his submissions and evidence on the reasonableness of the sum he sought to charge. The Defendants have already adduced evidence as to the reasonableness of the sum which the Defendants ought to pay and I do not give permission for the Defendants to adduce any further evidence on the issue of quantum meruit although clearly they will wish to make submissions on the evidence presented by Mr Jones.
19th April 2002
Deputy District Judge Marshland