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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Beauty Star Ltd v Janmohamed [2014] EWCA Civ 451 (14 April 2014) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2014/451.html Cite as: [2014] EWCA Civ 451

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
HHJ DIANA FABER
6WD03785 & 0WI00044

		Royal Courts of Justice Strand, London, WC2A 2LL
		14th April 2014

Lord Justice Davis:

Introduction

1. As long ago as 12 March 2008 the parties entered into a written Mediation Agreement designed, if fully implemented, finally to resolve the then extant claims and cross-claims made by the one against the other. That it has achieved no such thing is indicated by the melancholy fact that the parties find themselves before the Court of Appeal some six years later.
2. The background shortly stated is this.
3. The claimant is a company engaged in the wholesale supply of beauty products, operating from an address in Wembley, North London. The defendant at all relevant times operated as a retail seller of beauty products in North London, trading under the name of Sauf Enterprises.
4. On 27 July 2006 the claimant issued a claim form in Watford County Court (later transferred to Willesden County Court) claiming £92,940 as sums due in respect of goods sold and delivered at the defendant's request, "the full details whereof have been supplied". A defence and counterclaim was served on 2 August 2006. Criticisms were made of under-delivery, inadequate quality of stock supplied, delivery of items not in fact ordered, of overpayment and the like. The defendant counterclaimed £146,186. Given that, as it appears, the sales were meant to be in essentials on a cash and carry basis – albeit credit was from time to time given – the size of both claim and counterclaim is rather surprising. At all events, in due course Amended Particulars of Claim (revising the amount of the claim downwards somewhat) and an Amended Defence and Counterclaim (also revising downwards somewhat the amount of the counterclaim) were served. The counterclaim re-iterated the allegation of wrong overpayment. The invoices of the claimant were challenged – the defendant appending his own schedules of invoices supplied and payments made. A Reply and Defence to Counterclaim served on 17 January 2007 denied that the defendant's schedule constituted a comprehensive or accurate record of the parties' dealings. The "true history of the dealings" were, paragraph 17 asserted, as set out in the schedules annexed to the Reply and Defence to Counterclaim. The total sum claimed was now £75,201.73. The attached schedules ran from January 2001 to December 2006, with the last scheduled invoice being dated 5 June 2006.
5. Mediation was proposed. The defendant was legally represented at the resulting mediation; the claimant appeared by its managing director, Mr Singh. The mediator was an experienced barrister. The meeting resulted in a signed Mediation Agreement made on 12 March 2008.

The Mediation Agreement and Subsequent Events

6. The Mediation Agreement provides as follows:

"1. That the action no: 6WD03783 between the parties be stayed for a period of two months to enable the parties to reach settlement in accordance with the provisions of this agreement reached at mediation on 12.3.08.

2. The claimant will confirm through legal representatives by 4 p.m. on 19 March 2008 that the schedules attached to the Reply and Defence to Counterclaim dated 17 January 2007 served on its behalf accurately record all invoices issued by the claimant to the defendant between 1 January 2001 and 5 June 2006.

3. In the event that the defendant indicates by 2 April 2008 that it is prepared to resolve this dispute the following terms shall be binding upon the parties.

i) That an account shall be taken of all monies paid by the defendant and received by the claimant in the period 1 January 2001 to 5 June 2006.

ii) That to the extent that such sum exceeds the total of the invoices issued in the said period by the claimant, the claimant agrees:

a) to repay such sum together with interest of 8% to the defendant;

b) to pay the defendant's costs of the actions to be assessed on the standard basis if not agreed.

iii) That to the extent that such sum is less than the total of the invoices issued in the said period by the claimant, the defendant agrees:

a) to repay such sum together with interest of 8% to the claimant;

b) to pay the claimant's costs of the actions to be assessed if not agreed on the standard basis.

iv) The above to be in full and paid satisfaction of all claims between the parties.

4. In the event that the defendant gives no indication pursuant to paragraph 3 above the parties shall be at liberty to reconvene the mediation of 12 March 2008."

7. The claimant, by its solicitors, gave the confirmation provided for by paragraph 2 of the Mediation Agreement on 19 March 2008 in these terms:

"We refer to the above matter and by the terms of the Mediation Agreement confirm that the invoices served as schedules to the Reply and Defence to Counterclaim of our client accurately reflect the invoices issued between 1 January 2001 and 5 June 2006."

On 7 April 2008, after an agreed extension of time, the defendant by his solicitors indicated that he was prepared to resolve the dispute (as contemplated by paragraph 3 of the Mediation Agreement) in these terms:

"In terms of the Mediation Agreement our client agrees to take an account of the invoices paid, which would be the sums of money our client paid to your client and compare those with the invoices provided in your replies to the counterclaim. The difference would be paid by whichever party is responsible for it."

8. An accountancy firm called Gillespie Inverarity was instructed. The claimant declined to pay half its fee, so the defendant paid. On 3 July 2008 Gillespie Inverarity reported that the defendant had overpaid by £109,860. It was clear that Gillespie Inverarity had calculated the total of the payments of the defendant in that period (which that firm had checked against his accounting and bank records) and set them against the total invoiced sum derived from the invoices of the claimant as particularised in the schedules to the claimant's Reply and Defence to Counterclaim.
9. On receipt, the claimant challenged that conclusion. In particular, it said that the report had overlooked that £166,169 of the payments made by the defendant related to a series of invoices raised by the claimant in January/February 2005 in the sum of £166,169 but which had been omitted from the schedules to the Reply and Defence to Counterclaim and which Gillespie Inverarity had not taken into account. Other criticisms were also made. The defendant (by his solicitors) disputed the claimant's entitlement to reopen matters in this way by letter dated 11 August 2008. This was said:

"As far as we are concerned, this matter was effectively settled by mediation. By your letter of 19 March 2008 you confirmed that the invoices served as schedules to the Reply and Defence to Counterclaim of your client accurately reflected the invoices between 1 January 2001 and 5 June 2006.

By our letter of 7 April we confirmed our client's agreement to take an account based on those invoices. This we have done and you have the results of the reconciliation. In doing so our clients also compromised parts of his claim as pleaded in his defence and counterclaim. Your client agreed to proceed with the mediation on the basis of your invoices as set out in its schedule.

Our client has complied with the terms of the mediation Agreement which are now binding on both parties. The agreement was in full and final settlement of all claims between the parties.

We would add that we have been completely open about our position. To the extent that you are now saying that there are other invoices is entirely contrary to your pleaded case which after all was an amendment to your case as originally pleaded."

10. The claimant refused to accept this. It refused to make any payment whatsoever. So the defendant restored the matter back to the County Court.
11. The matter came before the court on a number of occasions. It is reasonably clear that the court was trying to encourage settlement. At all events, an order was made by District Judge Steel on 8 December 2008 (sealed on 15 December 2008). In the relevant respects it provides (in the form as subsequently corrected under the slip rule):

"Upon hearing counsel for both parties and Upon the parties agreeing that the schedule of invoices annexed to the Reply and Defence to Counterclaim are the only ones upon which there is a dispute and Upon the defendant acknowledging that his only defence is an account of sums paid and due and that the parties shall have no further claims against each other for the period of 1 January 2001 to 5 June 2006:

It is ordered that:

…

2. The parties do appoint an accountant pursuant to paragraph 3 of the mediation agreement dated 12 March 2008 on a joint letter of instruction to prepare an account of invoices due and paid between the parties from 5 January 2001 to 5 June 2006, the costs whereof is to be borne by the parties equally in the first instance and such reports to be filed by 4 p.m. on 6 March 2009.

3. Either party may ask questions of the accountant by 4 p.m. on 24 March 2009 to be answered by 10 April 2009.

4. The Directions hearing will take place on 20 April 2009 at 11 a.m.

…"

12. The claimant's solicitors thereafter proposed, and the defendant's solicitors agreed, that the firm of Blackstone Franks be appointed the accountant.
13. Correspondence ensued. On 13 May 2009, the defendant's solicitors wrote to Blackstone Franks to say that that firm's instructions were limited to the invoices scheduled to the claimant's Reply and Defence to Counterclaim. Among other things, they said this:

"The accounting that you are instructed to carry out will be limited to the invoices enumerated in the schedules to the claimant's Reply and Defence to Counterclaim which you have received from us. You are not required to go outside these schedules and look for other invoices, or for evidence of goods supplied by the claimant to the defendant in respect of which there is no invoice in its schedules. Hence, you are not required to call for further invoices from the claimant that have not been included in the claimant's schedule.

The claimant's claim is confined to the invoices in its schedules and the claimant has confirmed that they are accurate. Therefore, you are to proceed strictly on the basis that the invoices are accurate and there are no further invoices from the claimant to be looked into."

14. On 18 May 2009, Blackstone Franks wrote to both parties a proposed engagement letter. Among other things, this was said:

"We are to work on the assumption that the invoices enumerated in the schedules to the claimant's Reply to the Defence are as agreed by both parties."

By accompanying letter of the same date, this was among other things said:

"…We now understand that both sides have an agreed schedule of invoices from Beauty Star to Mr Janmohamed and we are to work from this schedule. For the sake of clarity, we have attached the first page of the copy of this schedule. Our work will therefore involve us in tracing and matching payments made by Mr Janmohamed to the list of invoices and identify those invoices that have not been paid."

15. By letter of 20 May 2009 Blackstone Franks wrote to the defendant's solicitors pointing out that invoices for January and February 2005 were missing from the schedules appended to the Reply and Defence to Counterclaim. The solicitors responded on the same day that Blackstone Franks were only concerned with the schedules appended to the Reply and Defence to Counterclaim. The claimant's solicitors then disputed that by letter of 26 May 2009, saying that it was not the case that there had been an agreement on the schedule of invoices and requesting that Blackstone Franks' instruction "continues in accordance with the court order".
16. On 2 June 2009 Blackstone Franks wrote to both parties:

"We attach a list of invoices of Beauty Star together with related payments from Mr Janmohamed in respect of those invoices.

The list is extracted from the documents relating to the court proceedings."

It asked if the claimant agreed with the contents. On 9 June 2009 it wrote again to both parties, saying:

"Also, we need agreement between your firms on the list of invoices from Beauty Star to Mr Janmohamed. At present, we shall be only using the list as included in the court proceedings unless the two firms have agreed otherwise."

17. Eventually, this letter was sent by the claimant's solicitors on 17 June 2009:

"Further to your recent correspondence our client has considered the schedule of invoices provided and confirms that the schedule was prepared and agreed by our client and that it confirms receipt of the payments shown in the list."

18. Blackstone Franks in due course prepared a report which it provided on 23 July 2009. It concluded that the defendant had overpaid the claimant by £178,434. It made clear that it had used the schedule of invoices appended to the Reply and Defence to Counterclaim. On receipt of that report, the claimant refused to pay that sum or any sum. It said that Blackstone Franks had wrongly omitted the invoices in the amount of £166,169 for January/February 2005. The claimant also said there were other inaccuracies and errors in the report, amounting to some £92,000. It further claimed (for the first time) that some of the payments made by the defendant in the period related to invoices issued in 2000. There was thereafter an amount of inconclusive correspondence.
19. On 6 February 2010 the claimant issued a second set of proceedings in the County Court. It claimed rescission or rectification of the Mediation Agreement, saying that it was made under mistake, in that the schedules appended to it wrongly omitted the invoices for January/February 2005. It further claimed that the schedules had wrongly omitted invoices raised in 2000 which remained unpaid in 2001. It said that its confirmation of 19 March 2008 likewise had been mistaken. Among other things, it was said that the defendant knew that the claimant had made such a mistake and had taken advantage of it. All that was disputed by the defendant.

The judgment of HHJ Faber

20. There was a three day trial before HHJ Faber in the Central London County Court. She gave a reasoned judgment on 28 February 2013. She dismissed the claim for rectification. She said that there was no mistake in the Mediation Agreement itself – as the evidence before her had confirmed. The mistake, if there was one, was in the claimant's letter of confirmation, written thereafter on 19 March 2008. She accepted that the claimant had overlooked the missing invoices for January/February 2005 in preparing, and then confirming, the schedules appended to the Reply and Defence to Counterclaim. But she found that it was not proved that the defendant knew of the mistake. That disposed of the rectification point; albeit, as I see it, there was a further legal difficulty for the claimant in that it was not the agreement but the subsequent unilateral confirmation given by the claimant on 19 March 2008 which was mistaken.
21. As to the issue of interpretation of the Mediation Agreement, the judge said that effect had to be given to paragraph 2 of that agreement. That had been implemented by the letter of confirmation of 19 March 2008 from the claimant and accepted by the defendant on 7 April 2008. Accordingly the account was to be taken by reference to the invoices annexed to the schedules to the Reply and Defence to Counterclaim: confirmed as accurate in the letter of 19 March 2008.
22. As to the subsequent report of Blackstone Franks, the judge held that the Order of DJ Steel enforced the Mediation Agreement and that Blackstone Franks was appointed under that Mediation Agreement. That firm was the parties' appointed expert, not the court's. The claimant was not free to challenge that report, because it had agreed to be bound by it. If, moreover, as the claimant also said, Blackstone Franks had made accounting errors, the claimant's remedy was against Blackstone Franks. But as between the parties the matter was final. In this regard she referred to Jones v Sherwood Computer Services plc [1992] 1 WLR 277.
23. The claimant sought to appeal. Lewison LJ refused leave on all points raised. Vos LJ on 18 November 2013 confirmed the refusal of leave on the rectification points. But he granted permission to appeal limited to the following points:

"1.1 As to whether paragraphs 2 and 3 of the Mediation Agreement mean that the account was to be taken on a "matching basis" i.e. including only payments made in respect of scheduled invoices and/or so as to exclude payments made in respect of unscheduled invoices.

1.2 Whether the effect of DJ Steel's order dated 15 December 2008 was (a) to limit the account to the disputed invoices only and/or (b) to make Blackstone Franks experts appointed under CPR Parts 35 or 40 so that the consequences explained in Jones v Sherwood do not apply to the challenges to their report."

Submissions and Disposal

(a) The Mediation Agreement

24. The submissions of Mr Armstrong, on behalf of the appellant claimant, were heavily based on what he asserted were the unjust and uncommercial consequences of the judge's conclusion. In particular, he said, there had been issued the invoices of January and February 2005 – indeed those (and payments in respect of them) had initially been listed in the schedules to the defendant's own Defence and Counterclaim. Yet those invoices had been disregarded first by Gillespie Inverarity and then by Blackstone Franks, thereby skewing the result in favour of the defendant.
25. Mr Armstrong went on to submit that, given the nature of the dispute that had arisen by 2008, commercially speaking one would expect an account to be taken of the dealings between the parties between January 2001 and June 2006. That would involve matching all the invoices rendered by the claimant on the one hand against all the payments made in respect of each such invoice by the defendant on the other hand. That would thereby establish the true account between the parties. The Mediation Agreement, he said, was to be interpreted accordingly.
26. I would agree that would be one method – indeed, an orthodox accounting method – of establishing the dealings between the parties. But, as I see it, it simply is not the method the parties chose when they entered into the Mediation Agreement.
27. If one focuses solely on paragraph 3 of the Mediation Agreement, one can find some support for Mr Armstrong's argument: because the references to "invoices issued in the said period" clearly comprehend the period of 1 January 2001 to 5 June 2006 mentioned in paragraph 3(i), and ostensibly without restriction. But one has to read the agreement as a whole. Regard must be had to paragraph 2. It cannot be ignored. That specifically stipulates that, as a precondition of the specified account being taken, confirmation was first required from the claimant that the schedules attached to the Reply and Defence to Counterclaim "accurately record all invoices" issued by the claimant to the defendant in that period. And the claimant in due course gave that confirmation, by its letter of 19 March 2008.
28. Such a consideration also explains why the account specified in paragraph 3(i) of the Mediation Agreement is limited to an account of all monies paid by the defendant in that period. No account of the invoices issued by the claimant in that period was needed: just because they would be as confirmed under paragraph 2. Nor is that a conclusion lacking commercial sense. It was within the power of the claimant to check and confirm the accuracy of its schedules – it, by paragraph 2, having been given the opportunity to do so – and within its power to refuse to give the confirmation. It was then open to the defendant either to agree or to refuse (under paragraph 3) to resolve the dispute. That confirmation and agreement being given, the taking of the account of payments could proceed accordingly. The (potentially expensive) task of identifying the relevant invoices and matching payments to them individually was thereby removed. Indeed, as Mr de la Piquerie noted, by agreeing to this procedure the defendant had withdrawn his erstwhile wider challenge to the invoices issued by the claimant: a significant element of compromise in itself.
29. So, as I see it, nothing has gone wrong here with the Mediation Agreement. What has gone wrong is the mistake of the claimant in thereafter providing confirmation as to the accuracy of its schedules when in fact (as it says) it inadvertently had omitted reference in those schedules to the missing invoices for January and February 2005. But the claim for rectification has failed; and there is no leave to appeal in that regard. In such circumstances it is contrary to all established principles of interpretation of contracts for the court to rewrite the bargain which the parties have actually made simply in order to achieve a result said to be fairer and more reasonable, having regard to supervening events and to subsequent mistakes in implementation.
30. In my view the true interpretation of the Mediation Agreement is plain. The judge was quite right to construe it as she did.

(b) The Order of District Judge Steel

31. I am also unimpressed by the claimant's arguments as to the meaning and effect of the order of 8 December 2008. What the claimant seeks to say is that the account thereby ordered was limited to the invoices in dispute (that is to say, those scheduled to the Reply and Defence to Counterclaim) and does not affect those which are undisputed (that is to say, in particular, those of January and February 2005). Further, it is said that the Order constituted Blackstone Franks as court appointed expert under CPR Rule 35: and the court is thereby, under that Rule or CPR Rule 40, empowered to reopen and re-examine the correctness of the approach and conclusions of Blackstone Franks, without the parties themselves being bound by such conclusions.
32. There is no reference in the Order of District Judge Steel to the accountant being appointed as court appointed expert under those Civil Procedure Rules. On the contrary, as I see it, the terms of the Order are against that: for, by paragraph 3, the District Judge ordered the parties to appoint the accountant. Yet further, such appointment was expressed to be "pursuant to paragraph 3 of the Mediation Agreement".
33. This, of itself, is a very strong indication that the account indicated in paragraph 3 was to be that provided for by the Mediation Agreement. I appreciate that paragraph 3 of the Order refers to the "taking of an account of invoices due and paid between the parties" from 5 January 2001 to 5 June 2006. But as I see it, that is to be read in the light of the Mediation Agreement itself. The whole context leading up to this Order, moreover, was that the defendant had been persistently and consistently asserting the terms of the Mediation Agreement and the compromise which he said had been reached under it. It is – looking at matters objectively – most improbable that at an interlocutory hearing of this kind the defendant would then, and by such elliptic means, have entirely abandoned his stance.
34. That this is so is, to my mind, also borne out by the recital to the Order. It recites that the parties agree that the schedule of invoices annexed to the Reply and Defence to Counterclaim are the only ones upon which there is a dispute. It further recites that the only defence is an account of sums "paid and due". That, naturally read, is a reaffirmation of the previous position. Mr Armstrong, however, sought to say that that recited agreement left open bringing into the picture the invoices which (he said) were not in dispute: viz. the missing invoices of January and February 2005. But whether or not they were undisputed then rests on his assertion to that effect; indeed, on his argument the claimant could in principle bring in yet further, as yet unidentified, invoices for the period which were not listed in the schedule, as not being in dispute. (Indeed, it may be noted that the claimant thereafter sought – for the first time – to claim in addition for invoices issued prior to 5 January 2001, on the footing that they represented the opening balance at that date.) That cannot, given the context, possibly have been intended: indeed such a scenario would potentially render the agreed recital that the parties shall "have no further claims against each other" nugatory. It would also cause one to query why, if that were indeed the position (as the claimant now says) the claimant thereafter issued rectification proceedings and also sought to challenge the omission of the missing invoices from Blackstone Franks' report, as it did.
35. I therefore conclude that the appointment of the accountant (Blackstone Franks) was under the Mediation Agreement. I simply add the observation that thereafter, by its solicitors' letter dated 17 June 2009, the claimant (again) in fact ultimately confirmed to that accountant that the invoices were to be regarded as those scheduled to the Reply and Defence to Counterclaim.
36. I appreciate that, by the Order of 8 December 2009, the court seems to have regarded itself as having some measure of control over the accountant so appointed. Mr Armstrong drew attention to paragraph 3 of the Order, and also drew attention to various subsequent court hearings (and various statements by the parties) which I would accept are in some respect consistent with the accountant being regarded as a court appointed expert. I have to say that quite what jurisdiction the court had regarded as taking for itself in this regard is not entirely clear: although it is plain it was trying to facilitate resolution of the issues. The inference is, in fact, that matters had simply not been thought through in this regard. But, given the context as set out above and given the terms of the Order of 8 December 2008 itself, I repeat that I think it goes altogether too far to say that Blackstone Franks was acting as court appointed expert, with the provisions of CPR Rules 35 and 40 applicable. It was not. It was acting on the terms of the Mediation Agreement.
37. It follows that, having regard to those terms of the Mediation Agreement and to the contents of the schedules appended to the Reply and Defence to Counterclaim, there was no error in Blackstone Franks disregarding the invoices of January and February 2005.
38. Mr Armstrong also complained of other errors in Blackstone Franks' reports. He said that there were indeed demonstrable transpositional, arithmetical and clerical errors to the order of some £92,000. He took us to a selection of certain documents to seek to illustrate his points. That may or may not be so: at all events, neither Blackstone Franks nor the defendant have ever conceded it to be so.
39. But be that as it may, once it is accepted that Blackstone Franks was acting under the Mediation Agreement the point loses its relevance for present purposes. This is because, even if there are such mistakes, the report is binding. It is binding because that is what the parties had agreed. The remedy of the claimant, if it has one, is to be sought against Blackstone Franks. Clerical and transpositional errors of the kind now alleged do not connote such a departure from the terms of appointment as to entitle either party to refuse to be bound by the report. Blackstone Franks did what they were required to do. If what they did included clerical and transpositional errors on the way, that does not cause the determination to cease to be binding. The judge was correct to conclude that in the circumstances of this case the position was governed by the approach laid down in Jones v Sherwood Computer Services plc (supra).

Conclusion

40. It is most unfortunate that matters have remained unresolved for so long. But the court cannot rewrite the parties' agreement, or the court's previous Order, to bring about a result the claimant considers right: in circumstances, moreover, where it was for the most part the intervening errors of the claimant itself which have brought about the result it does not like.
41. I think that the judge was right in all respects. I would dismiss the appeal.

Lord Justice Ryder

42. I agree.

Lord Justice Laws

43. I also agree.