7th March 2024 | Dispute Resolution, contracts

Who are you contracting with? That was ultimately the question in the recent High Court case of Coltech Recruitment Limited & 1st PS Limited v Cera Care Limited [2024] EWHC 466 (KB), in which Sherrards represented the Claimants in a long-running dispute over non-payment of very substantial recruitment fees. The Claimants were successful, but they had to fight for it.

What was the case about?

“Colltech” (yes, that’s what was misspelled on the agreement – note, two ‘l’s, not one) entered into a contract with Cera Care Limited (“Cera Care”) for the provision of recruitment services. Entirely separately, another Coltech entity – Coltech Consulting Limited (“CCL”) – entered into a separate agreement with Cera Care for the provision of certain consultancy services.

The recruitment services were actually provided by Coltech Recruitment Limited (“CRL”), but Cera care denied this.

CRL instructed Sherrards in early 2022 when Cera Care refused to pay invoices amounting to £359,681.00, relating to the provision of 23 temporary workers supplied to Cera Care and whose services Cera Care admitted to having received the benefit of.

The defence Cera Care raised was that it never contracted with CRL; it contracted with CCL. What ensued was a lengthy and long-running legal battle over which “Coltech” entity had contracted with Cera Care to provide the recruitment services – CRL or CCL.

What gave a degree of oxygen to Cera Care’s argument were two main factors:

  1. The contract that was entered into did not name CRL as the recruitment “Agency”; it named “Colltech”. That begged the question: what is “Colltech”? Did it mean CRL or CCL?
  2. The contract – unhelpfully, and clearly in error – displayed, in the top right-hand corner, a logo that referred to “Coltech Consulting”. Cera Care relied heavily on this as being clear evidence that the correct contracting party was CCL, not CRL.

Why did the CRL vs CCL distinction matter so much to Cera Care? It mattered because Cera Care claimed that it was owed a substantial sum of money from CCL pursuant to the contract for consultancy services, such that it was entitled to refuse to pay the recruitment fees and, instead, simply offset against the (much larger) sum it claimed it was owed under the consultancy contract. In order to get this argument off the ground, Cera Care had to succeed in showing that the recruitment services contract was with CCL, not CRL, and it attempted to do that by leaning heavily on the poor drafting of the contract and the inclusion of the logo that referred to “Coltech Consulting”.

Cera Care’s arguments – which Sherrards asserted were a try-on and utterly hopeless from the outset – ultimately failed, and badly, but not before CRL and 1PS had been forced to expend over £100,000 in legal costs on complex High Court litigation, involving hundreds and hundreds of pages of evidence and documents.

So what happened?

Sherrards promptly engaged Jonathan Cohen KC of Littleton Chambers – a heavyweight in commercial litigation, and with whom Sherrards has enjoyed a strong and successful relationship for many years – and, with his careful advice (and assistance from his junior, Stuart Sanders), CRL and 1PS applied to the High Court for summary judgment. Summary judgment is essentially a means by which a party can short-cut litigation where it can show that the other party’s argument has no real prospect of success and that there is no other compelling reason why the case should go all the way to a trial. The view was taken that Cera Care’s arguments fell into this category: they had no real prospect of success.

In August 2023, an application for summary judgment was prepared and issued. The matter came before Deputy Master Sabic KC on 31 January 2024, who, having heard a day of arguments on both sides, found resoundingly in CRL and 1PS’ favour.

A key feature of the case was that, on each and every occasion when Cera Care wanted to engage a temporary worker, a “Placement” would be produced, which (amongst other details such as the name of the worker, pay rates etc) named who the “Agency” was. The Placement was uploaded to a portal, accessed by Cera Care, and Cera Care would approve the Placements in the portal. Thus, the contract between the parties was not just the document that the parties signed at the outset (containing the words “Colltech” and the logo); it also included each of the Placements.

Importantly, the Placements – without exception – identified “Coltech Recruitment Limited” (i.e. CRL) as the “Agency”. Cera Care went to great lengths to try and dismiss the relevance of the Placements, but their arguments failed.

 

The Judgment – which can be read here, concluded (in the main) that:

  1. The existence of the logo with the words “Coltech Consulting” was irrelevant. Brand names cannot constitute a company’s legal entity.
  2. The logo did not even identify CCL as the contracting party; it only said “Coltech Consulting” (missing the word “Limited”).
  3. The incorrect spelling of “Colltech” was also immaterial, because all parties accepted that an actual legal entity was the party to the contract, and “Colltech” is not a legal entity. It had to be either CRL or CCL, each of which are formal legal entities.
  4. Analysis of the contract and the Placements leads to an unambiguous answer as to which Coltech entity was the true contractual counterparty: read consistently and coherently with each other, the contract and the Placements contain only one definition of “Agency” and it follows that the contracting party was CRL.
  5. Cera Care’s attempts to argue that evidence might come to light at a later date that points to CCL being the correct contracting party were also unsuccessful.
  6. Despite it being Cera Care’s positive case that CCL was the correct contracting party, Cera Care had not adduced any documentary evidence which “clearly and positively supported [its] case” in this regard. “CCL’s name does not appear in any of the relevant contracts”.
  7. CRL and 1PS’ case, by contrast to Cera Care’s, “is clear and straightforward”. The identity of the parties in the relevant contractual documents “is tolerably clear”.
  8. “On the plain reading of [the contractual documents], there is, in my judgment, no documentary ambiguity in the definition of Agency… Thus, the key question in this application, namely who is the Agency, is determined by the definition adopted by the parties in writing, which is plainly CRL”.

Key takeways

Ultimately, CRL and 1PS should never have been forced to have to litigate this case. But the unfortunate stance adopted by Cera Care forced their hand. Nevertheless, better attention to detail at the point of entering into the contract would have avoided the arguments that were ultimately left to the Court to determine. Had the contract not referred to “Colltech”, but instead “Coltech Recruitment Limited”, there would have been nothing to argue about. The mistaken use of the logo referring to “Coltech Consulting” was unfortunate and led to further needless arguments.

Sadly, it is all-too-common that lay persons who draft their own contractual documents make errors like this. Such is the way of the commercial world, where there is often reluctance to enlist the help of lawyers. We see the use of brand names on contracts all the time – “Coltech” rather than “Coltech Recruitment Limited”, for example – and this case is a paradigm example of how seemingly innocuous oversights like this can lead to an extremely costly legal battle.

When you next enter into a contract, pause and think to yourself “who are we contracting with?”, and make doubly-sure that the correct, full, parties’ names are set out. And, of course, if in doubt take legal advice.  To find out more about the case, or get advice contact Aaron Heslop, (full details below).

This article was originally authored by Barney Laurence, a former team member at Sherrards.

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