UK: No Estoppel Where Terms Subsequently Found To Apply And "Payment On Account" Sufficient Reservation To Enable Recovery Of Mistaken Payments

Last Updated: 12 January 2011
Article by Mark Alsop

DRL Limited v Wincanton Group Limited 2010 EWHC 2896

Wincanton provided delivery services for DRL, a white goods retailer, to DRL's customers. Under the contract, Wincanton was obliged to unpack and inspect the goods to check that the correct goods had been delivered and that the goods were free from apparent defects. This was not always done. The parties fell out and there were many matters for resolution, of which two are covered in this bulletin. First, Wincanton (or rather its predecessor supplier to DRL) had incorporated the Road Haulage Association conditions of carriage into the contract by reference, on the grounds that they ensured that Wincanton would have to take out legally required goods-in-transit insurance. In fact, they included rather more terms, including exclusions and limitations of liability. At first in the negotiations concerning the dispute, Wincanton did not mention the RHA conditions. It then realised that they contained relevant provisions limiting liability (in addition to any in the contract itself). DRL argued that Wincanton was estopped from relying on the RHA conditions on the grounds of (i) estoppel by convention, namely that the parties had at all times dealt with each other on the basis of a mutual assumption that the RHA conditions did not apply and (ii) promissory estoppel, namely that Wincanton had represented by its silence or behaviour that it did not rely on the RHA conditions and that they had no application. Secondly, DRL sought repayment, under the law of restitution, of payments mistakenly made to Wincanton where the unpack and inspect obligation had not been complied with. (The test for restitution is whether a person who pays when in doubt takes the risk that he may be wrong about payment; if he takes the risk, the monies have been paid under mistake and are not recoverable.)

The High Court found for Wincanton on the estoppel argument and for DRL on the restitution argument:

  • Estoppel. There was no estoppel by convention. Until termination of the contracts, both parties had been entirely unaware of their rights under the RHA conditions, so there was no common assumption that the conditions did not apply. Even if there had been a common assumption, DRL had failed to show detrimental reliance in that it would not have acted differently. As regards promissory estoppel, both parties were unaware of Wincanton's rights, so it could not be said that Wincanton had made a representation by conduct or silence that it would not rely on them, nor could DRL be said to have relied on silence as being such a representation. Silence can only amount to a representation where there is a duty to speak, and there was no such duty here. The fact that on occasion Wincanton failed to rely on rights under the conditions until after termination of the relationship was not sufficient to found an action for estoppel.
  • Restitution. The evidence showed that DRL was aware that Wincanton was not complying with its unload and inspect obligations on all deliveries, but had no means of knowing exactly which individual deliveries the failure applied to. DRL had failed to reserve its rights when making payment, but this did not mean that it was taking the risk that it was paying sums not properly due. The contract provided for invoices to be agreed before payment and DRL had never agreed the invoices. Instead, it made payments clearly "on account" and on the basis of only a broad assessment of the sums due. This was sufficient to evidence that DRL was not accepting the risk that the payments might not be properly due, even though it never expressly reserved the right to seek repayment. (The judge went on to hold that DRL was unable to recover the sums in restitution because there was no total failure of consideration. The unpack and inspect obligation was only one small element of the delivery charge and parties had not allocated any part of the price to it. It would thoroughly unfair if DRL could recover the whole payment for a delivery where, even if unpack and inspect did not occur, there was no complaint from the customer.)

It might seem slightly surprising that a party can negotiate in ignorance of its contractual position and only later raise arguments based on its actual contractual position. As for payment, where a payer suspects non-compliance, it should either reserve its rights or make it clear that it has not accepted that the amounts are properly due.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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