The Russell-Cooke litigation team successfully obtained Summary Judgment for £562,890.40 on behalf of their client, Venson Automotive Solutions Limited, at a hearing on 7/8 October 2019 (Venson Automotive Solutions Limited v Morrisons Facilities Services Limited & Ors [2019] 10 WLUK 147). The case raised interesting points around the payment provisions of commercial agreements and the effect of no set-off clauses.

Background

Pursuant to two interconnected agreements, the Claimant leased a fleet of 1,014 vehicles to the Defendants and provided management services in relation to those vehicles. The Hire Agreement appointed the Claimant as exclusive supplier of vehicles to the Defendants. The Fleet Management Agreement governed the provision of the Claimant's management services.  

The Hire Agreement required payment of invoices by direct debit and included a no set-off clause preventing the Defendants from relying on set-off and/or a counterclaim as a defence to non-payment. The Fleet Management Agreement provided that the Defendants must notify the Claimant of any dispute within seven days of receipt of an invoice.

The Defendants cancelled the direct debit in late 2016. The Claimant applied for Summary Judgment in respect of all unpaid, invoiced sums that had not been disputed by the Defendants within the seven day period. The Defendants argued that historical overpayments should be reallocated against the outstanding invoices.

Outcome

The Court agreed with the Claimant's position and awarded Summary Judgment in the sum of £562,890.40. The Court held that the Defendants had no real prospect of successfully defending the Claimant's claim for Summary Judgment and there was no other reason the claim should be disposed of at trial.

The no set-off clause in the Hire Agreement created a procedural mechanism that entitled the Claimant to payment pending determination of the rights of the parties at trial. The Court accepted that this was designed to ensure a supplier maintained capital payments without prejudice to the customer's rights to dispute any invoice within the prescribed period.

The Court did not accept the Defendants' argument of reallocation and even if the Defendants had an arguable case in relation to overcharging, it was not possible to appropriate those sums due to the payment mechanisms and the no set-off clause.

Further information on the case can be found here and on Westlaw.

Comment

The case shows the importance of concisely drafted and properly functioning payment regimes in commercial contracts. This is especially important for businesses looking to maintain cash flow and in particular where third party liabilities are incurred. No-set off clauses and notification clauses are commonly found in commercial contracts and can be valuable for businesses seeking to recover unpaid invoices quickly and efficiently.

In circumstances where there is a contractual payment regime and robust documentary evidence, Summary Judgment can be a useful tool. It may be possible to determine a claim, or particular issues in dispute, relatively cost effectively and without protracted litigation. Parties should seek advice at an early stage to determine the merits of such an application.

Senior associate Emily Mitcheson in the commercial litigation team, under the supervision of partner Elliot Elsey, acted for the Defendant. Assistance was also provided by senior associate Mark Fletcher. The Claimant had previously received advice from Russell-Cooke's corporate team and in particular, Guy Wilmot.

Corporate and commercial partner Guy Wilmot said: "Courts have again demonstrated that the precise wording of contracts really matters. Suppliers should be aware that if they have a robust “no set-off” clause this may prevent a customer from using outstanding payments as leverage in a commercial dispute. In many cases this will help to redress the imbalance which often exists between suppliers and customers, especially where the supplier is dependent on cashflow from its customer."