Information and Communications Technology: Case Note - Countrywide Communications Limited v ICL Pathway Limited and International Computers Limited

Raymond Henley
Manchester Metropolitan University

3 Nov 1999
This case note first appeared on the Lancaster Buildings website
This case provides an interesting insight into how important contract and associated law are in commercial work. Although the events in question arose in connection with a proposed computer contract, there was no information technology element.
The Facts
The Benefits Agency and the Post Office invited tenders for a system to computerize benefits payments. There were a number of consortia, but the successful bidder was ICL Pathway Limited ("Pathway"). This company had originally been the vehicle for a consortium, but the other members had dropped out leaving International Computers Ltd. ("ICL") as its sole shareholder. Girobank plc ("Girobank") had been one of the original consortium members. Countrywide Communications Ltd. ("Countrywide") was a public relations and communications consultancy, which had worked for Girobank in the past. Girobank recruited Countrywide to the project on the basis that Countrywide would support the bid for free, and would be rewarded, if the bid were successful, by a subcontract for the public relations work from then on. Most potential subcontractors to the project were recruited on that basis, and did not join the consortium. Things did not go well for Countrywide. Girobank withdrew from the consortium and there was a personnel change at ICL. The new person had not dealt with Countrywide before, but had dealt with a rival. Shortly after the bid was successful Countrywide was told that they would not be engaged and that the contract was going to their rival.

The Action

Countrywide brought proceedings against Pathway and ICL claiming that:

	it had been awarded a subcontract orally; and
	alternatively, restitution for its contribution to winning the business.

The contract claim failed but the claim to restitution was successful.

Judgment
Giving judgment to Countrywide, the deputy judge said that the general rule was that someone who carried out work in the hope that it would lead to a contract could not recover the cost of doing so should they be unsuccessful. However, there were exceptional cases when the court would impose an obligation to pay the other party. The deputy judge reviewed the existing case law and concluded that it was not straightforward to identify a unifying principle as to when payment would be required. The authorities disclosed 4 considerations:

	whether such services would normally be supplied for free;
	the risk which the supplier took that such services might not be recompensed;
	the nature of the benefit to the other party; and
	the circumstances in which the contract was not granted, particularly whether the other party was at fault or whether they were outside the risk that the supplier had undertaken.

Here Countrywide had been induced to supply free services by the promise of a subcontract if the bid was successful, and had provided Pathway with a benefit for which it would otherwise have had to pay. Although Countrywide had accepted the risk that they might not be paid because the bid might fail, they had not accepted the risk that if the bid succeeded their services would be dispensed with because of a personnel change. Justice required that Countrywide should be compensated for its work on the bid. The appropriate compensation was a quantum meruit based on an hourly rate for the time Countrywide had properly spent.
Comment
This case shows that in commercial life it is not always possible to rely on the black and white of whether there was a contract or not. The courts are clearly prepared to penalize unconscionable behaviour towards another party who does not have the protection of a concluded contract.

 

 

 

 

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