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Rock Advertising Limited (the “Respondent”) entered into a licence agreement with MWB Business Exchange Centres Limited (the “Appellant”) to occupy its managed office premises. Crucially, an anti-variation Daniel Hopeclause in the agreement stipulated that variations “must be agreed, set out in writing and signed on behalf of both parties before they take effect”.

After the Respondent fell into arrears on licence payments and other charges, the Parties had a telephone conversation about rescheduling payment of the sums due. However, two days after the Respondent made the first payment under the proposed schedule for future payments, the Appellant informed the Respondent that this constituted a sum inferior to the licence fee due. Before the Respondent could make another payment, the Appellant exercised its contractual right to exclude the Respondent from the premises, terminated the licence agreement and issued proceedings to recover the arrears.

Issues

The case was heard in the Court of Appeal on 9 March 2016 with judgment awarded to the Respondent.

On 1 February 2018 the following three issues were put before the Supreme Court:

  1. Is it possible for an agreement in writing, which contains an anti-oral variation clause, to be varied other than in accordance with the terms of that clause?

This became a matter of contention because the trial judge held the Appellant to have accepted the oral terms of the alternative repayment schedule. The Court of Appeal agreed. Kitchin LJ, who delivered the main judgment, was guided by the reasoning of Beatson LJ in Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd and anor [2016] EWCA Civ 396 (“Globe Motors”) and held that under the principles of freedom of contract contracting parties are entitled to agree whatever terms they choose, subject to the limits imposed by public policy.

  1. Was the Court of Appeal wrong to follow a previous Court of Appeal decision in which a relevant contrary authority was not cited, or a later Court of Appeal decision which considered both earlier decisions and rejected that contrary authority, but did so obiter?

Globe Motors followed the decision in World Online Telecom v I-Way Ltd [2002] EWCA Civ 413. However, this case was decided in ignorance of the Court of Appeal’s earlier decision in United Bank Ltd v Asif (unreported) 11 February 2000 (“United Bank”). United Bank determined that contracts containing anti-oral variation clauses, such as the clause above, cannot be varied orally. Although in Globe Motors the United Bank case was considered, it was held not to apply.

  1. On the factual findings of the trial judge, was there a practical benefit which could amount to consideration at law, given the principle that a promise to pay an existing liability cannot amount to good consideration per re Selectmove [1995] 1 WLR 474?

The Court of Appeal held the principles in Foakes v Beer (1884) 9 App Cas 605 and in re Selectmove [1995] 1 WLR 474 not to apply. Instead, it followed Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (“Williams v Roffey”); authority for the principle that a promise to perform an existing obligation could amount to good consideration, provided that there are practical benefits to the promisee. Applying this to the facts of the case, the Court of Appeal held that the arrangements reached under the revised payment schedule constituted a practical benefit beyond part payment of the arrears and promise of future payments. This is because under the modified arrangement the Appellant was likely to recover more in arrears from the Respondent than under the terms of the original licence agreement. The Respondent would also be more likely to overcome cash flow difficulties and remain a licensee of the Appellant, thereby securing the Appellant future business and the improved value of a currently occupied premises.

Comment

It will be interesting to see whether the Supreme Court decides to follow the Court of Appeal’s line of reasoning, which ignores an express contractual term at the expense of safeguarding the principle that contracting parties retain the freedom to enter into further contracts as they wish. The judgment is likely to determine what reliance contracting parties may place on anti-oral variation clauses.

Further, it is difficult to see Williams v Roffey applying in all but a specific set of circumstances. However, the rule is ripe for application to the renegotiation of contractual arrangements as regards debt repayment, particularly seeing as there are public policy demands to ensure that such arrangements are enforceable, otherwise there would be no incentive for parties to rely on them.

The appeal was heard on 1 February 2018 in the Supreme Court by Lady Hale, Lord Wilson, Lord Sumption, Lord Lloyd-Jones and Lord Briggs. Judgment is yet to be handed down.