Re Selectmove Ltd [1993] EWCA Civ 8 (21 December 1993)

Selectmove Ltd owed substantial PAYE and NIC arrears to the Inland Revenue. The company's director claimed an agreement was made with a tax collector to pay arrears by instalments. The Court of Appeal held there was no binding agreement due to lack of authority and consideration, reaffirming that practical benefits cannot constitute consideration for payment of existing debts under Foakes v Beer.

Facts

Selectmove Ltd owed the Inland Revenue substantial arrears of PAYE and National Insurance Contributions dating back to the previous fiscal year. In July 1991, the company’s Managing Director, Mr ffooks, met with Mr Polland, a Collector of Taxes, and proposed paying future PAYE and NIC as they fell due, with arrears to be paid at £1,000 per month from February 1992. Mr Polland indicated he would need to seek approval from his superiors and would revert only if the proposal was unacceptable. The company did not hear back until October 1991 when the Revenue demanded full payment. The company subsequently failed to make payments on time as proposed. The Revenue presented a winding up petition based on the outstanding debt.

Issues

1. Was there an acceptance by the Revenue of Mr ffooks’ proposal?

2. If there was an agreement, was it supported by consideration?

3. If there was no agreement, was the Revenue estopped from asserting its debt was due?

Judgment

The Court of Appeal dismissed the appeal, holding that no binding agreement existed between the company and the Revenue.

On Acceptance

Peter Gibson LJ held that Mr Polland had no actual or ostensible authority to accept the offer or bind the Revenue by his silence. Ostensible authority requires a representation by the principal, not merely the agent. There was no evidence that Mr Polland’s superiors made any representation that he had authority to accept or convey acceptance by silence.

On Consideration

The Court held that even if an agreement existed, it was unenforceable for want of consideration. The company’s promise to pay existing debts by instalments did not constitute good consideration under the principle in Foakes v Beer (1884). Peter Gibson LJ addressed the argument that Williams v Roffey Bros should extend to payment obligations, stating:

“if the principle of the Williams case is to be extended to an obligation to make payment, it would in effect leave the principle in Foakes v Beer without any application.”

He concluded that Foakes v Beer was not referred to in Williams and that it was impossible for the Court of Appeal to extend Williams to circumstances governed by Foakes v Beer. Any such extension must be made by the House of Lords or Parliament.

On Estoppel

The estoppel argument failed because Mr Polland had no authority to make the promise founding the estoppel, and the company had failed to honour its own proposed terms by making late payments.

Implications

This case is significant for confirming the continued application of Foakes v Beer in English contract law, specifically that a promise to pay an existing debt by instalments does not constitute good consideration. The judgment clarified that the practical benefit principle from Williams v Roffey Bros does not extend to obligations to pay money, maintaining the distinction between performance of services and payment of debts. The case also reinforces principles of agency law regarding ostensible authority and acceptance by silence.

Verdict: Appeal dismissed. The Court held there was no binding agreement between the company and the Revenue due to lack of authority to accept the offer and absence of consideration. The winding up order was upheld.

Source: Re Selectmove Ltd [1993] EWCA Civ 8 (21 December 1993)