Re Selectmove Ltd
Court of Appeal
Citations: [1995] 1 WLR 474; [1995] 2 All ER 531; [1994] BCC 349; [1995] CLY 763.
Facts
Selectmove was a company which owed Inland Revenue tax. Inland Revenue petitioned to have Selectmove wound up over the debt. Selectmove resisted this. They argued that a representative of Inland Revenue had agreed to allow Selectmove pay the tax in arrears. Selectmove contended that this either gave rise to a contract or estoppel preventing Inland Revenue from immediately acting on the debt.
Inland Revenue argued that the representative had no authority to make any such promise. The representative had made this clear to Selectmove by telling them he would need to seek permission from his superiors. They also noted that in any case, Selectmove had also failed to pay the tax in arrears.
Issue(s)
- Was consideration provided for the representative’s agreement?
- Did the representative’s agreement create an estoppel?
- Did the representative have authority to bind Inland Revenue to a contract or estoppel of this nature?
Decision
The Court of Appeal held in favour of Inland Revenue. This was primarily because the representative did not have (actual, ostensible or implied) authority to bind Inland revenue to any representation.
The court also noted that there was no consideration in this case. Selectmove was already under an existing obligation to pay the tax. A promise to fulfil an existing obligation at a later date could not amount to good consideration. It did not matter that Inland Revenue might secure more money by accepting tax in arrears than by putting the company into liquidation.
Finally, the court held that even if an estoppel had arisen, it was not unconscionable to allow Inland Revenue to renege on the promise. This was because Selectmove had failed to pay in arrears.
This Case is Authority For…
The Court of Appeal affirmed the principle that a promise to pay an existing debt cannot be used as consideration. They thought that the principle of ‘practical benefit’ expounded in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 did not apply to debt cases.
The court also clarified how estoppel applies to conditional representations. A conditional representation is a statement such as: ‘I will not insist on my rights if you do X’. It will not normally be unconscionable to allow a party to renege on a conditional promise if the other party failed to adhere to the conditions. As such, the other party will normally fail to establish estoppel unless they have adhered to the condition.
Other
Felthouse v Bindley [1862] EWHC CP J35 is often cited as authority for the proposition that it is not possible to accept an offer through silence.
The Court of Appeal in this case thought that it was in theory possible to accept an offer by silence. For example, where the offeree says that offeror can treat the offer as accepted if he does not hear a response within a particular period.
However, this was not relevant in this case. This was because the representative did not have the authority to convey Inland Revenue’s acceptance – by his silence or otherwise.
By contrast, silence is much less likely to amount to acceptance where the offeror states that if the offeree does not respond he will treat the offer as accepted.
