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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> University of Wales v London College of Business Ltd [2015] EWHC 1280 (QB) (08 May 2015) URL: https://www.bailii.org/ew/cases/EWHC/QB/2015/1280.html Cite as: [2015] EWHC 1280 (QB) |
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QUEEN'S BENCH DIVISION
CARDIFF DISTRICT REGISTRY
MERCANTILE COURT
2 Park Street, Cardiff, CF10 1ET |
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B e f o r e :
sitting as a Judge of the High Court
____________________
UNIVERSITY OF WALES |
Claimant |
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- and - |
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LONDON COLLEGE OF BUSINESS LIMITED |
Defendant |
____________________
Paul Simms (Director of Legal Services) for the Defendant
Hearing dates: 3, 4 and 5 February 2015
____________________
Crown Copyright ©
H.H. Judge Keyser Q.C.:
Introduction
The Validation Agreement
"2. TERM
2.1 This Agreement shall come into force on the Commencement Date and, subject to earlier termination in accordance with its terms, shall remain in force for the Minimum Term and thereafter from year to year until terminated pursuant to Clause 10.2.
2.2 The Institution shall promote and organise the Course to commence on the Course Start Date in each year of the Term."
The Commencement Date was 9 August 2011: clause 1.1 and Schedule 1. The Minimum Term was the three-year period commencing on the Commencement Date, that is, the period from 9 August 2011 to 8 August 2014 inclusive; and the Term was the period during which the Validation Agreement should remain in force: clause 1.1. The Course was the programme or programmes of academic study within the Subject intended as preparation for obtaining the Qualification (clause 1.1); the Subjects and Qualifications were set out in Schedule 1, as were the Course Start Dates for the respective Courses.
"3 . ENTRY REQUIREMENTS
3.1 … the Institution undertakes in each year of the Term to:
3.1.1 advertise and seek candidates for the Course; and
3.1.2 enrol by the Course Commencement Date no fewer than the Minimum Number of candidates and no more than the Maximum Number of candidates to participate and receive tuition in the Course.
If by the Course Commencement Date in any year insufficient candidates have enrolled on the Course, the University shall be entitled in its discretion to terminate this Agreement forthwith by giving 30 days notice in writing to the Institution."
Schedule 1 set out, in respect of each Course, the Minimum Number and the Maximum Number of candidates to be enrolled. Schedule 2 set out the minimum qualifications required of candidates for each Course.
"3.2 The minimum qualifications for candidates to apply for enrolment on the Course are set out in Schedule 2 and the Institution shall prior to the Course Commencement Date provide the University with written evidence satisfactory to the University that students enrolled by the Institution on the Course have achieved minimum qualifications.
3.3 Without prejudice to Clause 3.4, the University shall notify the Institution no later than 6 weeks prior to the Course Commencement Date of the Registration Information required in respect of each student. The Institution shall provide the Registration Information to the University no later than 1 week after the Course Commencement Date. The University is not required to enrol on the Course a student in respect of which it has not received all of the Registration Information required.
3.4 The Institution shall provide the University with the full name and details of each student enrolled on the Course as specified in the Guidelines on the Transfer of Data from time to time and shall forthwith notify the University if these details change or if a student withdraws or wishes to be admitted late to the Course. The University shall be entitled in its discretion to refuse to enrol on the Course any student admitted late by the Institution."
Clause 1.1.1 defined "Registration Information" as "the information and returns required by the University in respect of each student as a condition of enrolment of that student on the Course".
"4. AWARD OF QUALIFICATION
4.1 Subject to the Institution having duly performed its obligations under this Agreement, the University agrees to award the Qualification to those students enrolled on the Course who complete the Course successfully in compliance with the University's requirements (as notified to the Institution from time to time)."
The Qualifications were set out in Schedule 1. For the most part they were Bachelors' and Masters' degrees, though there was also a Foundational Certificate and a Master's Entry Diploma.
"5. FEES
5.1 The Institution shall pay to the University the Fees and all other sums payable under this Agreement in sterling and in accordance with the provisions of Schedule 2. Save as may be expressly set out in this Agreement, the Institution is wholly responsible for the cost and expenses of complying with its obligations under this Agreement. Payment shall be made without deduction, set-off or counterclaim."
In fact, the Fees were set out in Schedule 3.
"6. CONDUCT OF ASSESSMENTS
…
6.4 The Institution shall permit the Examination Board to visit the Institution on the dates specified in Schedule 1 for the purpose of finalising marks awarded to candidates by the Internal Examiners and to determine the awarding of the Qualification to assessed candidates. …
6.5 The University shall have absolute discretion in those instances that it deems appropriate to delay the procedure set out in Clause 6.4 in order to ensure the conduct of any investigation which may be deemed necessary by the University in its absolute discretion into any alleged instances of unfair practice or other irregularity at the Institution. …"
"7. QUALITY ASSURANCE
7.1 The University will hold the ultimate responsibility for the academic standard of the scheme.
7.2 The Institution agrees to implement fully the quality assurance procedures made known to it annually by the University. This includes (but is not limited to) compliance with:
7.2.1 the appropriate Regulations and Standing Orders of the University governing the Course;
7.2.2 appropriate administrative procedures relating to the registration of students and the conduct of examinations;
7.2.3 appropriate administrative procedures relating to the registration of students and the conduct of examinations;
7.2.4 Clause 6.9 (annual meeting of the Joint Board of Studies).
7.3 The University from time to time conducts reviews of its validated courses. The Institution agrees to participate fully in any University review of the Course in accordance with the written instructions of the University.
7.4 The Institution agrees to participate fully in all quality assurance and review exercises carried out by any person (including without limitation the UK's Quality Assurance Agency) who is entitled to or required to carry out such exercise whether by operation of law or otherwise.
7.5 Where review by the University or by any person pursuant to Clauses 7.3 and 7.4 indicates the existence of, or the university becomes aware of, any actual or potential issue which in the University's opinion (acting reasonably):
7.5.1 impairs or may impair the Institution's academic quality and standards;
7.5.2 might adversely affect the reputation and integrity of the University and/or the Qualifications awarded by it
then (at the University's discretion)
7.5.3 the University may require the Institution to take appropriate action at the Institution's own cost to resolve any problem or issue within such timescale as the University may impose and in the event of the Institution failing to take action or implement changes to the satisfaction of the University, the University shall be entitled to terminate this Agreement forthwith; or
7.5.4 the University shall be entitled to terminate this Agreement forthwith by notice in writing."
"10. TERMINATION
10.1 The University shall be entitled to terminate this Agreement forthwith by notice in writing:
10.1.1 if the Institution fails to make any payment due under this Agreement (including without limitation any payment of the Fees or any part of them) on the due date for payment;
10.1.2 if the Institution becomes insolvent or unable to pay its due debts …
10.1.3 if diplomatic relations between the United Kingdom and the country or state in which the Institution is located are for any reason severed …
10.1.4 if the Institution is in material or persistent breach of the terms of this Agreement and, where the breach is capable of remedy, the Institution has not remedied the same within 28 days of the date of service of any notice pointing out the breach and requiring its remedy;
10.1.5 if unfair practice is established by the University …
10.1.6 if the University … is not satisfied … that … the Institution has sufficient resources …; and
10.1.7 pursuant to Clauses 7.5, 12.4 and 13.3.
10.2 Either party shall be entitled to terminate this Agreement for any reason by giving the other 12 months notice in writing to expire no earlier than the end of the Minimum Term or on any subsequent anniversary of the Commencement Date.
10.3 Termination of this Agreement for any reason shall not affect any rights or liabilities which have accrued prior to the date of termination.
10.4 This Clause 10.4 shall survive the termination of this Agreement as shall any other provision so required to survive either by express provision or by necessary implication."
"11. CONSEQUENCES OF TERMINATION
11.1 Upon termination of this Agreement, the University and the Institution shall co-operate in good faith (without creating a binding obligation) to seek and find ways in which students enrolled on the Course may be permitted to participate in an appropriate alternative programme of study at another higher education institution recognised by the Academic Board of the University from time to time.
11.2 Upon termination of this Agreement the Institution shall continue to meet all its outstanding obligations under this Agreement and further shall transfer all records information data and documentation relating to the Course or any student enrolled on the Course as requested by the University and do all such acts as reasonably requested by the University to enable the University to perform its non-binding obligations under Clause 11.1.
11.3 Termination of this Agreement shall be without prejudice to all other rights and remedies of the parties."
"17. LIABILITY
…
17.3 Neither party shall be liable to the other under this Agreement to the extent that it is prevented from complying with its obligations because of any negligence, failure or default on the part of the other. Neither party shall have any liability whatsoever to the other whether in contract tort or otherwise for any losses or damages:
17.3.1 which were not reasonably foreseeable by the parties or either of them at the date of this Agreement; or
17.3.2 to the extent to which they are attributable to any intervening act, omission or event; or
17.3.3 which represent loss of any anticipated or future business, revenue, goodwill or profit."
"18. ENTIRE AGREEMENT
18.1 This Agreement constitutes the entire agreement and understanding of the parties and supersedes any previous agreement between the parties relating to the subject matters of this Agreement."
"21. WAIVER
21.1 The failure to exercise or delay in exercising a right or remedy provided by this Agreement or by law does not constitute a waiver of the right or remedy or a waiver of other rights or remedies.
21.2 A waiver of a breach of any of the terms of this Agreement or a default under this Agreement does not constitute a waiver of any other breach or default and shall not affect the other terms of this Agreement.
21.3 A waiver of a breach of any of the terms of this Agreement or of a default under this Agreement will not prevent a party from subsequently requiring compliance with the waived obligation.
21.4 The rights and remedies provided by this Agreement are cumulative and (subject as otherwise provided by this Agreement) are not exclusive of any rights or remedies provided by law or in equity."
"Part 1
1. For the first three years of the Term, and subject to paragraph 2 below, the Fees for each year shall be the greater of:
i. £15,000 per annum (per cohort of students enrolled on all years of the Course) and
ii. a sum which is set out in clause 1 iii of this Part of Schedule 3 multiplied by the total number of candidates enrolled on and who have commenced the Course (for all cohorts i.e. if there are 15 students in the first year, 15 in the second and 10 in the third, this will give a total of 40).
iii. Foundation Certificate - £350 in total
Master's Entry Diploma - £360 in total
BA (Hons) in Business Administration (including all pathways) - £300 per annum
Master of Business Administration (including all pathways) & Master of Business Administration (on-line) - £660 in total.
…
Part 2
1. The Institution shall provide the University within 30 days of the commencement of each intake of each Course with a transfer showing all candidates commencing or remaining on each Course. The University shall be entitled to invoice the Institution for the Fees at any time following receipt of this transfer. …
2. The Institution shall pay to the University the Fees due in accordance with the University's invoice within 30 days of the date of the invoice. The University shall be entitled to terminate this Agreement forthwith by notice in writing to the Institution if the Institution breaches the provisions of this Clause 2."
The relevant facts
1. … The substance of the [Sky News] allegations were (sic) that staff at the college had sold diplomas and English proficiency certificates to individuals they knew had not studied at the college and that staff at the college had been recorded by Sky News as saying that professionally written dissertations had been submitted to the University for marking by staff at the college. …
2. [Dr Strevett] held a meeting with staff at the college. Present were Dr Ana-Maria Pascal, Acting College Principal and MBA Programme Director, Dr Basha, college owner and Student Welfare Officer, … Dr Javed Ahktar (sic), Marketing Consultant …
4. LCB confirmed that the identity of the person who had been interviewed by Sky News as (sic) that of Dr Javed Ahktar. LCB clarified the position of Dr Ahktar in relation to the college and confirmed that he was not an employee of the college nor did he have any academic role with any students enrolled at the college. …
6. It was confirmed that Dr Ahktar worked for a number of local colleges in a similar recruiting role and none of these colleges had a connection with the University of Wales. …
16. LCB was asked to comment on recent contact with either the QAA or UKBA. It was reported that LCB had undergone a QAA Review of Educational Oversight and had received a draft copy of the report with confidence expressed in all areas. As such, and assuming the outcomes did not change, they were expecting to retain their licence for highly trusted sponsor (HTS) status and were waiting to hear from the Home Office on the number of visas they would be allocated.
17. LCB failed to report that they had been subject to a visit from the UKBA on Monday 26 March or what those outcomes were. Further discussions with LCB on the 29 March revealed that UKBA had informed LCB that their licence for HTS status had been withdrawn.
Conclusions:
The remit of the visit to LCB was determined by the initial details contained within the email sent to the University by Sky News on the 27 March. On the basis of the discussions held with staff at the college and a review of the paperwork held for LCB by the University the following initial conclusions can be drawn:
1. There appears (sic) to be no obvious grounds for suspecting that students registered for BTEC programmes at LCB have been sold these qualifications and are using them to gain entry onto UW validated programmes. Moreover, LCB have never offered any English language provision or been recognised as an English language teaching centre.
2. Both the procedures for submitting and internally marking dissertations and detecting unfair practice more generally appear to be robust and operating effectively and in accordance with University requirements. There is no indication in any external examiner or moderator reports that there is suspected fraud at LCB in terms of purchasing and submitting dissertations. The one recorded example of this happening was detected and dealt with through the Unfair Practice procedures at the college.
3. However, one area of risk to the University appears to be the very large number of students presenting qualifications gained at other colleges and seeking entry onto the MBA programme with advanced standing and determining precisely the role and extent of recruitment consultants and recruitment agents in this process. ["Advanced standing" is where students, having studied comparable modules on another programme, which may be at another institution, are credited with that study and are therefore exempted from the requirement to undertake all of the course modules.]
The University has requested that LCB provide a complete list of all students admitted to the MBA with advance standing, the list of colleges these students studied at and also a list of the colleges Dr Ahktar has acted in a recruitment capacity. Though the list is yet to be received, a follow-up conversation with the College Registrar has indicated that at least one college, London Canada College, and referred to in the subsequent Sky News broadcast on the 29 March in connection with alleged fraudulent activities will appear in the complete list.
Recommendation:
Therefore, it is recommended that the University of Wales should suspend LCB with immediate effect and constitute a broader enquiry into recruitment practices onto University of Wales' programmes at LCB in general and the role of recruitment agents in recruiting students onto the MBA programme with advanced standing."
"Staff at a college ranked as 'highly trusted' by the UK Border Agency are helping foreign students cheat the immigration system, a Sky News investigation has found. The investigation discovered that diploma certificates and dissertations were for sale inside the London College of Business in Barking.
As 'highly trusted' by the UK Border Agency, the college can sponsor visa applications for foreign students and help them towards post-study work visas if they get their applications in by April 6.
But we found foreign students desperate to obtain visas can buy themselves the necessary qualifications without attending any classes.
It should take nine months to get a postgraduate diploma from the college but its marketing consultant [named in the story as Dr Javed Akhtar] has been secretly filmed by Sky News telling students they can have one in a week if they pay £1,000.
…
Master's degree dissertations are also for sale. A student working for us was told by Dr Javed if he wanted the qualifications quickly he could pay someone at the college £500 to provide his coursework. That dissertation is then sent to be externally marked at the University of Wales."
The story reported that a government minister had confirmed that UK Border Agency was carrying out an ongoing investigation into LCB; this part of the initial broadcast was deleted from later broadcasts after complaints by LCB. The story also reported that the University had said it had launched an investigation into the matter, and that LCB had denied that Dr Akhtar was its employee or acting with its authority. When the story was broadcast, LCB issued a statement denying any involvement in improper practices.
"Where the student learning experience is perceived to be at risk, under the terms of its Agreement with Collaborative centres, the Taught Degrees Board has the authority to hold an Interim Review (IR). This decision may be made on the basis of concerns raised in external examiner/moderator reports, or as a result of the annual monitoring process, student/staff complaints or other relevant evidence received by the University.
…
The panel's focus will be on the current and potential risks associated with operation of the validated programme(s), particularly those identified as the rationale for the IR; the collaborative centre will be informed of the key areas for consideration in advance of the visit.
The IR event will take place at the Institution and will normally involve private meetings with key groups: senior management, teaching staff and students.
The outcome of the Interim Review may range from continuation of validation (perhaps with conditions/recommendations which will be developmental in their nature and focus) through to withdrawal of validation. The review panel shall submit a detailed report to the Taught Degrees Board for approval."
"[C]ould you let me know how long do you think it will take for the University to confirm the result of the review, once the review takes place? I'm asking this because we have a number of potential online students for our May intake and I was wondering if we'll be able to still enrol them (given the current suspension, pending review)."
Ms Williams replied:
"We are unable to confirm when the result of the review will be confirmed, but we will conclude the process as swiftly as possible. The majority of the work relating to the review is in the collation of the documentation, so we do hope that the result will be confirmed shortly after the review."
"1. Recruitment practices onto University of Wales programmes at LCB
- Initial screening process for students
2. The role of recruitment agents in recruiting students onto the MBA programme
- How LCB recruits and appraises recruitment agents
3. English Language admissions policies
4. Policies for dealing with Unfair Practice
- How students are informed of these policies and to what extent do LCB minimise opportunities for unfair practice in assessment
- Induction processes for students
5. Procedures relating to dissertation supervision and assessment
6. The organisation and implementation of pastoral care".
Professor Peach gave evidence concerning the Terms of Reference. He said that the panel had considered that the Vice-Chancellor's initial instructions, referring to "the students' learning experience", needed to be refined with much closer reference to the Sky allegations. It was important not only to identify any problem that might exist but to investigate what pressures or failures (for example, relating to the tutor-student relationship or to the adequacy of training in research methodology) might have caused those problems to arise.
"[A]gainst the stated invoices a sum of £6860 has been paid on 21 March 2012 towards fee due for the following list of students. Hence this payment may please be accordingly adjusted as detailed below.
- Invoice no. 508456 for £1200 paid in full – in respect of 4 students in the list
- Invoice no. 508508 for £300 paid in full – in respect of 1 student in the list
- Invoice no. 508509 for £26,400 – out of which an amount of £1320 in respect of following 2 students in the list
[Two students were then identified; £660 was marked against each.]
- Invoice no. 508333 for £46,860 – out of which an amount of £3300 in respect of following student in the list
[Five students were then identified; £660 was marked against each.]
Thus the total payment to be adjusted for all of the above is £6120, which leaves an excess payment of £740 (£6860 paid less £6120 adjusted). This excess payment amount may further be adjusted against future invoices.
In regard to the remaining students fee payment, based on the advise (sic) of our University Moderator and subsequent events in the college, we have been advised to suspend/withdraw enrolment of many students. This fact has already been informed to Caroline Walker (Caz), Institution Officer, as well. In view of this, we are revising the list of students that need to be finally enrolled. The revised student list is expected to be sent out to you in the next couple of days.
We therefore request you to condone this undue delay and would request you to credit/cancel the invoice numbers 508509, 508553 and 508333.
Based on the revised list of students to be enrolled, which we will be sending over to yourselves and Caroline, we hope you will raise an updated invoice, to enable us to make the payments due.
Thanks for your understanding and cooperation."
"After the Sky story broke I suggested that they urgently review all students introduced by that agent specifically [that is, Dr Akhtar] and any other locally based agent they had used.
I have also rejected a number of students through the APEL and Work Experience process and this may be what they are thinking of."
"The Panel felt more positive hearing some of the comments and noted that students spoke warmly of LCB. The Panel commended the detailed plagiarism and administrative processes carried out by the MBA Programme Administrator.
However, the Panel retained some concerns about the quality and the security of the provision of the programmes at LCB and wished to make the following recommendations:
- The College must revise, clarify and formalise its relationships with 'recruiting agents', both in the UK and overseas, to protect itself, the University of Wales and past, present and potential future students from the sort of allegations which surfaced in the media earlier this year. The College should submit documentation on the revised arrangements for approval by the University of Wales. The agents used to find academic supervisors for the online MBA need to be considered.
- The recent rapid growth of the 'top up' version of the MBA and the proposed growth of the online programmes do not seem to have been accompanied by the provision of adequate resources to ensure a secure and quality programme for the students. The College should draw up costed resource development programme for both the 'top up' MBA and the online programmes and a detailed operational model for the online programmes and submit them to the University of Wales for approval. The Panel recommend a Top Up admissions regulatory document.
- The dissertations are a concern. On the one hand the supervision responsibilities … seem daunting and must militate against detailed and quality supervision for all students. On the other hand, the submission of all dissertations for 'administrative inspection' and testing with plagiarism software before they are sent to the two internal markers suggests the College seemingly see plagiarised dissertations as the norm. The College must take steps to reduce dissertation supervision loads to more manageable proportions …, it should give more thought to vetting proposed supervisors to ensure that they have the necessary experience and it should monitor the number and the nature of the student supervision experience more closely. The Panel would like a review of dissertation arrangements and procedures, and how these will be managed.
- The Panel noted that there are issues surrounding Advanced Standing and how the moderator approved credit transfer students. The Panel noted that the credit transfer / advanced standing processes should be internally reviewed and made clearer to moderators. The Panel noted that LCB need to have more regulated CT processes as there is a risk with Top Up students, so their previous experience should be researched.
- The Panel noted that LCB need to formalise many of their processes, e.g. student support[,] so that they have clear audit trails.
- The Panel noted that there needs to be more sharing of information across the admissions and administrative teams, as currently the administrative staff are not involved in or consulted in admissions.
- The Panel noted that the research training for advanced standing students needs strengthening and [to be] made compulsory."
"Following your request for verification the following discrepancies were found. Certificate copies were provided for three students. … These candidates have previously been issued with certificates, however, all three certificates provided were found to contain false information. The dates of issue were incorrect; the EBMA reference numbers were incorrect; the font used to display results was incorrect and EBMA's logo is displayed incorrectly.
As a result of this and the information received from your centre and in accordance with EBMA's 'Suspected malpractice and Maladministration Policy and Procedure' we have determined that the certificates have been tampered with leading to a reasonable suspicion of fraud. As a result of this Malpractice all three students' qualifications and certificates will be revoked with immediate effect and the students named are barred from entry to EBMA for the period of one year.
…
I would also ask that you inform the students that they have the right to appeal this decision."
"I write to advise you that the University of Wales has reasonable grounds to believe that irregularities may have occurred with respect to the certification process at the London College of Business ('LCB').
As a result, we are hereby formally suspending the Validation Agreement between our institutions, (dated 1st February 2012) regarding the registration of new students with immediate effect until such time as we are able to satisfy ourselves through an investigation that the academic and administrative processes of LCB are sound.
Colleagues from the University will be in touch to make arrangements for the review to take place; it is our intention that this will commence within the next five business days."
"The College has been liaising with the University's staff throughout the last year in respect of the above mentioned students and invoices.
It has been common practice for the University's staff to liaise with the College regarding the students which have been submitted for enrolment by the University. Often the College would submit a list of students which were expected to enrol. The College would then withdraw some of these students based on the discussions and admission approval processes from the university moderator prior to the University undertaking the matriculation process. Throughout its relationship with the College under the Validation Agreements the University has agreed to withdraw these students and amended any invoices accordingly so that no fees were payable in respect of non-enrolled-non-matriculated students.
It has also been common practice since the commencement of both Validation Agreements (and indeed since the College began dealing with the University in 2007) for the College to discuss and amend the University's invoices to reflect only students which the University has matriculated. This process has often taken longer than the 30 day payment period as stated in the Validation Agreements. It was therefore implied that payment after the 30 day period was acceptable to the University irrespective of the terms of the Validation Agreements.
…
The College therefore requests (in accordance with the conduct of the University since 2010) that the University render updated invoices and appropriate receipts to the College reflecting the correct balances due and the payments which have been made.
The termination of the Validation Agreements has caused significant hardship to the College and hindered its ability to recruit students. In light of the above, we trust that the College's Validation Agreements will be reinstated. There has not been breach of the Validation Agreements (given the amended terms implied by the University) as alleged in your 20 December 2012 letter."
"We have no doubt that the suspension of the Validation Agreement in March 2012 for over 6 months, the subsequent further suspension on 29th November 2012 and the purported termination of the Validation Agreement by letter dated 20 December 2012 were unlawful and amounted to a breach of the conditions of the Agreement. As the purported termination was wholly unjustified it effectively extinguished the business of the London College of Business as then constituted as the University of Wales was our sole University collaborative partner. We regard the purported termination as a repudiation of the Validation Agreement and we now accept that repudiation without prejudice to our rights to claim damages for such repudiation and breach of the Validation Agreement.
It appears that the attempt to terminate was designed to enable the University to avoid its continuing obligations to validate our courses in order to make it free to speed up the merger with Trinity St David and to compete with our courses in the London market."
The issues
(a) that neither party would cause or procure the default of the other party under the Validation Agreement;
(b) that, except as expressly provided for in the Validation Agreement, neither party would interfere with the other party's enjoyment of its rights under the Validation Agreement;
(c) that the University would, in the performance of the Validation Agreement, exercise the care and skill reasonably to be expected of a competent university in the business of validating degrees for other institutions.
(a) From 29 March 2012 and again from 29 November 2012 (save only for an intake of students in September 2012), the University wrongfully refused to validate LCB's courses or to register its students.
(b) In respect of the September 2012 intake, the University failed to notify LCB that the intake was validated until October 2012, thereby preventing LCB from marketing the course, and then failed to process the registrations of the 7 students who sought admission to the September 2012 course until 20 November 2012.
(c) The University wrongfully purported to terminate the Validation Agreement for non-payment of the invoices, in circumstances where the invoices did not comply with the requirements of the Validation Agreement and no sums were properly yet due and payable under the Validation Agreement.
(1) Did the University have a contractual power to suspend enrolment?
(2) If the University had no such contractual power, is LCB precluded from taking the point on account of waiver, estoppel or some other factor relating to its own conduct?
(3) If the University did have a contractual power to suspend enrolment: (a) was its exercise of that power a breach of contract as being unreasonable on either the first or the second occasion? and (b) did it conduct the first review with reasonable expedition?
(4) Was the University entitled to terminate the Validation Agreement for non-payment of invoices?
(5) If the University was not entitled to terminate the Validation Agreement, was LCB's purported termination of the Validation Agreement in October 2014 effective?
(6) If the University was not entitled to suspend enrolment, is LCB's right to damages limited by clause 17.3 of the Validation Agreement?
Discussion
(1) Was there a power to suspend?
"[I]n every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson's speech [in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1WLR 601] that this question can be reformulated in various ways which a court may find helpful in providing an answer—the implied term must "go without saying", it must be "necessary to give business efficacy to the contract" and so on—but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?"
(2) Waiver, estoppel etc
78.1 The context in which the point falls to be considered is the import of suspension in the light of the dual nature of enrolment; see paragraph 71 above. Enrolment was not simply something for LCB; the University had its part to play. Although the University was in effect telling LCB not to take further students, it was also making it clear that it would not accept further students as being on validated courses under the Validation Agreement. This fact immediately makes the simple meaning of "consent" untenable. So one is indeed concerned with waiver of a breach.
78.2 The question under consideration is not whether LCB waived a right to treat the suspension as a repudiatory breach that justified it in terminating the Validation Agreement. Rather, it is whether LCB waived the breach itself, in the sense of something that entitled it to damages (what is sometimes referred to as "total waiver"). See Chitty on Contracts (31st edition), paragraph 22-047, which, in my view correctly, treats total waiver as an instance of waiver by estoppel.
78.3 Unlike waiver of the right to terminate, total waiver does not necessarily involve an irrevocable and irreversible election. However, it does require both (1) a clear and unequivocal representation that strict contractual rights will not be relied on and (2) some relevant conduct on the part of the other party that would make it inequitable for the representor to resile from its representation: see Chitty, op. cit. at paragraphs 24-007 to 24-009; Benjamin's Sale of Goods (9th edition) at paragraphs 12-036 to 12-038. Both of these matters would require to be pleaded and proved. I do not think that either is sufficiently pleaded; regardless of pleading points, neither is proved. A representation can, it is true, be inferred from conduct; yet it must be clear and unequivocal. I shall not attempt to remedy the deficiency of the pleading, but as it seems to me the furthest that the case on the first point goes is that LCB did not allege breach of contract and made efforts to satisfy the University with a view to having the suspension lifted. That may well have been politic and sensible. I cannot consider it enough to carry the clear implication that there was a waiver of legal rights. As regards matters that might make it inequitable to insist on legal rights, the suggestion must be that the University would have acted differently if LCB had asserted rights at the time. That is neither pleaded nor proved on the evidence and, in view of the attitude of the senior staff at the University, it seems to me to be highly improbable.
(3) The exercise of the power to suspend
1) Mr Ascroft accepted that the University was under an implied obligation to carry out any review with reasonable expedition. He referred to Lewison, The Interpretation of Contracts (5th edition), para 6.16: "Where a contract does not expressly, or by necessary implication, fix any time for the performance of a contractual obligation, the law usually implies that it shall be performed within a reasonable time." I have some doubt whether that proposition is directly in point; it relates to contractual obligations, whereas the University had not an obligation but only a power to review and (on the assumption now being made for the sake of argument) to suspend. However, there cannot be any doubt but that, if the University had power to suspend enrolment pending the outcome of a review, it was necessarily implied that the review should be completed within, and the suspension maintained only for, a reasonable time.
2) The question what is a reasonable time must be answered with regard to all the circumstances of the case, including not only facts known when the contract was made but any relevant later matter concerning or affecting the performance of the contract; cf. Peregrine Systems Ltd v Steria Ltd [2005] EWCA Civ 239, per Maurice Kay LJ at [15].
3) The fact of suspension must itself be material to the question what is reasonable, at least if the suspension is maintained pending the determination of the review. The fact that a leisurely approach to a review might be perfectly reasonable if the review process has no adverse implications for the counter-party does not mean that it will be equally reasonable if the process is having the effect of preventing the counter-party from carrying on its business in some material respect. As Mr Simms said, what was important was the duration of the suspension, not the length of the review itself; if there had been no suspension, urgency would not have been an issue.
4) I do not think that the review was conducted and the suspension lifted with reasonable expedition. Although it is possible to criticise the delay of nearly two months before the review meeting was held, the real problem relates not to the conduct of Professor Peach and the review panel but to the University's processes for dealing with and responding to the report of the review panel. The report was finalised in mid June 2012 (paragraph 39 above), though it was not provided to LCB for another month (paragraph 45 above) and the suspension was not lifted until either 5 October or 16 November 2012, depending on how one identifies the University's formal decision (paragraph 50 above). I regard that as unacceptable. Although some of the time may be referable to the issues raised by Professor Peach on 8 August, LCB was able to address those issues within a few weeks and in my view would probably have been able to do so within a similar time-scale if they had been raised earlier; and, though the matters (which I have not thought it necessary to set out) were entirely proper to raise, it is difficult to see that they required a delay in lifting the suspension. After the issues had been addressed to the satisfaction of the panel, it took a further four weeks before the University was able to make a decision and a further six weeks before it was able to publish that decision formally. This presents a striking contrast to the speed with which the University was able to implement the suspension; it showed itself perfectly capable of making quick decisions when it wants to. In my judgment, if the University had had proper regard to the effect of the suspension and had chosen to institute decision-making procedures that could and should have been in place, it would reasonably have published the review report and approved both the report and the response to it and lifted the suspension in good time to enable LCB to recruit students for the September 2012 intake.
5) I regret to say that the University's approach to the question of suspension seems to me to be deeply unattractive. This was exemplified in the evidence of Mr McInally, who appeared to take the view that all else was as naught when set against the University's academic reputation. So far as I can see, with the honourable exception of Professor Peach, those involved at the University seem to have had no concern for the effects that suspension of enrolment might have on the business of LCB.
(4) Did the University validly terminate the Validation Agreement?
Date | Number | Amount | Balance Owing |
02/02/2012 | 508333 | £46,860 | £31,020 |
12/03/2012 | 508509 | £26,400 | £ 4,620 |
29/03/2012 | 508553 | £ 9,240 | £ 2,640 |
15/11/2012 | 509156 | £ 5,940 | £ 4,620 |
£42,900 |
Among the points that emerge from the evidence, two might be mentioned.
1) The invoices were correctly issued by the University on the basis of the information provided to them. They later required adjustment; that is a different matter. The evidence of Mr Mark Rainey, the University's Head of Finance and Resources, explained how the invoices were prepared from the files uploaded by LCB to the University's registration system. Indeed, in his skeleton argument, Mr Simms wrote: "The invoices originated from batch information uploaded by LCB to the University, which then generated an invoice. However, the details uploaded were rarely totally correct because of students who did not take up their courses, were found in some way ineligible to pursue their courses and because of double counting and other administrative errors." How such errors in the information uploaded by LCB to the University's system could prevent its payment obligation arising in respect of fees properly due, when the University had prepared invoices in accordance with that information, was not explained.
2) In its email of 15 May 2012 (paragraph 35 above), which asked for revision of previous invoices and payment allocations, LCB specifically asked that a payment be allocated in part to invoices 508333 and 508509.
"Section 3: Liability arising in contract
(1) This section applies as between contracting parties where one of them deals … on the other's written standard terms of business.
(2) As against that party, the other cannot by reference to any contract term—
(a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach …
except in so far as … the contract term satisfies the requirement of reasonableness."
"Section 9: Effect of breach
(1) Where for reliance upon it a contract term has to satisfy the requirement of reasonableness, it may be found to do so and be given effect accordingly notwithstanding that the contract has been terminated either by breach or by a party electing to treat it as repudiated.
(2) Where on a breach the contract is nevertheless affirmed by a party entitled to treat it as repudiated, this does not of itself exclude the requirement of reasonableness in relation to any contract term."
"Section 11: The 'reasonableness' test
(1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act … is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.
…
(5) It is for those claiming that a contract term … satisfies the requirement of reasonableness to show that it does."
"Section 13: Varieties of exemption clause
(1) To the extent that this Part of this Act prevents the exclusion or restriction of any liability it also prevents—
(a) making the liability or its enforcement subject to restrictive or onerous conditions;
(b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy;
(c) excluding or restricting rules of evidence or procedure;
…"
"The expression 'deals on the other's written standard terms of business' is not defined or explained by the Act … Since, in any event, no two contracts are likely to be completely identical, but will at least differ as to subject matter and price, the question arises whether variations or omissions from or additions to standard terms thereby render them 'non-standard' and, if they do not, whether all the terms then become standard terms. Where negotiations have taken place around standard terms before the contract is made, and amendments agreed, it is a question of fact whether one party can be said to have dealt on those standard terms. If it is alleged that an ostensibly 'one-off' contract is in fact the other's written standard terms of business, extensive disclosure may be involved to determine the terms on which contracts have been concluded with others. The burden of proving that he dealt on the other's written standard terms of business appears to rest on the party who alleges that s. 3 applies."
In St. Albans City and District Council v International Computers Ltd [1996] 4 All ER 481, 490-1, Nourse LJ rejected the submission that one cannot be said to deal on another's standard terms of business if one negotiates with him over those terms before entering the contract: "Thus it is clear that in order that one of the contracting parties may deal on the other's written standard terms of business within s. 3(1) it is only necessary for him to enter into a contract on those terms." He agreed with the trial judge that, as the defendant's general conditions "remained effectively untouched in the negotiations", the plaintiff dealt on those terms for the purposes of section 3(1). In Hadley Design Associates Ltd v The Lord Mayor and Citizens of the City of Westminster [2003] EWHC 1617 (TCC), H.H. Judge Seymour Q.C. said at [78]:
"The concept underlying the provisions of Unfair Contract Terms Act 1977, s.3, in my judgment, is that there should exist a stock of written, no doubt usually at any rate printed, contract conditions which was simply drawn from as a matter of routine and intended to be adopted or imposed without consideration or negotiation specific to the individual case in which they were to be used. That seems to me to be the force of the words 'written' and 'standard' in the expression 'written standard terms of business'. In other words, it is not enough to bring a case within Unfair Contract Terms Act 1977, s.3, that a party has established terms of business which it prefers to adopt, as for example a form of draft contract maintained on a computer, or established requirements as to what contracts into which it entered should contain, as for example provision for arbitration in the event of disputes. Something more is needed, and on principle that something more, in my judgment, is that the relevant terms should exist in written form prior to the possibility of the making of the relevant agreement arising, thus being 'written', and they should be intended to be adopted more or less automatically in all transactions of a particular type without any significant opportunity for negotiation, thus being 'standard'."
Although Judge Seymour's approach seems to me to be broadly helpful, I do not consider that the retention of a stock of forms is necessary; a set of terms may be both written and standard even if it is held on the computer and printed as and when necessary. Negotiation or even minor modification does not necessarily preclude the application of section 3; if it did, the effect of the section could be easily avoided. It is a matter of fact and degree whether the section applies. Professor Guest's summary in Chitty on Contracts captures this point.
"The terms under which the University was prepared to validate a programme delivered by another institution are set out in a formal (written) Validation Agreement between the University and the institution. … The Validation Agreement is in a standard form and was drafted by the University's solicitors."
In cross-examination Mr McInally said that all potential collaborators were given a standard-form agreement so that they would know the University's expectations, but he insisted that not all validation agreements were precisely the same and that special arrangements could be made about matters other than merely fees. No documentary evidence was adduced by way of example of variations to the standard form. For LCB, Dr Basha stated in his witness statement dated 21 November 2014:
"[T]he University prepared through their solicitors a Validation Agreement which was sent to the College in January 2008 (the '2008 Validation Agreement'). We were told by the University that the Validation Agreement was in their standard form prepared by their solicitors for use for all colleges and that the college must sign and return the agreement if we wanted to proceed. We did not consider that we had any negotiating position with the University as it was really a take it or leave it situation."
"The College was sent the [2010 Validation Agreement] for signature and return on the basis that it was the standard form of the University drafted by their lawyers and no changes were allowed except to the schedules which related to the courses, qualifications and to the minimum and maximum number of students on the various courses. The 2010 agreement was the same as the earlier 2008 Validation Agreement except in so far as [concerned provision for the courses, the student numbers and the identification of the campuses]."
"The University Validation Department sent us the new validation Agreement on 26th January 2012 and asked the college to print off two copies, sign and return two signed copies to the University. … Here again, we had no opportunity to negotiate the substance of the Agreement but were required to sign as suggested. Again the only discussion was on the courses and degrees to be covered by the new Agreement. … The body of the agreement was the same as the previous agreements."
In cross-examination, Dr Basha said that he was not involved directly in the discussions that led to the 2008 and 2010 Agreements; his knowledge of the University's stance came from what he was told by LCB's staff. In 2008 he was told that the University was saying, "Take it or leave it." His instructions were to the effect that LCB had to start somewhere and so they would "take it". In 2010 and particularly in 2012 it appeared that the business arrangement was working well and Dr Basha saw no reason to be concerned over the terms of the Validation Agreement.
98.1 The parties are both commercial entities, carrying on business for profit. The fact that they are both educational establishments does not detract from this fact. Education can be big business. LCB can be presumed to have read the terms of the validation agreements before it signed up to them, and it is generally to be supposed that it was capable of entering into contracts that it judged to be in its own interests. (I make clear that it does not follow, and I do not accept, that LCB was of equal bargaining power with the University. I mention this below in the context of clause 17.3.)
98.2 Clause 5.1 was not ambiguous, unclear or complicated.
98.3 "No set-off" provisions are very common in business contracts. They do not affect the substance of the parties' obligations; they only affect the question of who has to take the initiative of bringing proceedings in the event of a dispute. (Cf. the dicta of Rix LJ in the Axa Sun Life Services case, at [108].) Put another way, they are about cash flow.
98.4 Although it is literally true that the provision is not mutual, that fact has to be understood in the context of the Validation Agreement as a whole. The University did not have payment obligations; only LCB had to pay money. This is not a case where one party was entitled to exercise rights of set-off but the other was not. Indeed, although LCB was required to do various things to satisfy the University's standards, the fundamental thing that it provided to the University under the Validation Agreement was payment of money. The corresponding thing that the University provided to LCB was its validation service. The "no set-off" provision had the effect that LCB was required to provide its fundamental benefit to the University during the term of the Validation Agreement. I have already held that the University had no power to suspend its corresponding obligations.
98.5 It is relevant to consider what sort of thing might be deducted against or set-off against the fees payable by LCB. Of course, there are various possibilities. But in view of the lack of mutuality of payment obligations the most likely kind of contra would be an unliquidated claim for damages. If such a claim could be set off against the fees payable, the result would be that, in the event of a disputed claim for damages, the University would have the choice of either purporting to terminate the Validation Agreement under clause 5.1 (in which case it would be at risk of a finding that it had repudiated the contract) or continuing to provide services without payment pending determination of LCB's claim (in which case there would not be mutuality of provision of the fundamental benefits during the subsistence of the contract). Clause 5.1 makes a clear and certain provision for the ongoing performance of the Validation Agreement. I do not think that it can be said to provide an arbitrary and unilateral benefit, as some "no set-off" provisions might be thought to do.
(5) Did LCB validly terminate the Validation Agreement?
(6) Limitation of liability: clause 17.3
108.1 If construed in the manner contended for by Mr Ascroft, the sub-clause would have a remarkable effect. The parties are businesses; whatever their other philanthropic motives may have been, each of them entered into the Validation Agreement for the purpose of making money. The University was to make money by providing services for a fee. LCB was to make money by recruiting paying students on the basis of the services it received under the Validation Agreement. If the University's construction is correct, the primary commercial benefit for each party could simply be negated by a breach of contract by the other. That is not quite to say with Mr Simms that practically no liability could remain; it is possible to think of cases, such as property damage or exposure of the other party to expenditure or to third-party liability, that would not be excluded by the University's construction of clause 17.3.3. But liability for the deprivation of the primary commercial benefit under the Validation Agreement would be excluded, other than in cases of fraud (clause 17.2).
108.2 The very striking effect of clause 17.3.3 as construed by the University is in marked contrast to the anodyne effect of the rest of clause 17.3. The first sentence merely excludes liability for breaches caused by the other party. The second sentence, up to this point, has merely stated familiar rules of remoteness and causation. In that context would be surprising, though not impossible, if clause 17.3.3 had the effect contended for by University, whereby a party would have no recourse for being wrongfully deprived of the very business it had bargained for in the Validation Agreement.
108.3 The context of the sub-clause within the wider clause helps in ascertaining its meaning. Three kinds of loss are identified. The first two are those which are not reasonably foreseeable at the date of the Validation Agreement and those which are caused by some one or some thing else. The third kind of loss belongs in that company, if it relates to the loss of business that might have been done with others, outside the Validation Agreement.
108.4 That is also suggested by the words "anticipated or future". Those words could literally apply to the business etc that was anticipated under the Validation Agreement. But all business, revenue and profit for the loss of which a party might be liable would almost certainly be future; it is hard to see how one could lose past business, revenue or profit. (The case of goodwill may be conceptually harder. But a claim for loss of goodwill is in substance a claim for the loss of future business.) The inclusion of the words indicates, in my view, that what is in mind is business future to, or anticipated outside of, the Validation Agreement.
108.5 This provides what is in my judgment the clear commercial construction of clause 17.3.3. It has nothing to do with excluding liability for the loss of business under the Validation Agreement. It is concerned with the business harm that a party might suffer more generally as a result of the counter-party's breach. Thus LCB cannot say: "Not only has your non-performance lost us £x under the Validation Agreement. If you had performed, we would have gone from strength to strength; other validating institutions would have done business with us; we claim damages for the lost business from those sources." Equally, the University cannot say: "Not only has your breach lost us the profit from the fee income under the Validation Agreement. It has tarnished our reputation and no one is any longer interested in having courses validated by us; we claim damages for the loss of our ongoing business."
113.1 The only business losses that can fall within clause 17.3.3 are those that would otherwise be recoverable on normal principles of remoteness and causation. These could include losses of specific business or general harm to business. Apart from losses under the Validation Agreement, the former would be unlikely and are not claimed; the latter is more likely to be in issue.
113.2 On what I have held to be its true construction, clause 17.3.3 is in my view entirely reasonable. Mr Simms did not submit to the contrary. There is nothing in the evidence to suggest that the University knew of any particular business opportunity or contract outside the Validation Agreement that might be harmed by non-performance; indeed, there is nothing to show that LCB knew of any such specific matter either. Therefore the theoretical applicability of clause 17.3.3 to losses in respect of specific contracts or business opportunities does not indicate that it is unreasonable. More generally, the provision applies equally to both parties, not merely to the losses of LCB. Accordingly LCB was equally protected against claims by the University on the basis that the University's business as a respected validator of courses had been harmed by LCB's breaches of contract. Further, losses in respect of general harm to business might be open-ended and difficult to predict, and the clause protects parties against indeterminate liabilities. Such losses, and even losses said to arise from specific contracts, might also give rise to difficult issues of quantification, even after they have arisen.
113.3 However, if (contrary to my view) clause 17.3.3 purports to exclude even liability for loss of profits that would be achieved under the Validation Agreement, I should consider the clause to be unreasonable, for the following reasons.
a) The parties were not really in equal bargaining positions. LCB was an institution of recent origin, seeking to establish itself in the UK degree-courses market. The University was a venerable, well-established and highly respected university. It is strongly probable that the University put the matter to LCB on the "take it or leave it" basis that Dr Basha understood to be its position, even if as a matter of fact it might possibly have considered a concrete counter-proposal. There is a lack of evidence to support the contention that LCB could have contracted on different terms with other validating institutions.
b) On the University's construction, clause 17.3.3 is extremely restrictive, because it would mean that one party could deprive the other of the commercial benefit of the transaction (its profit) without being liable for the loss. Expectation damages under the contract would be eliminated. Contrary to the University's contention, I see no reason to think that a clause with such an effect is a matter of standard or common practice.
c) The University's contention that the losses in question could be covered by insurance is unsupported by evidence and cannot be accepted without evidence.
d) Given the context of clause 17.3.3 and the way it is worded, the meaning contended for by the University, even if the "correct" construction, is hardly obvious. For the sake of the argument, it must be supposed that the clause is sufficiently clear to render that meaning when the principles of construction are applied to it. But the law reports are full of cases in which different judges have applied the principles of construction with differing results. Businessmen are presumably no different from judges in that regard. A clause that would have the effect of depriving a party of its right to recover as damages its lost profits under the contract itself should be expressed clearly, so that the party knows what it is signing up to.
Conclusion
116.1 The University was in breach of contract in suspending registration of new students on two occasions in 2012.
116.2 Therefore LCB is entitled to judgment on the counterclaim for damages in an amount to be determined by the Court.
116.3 The Validation Agreement was terminated by the University by its solicitors' letter dated 20 December 2012, pursuant to clause 10.1.
116.4 LCB's damages are subject to the limitation in clause 17.3 of the Validation Agreement, which is to be construed in accordance with paragraphs 108 and 109 above. The application of that clause to specific heads of damage will be a matter for consideration in the course of the determination of the amount of damages.