National Health Service Commissioning Board v Silovsky & Anor, Court of Appeal - Civil Division, September 28, 2017, [2017] EWCA Civ 1389

Issuing Organization:Civil Division
Actores:National Health Service Commissioning Board v Silovsky & Anor
Resolution Date:September 28, 2017
 
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Case No: A3/2015/3768

Neutral Citation Number: [2017] EWCA Civ 1389

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Mr Justice Leggatt

Commercial Court (2014 Folio 1267)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 28/09/2017

Before :

LORD JUSTICE GROSS

LORD JUSTICE FLAUX

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Between :

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Jonathan Swift QC and Simon Butler (instructed by Hempsons) for the Appellant

David Lock QC (instructed by Veale Wasbrough Vizards) for the Respondent

Hearing dates : 13 June, 2017

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JudgmentLord Justice Gross :

INTRODUCTION

1. As shown by the facts of this case, in certain circumstances, the NHS provides financial assistance to General Practitioners (``GPs'') to meet the cost of providing practice premises. The sole issue on this appeal goes to the true construction of a contractual provision relating to such assistance. On the Appellant's construction, the Respondents have been overpaid; on the Respondents' construction and in the view of the Judge, they have not.

2. The Appellant, the statutory successor to the role of the Suffolk Primary Care Trust (``the Trust''), appeals from a judgment of Leggatt J, dated 24th September, 2015 (``the judgment''), acceding to the Respondents' application for summary judgment and dismissing the Appellant's claim.

3. The Trust commissioned NHS primary care services in Suffolk. The Respondents are General Practitioners (``GPs'') who run a GP practice in Felixstowe. Though it will be necessary to look at the predecessor agreement (``the 2004 agreement''), these proceedings arise out of the Personal Medical Services (``PMS'') Agreement, dated 18th December, 2007 governing the relationship between the Trust and the Respondents ( ``the 2007 agreement'') at the material time.

4. In outline, NHS GPs provide primary care medical services to NHS patients. GPs are not, generally, NHS employees. Most NHS general practices operate as private businesses which contract with the NHS to provide services to NHS patients on their practice lists. GPs are under contractual obligations to provide appropriate practice premises from which they deliver primary care services. The 2007 agreement provides, inter alia, for certain payments to be made by the Trust to the Respondents to meet the cost of providing practice premises.

5. Schedule 7 to the 2007 agreement was in these terms:

``Premises payments

Rent 77,238 Calendar monthly 15th of each month''

The figure 77,238 (obviously representing £77,238) is found in a column headed ``Annual Value''.

6. As already foreshadowed, the sole issue on the appeal is whether, as a matter of the true construction of the 2007 agreement, the sum specified in respect of rent under Schedule 7 was a fixed amount of £77,238 per annum or was a variable sum, broadly intended to track the amounts actually paid by the Respondents under a bank loan. If the latter, then the Appellant's case is that it has overpaid the Respondents and may be entitled (subject to overcoming various defences) to reclaim the amounts overpaid. Dismissing the Appellant's claim, the Judge held that the former view prevailed and that the sum of £77,238 was a fixed amount.

7. Although we are considering an appeal from a successful application for summary judgment, it is plain that we must decide the issue of construction finally one way or the other. No useful purpose would be served by leaving any part of the construction argument over for some future trial: see, CPR 24.2.3. If the judgment is upheld, that is an end of the matter. If, per contra, the appeal is successful, then various restitution points would arise for consideration by a trial Judge.

8. Something must be said of the procedural history. The Appellant's pleaded case before the Judge focused on implied terms and rectification, as appears from the Case Memorandum and List of Issues, dated 15th September, 2015. The question of construction arose, if at all, as part of the argument as to implication. The essence of the Appellant's argument below was thus that the 2007 agreement, properly construed, did not support its current case - but that it should be rectified in order to do so, or a term (or terms) should be implied to achieve that result. Neither the rectification nor the implied term arguments are pursued on the appeal; the Appellant's case is confined to the true construction of the 2007 agreement, now said to support its case. Forensic points could be and were made for the Respondents in this regard but I would reject the submission, tentatively pursued by the Respondents, that, in the light of the pleadings, we should not entertain the Appellant's construction argument on its merits.

CONTRACTS AND FACTS

9. The factual history as such is largely undisputed and can be set out relatively briefly, much of it gratefully adopted from the judgment.

10. (1) The Loan: On the 1st April, 1998, the then partners of the practice entered into a 25 year loan agreement with the Royal Bank of Scotland plc (``the Bank''), to which the Respondents subsequently became parties (``the Loan''). In accordance with the terms and conditions of the Loan, the Bank made funding available to the practice, to assist in the purchase of land, the construction of a surgery on the land and the purchase of furniture and fittings for the surgery.

11. The Respondents applied to the Trust for financial assistance towards their borrowing costs.

12. For an initial period of 10 years from 1st April, 1998, interest on the Loan was charged at a fixed rate of 8.87% per annum, on the sum of £803,000. Thereafter, interest became payable at a variable rate of one percent above the Bank's base rate for the remaining period of the Loan with, in the event, a significant reduction in the Respondents' borrowing costs.

13. (2) Types of agreement: Pausing there and as summarised in the judgment:

`` 4. .....There are two types of contract made between NHS Commissioners and GPs which are relevant for present purposes. The first type is called a General Medical Services (or GMS) contract. The second type is called a Personal Medical Services (or PMS) agreement. For each type of contract, there are statutory regulations relating to it which require certain terms to be included in the contract, although the regulations do not prevent other terms from being included as well. GMS contracts are the default form of contract which GPs are entitled to have unless they are offered and agree to enter into a PMS agreement.''

14. As the Judge went on to record, the Secretary of State has power to issue legally binding directions providing for payments to be made to GPs under GMS contracts - and a similar power in relation to PMS agreements. Such directions were made in 2004 in respect of GMS contracts and were in force at all relevant times governing payments to be made in relation to premises. These were the National Health Service (General Medical Services - Premises Costs) (England) Directions 2004 (``the 2004 Directions''). No directions were made providing for premises payments under PMS agreements.

15. (3) The 2004 agreement: The 2004 agreement, made on the 1st April, 2004, was itself a PMS agreement. However, under the heading ``Payments to the Contractor'', cl. 440 provided as follows:

`` Where premises costs are payable to the Contractor these are excluded from the annual contract price and paid separately in accordance with the equivalent provisions of the SFE part 5 (existing premises development) and The National Health Services (General Medical Services - Premises Costs) (England) Directions 2004.''

Accordingly, the 2004 agreement, though a PMS agreement, expressly linked the calculation of sums payable for the practice premises to the 2004 Directions, made in respect of GMS agreements.

16. The 2004 Directions addressed Premises Costs in some detail and in respect of three situations. As helpfully encapsulated in the judgment:

``5. .....If the premises used by the GP practice are rented premises, the directions provide for reimbursement of the rent paid so long as it does not exceed the current market rent for the premises. If the premises are owned by the practice outright without a mortgage, the practice may apply for payments based on a notional market rent. If the practice has borrowed money to purchase or refurbish the premises, it may apply for financial assistance towards meeting the cost of borrowing.....''

In shorthand terms, the scheme of the Directions as to financial assistance for GP premises catered for, first, reimbursement of rent (strictly so-called); secondly, notional rent, where no rent or borrowing costs were payable; or, thirdly, as here, meeting the cost of borrowing, namely, cost rent.

17. The Payment Schedule...

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