Court of Appeal - Technology and Construction Court, April 10, 2018, [2018] EWHC 751 (TCC)

Resolution Date:April 10, 2018
Issuing Organization:Technology and Construction Court
 
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Claim No: HT-2017-000221

Neutral Citation Number: [2018] EWHC 751 (TCC)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

TECHNOLOGY AND CONSTRUCTION COURT (QBD)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date 10 April 2018

Before:

Miss Joanna Smith QC sitting as a Deputy

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BETWEEN:

CLEVELAND BRIDGE UK LIMITED

Claimant

and

SARENS (UK) LIMITED

Defendant

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Mr Lixenberg (instructed by Burness Paull LLP) for the Claimant

Ms Bodnar (instructed by Freeths LLP) for the Defendants

Hearing date: 13/14 March 2018

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JudgmentDeputy Judge Miss Joanna Smith QC

Introduction

  1. In this matter, the parties seek a final determination from the court, following a decision by an Adjudicator, of a dispute over the terms and interpretation of a subcontract.

  2. In short, the dispute arises out of work carried out by the Defendant (``Sarens'') for the Claimant (``CBUK'') on the Heysham M6 link road in 2014-2015 (``the Heysham Project''). Sarens was engaged by CBUK as sub-sub-contractor to provide cranes and ancillary equipment necessary for the installation of six bridges along the route. CBUK was engaged as sub-contractor to Costain Limited (``Costain'') under a modified NEC3 contract (``the Costain Contract''). In turn, Costain was engaged as the main contractor by Lancashire County Council.

  3. At the heart of the dispute is the question of what, if anything, CBUK and Sarens agreed in their subcontract by way of provision for delay damages and/or liquidated damages. CBUK contends that the parties had discussions about the imposition of a 10% cap on liquidated damages but it says, broadly, that no agreement was reached. Sarens, on the other hand, contends that the parties agreed a term that Sarens' liability for delay damages in general and/or liquidated damages in particular would be capped at 10% of the subcontract price and that a mechanism for the imposition of liquidated damages was also agreed. Each party has alternative cases in the event that I reject their primary case.

  4. Mr Robert Evans (``the Adjudicator''), decided this issue on 11 July 2017 in Sarens' favour (``the Decision''), but of course the Decision is not binding on me.

  5. I should record at the outset that it has always been agreed that there was a contract between Sarens and CBUK, although there is disagreement as to what it comprises, when and how it was formed and some of its terms. Accordingly, I have not considered the possibility that no agreement was ever reached between the parties in this judgment. I shall refer to the agreement between the parties as ``the Subcontract'' and identify later how, when and on what terms the Subcontract was formed.

  6. I understand that this dispute is part of a wider dispute, which is not before the Court, between CBUK and Sarens about the responsibility for delays which arose during the course of the Heysham Project. In 2016, CBUK and Costain entered into a compromise agreement in respect of these delays (``the Settlement Agreement''), pursuant to which CBUK agreed to pay to Costain £956,892 and to waive an entitlement to a further £893,107.89. Outside the context of this litigation, CBUK seeks to recover the sum it has paid to Costain under the Settlement Agreement from Sarens. It is Sarens' position that if I accept its argument that the parties agreed to a 10% cap on its liability, this will have an important impact on the amount that CBUK will be entitled to recover in the wider dispute; in particular, that its liability for culpable delay would be limited to £96,363.44 (being 10% of Sarens' Subcontract price of £963,634). I am not able to decide whether this is so, as I have been asked to consider only the general question of the terms of the Subcontract and their proper construction and not any underlying issues by reference to the facts of the wider dispute.

    The Statements of Case

    CBUK's Case

  7. CBUK sets out its case as to the terms of the Subcontract in paragraphs 5 and 6 of its Amended Particulars of Claim as follows:

  8. ``The Subcontract formed on or around 11 to 17 November 2014 in substantially the terms set out in documentation signed by CBUK and handed to Sarens on 11 November 2014 (together with enclosures as previously sent by CBUK to Sarens on 5 June 2014)''.

  9. ``An email from Mr Render of Sarens to Mr Osborne of CBUK on 17 November 2014 identified that the only outstanding matter (as to which the parties were not in agreement and did not subsequently conclude any agreement) concerned the position in relation to liquidated damages and a corresponding cap thereon''.

  10. CBUK seeks declarations at paragraphs 12(a) and (b) of the Amended Particulars of Claim in line with its primary case that there was no agreement between the parties in relation to liquidated damages.

  11. Alternatively, if I find (contrary to its primary case) that liquidated damages were agreed, or an operative 10% cap on liquidated damages was agreed, then CBUK seeks at paragraph 12 (c) a declaration that any such liquidated damages (i) only apply to a claim arising from Sarens' failure to complete the whole of the works which were the subject of the Costain Contract and/or (ii) have no application to any claim arising from Sarens' obligations in relation to the progress and completion of the individual bridges corresponding to Key Dates under the Costain Contract.

  12. CBUK does not seek to rely on any witness evidence in support of its case.

    Sarens' Defence

  13. In an Amended Defence and Counterclaim, Sarens pleads various alternative cases as to the agreement between the parties.

  14. First it says the Subcontract was formed on or before 10 November 2014, the date on which Sarens commenced work in respect of Folly Bridge (paragraph 13), and that it included agreement that Sarens' liability to CBUK (which is said in Further Information dated 2 March 2018 to be loss and damage for delay) (i) would be capped at 10% of the Subcontract value and (ii) would be recoverable only upon proof of Sarens' negligence (paragraph 14). Sarens then identifies five documents which it says ``contained and/or evidenced'' that agreement (paragraph 15). Further Sarens relies on ``an established course of dealing'' as containing or evidencing the agreement. Sarens then asserts as part of its primary case that the parties reached a further agreement on 18 November 2014 about liquidated damages (in terms set forth in paragraph 17) and it identifies three documents which it says ``contained and/or evidenced'' this agreement (which Sarens refers to as ``the Liquidated Damages Agreement'' and which it is alleged is a variation to the original agreement reached on or about 10 November 2014). It says the Liquidated Damages Agreement was accepted by CBUK by an email of 18 November 2014, alternatively it was accepted by Sarens when Sarens continued with work on site after 11 November 2014, or after 18 November 2014.

  15. Second, and by way of alternative, Sarens says that the Subcontract was formed on 18 November 2014 by way of an email of that date or alternatively when Sarens continued with work on site following that email. It says that the parties agreed that loss and damage for delay, alternatively liquidated damages recoverable by CBUK from Sarens would be limited to and capped at 10% of the Subcontract value and that express terms were agreed as to liquidated damages (paragraph 25). This alternative Subcontract is said to be ``contained in, alternatively evidenced by'' three documents. Again Sarens also relies on ``an established course of dealing'' as containing or evidencing the agreement.

  16. In respect of both its primary and secondary cases, Sarens asserts by way of alternative, estoppel by representation and estoppel by conduct (paragraphs 16, 22 and 27). This alternative allegation is (on each occasion) firmly tied to identified documents in its statement of case.

  17. I have set out the nature of Sarens' defence with some care in circumstances where, shortly before trial, it sought permission substantially to amend its Amended Defence and Counterclaim, to rely on a plea that the Subcontract was formed at a meeting on 30 September 2014 (``the September Meeting'') and that it was evidenced by documents not previously relied upon, including internal notes of the September Meeting. This was an entirely new case, never previously intimated and inconsistent with the case advanced by Sarens before the Adjudicator.

  18. The application to amend was refused by O'Farrell J on 22 February 2018 [2018] EWHC 460 (TCC), essentially on the grounds that the proposed amendment was ``a material change in case'' because ``it had always been the parties' position that there was no oral agreement'' and that this new case would require a new approach from CBUK to witnesses, that CBUK would be prejudiced in producing witness statements for a trial starting two and a half weeks later, that its preparation for trial would be disrupted, the trial date would have to be vacated and the trial length increased [24-25]. O'Farrell J also took the view that there was no adequate explanation given for the lateness of the proposed amendment: ``...it must have been obvious to everyone that Mr Mitchell's evidence as to what happened at the meeting was relevant and it must have been obvious that this matter could be of significance to the formation of the subcontract. Mr Mitchell signed a statement of truth in relation to the earlier pleadings submitted by Sarens. Those pleadings did not make any reference to the 30th September meeting let alone plead any form of agreement being reached at that meeting'' [23]. In paragraph 28 of her Judgment, O'Farrell J refused permission to amend ``so as to change the pleaded case on the formation of the subcontract and/or the terms of the subcontract''.

  19. Notwithstanding its failure to persuade the court to permit it to amend its...

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