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England and Wales High Court (Technology and Construction Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Sydenhams (Timber Engineering) Ltd. v CHG Holdings Ltd. [2007] EWHC 1129 (TCC) (03 May 2007) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2007/1129.html Cite as: 112 Con LR 49, [2007] EWHC 1129 (TCC) |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURTS
133-137 Fetter Lane London EC4A 1HD |
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B e f o r e :
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SYDENHAMS (TIMBER ENGINEERING) LIMITED |
Claimant/Part 20 Defendant |
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-and- |
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CHG HOLDINGS LIMITED |
Defendant/Part 20 Claimant |
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WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
____________________
Crown Copyright ©
JUDGE PETER COULSON QC:
A. Introduction.
B. Factual Position up to end of December 2003.
(a) A Quotation.
This was in letter form and sent to Mr Pink. It identified the total cost, in this case £507,014.06. Although Sydenhams' standard terms and conditions appeared on the back of the first page of the quotation, the second page of this quotation letter stated that the terms were "to be agreed".
(b) A Customer Schedule.
This document, enclosed with the quotation letter, set out what would be supplied under each package, and included specific comments about some of the materials. It also included what was called a standard erection specification.
(c) A Pricing Schedule.
This document, which was not sent to Mr Pink, was an internal record kept by Sydenhams to demonstrate the build-up of their various prices.
(d) An Order for Manufacture ("OFM").
This was designed to operate as a sort of standard form acceptance document. One copy was to be retained by the customer, the other was to be signed and sent back to Sydenhams. This particular OFM stated:
"I hereby instruct Sydenhams Timber Engineering to proceed with manufacture at the quoted prices."
The different packages, each with a price, were then set out in the OFM, which concluded with the words: "This quotation is not subject to any future main contractor's discounts".
"Bill through Rybarn may be required due to Customs & Excise. CHG Holdings will then pay Rybarn to pay us. Otherwise CHG will pay direct."
"At the time Mr Pink mentioned Customs & Excise and I really did not understand quite what he was getting at. But he used it as a reason for possibly -- and it was very much possibly at that stage -- having to go through Rybarn."
Mr Orchard went on to say that the reference to payment through Rybarn was a suggestion, "a brief comment in a much larger meeting". He emphasised that he did not necessarily agree to it. He also said:
"I was concerned about Rybarn. Then it was suggested to me that it would not be a problem because there would be staged payments from CHG to Rybarn which would be passed directly on to ourselves, so channelled through Rybarn would be my understanding. That was given to me as a reassurance as much as anything else."
"Sydenhams (Nick) to have meeting with Jeldwin re windows. These need to be ordered asap. Les [Pink] agreed to order the GF windows and CHG Holdings would take the risk on cost if these were subsequently not used."
Mr Pink said in evidence that this change constituted "a variation to the original order of windows". He claimed that the minute was wrong, because it made no mention of the fact that the payment to which reference was made would actually be made through Rybarn. He said that that was discussed at the meeting. However, I am bound to reject that suggestion. There was no mention of such a payment arrangement in the minutes, which were accepted by everybody at the time as being accurate.
"With reference to the above and your order dated 3rd October 2003.
Listed below are the packages accepted under the payment agreement.
It is agreed that the external joinery, additional floor joist zone and internal joinery will be paid subject to an approved account ..."
The letter then identified packages 1-4, 5, 7 and 8 in the total sum of £385,300 and then, over the page, identified the eight installment payments by which that sum would be paid.
The letter concluded:
"Failure to pay on the dates agreed will result in our erect team pulling off site and any costs incurred could be passed on to yourselves."
C. Factual position from January 2004 to 23rd April 2004.
"Sydenhams were asked on Friday 30th January by ERMC to lower the height of the roof. As Sydenhams have already designed the fourth floor and the roof we contacted Les Pink to let him know that there would be an increase in the price. This is because there would be considerable design costs involved in redesigning the roof structure. Les Pink asked Sydenhams not to change the roof until he had spoken to ERMC. THIS MATTER IS VERY URGENT TO AVOID ANY DELAYS AND WE CANNOT ORDER ANY MATERIAL UNTIL THIS HAS BEEN RESOLVED."
It is difficult to read this as anything other than an example of direct (and in this case conflicting) instructions being given by Mr Pink and ERMC, on behalf of CHG, direct to Sydenhams. Rybarn appeared to have no role at all.
"I was most concerned that the very first payment was delayed and, when made, the cheque was initially post-dated.
This caused considerable difficulties and could easily have resulted in delays to the project.
I understand that you have agreed with Mr Pink that he will make the second payment on your behalf.
We all want this project to go well and I assure you that Sydenhams are working hard to this end. I am however concerned about payment. In the light of recent experiences I am no longer able to offer you a credit limit of £60,000. Your new credit limit is £5,000.
In order that this reduced limit should not affect the Bournemouth project I would like to propose that Les Pink makes all future payments against the payment plan and all other orders for the Bournemouth project are transferred to his account.
To achieve my proposals it will be necessary for you to amend the contract between yourself and Les Pink. I have therefore written separately to Mr Pink outlining my concerns and proposals and a copy of this letter is enclosed. I would be grateful for your confirmation that you accept these proposals."
"As you know, we have agreed a payment schedule for the hotel with Rybarn Limited.
Unfortunately the first payment was not made in accordance with that schedule. As a result we have reviewed the credit facilities for that company and have reduced their credit limit.
In order that the Bournemouth hotel project is not affected by this change I should like to propose that a new account be opened in the name of Rybarn Limited Bournemouth Hotel. This account would be used solely for goods supplied to the hotel. Payment to this account would be made by yourself and subsequently reclaimed from payments that you make to Rybarn Limited.
It would be necessary for you or one of your companies to provide a guarantee in respect of this account and I would happy to forward one of our standard agreements for this.
Work on the project appears to be progressing satisfactorily and I do not want payment issues to affect matters. I believe that these arrangements will avoid this and I hope therefore that you will agree with my proposals."
In cross-examination, Mr Pride confirmed that, even at this stage, what he wanted was a guarantee from CHG in respect of the payments to Sydenhams.
"Due to non-payment this afternoon we have no option but to cancel all deliveries and labour on site for next week.
We currently have lorries loaded in our yard which will be charged for by our transport provider, the cost of which will be added to your account.
As discussed we require both cheques cleared before we will return to site."
The reference to both cheques was apparently a reference to Installment 3 and Installment 4 which was not in fact due for payment until 22nd March 2004.
"As supplier and erectors of the timber frame package for the above project, it is with regret that we have to inform you of our decision to stop all works and deliveries for this project commencing from 15th March 2004. This is due to non-payment of stages 3 and 4, which were due on 8th March 2004 and 22nd March 2004, both totalling £102,499.66. We are currently up to stage 5 on site (third floor timber frame complete) therefore we would also require a further stage payment of £51,249.83 before we will consider returning to site."
"A: I did not refuse to talk to Mr Rybarn -- with Mr Bradley of Rybarn. All conversations regarding payment were with Mr Pink.
"Q: So you agree that Mr Pink was the one really basically mediating between Sydenhams and Rybarn?
"A: I would not use the term mediating, no.
"Q: Trying to broker a solution?
"A: No.
"Q: That he was trying to get some deal done whereby you would be paid and you would come back to site?
"A: The conversations that we had with Mr Pink involved schedules like this. He would say that he had paid Rybarn, could not understand why they had not paid us. When we spoke to Mr Bradley and indeed when Mr Bradley visited my offices, he said he had not been paid by Mr Pink. We were going round and round that circle."
In this, he was supported by the evidence of Mr Orchard at paragraph 35 of his statement, on which he was not challenged, to the effect that Mr Bradley of Rybarn told him that Mr Pink had not paid him so that he could not pay Sydenhams, whilst on the other hand Mr Pink was maintaining that he had paid Rybarn and that the fault therefore lay with them.
"The rejection by you of the mediated settlement I negotiated with Sydenhams for payment from stage 6 to allow work to continue is unacceptable. I feel Sydenhams' offer to return to site after the reneged promises of cheques by you was more than fair and reasonable."
"As you are aware, payment on the above project has not been in accordance with the payment plan agreed at the start. The payment plan was fundamental to our agreement to undertake this project due to the lack of working capital within your company ...
As a result of non-payment we have been forced to take our erection team off-site. I am concerned that a protracted delay may result in their obtaining alternative work. If this was to happen there would be a significant increase in cost and delay to the project and I would require compensation for any additional cost incurred should this happen."
"My view was hardening, and I was completely convinced that the only way forward was for Sydenhams to have a contract with CHG Holdings. We would not have gone forward on any other basis."
"Q: Mr Pride says: 'At that meeting I made the company's position clear that we would only return to site upon CHG Holdings Limited being responsible for future payments and that Mr Pink would have to change whatever contractual arrangements he had with Rybarn to allow that to occur'. Agree or disagree?
"A: I will agree with that."
Mr Pink also agreed with the proposition that, since CHG were desperate for Sydenhams to recommence work, they were in a very powerful position commercially. As was put to him and he agreed, Sydenhams had CHG "over a barrel".
"Further to our meeting at your Isle of Wight branch today, 20th April 2004, and the withdrawal of labour and materials by your company for the Bournemouth hotel project due to non-payment of accounts by the main contractor, Rybarn Limited.
My financiers have agreed that CHG Holdings Limited should self-project manage the financial administration of the JCT contract in line with the milestone stage payment in place.
This will enable the following payment structure to be implemented.
Prior to works to be recommenced, CHG will pay:
Stage 4, balance of second floor complete £29,992
Stage 5, third floor complete £43,616
£73,608
The balance of the remaining three-stage payments to be reduced by package 7 flooring £27,000 and package 8 insulation £38,000 which will give payments of:
Stage 6, fourth floor complete £21,950 w/c 10/5/04.
Stage 7, 50 % rooms £21,950 w/c 17/5/04.
Stage 8, timber frame complete £21,950 w/c 24/05/04~..."
The letter then went on to identify various sums which "will be paid on delivery". These included "windows A £50,000" and "windows B £50,000". It also included an amount of £10,337 which was said to relate to "outstanding account".
"Thank you for your fax setting out payment proposals which I accept in principle subject to the following:
1. We will return to site on Monday 26th April 2004 subject to the payment of £73,608 being received on Wednesday 21st April. In a brief conversation regarding their return, our erectors made no mention of compensation and I hope that this will not arise. In the event that it does, I will discuss the matter with you and will require the cost to be met by CHG.
2. There must be a legally binding agreement between CHG Holdings and Rybarn which will allow you to make the proposed payments.
3. The further payments referred to in your fax are of necessity round-sum figures and in some cases are still being influenced by design changes, eg windows. This may affect the final price.
4. The charge for extras to date of £9,000 should read £13,700. I understand that you asked Dean [Orchard] to look at the charge and he in turn has discussed the matter with me. As I hinted this morning, the actual additional cost incurred is much greater than the proposed charge and we are therefore unable to offer any reduction.
5. The retention payment of £19,265 will be paid by CHG Holdings on completion of the timber frame."
Rybarn were not a party to the discussions on 20th April 2004, nor did they sign or even receive any of these letters.
D. Factual position after 23rd April 2004.
"Ground floor. Front Christchurch Road elevation. Main front entrance and these front bar windows not included. Stairwell windows not glazed and painted."
"Less amount to be paid direct by CHG Holdings to subcontractors/suppliers on behalf of Rybarn:
"Sydenhams Timber Engineering £100,000."
"Q: So according to this certificate, CHG or Mr Pink was at some future date to be paying £100,000 to Sydenhams in respect of windows?
"A: Correct.
"Q: More importantly, according to this certificate, no payment was made to Rybarn in respect of the windows?
"A: That is correct."
E. Analysis of the contractual situation.
E1 principles of law, Contract Formation and Contract Construction.
(a) A binding construction contract usually requires, as a minimum, agreement as to parties, price and work scope: see Keating on Construction Contracts, Eighth edition, paragraph 2-018. A failure to agree a completion date will usually not be fatal because the law will imply a term that completion must be within a reasonable time.
(b) There must be an intention to create legal relations. Such an intention is to be construed by reference to the factual background and the relevant documents: see Edwards v Skyways [1964] 1 WLR 349 and Kleinwort Benson v Malaysian Mining [1989] 1 WLR 379.
(c) "The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations. It will often be difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty or alternatively it may make it possible to treat a matter not finalised as inessential": Steyn LJ in G Percy Trentham v Archital Luxfer [1993] 1 Lloyds Report 27 CA.
(d) Any questions of construction must be considered against the backdrop of Lord Hoffman's five principles in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, helpfully summarised by Longmore LJ in the recent case of Absolom v TCRU Limited [2006] 2 Lloyd's Rep 129, [2005] EWCA Civ 1586, as follows:
"(i) The aim of the exercise is to ascertain the meaning of the relevant contractual language in the context of the document and against the background to the document. The object of the inquiry is not necessarily to probe the real intention of the parties but to ascertain what the language they used in the document would signify to a properly informed observer.
(ii) The interpretive exercise must not be done in a vacuum but in the milieu of the admissible background material. That comprises anything that a reasonable man would have regarded as relevant in order to comprehend how the document should be understood, providing that the material was reasonably available to both parties at the time, i.e. up to the time of the creation of the document.
(iii) However, evidence of negotiations and subjective intent are not admissible for the purposes of this exercise.
(iv) A commercial document must be interpreted so as to make business common sense in its context. But if 'a detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense': See Antaios Compania Naviera SA v Salan Rederierna AB [1985] AC 191 per Lord Diplock".
(e) The question is what meaning the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. It is therefore irrelevant to call evidence of how one party behaved after the event. That only sheds light on what that party subjectively thought that he had agreed: see Miller (James) & Partners v Whitworth Street Estates (Manchester) Limited [1970] AC 573.
(f) The principle at (e) applies to contracts in writing; it does not apply to an oral contract, because:
"Determining the terms of an oral contract is a question of fact. Establishing the facts will usually, as here, depend upon the recollections of the parties and other witnesses. The accuracy of those recollections may be tested and elucidated by things said and done by the parties or witnesses after the agreement has been concluded": See Smith LJ in Maggs v Marsh and another [2006] EWCA Civ 1058; 2006 BLR 395.
E2. Was there a binding contract between Sydenhams and CHG on or about 3rd October 2003?
E3. What is the legal status and effect of the letter of 18th December 2003?
E4. What is the legal effect and status of the agreement of 20th April 2004?
(a) They reached a binding agreement on April 2004.
(b) That agreement was evidenced in the two letters of that date.
(c) There was no part of the agreement of 20th April that was not recorded in writing.
Accordingly, in this section of the Judgment, I identify the relevant part of the background and then construe the agreement. For the reasons set out below, I am in no doubt at all that the principal effect of this agreement was that CHG promised to make direct payments to Sydenhams in respect of the remainder of the works at the property.
(a) As early as February Mr Pride believed the best solution for the payment difficulties was for CHG to pay Sydenhams direct.
(b) Mr Pink himself acknowledged that direct payment was the best solution because, in his separate dealings with Rybarn in March, he obtained their consent to a direct payment regime.
(c) By 20th April, CHG were desperate for Sydenhams to recommence work on site and Mr Pink was aware that they would only do so if CHG agreed to pay them direct.
(d) By 20th April, Mr Pride had made it plain that Sydenhams would not go back to site unless they had obtained a promise that CHG would pay Sydenhams direct.
(a) The first paragraph refers to the problem being "non-payment of accounts by the main contractor Rybarn Limited". The solution to that is set out in the second paragraph: that CHG "should self-project manage the financial administration of the JCT contract ... this will enable the following payment structure to be implemented." In other words, the problem was Rybarn's failure to pay, and the solution to the problem was that CHG would pay instead.
(b) Various sums were expressly identified in the letter as being sums that "CHG will pay". It is quite impossible to interpret those words in any other way than a promise of direct payment by CHG. All other payments identified in the letter and all other sums that "will be paid" can only properly be construed as being sums that would be paid direct by CHG to Sydenhams.
(a) His first paragraph talks about possible disruption costs. If such costs arise, he says, he "will require the cost to be met by CHG". That must mean a direct payment, not a payment through Rybarn, who are not mentioned.
(b) Paragraph 2 refers to the need for a legally binding agreement between CHG and Rybarn. This is mentioned by Mr Pride, because, he says, "It will allow you [i.e. CHG] to make the proposed payments". Not only was that the clearest possible reference to the basic agreement that the payments would be made by CHG to Sydenhams, but it was also wholly contrary to any suggestion that the payments would be made by or through Rybarn. If they were to be made via Rybarn, there would have been no need for any new agreement between CHG and Rybarn.
(c) Paragraphs 3 and 4 are concerned with possible increases in price. They are only consistent with the fact of direct contractual negotiations between CHG and Sydenhams' without any involvement of Rybarn.
(d) Paragraph 5 refers to the retention of £19,265 which "will be paid by CHG Holdings on completion of the timber frame". Again, that is only consistent with the operation of a direct payment regime by CHG to Sydenhams. Again, it cannot be interpreted in any other way.
E5. What is the legal effect and status of the OFM of 11th May 2004?
F. The deed of warranty.
F1. Factual background.
F2. Issues.
F3. Rectification.
F4. Estoppel.
"... the scope of the doctrine is extremely limited in modern law. First, it only applies between the parties to the deed and those claiming through them. Secondly, it only applies when an action is brought to enforce rights arising out of the deed and not collateral to it. Thirdly, it only applies if the statement is clear and unambiguous ... In view of these limitations there seems little point in preserving any separate category of estoppels by deed, since the basis of the estoppel appears now to be covered by estoppel by representation or by convention."
F5. Clause 5 of the warranty.
F6. Summary.
G. The Other Issues.
G1. The £90,000 plus VAT for windows.
G2. The £19,625 plus VAT (retention monies)
G3 The £528 plus VAT for structural calculations.
G4 Trade Account. £1,982.05.
G5 Cross-Claim for defects.
G6 Interest.
G7 Reconciliation.
(a) £105,750 (section G1 above).
(b) Interest on that sum at 8 per cent over base from 1st November 2004.
(c) £22,636.38 (section G2 above);
(d) Interest on that sum at 8 per cent over base from 1st August 2004.
H Conclusions.
Note 1 See paragraph 8.02 of the Initial Construction Appraisal provided by ESP and dated 31/10/03 [Back] Note 2 See paragraph 20 of his witness statement on which he was not challenged. [Back] Note 3 The cases which are relied on in support of these propositions are set out in footnotes 467 and 468 of the relevant paragraph of Chitty. All of the cases date from the 19th century. [Back]