Ellis Building Contractors Ltd v Vincent Goldstein

JurisdictionEngland & Wales
JudgeMr Justice Akenhead
Judgment Date18 February 2011
Neutral Citation[2011] EWHC 269 (TCC)
Docket NumberCase No: HT-11-22
CourtQueen's Bench Division (Technology and Construction Court)
Date18 February 2011

[2011] EWHC 269 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Akenhead

Case No: HT-11-22

Between:
Ellis Building Contractors Limited
Claimant
and
Vincent Goldstein
Defendant

Crispin Winser (instructed by Stephen Rimmer LLP) for the Claimant

Marion Smith (instructed by Philip Ross) for the Defendant

Hearing dates: 11 February 2011

Mr Justice Akenhead
1

The Claimant, Ellis Building Contractors Limited ("Ellis"), seeks summary judgement in these proceedings to enforce the decision of an adjudicator issued on 12 January 2011 by which he ordered the Defendant, Mr Goldstein, to pay to Ellis £121,566.86 plus VAT on part as well as requiring Mr Goldstein to pay his fee. Issues are raised in relation to possible bias and breaches of natural justice. One aspect of this is a complaint based on without prejudice material being put before the adjudicator. This is not wholly uncommon unfortunately and it is a practice that should be discouraged.

The Background

2

The facts and history as I set them out in this judgement only relate to this judgement and are not intended to bind the judge who tries any issues as to what in fact any contract between the parties comprised.

3

Mr Goldstein wished to carry out a part demolition, rebuild, refurbishment and fit out of 12 commercial units at Bush Mews, 5 Arundel Road, Brighton. Architects, Farmiloe Architects ("FA"), were employed to design and administer the project. Negotiations appear to have continued between about April 2008 through to June 2009 between Mr Goldstein and his associate a Mr Conway and, although it is clear that tenders were sought from at least two other tenderers, Ellis tendered on 17 March 2009 in the total sum of £429,270.28. On 18 June 2009, Mr Goldstein sent a Letter of Intent (the "First Letter of Intent") to Ellis. The following was stated:

"Please accept this as our Letter of Intent to enter into a Contract with Ellis… to carry out and complete the repair & refurbishment works to Bush Mews…

At this point in time, certain elements of the design are required to be finalised by our directly employed Design Team and in the interim, to establish a Contract Sum we will base this Letter of Intent on Ellis…letter dated 9 February 2009 and letter…dated 17 March 2009 identifying a contract sum of £429,270.28 plus VAT. To this will be added a contingency sum of 10% which gives a Contract sum of £472,197.31 plus VAT…

This letter provides you with the authority to commence all necessary preconstruction works to facilitate the earliest possible commencement date from the date of this letter. These works will be carried out under the specific terms of JCT 2005 Intermediate Building Works Contract, Clause 2.23 Liquidated Damages at the rate of £Nil per week…Date of issue of Interim Certificates as per Contact Particulars 4.6.1 shall state 14 days from date of possession.

In the event of failure to conclude the Contract or either party deciding that the provision of the work should cease for whatever reason, the Employer's total liability will be Ellis… pre-construction costs together with any costs and expenses reasonably and properly incurred together with associated overheads and profit.

In the event that the formal Contract is not prepared prior to commencement, following commencement the parties agree that the works will be carried out under the specific terms of the JCT 2005 Intermediate Building Contract."

This was signed by the parties.

4

Another Letter of Intent appears to have been drafted on 4 August 2009 but does not appear to have been sent or actioned. By mid-September 2009, work had been started by Ellis and their report No 1 at that time suggests that four weeks worth of work had been done and a further 21 weeks remained for completion. FA sent to Mr Goldstein a draft Intermediate Building Contract which appears to have assumed a contract price of £472,197.31 which was Ellis's latest price plus a 10% contingency. Project meetings were held regularly and frequently, attended by Ellis, Mr Goldstein and FA. Substantial payments appear to have been made to Ellis. By April 2010 consultants were telling Mr Conway that there was an overspend which would produce a final completion value estimated at £583,099.55 which would involve a total overspend of some £110,000 over the earlier assumed contract price. On 15 April 2010 Ellis wrote to Mr Goldstein:

"…we have conducted a periodic review…and are aware that the value of the works is fast approaching the value of that stated in your letter of intent dated 18 June 2009 for a Contact sum of £472,197.31 plus VAT.

Normally this would not be an issue as the letter of intent would have been superseded by the Contact Documents which had the necessary mechanism within them to cater for an increasing contract value. However, for reasons which are unclear to us, these documents are yet to be formally issued and therefore need to bring this matter to your urgent attention.

As we see it there are two options for dealing with this situation:-

1. Issue a further letter of intent to cater for the increase in value of the works.

2. Formally issue the Contract Documents.

We would anticipate that we are currently very close to the contract sum for the works actually carried out on site and have committed orders to various sub-contractors and suppliers that will exceed the value of the letter of intent. We would therefore very much appreciate if you could see your way clear to organising a prompt response to these matters…"

5

Following some further discussions, this resulted in the second Letter of Intent dated 4 May 2010 being issued by Mr Goldstein and signed by Ellis:

"Further to your letter of intent dated 18 June 2009, we now write to you to extend the authority of the aforementioned letter to expire on the execution of the Contract unless extended again in writing by us.

These works will be carried out under the terms of JCT 2005 Intermediate Building Works Contract, Clause 2.23 Liquidated Damages at a rate of £Nil per week and Clause 6.7 Option C shall apply in respect of insurance. Dates of Interim Certificates as per Contract Particulars 4.6.1 shall state 14 days from date of possession.

In the event of failure to conclude the Contract or either party deciding that the provisions of the work should cease for whatever reason, the Employer's total liability will be Ellis… pre-construction costs together with any costs and expenses reasonably and properly incurred together with associated overheads and profit.

We undertake to pay you the proper and reasonable costs incurred by you in working in accordance with the Drawings, Specification and Instructions issued by [FA] (acting as our Agents) for properly providing services, works, goods and materials for the Authorised Works, in accordance with this letter, providing that our liability to you will be extended by £107,802.69…and will not exceed £580,000…(the "Maximum Amount").

Both parties agree that the works will be carried out under the specific terms of the JCT 2005 Intermediate Building Contract.

Please acknowledge receipt of this letter and confirm the acceptance of its contents by signing the duplicate copy and returning it to us."

6

Following receipt of a cheque for £100,000 from Mr Goldstein's solicitor, Philip Ross, Ellis responded on 3 June 2010 acknowledging receipt and asserting that the sum due to date was £568,841.42 and that the Second Letter of Intent limit would be exceeded shortly. Ellis asked for a further letter of intent. The solicitor replied on 22 June 2010 sending a further payment of £44,769.92 and indicating that Mr Goldstein would not agree to increase the financial limit. On 23 June 2010, Ellis wrote back hinting that there might have to be a cessation of work if the financial limit in the Second Letter of Intent was to be exceeded.

7

A meeting was held on 30 June 2010 attended by Mr Conway, three representatives of Ellis and two from FA. Minutes, which may ultimately be disputed, produced by FA on or shortly after 7 July 2010 stated at Minute 2.20:

"FA issued two copies of the contract documents to [Ellis] for signature prior to being forward to [Mr Conway] for signing. [Mr Conway] is to then return a single signed copy of the contract to [Ellis]. FA requested [Ellis] include the second Letter of Intent prepared within the Contract Documents and forward a copy of this to FA for their records."

8

Apparently, before those minutes were received by Ellis, on 1 July 2010, Ellis sent to Mr Goldstein the signed contract documents asking him to sign. Ellis wrote that it had incorporated the additional documentation requested and as detailed in its letter to FA dated 1 July 2010. The letter to FA of 1 July 2010 makes it clear that the Letters of Intent were not incorporated into the documents. This obviously raises an issue as to what was said or agreed at the meeting of 30 June 2010, namely as to whether the Second Letter of Intent was in some way incorporated into the contract which was to be signed.

9

The documentation and evidence does not reveal precisely what happened in relation to the contract documents or how the works progressed thereafter. It is said that the Certificate of Practical Completion was issued on 23 July 2010. So far as I can ascertain, £83,759.82 plus VAT was the outstanding unpaid sum certified for payment by FA whilst Ellis claimed an additional £35,000-£40,000 plus VAT for variations and prolongation which had not been certified. A total gross sum said to be due of £650,224.46 was claimed by Ellis. £98,417.78 inclusive of VAT was claimed for certified sums and £47,030.39 was claimed in respect of uncertified sums.

10

Perhaps unfortunately, Ellis decided to serve a statutory demand on Mr Goldstein in respect of...

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