London & Regional (St George's Court) Ltd v Ministry of Defence
| Jurisdiction | England & Wales |
| Judgment Date | 18 March 2008 |
| Neutral Citation | [2008] EWHC 526 (TCC) |
| Docket Number | Case No: HT 07 306 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 18 March 2008 |
[2008] EWHC 526 (TCC)
(Mr Justice Coulson
Case No: HT 07 306
IN THE HIGH COURT OF JUSTICE
TECHNOLOGY AND CONSTRUCTION COURT
QUEEN'S BENCH DIVISION
St Dunstan's House
133-137 Fetter Lane
London, EC4A 1HD
Mr Paul Darling QC (instructed by Wragge & Co LLP) for the Claimant
Miss Stephanie Barwise QC and Marc Lixenberg (instructed by Treasury Solicitor) for the Defendant
Hearing dates: 13 and 14 February 2008
The Honourable Mr Justice Coulson:
A. INTRODUCTION
This Judgment deals with certain preliminary issues which have arisen in these proceedings, which concern the refurbishment of an office building known as St George's Court, London, WC1 (“the property”). The freehold owners of the property are the Crown Estate Commissioners (“CEC”). CEC leased the building to the Claimant pursuant to an agreement known as the Building Agreement dated 28 March 200Part of the Claimant's obligations under the Building Agreement required them to carry out the refurbishment of the property. Pursuant to a separate agreement, known as the Agreement for Lease (“AFL”) the Claimant sub-let the property to the Defendant, and agreed to carry out the refurbishment works. The works themselves were carried out pursuant to a Building Contract between the Claimant, as Employer, and Shepherd Construction Limited (“Shepherd”).
The disputes between the Claimant and the Defendant arise out of the inter-relationship between the various parties and the various contracts referred to above. The Claimant's claim is that, pursuant to Clause 4 of the AFL, it procured the carrying out by Shepherd of certain additional works over and above the agreed Works, which were variations required by the Defendant and known as “Tenant's Variations”. The Claimant seeks declarations to the effect that the three particular claims which they now pursue are the Defendant's liability under the AFL. The Defendant disputes these claims for a variety of reasons. These include the contention that the Claimant's agents, Tweeds, did not certify the disputed claims as Tenant's Variations and that Tweeds' certification (or the lack of it) is a final and binding determination of their liability for these claims. The Defendant also takes two other points of principle arising out of the Settlement Agreement reached between the Claimant and Shepherd on 17 May 2004. One is concerned with the Claimant's capacity to pursue the claims at all; the other is based on the assertion that the Claimant has suffered no recoverable loss. Each of these three defences in principle is, if correct, sufficient to defeat the Claimant's claim in its entirety.
I propose to set out, in Section B below, the relevant terms of the three different contracts to which the Claimant was a party and which lie at the heart of these disputes. At Section C I set out an outline of the relevant events and documents passing between the parties and their agents. At Section D, I identify the relevant terms of the Settlement Agreement between the Claimant and Shepherd, and some of the subsequent correspondence. Thereafter I address the preliminary issues in three groups: the Certificate issues ( Section E below); the Capacity issues ( Section F below); and the 'No Loss' issues ( Section G below). A short summary of my conclusions is set out at Section H below.
B. THE CONTRACTURAL FRAMEWORK
B1. The Building Agreement
Clause 5.1 of the Building Agreement provided that CEC would grant a Lease to the Claimant in respect of the property. Clause 1.15 defined the lease as meaning a lease of the property for a term commencing on 22 March 2001 and expiring on 4 January 2126. The initial minimum rent was stated to be £400,000 per year.
Pursuant to Clauses 3 and 4, the Claimant agreed to carry out works at the property. Those works were to be either the Base Scheme, defined in Part 1 of the Second Schedule to the Building Agreement, or the Enhanced Scheme, described in Part 2 of the Second Schedule. The Claimant gave various warranties in respect of that work at Clause 3, including, at Clause 3.2, the warranty that “reasonable skill, care and diligence have been and will be exercised in the preparation of the Building Documents and in connection with all matters relating to the Works.” The Building Documents were defined as those listed in the Third Schedule and included the Employer's Requirements and the Contractor's Proposals. These documents formed a crucial part of the Building Contract (see Section B3 below).
For these reasons, Clause 1.34 defined the Works to be carried out by the Claimant pursuant to the Building Agreement as:
“ the works which are to be constructed on the Site in accordance with this Agreement being either the Base Scheme or the Enhanced Scheme and more fully described in the Base Scheme Building Documents or the Enhanced Scheme Building Documents respectively.”
It should also be noted that Clause 1.10 defined 'the Employer's Agent' as Tweeds of Churchill House, 160, New Bond Street, London W1Y 9PA. As we shall see, that was the role which Tweeds performed under the Building Contract between the Claimant and Shepherd. The Claimant was not the Employer under either the Building Agreement (where it was referred to as 'the Tenant') or the AFL (where it was referred to as 'the Landlord'). The Claimant was, however, defined as 'the Employer' under the Building Contract.
B2. The Agreement For Lease (“AFL”)
The AFL was also dated 28 March 2001. Pursuant to this Agreement, the Claimant became the Landlord and the Defendant was the Tenant. The underlease expires on 4 January 2126.
Pursuant to the AFL, the Claimant was obliged to carry out the Landlord's Works. These were defined at Clause 1.16 as:
“…the works to be carried out by the Landlord by way of major refurbishment of the Property as shown in the Approved Plans.”
The Approved Plans were themselves defined as:
“…the output specification contained within volume 2 of the Employer's Requirements produced by the Employer's Agent … together with associated documentation, plans and drawings referred to therein and such term shall include any variations from alternations and additions to and revisions of the Approved Plans made from time to time in accordance with this Agreement.”
The Claimant's specific obligations in relation to these works were set out in Clause 3 of the AFL:
“3. The Landlord's Works
3.1 The Landlord will procure that the Landlord's Works are carried out and all other requirements of the Approved Plans are met:
(a) in a proper and workmanlike manner and in accordance with good building practice
(b) with good quality and suitable materials
(c) in accordance with Approved Plans and the Requisite Consents
(d) in compliance with all statutes, statutory orders and regulations made under or deriving validity from them and any requirements and codes of practice of local authorities and competent authorities affecting the Landlord's Works
(e) in accordance with the Building Agreement
…
3.9 The Landlord may from time to time make such variations to the Approved Plans as may in the circumstances reasonably be necessary but if the variations would have the effect of reducing the size or the amenities of the Property the Landlord may not do so without the consent of the Tenant (such consent not to be unreasonably withheld) and the Landlord will in any event follow the procedures set out in the Approved Plans which shall prevail in the event of any conflict with the provisions of this sub-clause 3.9.
3.10 Subject to any procedures set out in the Approved Plans the Tenant will be deemed to have approved any variation requiring its consent within ten working days of the date on which the Landlord sends the Tenant an application for consent unless the Tenant notifies the Landlord in writing of any reasonable objection to the variation within that period.
3.11 Without limitation to the requirements of the Approved Plans the Landlord will keep the Tenant informed of:
(a) the progress of the Landlord's Works and
(b) any material problems or delays affecting the Landlord's Works.”
Clause 4 provided specifically for variations required by the Defendant, and known as Tenant's Variations. The relevant parts of Clause 4 were in the following terms:
“4. Tenant's Variations
4.1 The Tenant may request the Landlord to incorporate Tenant's Variations in the Landlord's Works and the Landlord shall not unreasonably withhold its consent to any such request provided that
(a) any necessary additional Requisite Consent can reasonably be obtained
(b) the execution of the Landlord's Works incorporating the Tenant's Variations would not constitute a breach of any of the matters set out in Clause 3.1(d)
(c) the Building Contractor and the Professional Team are reasonably able to incorporate such Tenant's Variations into their design and programmes
(d) the incorporation of the Tenant's Variations will not reduce the Net Lettable Area of the Premises nor otherwise conflict with the Landlord's Obligations in the Building Agreement.
4.2 The Tenant will pay the costs and incidental expenses of the Tenant's Variations (including without limitation the cost of any delay to the Landlord's Works and any professional fees for the Landlord or the Superior Landlord giving their consent to the Tenant's Variations) as they are incurred as to which:
(a) in respect of the costs of the Tenant's Variations payment is to be made against the Employer's Agent's certificates of the costs and incidental expenses within 30 days of delivery of the certificates to the Tenant and
(b) in respect of incidental expenses and professional fees payment is to be made within 30 days of written demand
(c) if payment is not made within 30...
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