London & Regional (St George's Court) Ltd v Ministry of Defence
| Jurisdiction | England & Wales |
| Judge | Lord Justice Hughes:,Lord Justice Richards,Lord Justice Waller |
| Judgment Date | 06 November 2008 |
| Neutral Citation | [2008] EWCA Civ 1212 |
| Court | Court of Appeal (Civil Division) |
| Date | 06 November 2008 |
| Docket Number | Case No: A1/2008/0751 |
[2008] EWCA Civ 1212
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN`S BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT
The Hon. Mr. Justice Coulson
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Waller
Lord Justice Richards
and LORD JUSTICE HUGHES
Case No: A1/2008/0751
Mr Paul Darling QC (instructed by Wragge & Co.) for the Claimant/Respondent
Miss Stephanie Barwise QC and Mr Marc Lixenberg (instructed by Treasury Solicitor) for the Defendants/Appellants
Hearing dates : 15 and 16th October 2008
London & Regional (St George's Court) Ltd (“L & R”) took a lease from the freeholders, the Crown Estate Commissioners (“CEC”), of an office building in central London, with a view to refurbishing it and subletting to the Ministry of Defence (“ MoD”). L & R engaged builders, Shepherd Construction Ltd (“Shepherds”) to carry out the work. The consequence was three principal associated contracts, all concluded within a few days of one another in March 200They were:
i) A building agreement (“BA”) between CEC and L & R, under which L & R agreed to carry out the main refurbishment;
ii) An agreement for a lease (“AFL”) between L & R and MoD; and
iii) A building contract (“BC”) between L & R and Shepherds.
The AFL, which is principally here in issue, refers to both the other contracts. The BC refers to both the BA and the AFL, and both were provided to Shepherds. We were given to understand that there was also some related agreement between MoD and the freeholders CEC. Although we have not been shown the BA, it seems plain that each contract was entered into in contemplation of, and in the context of, the others.
As well as agreeing with MoD to carry out the principal refurbishments (described in the AFL as 'Landlord's Works'), L & R agreed to incorporate into the works any additions or variations ('Tenant's Variations') reasonably requested by that Ministry. Unlike the principal refurbishments, these Tenant's Variations were to be paid for by MoD. The present litigation centres upon the terms of the agreement to pay for them. Coulson J was invited by agreement between the parties to determine certain preliminary issues. MoD challenges his conclusions upon some of them.
In due course, disagreements arose about what fell to be paid for by MoD as Tenant's Variations and also between L & R and Shepherds as to various other parts of the works. In May 2004, Shepherds and L & R largely settled their differences and entered into a written contract of settlement (“the settlement agreement”). Shepherds and L & R wished to settle the issues between them other than those relating to Tenant's Variations, which they wished to preserve for future resolution. By one of the terms of the settlement agreement, L & R gave Shepherds conduct in the name of L & R of any further dispute with MoD as to payment for Tenant's Variations. Thus it came about that the present action takes the form of an action brought by L & R against MoD, but is in reality conducted by Shepherds.
The particulars of claim contend that three categories of work (space planning, construction of certain rooms and alterations to a staircase) were Tenant's Variations. The claim is not for quantified costs of such work, but for declarations that these were indeed Tenant's Variations. By its defence MoD contends that only part of the space planning work constituted Tenant's Variations and that L & R have been paid all that was due in respect of that part. As to the other two categories of work, it says that no Tenant's Variations were involved at all. But MoD also contends (i) that the effect of the settlement agreement is that L & R can no longer be liable to Shepherds for anything and thus cannot incur any expense which can be claimed from MoD and moreover (ii) that in any event it has no liability to pay anything except as certified by L & R's agent, Messrs Tweeds and that none of the claimed work has been the subject of such certification. Those last two contentions, together with some others not now pursued, gave rise to the agreed preliminary issues put before the Judge.
As the hearing of the appeal progressed the questions before us were somewhat refined. It is common ground that the issues which now remain upon MoD's notice of appeal relate to (a) the effect of the settlement agreement and (b) the role of a “certificate” under the AFL.
As stated for the Judge below, the relevant settlement issue is:
“6. Whether the effect of the Settlement Agreement is that no further sum is due from the Claimant to Shepherd with the result that the Claimant has incurred no cost or expense as defined by Clause 4.2 AFL and therefore has no entitlement to claim against the defendant under that clause ?”
This settlement agreement issue has been referred to in shorthand as the 'no loss' issue. It is the principal issue before us. If MoD is correct, that is an end of the case against it.
As to the role of a “certificate”, there were two linked issues:
“1(b) Are certificates within the meaning of clause 2.7 and/or 4.2 AFL binding as to the fact and amount of a Tenant's Variation ?”
“1(c) Is a certificate a condition precedent to the Defendant's obligation to make payment to the Claimant under Clause 4.2 AFL ?”
Logically, 1(c) comes before 1(b).
The AFL and the BC
The provision of the AFL dealing with Tenant's Variations is to be found in clause 4. The first part of clause 4 provided for MoD to be entitled to seek such variations. Payment was dealt with by clause 4(2) as follows:
“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 days of delivery of the certificate the Tenant will pay interest on so much of the expenditure as for the time being remains unpaid at the prescribed rate calculated from the date on which payment was due.”
The 'Employer's Agent' there referred to was defined in clause 1.14 of the AFL as Tweeds, who were building consultants acting for L & R throughout the development.
The definition section of the AFL contained at clause 2.7 the following:
“2.7 Any certificate issued by the Employer's Agent shall save in the case of manifest error be final and binding.”
The AFL contained no other material provision relating to certification. It contained no provisions for anyone to claim payments, whether interim or final, nor for how Tweeds were to approach the issue of any certificates, for example by indicating whether they were to exercise their judgment or otherwise. It contained no means by which MoD could make representations as to what ought to go into a certificate. It contained no provisions for challenge to any certificate.
MoD d id not initially plead in its defence what these certificate(s) were intended to be. But it conducted the preliminary hearing before the Judge on the basis of the contention that the tenth edition of a schedule of works, prepared by Tweeds during the operations, was the certificate and dealt finally with what Tenant's Variations there had been and what was due. The Judge rejected that contention. The schedule was simply a running log of work under discussion amongst the three principal parties, L & R, MoD and Shepherds, and a record of stances taken. Its tenth edition was no more a determination of money due than the preceding nine editions had been. There is now no appeal from that finding, which if I may say so was plainly right.
The BC also contained no provision for certification. It was basically a standard form JCT contract, with contractor's design, 1998 edition. Tweeds were stated to be the agents of L & R (the employer) under this contract. But they were given no determining role in relation to payment. The word 'certificate' does not appear anywhere in the contract in relation to payment. Interim payments were, under clauses 30.3.1 and 30.3.3, to be made by the contractor applying for payment, and by the employer issuing a 'notice' of what he intended to pay. If he issued no notice, he was bound by clause 30.3.5 to pay the interim amount claimed. Articles 5 & 6B, with clauses 39A and 39C, permitted dispute resolution by adjudication or litigation. Clause 30.5–30.8 then provided for final payment (including no doubt the correction of any under—or over-payment in the interim) to be resolved by one or other party submitting an account for agreement or disagreement by the other, and (with articles 5 & 6B and clauses 39A and 39C) again contained provisions for resolution of any dispute by adjudication or litigation.
It appears that a number of employer's notices as contemplated by clause 30.3.3 had in fact been issued by Tweeds on L & R's behalf, indicating what L & R was thus far intending to pay, and for which work. These documents were sometimes described as...
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