Masons (A Firm)(Claimant/Part 20 Defendant) v Wd King Ltd and Another (Defendant/Part 20 Claimants)
| Jurisdiction | England & Wales |
| Judge | Re,RE |
| Judgment Date | 17 December 2003 |
| Neutral Citation | [2003] EWHC 3124 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case Number: HT 02 354 |
| Date | 17 December 2003 |
[2003] EWHC 3124 TCC
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
His Honour Judge Humphrey LLoyd QC
Case Number: HT 02 354
Richard Wilmot-Smith QC and Sean Wilken appeared for the defendant and Part 20 claimants, instructed by Fenwick Elliott.
Derek Sweeting QC appeared for the claimant and Part 20 defendant, instructed by Masons.
Pursuant to the Practice Statement of 22 April 1998 this is the official judgment of the Court and no note or further record is to be made.
December 2003
Introduction
This action was commenced by the claimant, Masons, a well-known firm of solicitors, to recover £37,093.35 as the balance of its fees for professional services. The fees so far paid come to more than £250,000 as the work was extensive. The first defendant, W D King (WDK), is a property company, as is, nominally, the second Part 20 claimant (PGBL). The latter are the effective claimants. I shall use the term WDK to cover both (unless the context indicates that it is only the first defendant). This Introduction provides a summary of the case. I shall then set out certain extracts from the pleadings and the issues, before considering the facts relevant to the issues and providing answers to those issues.
In 1999 Masons was retained to advise and to prepare documents for the purposes of a development at Prospect Gardens, off Wells Road, Beechen Cliff, Bath. The project was to build new accommodation for about 220 students at the University of Bath. It was joint venture of which WDK and another company City and County Ltd were the leading members. WDK was to provide the money. PGBL was a SPV (Special Purpose Vehicle) formed by the joint venture and was to be the employer of the contractor. On completion the University would take a lease of the development from PGBL, but the latter's interest would at the same time be assigned to an investment fund so that the University would become its tenant. The partner at Masons who was first contacted was Frances Alderson, but the partner principally responsible was Mr Mark Collingwood who is based at the firm's Bristol offices. He had then over twenty years' experience as solicitor specialising in construction (in which field Masons' reputation is largely founded). He became a partner in 1985. He was assisted by Mrs Alyson Houghton (then Alyson Howells as I shall call her in this judgment) who is a Senior Associate. She qualified in 1989 and worked at Cameron Markby Hewitt, Simmons and Simmons and Eversheds, throughout specialising in non-contentious construction work, before joining Masons. Ms Beverley Pike also worked on the matter but was not really involved with the drafting of the building contract.
The University wanted to have the buildings (there were three sections or phases) completed in good time for the start of the academic year in 2000. If Section 2 (the main accommodation) was not ready by then the University would not pay rent until the following year. It was therefore important to WDK that the building work was finished on time. Ideally the building contract should have rendered the building contractor liable to pay damages equivalent to the loss of a year's rent if the works were finished late. That was of course commercially unrealistic (if only because any contractor would simply add to its tender price an amount to offset the risk of such liability) but the building contract did contain some special provisions which were intended to provide protection to WDK. The contract was to incorporate the GC/Works/1 Standard Form, Single Stage Design and Build Version (1998) as it was favoured by WDK. It had to be adapted for use on this project by a private developer. One of the special provisions originally drafted by Masons was a replacement for condition 38. In its final form (after the inclusion of wording proposed by the contractor's solicitors, Eversheds) the relevant part read:
"In the event the PM is of the opinion that the Contractor's rate of progress in carrying out the works is likely to prejudice completion of the works or any section by its date for completion, and to the extent that in the opinion of the PM this is due to a cause which is not listed in Condition 36(1), the PM, acting reasonably, and taking account of the Contractor's representations may instruct the Contractor as to the measures he requires the Contractor to take to retrieve the position and the Contractor shall comply with the same at no cost to the Employer. Without prejudice to the generality of the foregoing, such instructions may include the requirement to re-sequence works, to accelerate completion of the works and/or require the Contractor to increase his on and off site resources".
In essence therefore the Project Manager had a new power to issue an instruction to re-programme or re-sequence or deploy additional resources if delay to completion looked as if it might occur. The contractor would have to bear the cost of compliance. Accordingly all the contractor could jib at was whether the instruction was reasonable (the amendment added by Eversheds).
The building contract was made on 19 October 1999 between PGBL and Jarvis Construction (UK) Ltd (Jarvis). The contract sum was £5,750,000. The Project Manager was Paul Whitley Architects ("PWA"). The contract also contained Condition 55 which as amended (the new wording is in italics) read:
"55 Liquidated damages
(1) This Condition applies where a rate of liquidated damages for any delay in the completion of the Works or a Section has been specified in the Abstract of Particulars.
(2) If the Works or a Section are or is not completed by the relevant Date for Completion, the Contractor shall immediately become liable to pay to the Employer liquidated damages in accordance with the Abstract of Particulars. Nothing herein shall prevent the Employer being entitled to such damages prior to certification of completion of the Works or any Section under Condition 39.
(3) Subject to Condition 50A (Withholding payment), the Employer may deduct any amount of liquidated damages to which he may be entitled under this Condition from any advances to which the Contractor may otherwise be entitled under Condition 48 (Advances on account).
(4) If the sum due as liquidated damages exceeds any advance payable to the Contractor under Condition 48 (Advances on account), the Contractor shall pay to the Employer the difference. That sum shall be recoverable in accordance with Condition 51 (Recovery of sums).
(5) No payment or concession to the Contractor, or Instruction or VI at any time given to the Contractor (whether before or after the Date or Dates for Completion), or other act or omission by or on behalf of the Employer, shall in any way affect the rights of the Employer to deduct or recover liquidated damages, or shall be deemed to be a waiver of the right of the Employer to recover such damages The rights of the Employer to deduct or recover liquidated damages may be waived only by notice from the Employer to the Contractor.
(6) The Contractor hereby irrevocably accepts and agrees: -
(a) that having regard to the purpose for which the Works are required and the Employer's obligations and liabilities under the Agreement for Lease and the Development Finance Agreement, liquidated damages calculated in accordance with paragraph (2) represent reasonable pre-estimates of the loss and damage likely to be sustained by the Employer in the event the Works or Sections 1, 2 and 3 are not completed by the Date or Dates for Completion and in particular if the Works (except Section 3) are not completed by 30 th August 2000.
(b) that no challenge shall be made or sought to be made to the liquidated damages by the Employer, or by the Contractor on the basis that they are a penalty or that they do not represent a genuine pre-estimate of the Employer's losses arising from delay.
(c) That pursuant to paragraph (2) of the Abstract of Particulars, the Contractor's liability to pay or allow up to the sum of £300,000 by way of liquidated damages accrues irrespective of the extent of delay beyond the Date or Dates for Completion where completion occurs after 30 th August 2000.
….
The Abstract of Particulars provided that Section 2 was to be completed by 28 August 2000; Section 1 was due to be finished by 23 December 2000 and Section 3 by 7 January 2001. It also provided that £1500 per week was payable as liquidated damages for delay in the completion of sections 1 and 2 up to 30 August 2000 and £3000 per week for delay to section 3 in respect of any delay after the Date for Completion. It then said: "Thereafter in respect of Sections 1 and 2 and…. subject always to Condition 55(2), a single lump sum… " and then four graduated amounts, starting with £300,000 and decreasing to £200,000 were provided as payable, depending on how many blocks were incomplete between 1 September and 31 December 2000. Thus the contractor would pay no more than these maxima should the relevant work be finished later.
There was also a Development Finance Agreement dated 19 October 1999 (DFA) between (1) WDK, (2) PGBL, (3) Unilease Jersey No 3 Ltd (UJ3) the nominal developer (and funder) and (4) Unilease Jersey No 4 Ltd (UJ4) the funder, as well as an agreement for a lease (also dated 19 October 1999) between UJ3 and the University. The arrangements are conventional (at least superficially). The agreement with the University enabled it to take possession up to August 2003. The lease was for 30 years. If the accommodation was not ready for the University, WDK would have to fund the project for an extra year. That would cost about £680,000, i.e. more than the maximum that it might recover from the contractor.
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