Mears Ltd v Shoreline Housing Partnership Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 20 May 2015 |
| Neutral Citation | [2015] EWHC 1396 (TCC) |
| Docket Number | Case No: HT-12-209 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 20 May 2015 |
[2015] EWHC 1396 (TCC)
Mr Justice Akenhead
Case No: HT-12-209
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Anthony Speaight QC (instructed by Ashfords LLP) for the Claimant
Marc Rowlands QC (instructed by DWF LLP) for the Defendant
Hearing dates: 9–11 and 17 March 2015
This is a case that need never have been fought all the way through to trial. Nominally the dispute between the parties, Mears Ltd ("Mears"), the contractor, and Shoreline Housing Partnership Ltd ("Shoreline"), the employer, relates to some £300,000 said to have been overpaid under the terms of a substantial repair and maintenance term contract ("the Contract") which was signed some six months after work started and by agreement retrospectively applied. Over 12,000 small jobs were done and paid for on a basis that the contract did not recognise as such. The dispute relates mainly to whether by way of estoppels this basis of payment was effectively agreed or otherwise enforceable notwithstanding. The proceedings have been rightly described by Shoreline's Counsel as having "a long and turbulent history". Shoreline applied to strike out Mears' claim, unsuccessfully both at first instance and in the Court of Appeal. The first trial was adjourned and efforts were made with Ramsey J as mediator to settle not only this dispute but another substantial payment claim (running to a seven figure sum); that was unsuccessful also. The pleadings have been heavily amended. The submitted costs budgets (totalling well over what was in issue in these proceedings) were rejected by the Court; the parties for no obvious good reason have not submitted revised budgets. The parties have each instructed experienced specialist QCs. The costs on both sides must total at least twice what is in issue. Belatedly and openly, after I expressed surprise that the case was fighting, Mears offered to settle for 50% of what was claimed and Shoreline offered a "drop hands walk away" deal. Neither was accepted. Of course, the Court cannot and does not know what has been happening behind the scenes and that may emerge after this judgment is handed down.
The Background
Shoreline is and was a registered social landlord with some 8,000 houses or flats under its management in the Lincolnshire and Humberside area, including Cleethorpes, Grimsby and Immingham. Mears is a well known national contractor. Prior to the current contract, Mears and Shoreline were in contract on two other projects; on one, a gas servicing and repair contract, the parties worked well together. For general maintenance, Shoreline used its own in-house subsidiary, Shoreline Property Services Ltd ("SPS"), which had proved unsatisfactory at least so far as efficiency and cost was concerned. It decided to market test and set up a public procurement exercise, subject to the Public Contract Regulations 2006. An appropriate Contract Notice was published in the Official European Journal in August 2008. On 5 January 2009, Mears (and others who had also been shortlisted) were invited by Shoreline to tender, with detailed documentation provided upon which to tender. The proposed contract was described as the "Responsive Repairs, Voids and Planned Maintenance Contract". What was envisaged was that if an outside contractor secured the job, there would transfers of the SPS staff to it under the Transfer of Undertakings (Protection of Employment) Regulations ("TUPE").
It was made clear that the contract terms would be the New Engineering (NEC3) Term Service Contract conditions incorporating "Option C" ("Target Contract with price list"). The "Service Manager" was named in the provided documents as Brian Clark. I will return to the relevant provisions later in this judgment. Suffice it to say, these conditions called for interim payments to be made to the Contractor on the basis of actual costs plus profit and overheads but provided for a reckoning to take place every 6 months such that there would be an adjustment, if the costs (plus) were more than the tendered prices down to the level of the prices, but if the costs (plus) were less than the prices, there would be a sharing of the difference. This was explained reasonably succinctly by Mr Mark Tomkinson, Shoreline's interim Head of Property Investment, in an e-mail dated 11 February 2009:
"I thought I would clarify the pricing requirement for the NEC3 Term Service Contract.
When pricing the schedule of rates, the rates must be fully inclusive of everything. This forms the 'value' of the work and no additions to the schedule rates are allowable for valuation or interim/final accounting processes. No fee % is added to 'value'.
In the open book reconciliation, the actual cost of labour, plant, materials, support staff and/or other thing[s] directly employed on the contract as defined…will be payable, together with a fee % for directly employed resources and fee % for subcontracted works. This is the 'cost'.
Upon reconciliation, the 'cost' is deducted from the 'value' to form the gain share which is distributed in accordance with the tender documents."
This approach was different to that adopted on the gas servicing and repair contract where the value was invoiced and the "gain share" arose only if the cost was less than the value. There was a Price List for the new project to be priced by tenderers, comprising some hundreds of items of work to price, which was not necessarily exhaustive of all the types of work which the Contractor might be called upon to do. Pricing was not the only criterion upon which the tender would be judged.
Mears submitted its tender on 13 February 2009, offering to "provide the Service in accordance with Contract Data part 1 and Contract Data part 2 for a sum to be determined in accordance with the conditions of contract" and said that "this Tender together with your written acceptance shall constitute a binding contract between us". On 18 March 2009, Mr Tomkinson informed Mears by letter that Mears had "been successful in being selected as our preferred partner for the delivery of this contract." Mears' total tendered price at £24.263m was almost £2.5m less than the nearest tenderer and internally in a Report to Shoreline's Board on 17 March 2009 a 22% saving was identified which, if realised, it was thought would generate about £1m's worth of savings per year. Mr Tomkinson went on in his letter to Mears:
"…it is our intention to award the contract to yourselves having achieved a score of 99.33, judged strictly in accordance with the scoring criteria circulated with the tender documentation. This is viewed as the Most Economically Advantageous Tender…
In accordance with the Public Contracts Regulations 2006 section 32 the '10 Day Mandatory Standstill Period' will commence on Thursday 19 th March 2009…
I would like to convey the appreciation of our team for all the time, effort and resources you have committed to the process and look forward to building a strong repairs and maintenance partnership."
There is a fair amount of reference in the tender and what was later to be the Contract documentation about partnership and co-operation. Indeed, even before the tender was submitted, at a presentation attended by Mears on 1 February 2009 Shoreline's specialist advisers, in particular a Dr Stuart Kings, highlighted the fact that the proposed NEC3 contract fitted "well with [Shoreline's] partnering values and structured project management approach".
Although work was not to commence in the result until July 2009 and the contract would not be signed until December 2009, there were extensive interchanges and exchanges between the parties with the main participants being Messrs Tomkinson and Clark for Shoreline and Messrs Critchley and Lester, respectively then Mears' Partnership Manager and Director in charge of the project. It was agreed between the four of them that when work started, invoicing by Mears would be on the basis of the agreed prices in the Price List (often referred to by them as the "SOR" or Schedule of Rates), notwithstanding the clear understanding which both parties had that the contract to be signed required invoicing to be by reference to defined cost plus fee. Apart from this being supported in evidence by Mr Lester and Mr Critchley (which I accept), it is corroborated by Mr Clark's handwritten notes of the meeting on 15 April 2009 (which notes "Invoice on SORs") and by Mr Tomkinson's circulated notes of a Commercial Task team meeting held on 7 May 2009 (which in answer to a recorded question: "Should Mears invoice SOR Value or Cost" the Action specified was: "Agreed to invoice on Value (SOR)". This latter document also recorded that an "average cost schedule was to be established" and that each party's computer systems were to be "populated with average SOR rates"; one advantage was said to be that such average rates would "eliminate the majority of variations". The note also recorded that the average cost schedule was to be agreed with PI (Shoreline's Property Investment department), of which Mr Tomkinson was in charge and Mr Clark was a member.
There was a clear belief and understanding as between these four people and indeed others in both organisations from March 2009 onwards that the Price List was incomplete in that there were a significant number of typical jobs which would need to be done which were not listed and therefore not priced. Mr Tomkinson told Mr Lester and Mr Critchley that the reason for this was that SPS had refused to release job data so that Shoreline considered that the Price List upon which Mears had been invited to tender was "somewhat academic" as Mr Tomkinson recorded in his e-mail of 10 July 2009. Mr...
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