Merit Holdings Ltd v Michael J Lonsdale Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Jefford DBE |
| Judgment Date | 11 October 2017 |
| Neutral Citation | [2017] EWHC 2450 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2017-000106 |
| Date | 11 October 2017 |
[2017] EWHC 2450 (TCC)
Mrs Justice Jefford DBE
Case No: HT-2017-000106
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Justin Mort QC (instructed by Mills & Co) for the Claimant
Alexander Hickey QC (instructed by Stevens & Bolton LLP) for the Defendant
Hearing date: 22 June 2017
Introduction
This claim arises out of the construction of One Angel Court, Copthall Avenue, London EC2.The Defendant ("MJL") was engaged as mechanical services sub-contractors. The Claimant ("Merit") describes itself as a specialist contractor.
The hearing before me was of a Part 8 Claim seeking a declaration "as to the correct interpretation of the contract". I will say something more about that Claim in due course but I start by setting out the background.
The facts and background
It is common ground that the parties' initial contractual relationship was set out in a letter of intent dated 20 November 2015 ("the first letter of intent") sent by MJL to Merit. That letter provided:
"We refer to our recent discussion regarding the supply and installation of the mechanical pipework package, pending execution of our formal contract with Merit Holdings Ltd., we hereby confirm by way of LOI expenditure authority / appointment for you to undertake the off-site prefabrication of materials for LTHW, Condenser Water and CHW system and commencement of the on-site installation works for the above mentioned project to a capped value of £330,000.00.
….
In relation to any works properly carried out by you in accordance with this letter, we agree to reimburse you the costs wholly and necessarily incurred by you pursuant to this letter up to a maximum sum of £330,000.00. (Three Hundred and Thirty Thousand Pounds and Zero Pence). Such costs shall be paid in accordance with MJ Lonsdale payment procedures to be agreed and shall be subject to retention of 0%. This maximum sum shall not be exceeded except where specifically notified to you in writing and any costs incurred by you in excess of such sum shall be borne by you. This letter will expire Thursday 31 st December 2015 and another LOI will have to be issued in its place if the formal sub-subcontract order is not in place.
…
In the event that a binding contract is entered into by the parties, all work authorised by Michael J Lonsdale and carried out by Merit Holdings Ltd. pursuant to this letter shall be treated as work performed under the Sub-subcontract Agreement for mechanical pipework services installation. Any monies paid to Merit Holdings Ltd. in respect of this letter shall form part of the Contract Sum under the Sub-Subcontract Agreement.
We may terminate these arrangements at any time by notice in writing to you in which case you shall forthwith vacate the site and leave your work in a safe and secure condition as appropriate, we will pay you, subject to the maximum sum referred to above, the costs accrued due under this letter, up to the date of such termination. We shall have no further obligation or other liability to you in relation to the Works or this letter and you will have no claim against Michael J Lonsdale or any party for any breach or loss of contact (sic), loss of profit, loss of expectation, consequential loss or any other indirect loss in the event that a binding contract does not come into existence.
By your acceptance of the terms of this letter, you acknowledge that there is no contract between us, except as set out in this letter."
The letter was countersigned on behalf of Merit under the words "We hereby confirm our agreement to commence and complete the Works in accordance with the terms of this letter …"
A further letter of intent ("the second letter of intent") was sent on 16 February 2016 (incorrectly dated 2015). It was in the same terms as the first letter of intent except that the date of expiry was given as Thursday 29 February 2016. There was obviously a gap in time between the expiry of the first letter of intent and the sending of the second but work continued.
A yet further letter of intent was sent on 6 April 2016 ("the April letter"). It was again in the same terms as the first letter of intent, except that (i) the capped value or maximum sum referred to was £430,000 and (ii) the date of expiry was Friday 29 April 2016. There was again a gap in time between the expiry of the second letter of intent and the sending of the April letter when work continued.
It was Merit's case, as pleaded, that these letters of intent were the basis of the parties' contractual relationship but that "in addition the parties' conduct, including the conduct of the parties after 29 April 2016, varied and/or created the contractual relationship."
It was not in issue that after 29 April 2016, Merit continued to carry out work until 12 July 2016. Between December 2015 and June 2016, Merit made 7 applications for payment. The applications were made roughly on a monthly basis and, therefore, continued during the gaps between the letters of intent. Each application was based on Merit's Tender Summary and assessment of percentage complete against each item. The Tender Summary aligned with a Quantified Schedule of Rates (QSOR) which was provided by Merit under cover of an e-mail dated 3 May 2016.
By the time of the application dated 24 February 2016, the amount claimed had already exceeded the maximum amount of £330,000. The application dated 20 April 2016 was in a sum in excess of £800,000. MJL issued payment notices and made payments which, in due course, exceeded the cap identified in the letters of intent. For the period of the end of April 2016, MJL's gross valuation was £612,974.15. For the period to the end of May 2016, MJL's gross valuation was £813,967.49.
By letter dated 12 July 2016, MJL terminated the arrangement between the parties. MJL's letter was headed Notice of Determination of the Sub-Subcontract. It purported to apply the provisions of clause 26 of the Sub-Subcontract and to terminate the Sub-Subcontract because of Merit's persistent failure to proceed regularly and diligently with the sub-subcontract works. It intimated a claim against Merit in respect of costs incurred in completing the sub-subcontract works.
A dispute arose about payment of Merit's application no. 7 dated 22 June 2016 and, following the termination, in September 2016, Merit commenced an adjudication claiming the sum of £1,128,106.42. The adjudicator, Mr Matt Molloy, decided that the parties' conduct evidenced an agreement that Merit would make applications for payment valuing the work up to the end of each calendar month (amounting to a payee's notice); that s. 110B(4) of the Housing Grants Construction and Regeneration Act 1996 (as amended) was engaged; and that MJL was obliged to pay the notified sum of £1,128,106.42.
In January 2017, Merit made a further application for payment (application no. 8). For the first time, the application was made on the basis of costs allegedly incurred by Merit. On this basis, Merit claimed a further £187,980.87. MJL disputed Merit's entitlement to payment and Merit commenced a second adjudication in which the adjudicator was again Mr Molloy. In the adjudication, Merit sought payment. In the alternative, Merit sought a declaration as to the basis on which its entitlement to payment was to be calculated. Its case was that it was entitled to be reimbursed its costs wholly and necessarily incurred, in accordance with the terms of the letters of intent.
In his decision, Mr Molloy set out the evidence before him including that as to Merit's tender, the minutes of a Pre-Order Meeting on 25 August 2015, and the fact that applications for payment nos. 1 to 7 were all based on the tender summary and a Contract Sum Analysis signed by Merit on 17 March 2016. In his decision dated 20 April 2017, he decided that Merit was not entitled to the sum claimed and that its entitlement to payment was based on the agreed Contract Sum and the QSOR.
Given what I say below about the contractual relationship, it seems to me helpful to set out the material part of Mr Molloy's analysis and decision in full:
"In Adjudication No. 1, I accepted that the parties' contractual relationship continued after the expiry of the 6 th April 2016 letter of intent, i.e. after 29 th April 2016. By that date, the parties had evidently agreed a Contract Sum and a scope of work, but a formal contract had not been concluded or terms agreed. The fact that Merit submitted subsequent applications for payment based on the agreed scope of works and the agreed Contract Sum, and the fact that MJL had made payments based on that agreed scope and Contract Sum points heavily towards the conclusion that the parties are taken to have agreed by their conduct that the basis of payment after the expiry of the 6th April 2016 letter of intent was by reference to the agreed Contract Sum and the QSOR. Alternatively, I also consider there to be some force in MJL's submission that, if there was no formal agreement regarding the basis of payment following the expiry of 6 th April 2016 letter of intent, then Merit would be entitled to a quantum meruit to be valued by reference to the Contract Sum which had been agreed. My view is that either analysis is consistent with the basis upon which Merit advanced its case in Adjudication No. 1 and the Decision reached.
Accordingly, I find that the basis of Merit's entitlement to payment is to be based on the agreed Contract Sum and the QSOR."
On the same date as Mr Molloy's decision, MJL gave notice of intention to adjudicate. The notice stated that the adjudicator would be asked to value application no. 8 and make declarations in relation...
To continue reading
Request your trial
-
LJR Interiors Ltd v Cooper Construction Ltd
...abridged time and expedited directions appropriate for the enforcement claim: see, e.g., Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC) at [20]–[21]; Victory House General Partner Ltd v RGB P&C Ltd [2018] EWHC 102 (TCC) at [6]; and Amey LG Limited v Amey Birmingham Hig......
-
A & v Building Solutions Ltd v J & B Hopkins Ltd
...the over-liberal and inappropriate use of Part 8 in adjudication cases: see Jefford J in Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC); [2017] 174 Con LR 92, and Ms Joanna Smith QC (as she then was) in Victory House General Partner Linted v RGB P&C Limited [2018] EWHC......
-
Mansard Mortgages 2007-2 Plc v Beyat Holdings Ltd
...She said that this defect was fatal, relying on comments made by Jefford J in Merit Holdings Limited v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC). I will come back to this 29 The final point made by the fifth defendant was to rely on CPR rule 8.8(2), which provides: “When the court rece......
-
Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd ((in Liquidation))
...simply provided the necessary background facts, none of which are controversial. 10 In Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC) Jefford J at [17] to [28] made certain comments about the appropriateness (or more accurately in that case, the inappropriateness) of the......
-
UK Construction briefing, January 2019
...insist that parties seek declaratory relief under CPR Part 8 only when appropriate. In Merit Holdings Ltd v. Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC), Mrs Jefford J DBE held that an issue related to adjudication proceedings is not necessarily suitable for expedited, declaratory relief ......
-
Adjudication Review, Spring 2018
...proceedings is not necessarily suitable for expedited, declaratory relief proceedings In Merit Holdings Ltd v. Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC), the parties had been involved in two sets of adjudication proceedings. When a third reference was made to adjudication, the claimant,......
-
Adjudication Review, Spring 2018
...proceedings is not necessarily suitable for expedited, declaratory relief proceedings In Merit Holdings Ltd v. Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC), the parties had been involved in two sets of adjudication proceedings. When a third reference was made to adjudication, the claimant,......
-
Procurement
...[39]. See also Mackie Group Pty Ltd v Reading Properties Pty Ltd [2010] VSC 131. Compare Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (tCC) at [33]–[43], per Jeford J. 463 See paragraphs 4.127–4.135. 464 Twintec Ltd v Volkeritzpatrick Ltd [2014] EWHC 10 (tCC) at [33], per Ed......
-
Statutory adjudication
...Construction Ltd [2009] BLR 525 at 540 [73]–[74], per Christopher Clarke J. See also Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC) at [18]–[32], per Jeford J. 356 here have been at least two cases where a party has been enjoined from prosecuting an adjudication on the b......
-
Table of cases
...II.12.25, III.20.88, III.26.61 Meridian Construction, Inc, re 2006 NSSC 17 III.25.198 Merit holdings Ltd v Michael J Lonsdale Ltd [2017] EWhC 2450 (TCC) I.4.142, III.24.60 Merit process Engineering Ltd v Balfour Beatty Engineering Services (hY) Ltd [2012] BLr 364 I.2.22, I.2.27, I.3.191 Mer......