Mid Essex Hospital Services Nhs Trust v Compass Group Uk and Ireland Ltd (trading as Medirest)
Jurisdiction | England & Wales |
Judge | MR JUSTICE CRANSTON,Mr Justice Cranston |
Judgment Date | 28 March 2012 |
Neutral Citation | [2012] EWHC 781 (QB) |
Court | Queen's Bench Division |
Docket Number | Case No: HQ10X02821 |
Date | 28 March 2012 |
[2012] EWHC 781 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cranston
Case No: HQ10X02821
Robert Howe QC and James Willan (instructed by DLA Piper LLP) for the Claimant
James Collins and Siddharth Dhar (instructed by Berwin Leighton PaisnerLLP) for the Defendant
Hearing dates: 14—29 February 2012
I. INTRODUCTION
At the heart of this claim is a clause in a long-term facilities contract which obliged the parties, inter alia, to cooperate in good faith. The contract incorporated a mechanism which enabled deductions to be made from service payments in the event of performance failures by the party to the contract providing the service. Calculations made in accordance with this mechanism led to a poisoning of the relationship between the parties so that within eighteen months both sides purported to terminate the contract.
The contract was entered on 1 April 2008 between the claimant, Medirest, and the defendant, Mid Essex Hospital Services NHS Trust ("the Trust"). Medirest, is part of the healthcare division of Compass UK & Ireland Ltd, which in turn is part of an international group. Medirest delivers facilities management, including catering services, to the healthcare market. As the name suggests the Trust is an NHS hospital in one of the home counties of England. It offers acute and community based services. At the relevant time it operated two hospitals, Broomfield and St John's, but it was part-way through a PFI project to build new facilities at the Broomfield site to replace St John's Hospital.
The trial of the claim took place over eight days. I heard evidence from seven witnesses. There were very few disputes of fact having any real bearing on the outcome of the case. Four witnesses gave evidence for Medirest. Mr Gernon was Medirest's catering manager located at the Trust. Prior to the contract Mr Gernon worked for the Trust, transferring to Medirest until the contract ended. He is again with the Trust. I found Mr Gernon to be impressive in his evidence, much of which was not challenged in cross-examination. Mr Cage (a general manager) and Mr Taylor (an operations director) were Medirest managers above Mr Gernon. Both had other responsibilities besides the contract with the Trust. Mr Cenci is the managing director of Medirest. On the whole there was nothing during the trial which led me to doubt the quality of the evidence given by these witnesses.
There were three witnesses for the Trust. Mr Wright was responsible for hotel services at the Trust and Mrs Brown was his manager. As with the Medirest witnesses there were occasional blemishes in the evidence of Mr Wright and Mrs Brown but not such as to cast any shadow over it as a whole. Mr Aitchison was the commercial director of the Trust, to whom Mr Wright and Mrs Brown reported. As I explain in the judgment Mr Aitchison must accept prime responsibility for the unfortunate situation in which the Trust now finds itself. In addition to these three witnesses, there were two witnesses for the Trust who were not called. Mrs May was the chief executive of the hospital at the relevant time, although in June 2009 she moved from the Trust to another job in the NHS. Because her daughter was ill Mrs May's evidence was tendered under the Civil Evidence Act 1995. In fact her evidence went only to peripheral matters. A matron at the Trust, Mrs Ali, did not need to give evidence. Her statement underlines the importance of cleaning and food hygiene in hospitals but in my view has no real bearing on the matters in issue. In the course of the evidence mention was made of two other members of the Trust's staff, Ms Mitchell, the facilities performance manager, and her subordinate Kerri Nepean, who began with the Trust in November 2008.
II. THE CONTRACT
Outline
The contract was for the provision of catering services to the Trust mainly for patients but also covering other aspects such as the restaurant, hospitality and vending machines. It consisted of a short "Contract Agreement", Document No 1, identifying the parties, the start date as 1 April 2008 and the seven year term, extendable at the sole discretion of the Trust for a further three years. Document No 2, "General Information" gave background information on the Trust, outlining the PFI process then underway for centralising hospital services on the one site. Clause 3.4.1 of Document No 2 provided that, at the pre-PFI stage, there would be a catering helpdesk service provided by Medirest, and clause 5 read that Medirest was "expected to provide and operate a helpdesk system to process requests and queries from the Trust regarding the catering service". Subsequently, the PFI consortium was to operate a helpdesk service as part of the facility management services.
The body of the contract was contained in the "Conditions of Contract" at Document No 3, the "Specification of Services" at Document No 4 and a separate document entitled "the Payment Mechanism". In the Conditions of the Contract, the key obligations were contained in clauses 2.1 and 2.2. The Trust appointed Medirest as its Contractor to perform the Services in accordance with the Service Level Specification and the Trust agreed to pay the Contract Price.
The Payment Mechanism set out in its Part A the annual service payment to Medirest, subject to indexation: £2,137,433 for year 1 (£178,119 a month); £2,187,433 for other years pre PFI, and £1,643,144 for the years post-PFI. (The decrease post-PFI reflected the consolidation of hospital services on one site and what was expected to be a reduction in the number of patient beds). Part B contained the formula to calculate monthly payments to Medirest: these were one twelfth of the annual amount, reduced by deductions for performance failures, but adjusted for so-called volume adjustments (in broad terms, to cover more patients). Deductions were capped in Part C so that they could never exceed the monthly volume adjusted service payment. There was a three month bedding-in period, April-June 2008, when no deductions were to be made.
Terms of the contract
In its form the contract was a standard NHS contract coupled with a mechanism for service failure points and deductions. The latter was taken from a standard form for a private finance initiative (PFI) project, although this catering contract was not a PFI project. The cobbled together nature of the contract did not assist its use by either Medirest or Trust staff. The contract terms relevant to the present dispute are relatively few.
(a) Definitions including "location"
The Conditions of Contract contained in clause 1 various definitions and rules of interpretation. Apart from the Trust, there were terms identifying other beneficiaries of the contract and clause 1.1.2 defined "Beneficiary" widely to include the Department of Health, GPs and various health bodies. "Contract" was defined in clause 1.1.5 to exclude implied terms in favour of Medirest.
"… for the avoidance of doubt all other terms, conditions or warranties other than any terms, conditions or warranties implied by law in favour of the Trust or the Beneficiaries are excluded from the agreement between the Trust and the Contractor unless expressly accepted in writing by the Trust's Representative".
Headings to clauses were for convenience only and were not to affect the meaning of the terms and conditions: clause 1.3. Terms of the contract were to be given their natural meaning. The parties, continued clause 1.4, had had an equal opportunity to take legal advice and the contra proferentum rule was not to apply.
"Location" was defined in clause 1.1.29 of the Conditions of Contract as "the location for the provision of the Services as set out in the contract or otherwise agreed in writing between [the parties]". Subject to satisfactory agreement between the parties on price, the Trust reserved the right by clause 15.1 to increase or reduce the number of locations under the contract. There was nothing further in the Conditions of Contract about location but clause 1.1 of Document No 2, General Information, read as follows:
"The acute hospital services provided by the Trust are currently split across two main hospital sites:
• St. John's Hospital, a site of approximately 5 hectares located near the centre of Chelmsford; and
• Broomfield Hospital, a site of approximately 23 hectares located some 3 miles north of Chelmsford, in the village of Broomfield.
The current layout of these sites ("the Location") are contained in the drawings at Appendix 1."
Clause 1.1 continued: "The inpatient facilities at the Location are summarised as follows" and there then followed a list of wards, the bed numbers for each ward, and the purpose (cardiac, medical, surgical etc). The total number of beds was given as 675.
(b) Performance: the duty to cooperate in good faith etc
Clause 3 of the Conditions of Contract fell under the heading "Performance of the Services". Clause 3.2 underlined the obligation of Medirest to comply with the performance due-by dates, minimum performance levels and methods of performance measurement in the Service Level Specification. Importantly, clause 3.5 imposed a duty to cooperate in good faith:
"3.5 The Trust and the Contractor will co-operate with each other in good faith and will take all reasonable action as is necessary for the efficient transmission of information and instructions and to enable the...
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