E-Nik Ltd v Department for Communities and Local Government

JurisdictionEngland & Wales
JudgeMR JUSTICE BURTON,Mr Justice Burton
Judgment Date02 November 2012
Neutral Citation[2012] EWHC 3027 (Comm)
Docket NumberCase No: 2012 Folio 745
CourtQueen's Bench Division (Commercial Court)
Date02 November 2012

[2012] EWHC 3027 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Burton

Case No: 2012 Folio 745

Between:
E-Nik Ltd
Claimant
and
Department for Communities and Local Government
Defendant

Mr Gerard Rothschild (instructed by Manches LLP) for the Claimant

Mr Mathew Gullick (instructed by the Treasury Solicitor) for the Defendant

Hearing date: 12 October 2012

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

MR JUSTICE BURTON Mr Justice Burton
1

The Claimant is an information technology services company, which entered into a contract with the Defendant dated 1 April 2009 ("the Contract"); this was itself an Appendix 1 to an agreement between the Defendant and Fujitsu Services Ltd ("the Fujitsu Agreement"). The latter at the outset of the arrangements was acting as an intermediary, but soon thereafter dropped out of the picture and does not feature as relevant in these proceedings. It was not the first relationship between the parties, since the Claimant appears to have gained and retained the confidence of the Defendant in providing its consultancy services on a number of occasions previously: by 2008, the Defendant was purchasing approximately 800 days of consultancy work from the Claimant in each year, at rates of between £750 and £1200 per day: the rate varied according to the seniority of the consultant and the work done, and the rates charged by the Claimant were at or slightly below the industry norm.

2

The Contract provided, by a recital, that its " Purpose or Meaning" was to " purchase Consultancy to provide Project Work, including Project Management, Scoping/Analysis and Systems Development for" Government information technology systems. The term of the Contract was 2 1/2 years, commencing on 1 April 2009 until 30 September 2011, but terminable (by Clause 8.1 of the Contract) by " 12 months written notice with 12 months cancellation from the date of notice received by either party". It was, in the event, never terminated by either side. The Contract was not drafted by lawyers, and its language is not always elegant or apt.

3

The dispute relates to the Claimant's unpaid invoices, dated 9 May 2011 and 25 October 2011 and the sum in issue is £760,920 (inclusive of VAT). At the hearing before me I have had to resolve a summons brought by the Claimant pursuant to CPR Part 24 for summary judgment against the Defendant on all issues, and cross-summonses by the Defendant seeking permission to amend its Defence (not opposed save as to costs, and save by reference to the Claimant's argument that the amendment will not avail the Defendant to avoid summary judgment) and for summary judgment against the Claimant on some issues (see below). Counsel for the parties, Mr Gerard Rothschild for the Claimant and Mr Mathew Gullick for the Defendant, have argued the matters before me clearly and succinctly.

4

The relevant terms of the Contract in issue before me are as follows (the Authority being the Defendant and the Supplier being the Claimant):

" 2. AUTHORITY'S OBLIGATIONS

2.1 The Authority hereby undertakes to purchase minimum of 500 days of Consultancy from the Supplier per year based on project requirement, additional days will be required once the purchased days have been exhausted.

2.2 The Authority shall issue an Assignment Note to requisition Services from the Supplier.

2.3 The Authority shall pay the Supplier fees at the rate of not less than £850 per day but subject to mutually agreed assignment notes for each change request. This rate may be revised upward at the time of issue of an Assignment Note to reflect the complexity of the Services requisitioned or the level of skill required for the provision of the Services.

2.4 Payment of the fees shall be made within 30 days of the date of a valid invoice from the Supplier.

3. SUPPLIER'S OBLIGATIONS

3.7 To comply with all the requirements of VAT legislation and the Companies Act.

3.8 Supplier is obliged to provide concise accounts of resources used on a monthly basis as an excel document which shows work priorities, days used, days remaining and days purchased."

The only other relevant provision not referred to above is in fact contained in Appendix 2 to the Fujitsu Agreement, and it provides:

" Process for Raising Purchase Orders, Invoicing and Payment

The Customer will raise a PO on Fujitsu for the full amount for the services including the paying agent fee.

Fujitsu will raise a PO upon the Supplier for the full service charges.

Fujitsu will raise an invoice upon the Customer yearly in advance.

The Supplier will raise an invoice upon Fujitsu yearly in advance."

5

The issues as set out by the Claimant in its skeleton argument (by reference to the Agreed List of Issues) are as follows:

Issue 1: Does Clause 2.1 of the Contract mean (as the Defendant contends) that, insofar as the Defendant's project requirements did not require at least 500 days of consultancy services, there was no obligation on the Defendant to purchase a minimum of 500 days of consultancy services from the Claimant? If it does, is the Defendant estopped from so contending.

Issue 2: Is the minimum of 500 days per year referred to in Clause 2.1 of the Contract to be pro-rated to 250 days for the period 1 April 2011 to 30 September 2011 (as the Claimant contends)?

Issue 3: Was the rate of £850 per day in Clause 2.3 of the Contract payable in return for the Claimant making its consultancy services available up to any such minimum level, whether or not the Defendant specifically demanded or made use of such services so as to give rise to a claim in debt (as the Claimant contends), or is no such claim in debt maintainable (as the Defendant contends)?

Issue 4: Is VAT to be added to the rate of £850 per day in Clause 2.3 of the Contract (as the Claimant contends)?

Issue 5: Did the Claimant make available consultancy services to the Defendant at all times from 1 April 2009 to 30 September 2011 (as the Defendant requires the Claimant to prove) and despite the announcement of the closure of the Government Offices for the Regions ("GOR") in [July or] October 2010 and their closure from the end of March 2011? [I add the July date because of the evidence of Ms Dawett referred to below.]

Issue 6: Is the claim one for an unenforceable penalty (as the Defendant contends)?

Issue 7: Is the principal sum claimed a qualifying debt for the purposes of the Late Payment of Commercial Debts (Interest) Act 1998 ["the 1998 Act"] (as the Claimant contends)? If so, has statutory interest under that Act begun to accrue (as the Claimant contends)?

Issue 8: Should the rate of interest be remitted pursuant to s5 of the 1998 Act (as the Defendant contends)?

6

The Claimant seeks summary judgment on each of the issues in its favour. The Defendant contends that it should have (after amendment of its Defence) summary judgment in its favour in respect of Issues 3 and 4, which Mr Gullick submits will be sufficient for it to have the claim as presently formulated dismissed. I apply the ordinary principles of summary judgment in respect of each party and each issue.

7

The Claimant relies upon the evidence of Ms Dawett, a 50% shareholder of the company, who describes the communications and arrangements between the parties up to and beyond the signing of the Contract, in which she was personally involved. The Defendant relies only upon the evidence of its Head of Procurement, Mr Culver. Although he has occupied that post since July 2008, he had no involvement in any relevant respect until the parties came into dispute in or about April 2011. Ms Dawett was the person who was responsible for negotiating the Contract on the Claimant's behalf, although it was her husband and fellow shareholder who signed the Contract on 20 May 2009. It was Mr Bentley who was the relevant representative of the Defendant who negotiated the contract and signed it on the Defendant's behalf on 21 May 2009. According to Mr Culver, Mr Bentley ceased employment with the Department on 31 March 2010, and no information is supplied as to his present employment or whereabouts or as to any attempts to obtain evidence from him. This is significant because he is the author of an email dated 15 May 2009 (responsive to Ms Dawett's email to him of 12 May), six days before he signed the contract on the Defendant's behalf, to which I refer below.

Issue 1: Minimum of 500 days.

8

The Claimant submits that Clauses 2.1 and 2.3 of the Contract (set out in paragraph 4 above) constitute an express agreed obligation upon the Defendant to purchase and pay for a minimum of 500 days of consultancy services from the Claimant per year. The Defendant relies upon the words " based on project requirement", and submits that its obligation is based on– namely dependent upon – project requirement. So, submits Mr Gullick, if the project (undefined) does not require 500 days per year, the Defendant need neither purchase nor pay for them. This means:

i) There is no minimum yearly obligation. The result could be, as Mr Gullick appreciates, that this could mean that if the project requires no days (if the Defendant decides that the project requires no days) then no days need to be purchased or paid for.

ii) This is submitted to apply also if the project does not require the services by virtue of a unilateral act of the Defendant—such as the closure of the GOR, which was announced as going to be closed (after the change of Government) in July 2010 – if the Defendant asserts that, as a result, the project did not require any or any further services.

9

Mr Gullick accepts (indeed asserts) that there is no room for any implication...

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