Redbourn Group Ltd v Fairgate Developments Ltd
| Jurisdiction | England & Wales |
| Judge | Andrew Bartlett |
| Judgment Date | 13 April 2018 |
| Neutral Citation | [2018] EWHC 658 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2016-000363 |
| Date | 13 April 2018 |
[2018] EWHC 658 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Andrew Bartlett QC
Sitting as a Deputy High Court Judge
Case No: HT-2016-000363
Mr Benjamin Fowler (instructed by Taylor Walton) for the Claimant
Mr Andrew Miller QC and Mr Austin Mahler (instructed by Debenhams Ottaway) for the Defendant
Hearing dates: 5, 6, 7, 8 March 2018
JUDGMENT APPROVED
Andrew Bartlett QC:
INTRODUCTION
The Claimant (“RGL”) claims damages for the wrongful termination of a contract to act as development manager and project manager in respect of a proposed development in Wembley, London. There is also a small claim for a balance of remuneration due.
RGL began work in 2013 without a firm agreement on fees with its client, the Defendant (“FDL” or “Fairgate”). The proposed development comprised three parcels of land: (a) FDL's own building, Fairgate House; (b) the neighbouring building which FDL acquired in May 2014 but which initially remained tenanted – Pitman House; and (c) a car park to the rear of the site which was owned by Network Rail (“NWR”) but leased to FDL on a long lease expiring in 60 years.
FDL formally appointed RGL by a written contract which was signed on 26 February 2015.
RGL's contract was terminated as a result of a notice of default dated 24 February 2016, served by FDL. This made allegations of breach of contract by RGL and required that the alleged breaches be remedied in 14 days. RGL considered the allegations to be unjustified. RGL accepted this action as a wrongful repudiation of its contract, and later commenced proceedings.
The Defendant failed to serve a defence at the proper time. On 9 March 2017 RGL obtained judgment in default of defence. FDL made an application to set aside the judgment, but this was dismissed by Coulson J (as he then was) in a judgment handed down on 26 May 2017: [2017] EWHC 1223 (TCC).
In addition to the allegations in the notice of default, three other matters were also relied on by RGL as repudiating the contract: see [2017] EWHC 1223 (TCC), [36]–[40]. Coulson J regarded the justification, or otherwise, of the allegations in the notice of default as the crucial issue: [41].
He summarised his conclusion at [66]:
… . I consider that FDL has no realistic prospect of defending this claim in principle or making any counterclaim on its own behalf. The most I am prepared to do is to accept that there may be arguments about quantum, both in relation to RGL's fee claim, and their claim for damages for wrongful repudiation. Those can be dealt with at a quantum hearing… . .
By an Order made on 29 August 2017 Coulson J gave judgment for various specified amounts of remuneration due for work done under the contract and gave directions for trial of remaining issues. These were provisionally defined in the Order and were to be further defined by a Schedule of Loss and Counter Schedule.
The issues which remain to be decided are essentially concerned with causation of loss and quantum.
THE CONTRACT
Relevant features of the signed contract include the following.
By clause 1.1, ‘Development’ is defined as the development at 390–406 Wembley High Road, details of which are set out in Schedule 1, with a site plan in Schedule 2. On the plan the land to be the subject of the development is outlined in red.
The definition of Development in Schedule 1 gives RGL eight key objectives. These include, as objective 3, the negotiation of a new 150 year lease on the Network Rail leasehold car park property to the rear of Fairgate House. Schedule 1 further states under ‘Stage 2 – Site Assembly’:
Whilst Fairgate House is the main property within the development site, to implement the scheme in full will require the purchase of additional property and leasehold interest, namely:-
1. The freehold purchase of 402–406 Wembley High Road.
2. The purchase of three leases within the above property.
3. To negotiate a new 150 year lease with Network Rail on the rear car park land, currently held under a lease by FDL for a term unexpired of approximately 67 years.
At the time of writing, 1 above has been completed and progress is now being made on items 2 and 3.
Schedule 1 also refers to ‘Stage 3 & 4 – Development Management & Design for Tender & Build’ and ‘Stage 5 – Detailed Design for Tender & Build’.
The services required of RGL by the agreement are the services of a development manager and project manager as set out in Schedule 3 to the agreement. This schedule lists 56 duties to be performed. These include negotiating a new 150 year lease with Network Rail, co-ordinating meetings to secure the necessary planning consent, and co-ordinating the design team in the preparation of the detailed design for tender.
Clause 4 ‘Remuneration’ provides:
4.1 The fee set out in Schedule 4 plus applicable VAT will become due to RGL as set out in Schedule 4.
Schedule 4 sets out fee entitlements for Stage 1 (Feasibility), Stage 2 (Site Assembly), Stages 3/4 (Development Management and Design for Tender and Build) and Stage 5 (Project Management Fee). The wording from Stages 3/4 onwards is:
Stages 3/4 Development Management and Design for Tender and Build
This is a fixed fee element of £400,000 payable in two tranches as:
A fixed fee of £200,000 to be paid monthly over the planning and initial design for tender period. The approximate time line for this is anticipated to be August 2014-April 2016.
A fee of £200,000 payable upon the granting of full planning consent, the planning application having first been approved by FDL.
Stage 5 Project Management Fee
A fee equal to 2% of the estimated build cost for the project.
The build cost to be determined at the point the build contract is awarded following a full tender process… .
Additional performance fee
If the construction of the development completes on time and on budget (as those dates and amounts are set out in the awarded build contract) then RGL to receive a fixed fee of £250,000 on settlement of the final account with the design & build contractor.
At the sole discretion of FDL, an additional performance fee may be paid to RGL on completion of the project.
It may be noted that Stages 3 and 4 overlap. The obtaining of planning consent would come after the preparation of the planning application but before the preparation of a design which could be put out to tender.
Clause 7 ‘Termination and suspension’ provides:
7.1 If a … liquidator … is appointed over any part of RGL's or FDL's assets and undertaking, or if RGL or FDL fails to remedy a material breach of the terms of this agreement within 14 days of the other party's notice specifying the breach, the other party may terminate RGL's appointment by giving notice in writing.
7.2 Any termination of RGL's appointment, howsoever arising, will be without prejudice to the rights and remedies of either party in relation to any omission or default of the other prior to such termination.
RGL'S CLAIM AND FDL'S RESPONSE
RGL claims first the remaining unpaid balance of the fixed fee of £200,000 to be paid monthly over the planning and initial design for tender period. The sum unpaid is £21,615. At the hearing Mr Miller QC stated that this element of claim was admitted by the Defendant.
RGL further claims the fee of £200,000 payable upon the grant of planning consent. RGL states that, if its engagement had been continued, the grant of planning consent was inevitable, so that RGL has been deprived of this full sum.
RGL's claim in respect of Stage 5 is 2% of build cost. In the Schedule of Loss this is put at £1,032,414.
RGL also claims an amount for the additional performance fee for completion on time and on budget in the sum of £250,000.
At the hearing Mr Fowler for RGL stated that no claim was pursued in relation to the discretionary element of the additional performance fee.
With the exception of the first item (£21,615), the sums claimed are all claims for damages for breach of contract, assessed at the full amount of what could have been earned. An alternative claim is advanced for the lost chances of earning the various fees.
RGL gives credit against the damages for £230,000 that it says it would have spent in earning the further fees. 1 This represents the costs of employing a senior project manager for two years. Further information about RGL's case is contained in its solicitors' letter of 19 October 2017.
FDL's case in defence of the claims is in its updated Counter Schedule dated 6 November 2017. This sets out reasons why planning permission could not and would not be obtained, and why, so it is said, no building contract would ever have been awarded.
In particular, it states:
The Claimant would have had no contractual right under the Appointment to any further fees in the event that the Defendant had decided not to proceed to planning, as it would have. Nor would the Defendant have owed the Claimant any obligation with respect to how it made that decision, or as to the matters which it deemed relevant. Under the terms of the Appointment, the question of whether the Defendant wished to
proceed would have been in the Defendant's sole discretion, and was at the Claimant's risk.
FDL also takes issue with the size of the credit allowed in reduction of the damages and with whether RGL acted reasonably in mitigating its losses.
ISSUES
The Defendant's note of opening appended a List of Issues which was agreed by the Claimant. The parts of this which remain relevant state:
1. Has FDL's breach of contract caused RGL to sustain loss for which it is entitled to be compensated pursuant to the Remuneration...
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