Spartafield Ltd v Penten Group Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Alexander Nissen |
| Judgment Date | 29 September 2016 |
| Neutral Citation | [2016] EWHC 2295 (TCC) |
| Docket Number | Case No: HT-2016-00097 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 29 September 2016 |
[2016] EWHC 2295 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Alexander Nissen QC
sitting as a Deputy Judge of the High Court
Case No: HT-2016-00097
Paul Darling QC (instructed by Howard Kennedy LLP) for the Claimant
Jonathan Lewis (instructed by Goodman Derrick) for the Defendant
Hearing dates: 4, 5, 6 and 8 July 2016
Mr Alexander Nissen QC:
SECTION A – OUTLINE
Introduction
By this action, the Claimant developer ("Spartafield") primarily seeks declaratory relief against the Defendant contractor ("Penten") to the effect that it ultimately entered into a contract on the terms of and subject to the JCT Intermediate Contract with Contractor's Design 2011. Penten contends that no such contract was concluded but that, instead, the parties continued to operate on a letter of intent which, it is common ground, had already been agreed between the parties. The essential issue, therefore, is whether the contractual letter of intent was ultimately replaced by the conclusion of a subsequent contract on the JCT form.
These proceedings were issued following a decision of an adjudicator who concluded that the parties were operating on a letter of intent and not on the JCT Intermediate Contract with Contractor's Design. In proceedings to enforce that adjudication decision Coulson J concluded that the parties were bound by that conclusion until it was reviewed in subsequent litigation 1.
Thereafter, a second adjudicator determined a sum which was due from Spartafield to Penten by reference to the terms of the letter of intent. The current position is that the sum so determined was the subject of summary judgment by way of enforcement but was also subject to a stay of execution. The sum was paid into Court by Spartafield pursuant to an Order of Mr Jonathan Action Davis QC sitting as a Deputy Judge of the High Court in yet further, separate, proceedings to enforce the second decision.
In the present action, Spartafield also seeks to have both adjudication decisions set aside. During closing submissions it was agreed between the parties that I should not deal with the consequential impact of my judgment on the two adjudications. That will be the subject of further argument as necessary in light of this judgment.
In his judgment, Coulson J described the "almost maniacal desire of the parties to issue notices of adjudication against each other" and that "this impulse seems to have overwhelmed every other consideration". It is fair to say that the proceedings before me were conducted with no less vigour than was apparent to him at that time.
As a condition of obtaining a stay of execution of the second adjudicator's decision, Spartafield also agreed to issue and pursue the present proceedings with expedition. Subject to what I say below, the parties and their advisors are to be commended for the speed with which they were able to make sure this action was ready for trial. The Claim Form was issued on 19 April 2016. There was then a Case Management Conference. Pleadings were duly served and indeed amended. Disclosure was
addressed by requests for categories of documents. Witness statements were served about a week before trial. The trial took place between 4 and 8 July 2016.The Trial
It may have been one of the consequences of the speed with which this action came on for trial that the disclosure process came under a degree of strain. Each side made robust criticisms of the other concerning the paucity of documents provided in response to category requests that had been made during the disclosure process. At the start of the trial Mr Darling QC, who appeared for Spartafield, provided further documents not hitherto disclosed which he properly accepted included documents that fell within requested categories. During the trial, I was also asked to rule on the adequacy of disclosure provided by Spartafield. It was necessary for me to make certain orders about documents and for those documents to be produced during the course of the trial. Mr Lewis, who appeared as counsel for Penten, was given time to consider the documents before relevant cross examination was completed. Despite being foreshadowed in general terms, the details of Spartafield's criticisms of Penten's disclosure were not debated before me but I am nonetheless aware that such criticisms were being made.
Although originally listed for two days, the trial lasted four days. This was primarily because of the interruptions caused by problems with the disclosure process but also because the original time estimate was, in hindsight, a little optimistic.
Spartafield called three witnesses of fact. Mr Roger Leon is a director of Spartafield and, unsurprisingly, was its principal witness. Spartafield also called Mr Andrew Puncher, who is a director in the firm of architects named as such in the tender documentation. The full title of the firm is Puncher Hamilton Plus Limited but that was invariably shortened by everyone to " PH+" and that is how I shall refer to the firm. Finally, Spartafield called Mr John Shannon who is a quantity surveyor. Mr Shannon was employed to act on behalf of the funders, Handelsbanken, to monitor the project expenditure and, particularly, the payments to Penten.
Penten called two witnesses of fact. Its primary witness was its director, Mr Ranjith Ratnasingham. Penten also called Mr Stephen Brown of WT Partnership who acted as an advising quantity surveyor to Penten.
I am satisfied that all witnesses were trying their honest best to recall the events which took place. In general terms, I found the evidence from each of Spartafield's witnesses preferable to the evidence from those from Penten. Whilst both company directors were guilty to differing degrees of not meeting a difficult question head-on, I did feel that this was a particular problem in the case of Mr Ratnasingham. His evidence tended towards long speeches which sought to mask and evade the difficulties he faced with documents that were not wholly consistent with the evidence he would wish to give.
In those areas of direct conflict of evidence, I have therefore preferred the evidence of Spartafield to that of Penten.
In light of the documentary and oral evidence I make a series of general findings of fact set out below in Section B. In my findings I have concentrated on the exchanges passing between the parties rather than internal communications staying behind party lines since, as I explain below, those have little bearing on the issues that I have to decide. In Section C, I address the letter of intent. In Section D, I outline the rival positions of the parties in these proceedings. In Section E, I set out the established law. In Section F, I reach my particular conclusions of fact and law in this case in the light of the submissions made. Section G contains a summary of my conclusions and some closing remarks.
SECTION B – FINDINGS OF FACT
On 8 February 2013, various contractors including Penten were invited to tender for a proposed development at 21, Plumbers Row, London, E1. The nature of the works was briefly described as part demolition and part new build of a three storey roof extension to an existing five storey building so as to provide eight no. private residential units and other facilities. There was to be a single storey lift extension, external balconies and terraces. Spartafield was the named Employer. PH+ was identified as the Architect. The QS was to be Stockdale, which was the firm of quantity surveyors who had prepared the tender documents. The form of contract was identified as the JCT Intermediate Building Contract with Contractor's Design 2011 ("JCT ICD") to be executed under hand between Employer and Contractor. The tender provided that the Contractor would be deemed to have carefully examined the full text of the Form of Contract and to include the all costs of fulfilling the requirements, obligations and liabilities in connection therewith.
From the draft tender documentation it was apparent that the Contractor would be expected to provide collateral warranties both to purchasers and tenants and to a funder. Those warranties were to be in the standard forms available from the JCT suite of contracts, Cwa/P&T and Cwa/F. In both cases the parties in respect of which the net contribution provision was to apply was left to be confirmed. Pursuant to a bespoke Article 11, the tendering Contractor agreed it would enter into all warranty agreements in the prescribed form within six weeks of the Date for Possession i.e. post contract.
Penten tendered on 15 March 2013. The bid was expressed to be compliant with the tender documents and confirmed that, having read the Conditions of Contract, the specifications and the drawings, Penten was willing to carry out the works for £1,236,083.
By May 2013 Penten had become the preferred tenderer. However, the proposed price was too high for Spartafield. Mr Leon and Mr Ratnasingham met to see where savings could be made. Spartafield's objective was to reduce the cost to around £1,000,000. The process of seeking to vary the proposed scope to obtain a cost reduction was then embarked upon. This became known by the parties as an exercise in value engineering.
On 22 May 2013 Mr Miller of Penten proposed to Stockdale that a letter of intent be issued to cover the cost of design and pre-construction related activities. The proposed sum for inclusion in the letter was the modest amount of £15,355. Stockdale passed this to Mr Leon, noting that Mr Leon's preference was not to have a letter of intent.
On 12 June 2013 Mr Miller provided Stockdale with an amended Contract Sum Analysis...
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