Trentham (G Percy) Ltd v Archital Luxfer Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE NEILL,LORD JUSTICE STEYN,LORD JUSTICE RALPH GIBSON
Judgment Date20 Jul 1992
Judgment citation (vLex)[1992] EWCA Civ J0720-2
Docket Number92/0715

[1992] EWCA Civ J0720-2

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

OFFICIAL REFEREE'S BUSINESS

(HIS HONOUR JUDGE RICH Q.C.)

Royal Courts of Justice.

Before:

Lord Justice Neill

Lord Justice Ralph Gibson

Lord Justice Steyn

92/0715

G. Percy Trentham Limited
(Plaintiffs) Respondents
and
Archital Luxfer Limited & Ors.
(First Defendants) Appellants

MR. JOHN POWELL Q.C. (instructed by Messrs. Nabarro Nathanson) appeared on behalf of the (Plaintiffs) Respondents.

MR. MICHAEL PATCHETT-JOYCE (instructed by Messrs. Bristows, Cooke & Carpmael) appeared on behalf of the (First Defendants) Appellants.

LORD JUSTICE NEILL
1

I will ask Lord Justice Steyn to give the first judgment.

LORD JUSTICE STEYN
2

This is an appeal against a judgment on preliminary issues given by His Honour Judge Rich Q.C., sitting as an official referee, on 19th December 1991. The judge was asked to decide whether two contracts were concluded between the plaintiffs ("Trentham") and the defendants ("Archital"). The judge ruled that Trentham had established that the two contracts were concluded. He also made rulings as to the terms of the contracts. There are no independent grounds of appeal challenging the rulings as to the terms of the contracts. The grounds of appeal are directed solely at the judge's rulings that the conclusion of the two contracts was established. Leave to appeal on questions of fact was given under Order 58, rule 4(b).

3

The way in which the dispute arose must now be sketched. Trentham were building and civil engineering contractors. Municipal Mutual Insurance Limited ("Municipal Mutual") engaged Trentham as main contractors to design and build industrial units in two phases on land known as the Summit Centre, Southwood, Cove, Farnborough, Hampshire. An agreement dated 2nd February 1984 ("the main contract") governed phase 1. An agreement dated 18th December 1984 ("the supplemental agreement") governed phase 2. The work for both phases included the design, supply and installation of aluminium window walling, doors, screens and windows. It will be convenient to refer to such work as "window works". Archital carried on business as manufacturers, suppliers and installers of aluminium window walling, doors, screens and windows. It is common ground that Archital in fact undertook for Trentham the window works in phase 1 and in phase 2, and that Trentham paid Archital for the carrying out of the window works. Trentham contends that two separate sub-contracts, one covering phase 1 window works and the other phase 2 window works, came into existence. Archital denies that the dealings between the parties ever resulted in the conclusion of binding sub-contracts.

4

A distinctive feature of the case is that the transactions between Trentham and Archital were fully executed. Archital performed the agreed work and Trentham made the agreed payments. That fact calls for an explanation of the relevance of the dispute about the formation of the two alleged sub-contracts. The answer is to be found in subsequent claims made by Municipal Mutual against Trentham under the main contracts. Those claims were for alleged delays and defects. The claims were put forward in arbitration. Two interim awards have been made against Trentham in the sums of £558,335 and £343,820. Trentham instituted proceedings against seven sub-contractors for an indemnity in respect of such sums as Trentham is liable to pay Mutual Insurance. One of these sub-contractors is Archital, the first defendant in the proceedings. Trentham alleges that there were defects in the window works in both phase 1 and phase 2. Trentham's claim against Archital is brought in contract. Archital by their amended defence deny or do not admit the alleged defects. But Archital also disputes that any sub-contracts ever came into existence.

5

His Honour Judge Fox-Andrews Q.C. ordered that as between Trentham and Archital preliminary issues should be tried. Those preliminary issues were defined by reference to the statement of claim. It is unnecessary to set out the terms of the statement of claim and the order. The principal issues ordered to be tried were whether valid sub-contracts governing phase 1 and phase 2 were made between Trentham and Archital. Those issues came before His Honour Judge Rich Q.C. for hearing. He decided those issues in favour of Trentham. The appeal challenges those findings.

6

It is necessary to consider the basis of the judge's decision that Trentham proved the formation of two valid sub-contracts. It is common ground that as between Trentham and Archital no integrated written sub-contracts ever came into existence. There was no orderly negotiation of terms. Rather the picture is one of the parties, jockeying for advantage, inching towards finalisation of the transaction. The case bears some superficial resemblance to cases that have become known as "battle of the forms" cases where each party seeks to impose his standard conditions on the other in correspondence without there ever being any express resolution of that issue. In such cases it is usually common ground that there is a contract but the issue is what set of standard conditions, if any, is applicable. Here the issue is one of contract formation. Moreover, the present case is different in the sense that Trentham's case was that the sub-contracts came into existence not simply by an exchange of correspondence but partly by reason of written exchanges, partly by oral discussions and partly by performance of the transactions. It will be necessary to trace the dealings between the parties, taking into account the judge's findings. Given the fact that the grounds of appeal seek to attack the judge's findings in respect of successive stages of the dealings between the parties, I will deal with those criticisms in the course of the narrative. The thrust of the criticisms is throughout that there was no evidence to support the findings which are now challenged. The appellant relies on the principle that it is a question of law whether there is evidence to support a particular finding of fact. At this stage I would assume that this is a useful exercise. Later in this judgment I will consider whether this approach is correct in this case, and I will consider the matter more broadly in the light of the totality of the evidence.

7

Before I turn to the facts it is important to consider briefly the approach to be adopted to the issue of contract formation in this case. It seems to me that four matters are of importance. The first is the fact that English law generally adopts an objective theory of contract formation. That means that in practice our law generally ignores the subjective expectations and the unexpressed mental reservations of the parties. Instead the governing criterion is the reasonable expectations of honest men. And in the present case that means that the yardstick is the reasonable expectations of sensible businessmen. Secondly, it is true that the coincidence of offer and acceptance will in the vast majority of cases represent the mechanism of contract formation. It is so in the case of a contract alleged to have been made by an exchange of correspondence. But it is not necessarily so in the case of a contract alleged to have come into existence during and as a result of performance. See Brogden v. Metropolitan Railway (1877) 2 A.C. 666; New Zealand Shipping Co. Ltd.. v. A.M. Satherwaite & Co. Ltd. [1975] A.C. 154, at 167 D-E; Gibson v. Manchester City Council [1979] 1 W.L.R. 294. The third matter is the impact of the fact that the transaction is executed rather than executory. It is a consideration of the first importance on a number of levels. See British Bank for Foreign Trade Ltd. v. Novinex [1949] 1 K.B. 628, at 630. The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations. It will often make it difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalised in negotiations as inessential. In this case fully executed transactions are under consideration. Clearly, similar considerations may sometimes be relevant in partly executed transactions. Fourthly, if a contract only comes into existence during and as a result of performance of the transaction it will frequently be possible to hold that the contract impliedly and retrospectively covers pre-contractual performance. See Trollope & Colls Ltd. v. Atomic Power Construction Ltd. [1963] 1 W.L.R. 333.

8

The story starts on 12th January 1984 when Archital submitted four alternative quotations for phase 1 window works to Trentham. Discussions followed. On 24th January 1984 Archital substituted a revised offer in respect of one of the earlier quotations at a revised price of the order of £140,000. The offer was conditional on the incorporation of Archital's standard conditions or the so-called blue form. Trentham was not prepared to accept this offer but made a counter-offer contained in Order No. 8285 dated 30th January 1984. This counter-offer stipulated the work and price described in Archital's revised offer but was conditional on the incorporation of Trentham's standard terms of sub-contract. Moreover, the order was expressed to be "subject to (a) Form of sub-contract being entered into…[and] (b) the signing and immediate return of the attached acknowledgment slip." Neither of these formalities for acceptance was ever completed. The...

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