Neutral Citation Number: [2005] EWHC 3529 (TCC)




Royal Courts of Justice


London WC2A 2LL


Date: Friday, 18 November 2005





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Tape transcript of Wordwave Limited

PO Box 1336 Kingston-Upon-Thames Surrey KT1 1QT

Tel No: 020 8974 7300 Fax No: 020 8974 7301

(Official Shorthand Writers to the Court)


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MR LEE appeared on behalf of the CLAIMANT


MISS GILLIES appeared on behalf of the DEFENDANT

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1 HE R HONOUR JUDGE KIRKHAM: This is an application by the defendant to defeat a claim brought by the claimant to enforce the decision of an adjudicator.


2 On 9 June this year the adjudicator decided that the defendant should pay the claimant £18,600 plus VAT and interest and that LMS should meet the costs. LMS, the defendant, refused to pay. The claimant issued proceedings. A defence has been served and directions have been postponed pending the outcome of this application.


3 The application is brought pursuant to CPR part 24 which provides that the court may give summary judgment against a party if it considers that it has no real prospect of succeeding in its claim or defence, as the case may be, and there is no other compelling reason why the case should be disposed of at trial.


4 In relation to this application today, the defendant now relies only on the proposition that there was no construction contract between the parties as required by section 107 of the Housing Grants, Construction and Regeneration Act 1996. The defendant has decided not to pursue an alternative or additional head of the application as to whether or not it was acting as agent or principal. So I am not concerned with that issue today. I have read statements prepared by Mr Herbert, the proprietor of the defendant, two statements by Mr Borner, who was the project manager for the claimant at material times. I bear in mind, of course, that none of this evidence has been tested in cross-examination. I thank Miss Gillies, for the defendant, and Mr Lee, for the claimant, who have provided very helpful written skeletons and made extremely helpful oral submissions.


5 It is probably helpful if I summarise briefly the background to this matter. There was a construction project concerning the construction of a new building for the Home Office. It appears that Bouygues were the main contractor.


6 The claimant was engaged by Bouygues to install ceilings in the building. The defendant was concerned with the installation of 18 lifts in the building. Mr Herbert says in his statement that, throughout 2003 he was concerned with the installation of lifts. At the end of 2003, the design of the ceilings for the lifts came under discussion and the claimant, at Bouygues' instruction apparently, created a mock-up of a ceiling for the lifts. It was thought that it would be desirable if the ceilings in the lifts were similar to those in the building generally. Mr Herbert in his statement says that in about March or early April 2004 Bouygues told him that it had been decided to install ceilings in the lift along the lines of the mock-up and Mr Herbert therefore spoke to the claimant about proceeding with this.


7 It is common ground that there was a meeting during the week beginning 12 April 2004, attended by Mr Herbert for the defendant and Mr Borner for the claimant. Mr Herbert asked the claimant to provide a quotation for ceilings to the 18 lift cars. Mr Herbert said that as the claimant had made a mock-up there was no need for discussion of any technical issues. Mr Herbert and Mr Borner agreed that Mr Borner had quoted a price of £1,005 per car, a total of just over £18,000 for the 18 lifts. Mr Herbert says in his statement that he told Mr Borner that he would have to revert to Bouygues for approval to place the order. He goes on to say that, after the meeting, he contacted Mr Penny of Bouygues, who in turn had to go back up the line to obtain approval, and some days later Bouygues told Mr Herbert that the claimant's price was acceptable.


8 The defendant sent the claimant a purchase order dated 23 April 2004. This is a simple document. It is headed "purchase order" with a reference number and it says:


"Supply and fit ceilings to lift cabins as per your quote. (1) Eighteen lifts in total. (2) Delivery in six weeks. (3) Price: £1,005 per lift." [Judge’s note: unable to check the wording]


9 On 20 September 2004 an e-mail was sent from Bouygues to a company involved with the manufacture of relevant aspects of this work, making detailed comments on the work to be carried out. An e-mail dated 22 September from Bouygues to the claimant refers to ongoing discussions about the work which was to be carried out in relation to these ceilings and, amongst other matters, it indicates that the lift cars would be ready for installation of the ceilings beginning 27 September 2004 and ongoing in the various blocks within the building. An e-mail dated 24 September from Bouygues refers to comments from the project architect on the revised drawings for the work. By a letter dated 28 September 2004 the claimant wrote to defendant:


"Further to our initial meeting and your verbal request for the claimant to quote for the supply and installation of (inaudible) acoustic ceiling panels for the 18 lift cars and your subsequent purchase order [and reference is made there to the April 2004 purchase order], the price of £1,005 per lift car was as your verbal instructions and sketched by myself at the meeting. [Then he goes on to make brief reference to what that sketch showed.] From various meetings this appears to be contrary to what the architect is expecting. Bouygues have requested that we revert back to the architect's original drawings [and the numbers are quoted which show nine panels with stainless steel edges, and so on]. The additional cost to revert back to the architect's drawings will be forwarded to you when known ... We respectfully request an instruction on how you wish us to proceed with the changes." [Judge’s note: unable to check the wording]


10 Then they deal with installation dates once they have delivery dates from their supplier. The sketch referred to in the second paragraph of that letter is not available to me. Mr Borner, in a second witness statement explains that efforts have been made to find the sketch in the site file but it has not yet apparently been found. He says in his statement:


"Mr Herbert will have a copy of the sketch as I sent him a copy after our meeting to confirm the work that we had agreed to carry out for the price of £1,005 per lift car." [Judge’s note: unable to check the wording]


11 It has to be said that at no stage in the correspondence after 28 September 2004 does Mr Herbert dispute what was said in that letter about the existence of a sketch, but there is no reference to that being challenged in Mr Herbert's statement. The claimant sent the defendant a fax dated 4 October. It refers to the claimant's letter of 28 September and says:


"Further to that letter, we send attached copy of approved drawing issued to us by Bouygues today. Could you please forward your comments as soon as possible, instructing us on how you wish us to proceed. We again remind you that our order is with you and we will only take instruction from yourselves." [Judge’s note: unable to check the wording]


12 Annexed to that facsimile was a drawing as apparently recorded in that document. The defendant sent the claimant an e-mail dated 4 October saying this:


"Please proceed urgently with the manufacturing of lift ceilings incorporating architect's comments. We have no further comments." [Judge’s note: unable to check the wording]


13 Installation of the lift ceilings apparently began in mid to late October 2004. By letter dated 17 November 2004 Mr Borner wrote to the defendant saying this:


"As you were aware, the specification of the ceiling panels to the lift cars has changed from our earlier discussions. [Then he sets out briefly what he says the requirement is now.] Our original price as stated on your purchase order was £1,005 per lift car. Our revised price is £1,318.20 per lift car. We request your written approval of the following: (a) the mock-up installed in the scenic lift and (b) our revised price of £1,318.20. We have procured the materials and therefore request a deposit of 50 per cent of the overall contract value to enable us to proceed further with the installation." [Judge’s note: unable to check the wording]


14 It is not disputed that there was no written approval given to the mock-up installed in the scenic lift or to the proposal for a revised price of £1,300-odd, nor was any deposit of 50 per cent paid. On 23 December 2004 the claimant sent the defendant an invoice for the ceilings, claiming the revised price of £1,318.20 per lift for 18 lifts. On 14 February 2005 the defendant wrote to the claimant saying:


"Regarding your invoice, Bouygues will not agree to the increased costs unless they have documented evidence of the changed design from the original order." [Judge’s note: unable to check the wording]


15 Then complaints are made about the quality of the work. In their letter of 16 February 2005, sent to the defendant, the claimant makes reference to the letters of 28 September and 17 November 2004, to which I have already referred. They reply in their letter to the complaints concerning the installation. In particular they make reference to a suggestion that steel ropes should have been incorporated and say:


"The cost of installing the steel ropes that you refer to will be most certainly not accepted by ourselves as there is no design or contractual requirement for us to design or incorporate these components into the supply and fix installation." [Judge’s note: unable to check the wording]


16 By letter of 21 February 2005 the defendant wrote to the claimant asking rhetorically: who instructed yourselves to make changes from the original design, and reiterating the point that substantiation for the claimant's claim that there had been a change would have to be provided, to be passed on to Bouygues, and making the point that the defendant had not agreed the extra cost and had not agreed to pay the 50 per cent deposit and then making comments as to responsibility for the method of installation and to the testing which was carried out.


17 Section 10.7.2 of HGCRA is relevant, and in particular section 107.2 We are not subsections (b) and (c). The statute provides that there is an agreement in writing:


"(b) If the agreement is made by exchange of communications in writing, or (c) if the agreement is evidenced in writing."


18 I have been taken to the decision of the Court of Appeal in RJT v DM Engineering [2002] BLR at page 217 and to the decision of His Honour Judge Bowsher QC in Carillion Construction Limited v Devonport Royal Dockyard [2003] BLR at page 79 and I have been reminded of a judgment which I gave in a case called Lloyds Project Limited v Marlnick, an unreported judgment dated July 2005.


19 The defendant's case is that there is no construction contract within the meaning of either subsection (b) or subsection (c). Their case is that a contract was made orally in April 2004. There is, however, a difficulty with that submission in that Mr Herbert's own evidence contradicts that, as I have outlined. He says that he had to go back to Bouygues to check that they were happy with the price that was proposed.


20 The defendant's case is that there was no written evidence of the specification for the work to be undertaken. It was not clear, they say, what was contained in the mock-up to confirm the feasibility of the design. There was no indication in writing as to responsibility for the installation in the sense that there was no methodology and no design of the installation methods evidenced in writing. There was no agreement as to price as at 4 October 2004. The defendant proceeds on the basis that there was an agreement but not all of the important matters, they submit, were recorded.


21 The claimant put forward a revised price in its letter of 17 November but there was no agreement as to the revised price and that, Miss Gillies submits, was fundamental to a contract of this sort. Miss Gillies submits that the mock-up is vital in this context. It formed the basis of the discussions as to what was to be done and at what price. All of those matters are missing from the written records upon which the claimant seeks to rely. In relation to the mock-up I should just add that it may be that there is more than one mock-up but that is not material to this decision. The claimant's case is that a contract was made by exchange of communications in writing, as section 107.2(b) provides, alternatively, that the documents evidence a construction contract within the meaning of 107.2(c).


22 I am persuaded by Mr Lee's submissions that a contract was made in writing in April 2004. That appears from Mr Borner's evidence, which itself is supported by the reference in the letter of 28 September 2004. A sketch indicating the scope of the work to be undertaken had been prepared and was in existence at the relevant time, even if it cannot now be found, and, of course, there was the defendant's purchase order.


23 One finds in these documents, in my judgment, a sufficient definition of the scope of the work to be undertaken and the price and indeed the document in the purchase order records the time period during which the work was to be carried out. It is a simple contract but the elements which the parties had discussed were present. In my judgment, there was no need and no requirement for the documents to spell out terms as to methodology or design of the installation methods. It was clear on the face of the purchase order that the claimant had an obligation to fit the ceilings. It is, in my judgment, a question of construing what was meant by that phrase and no doubt if it is relevant for that to be done reference will be made to what is said in the purchase order.


24 During the summer of 2004 drawings were prepared, as I have outlined. On 4 October the claimant sent the approved drawing. The facsimile enclosing that makes a specific reference to these being approved drawings issued to the claimant by Bouygues. By that fax the claimant expressly asked the defendant how they were to proceed. The inference must be from that facsimile that the question that was being asked was: should they proceed in accordance with the scope of work agreed in April or should they proceed in accordance with the varied work as set out in the approved drawing? Mr Herbert, for the defendant, gave as clear an answer as one could expect to see in his e-mail of 4 October. He said:


"Please proceed urgently with the manufacturing of the ceilings incorporating the architect's comments." [Judge’s note: unable to check the wording]


25 As I have said, the facsimile of 4 October had annexed to it the drawing referred to. There was certainty as to what was to be built. But Mr Lee submits that there are two possible ways of viewing the question of the increase in price. One possibility is for the court to conclude that the defendant accepted that it would proceed on the basis of the revised price which the claimant envisaged would be set, as can be seen in the 17 November letter. In my judgment, that would not arrive at a position where there was sufficient certainty between the parties as to what was to be paid or how that matter was to be resolved.


26 The second proposition which Mr Lee puts forward is that the Sale of Goods Act 1992 at section 15 provides a mechanism by which the price will be determined, that section, of course, providing that where under a contract for the supply of a service consideration is not determined, and so on, then there is an implied term that the party contracting with the supplier would pay a reasonable charge. In my judgment, that must be the appropriate mechanism to operate in this case.


27 In my judgment, therefore, there is sufficient exchange of written communications between the parties to amount to an agreement made by exchange of communications in writing, as section 107.2(b) requires, or at the very least such as to evidence the agreement in writing, as section 107.2(c) requires.


28 It is not suggested by either Mr Herbert or Mr Borner that terms were discussed or agreed between them orally which were not recorded in writing and that, of course, is one of the essential differences between this case and the RJT case. The Marlnick decision does not assist me here. In that case it was said that there were many significant matters which the parties had agreed orally but which had not been reduced to writing; that is not the case here.


29 Mr Lee has made submissions as to section 107.6 as to whether the mock-up, or one of the mock-ups if there were more than one, could amount to a record within the meaning of the Act. It is not necessary for me to decide that point in relation to this case and I think that that interesting question will have to await another case.


30 In all the circumstances I conclude that there was an agreement in writing, as section 107 requires. The defendant has failed to persuade me that the claimant has no real prospect of succeeding in demonstrating that the adjudicator had jurisdiction to make the decision that he did, given that there was a construction agreement .