Decoma (UK) Ltd v Haden Drysys International Ltd

LORD JUSTICE NEUBERGER: This is an application for permission to appeal against a detailed and careful judgment given by HHJ Peter Coulson QC in the Technology and Construction Court on 27 July 2005. In his judgment, Judge Coulson had to deal with a number of preliminary issues relating to a detailed contract entered into between the claimant (therein the owner) and the defendant (therein the contractor), called a Turnkey Waterborne Paintline agreement, entered into on 13 October 1999. The judge decided a number of points, and he was asked to grant permission to appeal in relation to a significant number of points that he had been asked to determine. He refused permission, and the application that is now made to us by Mr David Sears QC, who appeared below on behalf of the claimant, is more limited in its ambit.

The effect of Judge Coulson's decision was that the claim was struck out in a number of respects. When the papers were first before us, it appeared that the contract was still in existence. The three issues upon which permission to appeal were being sought were these. First, whether a claim under the first sentence of Article 11.1 and Article 11.3 could be brought before the "final completion date or final acceptance date as therein defined". The judge held that it could not. Secondly, if a claim was brought under Article 11.3, whether it was to the cap imposed by the first long sentence of Article 12.4? The judge held that it was. Thirdly, if that cap did not apply, whether the cap in the very last shorter sentence of Article 12.4 applied. The judge held that it did.

Shortly before the hearing (so far as I was concerned at any rate, Friday -- today being Monday) we received a letter from the respondent's solicitors, Messrs Gately Wareing, telling us of facts which had occurred subsequent to the handing down of judgment, which was as follows. A payment into court had been made by the defendant. On the day that the judgment of Judge Coulson was handed down it was intimated that the claimant was minded to accept the payment into court. The terms upon which such payment into court was to be accepted had been in dispute, albeit that it was not in dispute that the claimant could accept it, and Judge Coulson determined the costs basis upon which the payment into court would be accepted. As a result, the only issue between the parties now, so far as the claim was concerned, is that embodied in paragraph 33.3 of the points of claim. Further, there had been no fewer than four notices purportedly determining the agreement pursuant to Article 14 thereof: three of those notices having been served by the claimant, and one by the defendant. The defendant has accepted that, if its notice to determine was not valid, the claimant's final notice to determine was valid.

The claimant says that, in the circumstances, Article 11 is irrelevant because the parties are agreed that all damages are to be determined by reference to Article 14.3. Accordingly, save perhaps on the issue of costs, the defendant's argument is that this appeal was academic. Having heard Mr Sears shortly develop one or two points made in his skeleton argument, which related purely to the merits of his argument of interpretation of the agreement, and having heard him more fully answer the point made by Gately Wareing in their letter, I am of the view that this application should be allowed.

I do not propose to deal with the merits in any length because it would normally be inappropriate when granting an ex parte application. There seems to me to be undoubtedly an argument to the effect that the first sentence of Article 11.1 can be invoked before the completion date. Perhaps the simplest point that can be made is that there is no temporal limitation in that sentence, as there is in the second sentence, in light of the words "upon final completion date". Further, it may be that Mr Sears' reliance on Article 16.12, to which the judge was not taken in relation to this issue, will assist on any appeal in light of the reference to Article 11.1 and the bracketed words immediately following.

I am far from saying that the judge's cogent judgment was wrong on this point; however, I am bound to say that, looking at the matter purely on the merits, it seems to me that there is an arguable case open to the claimant.

So far as the judge's two decisions as to the effect of Article 12.4 are concerned, it seems to me once again that the claimant has an arguable case that the judge was wrong.

The question of whether "damages" in that Article is apt to cover a claim within the ambit of Article 11.3 is one which does not appear to me to be straightforward, and one can see the commercial force of the argument that it is not as put forward by Mr Sears. Article 11.3 could be said to have been intended to give the claimant the opportunity of requiring the defendant to put right defects, and it would be somewhat surprising if the defendant could carry out a calculation which resulted in its deciding that the costs of any remedial works were greater than the cap imposed by Article 12.4, and that, in those circumstances, the defendant could, as it were, walk away. That may well be the effect of the arrangements between the parties, and it may be commercially sensible, but one can see the arguments the other way.

As to the closing sentence of Article 12.4, I can see a reasonably strong argument for saying that it does not extend the meaning of the word "damages" in the earlier part of Article 12.4, and if the word "damages" is not apt to cover a claim under Article 11.3, then the defendant is not assisted by the closing sentence.

Accordingly, on the pure merits, I consider that the claimant has an arguable case, and bearing in mind that potentially a substantial amount of money appears to be involved, I would be minded to grant permission to appeal on the merits. The question then is whether what we were told by Gately Wareing in their letter on Friday alters this view. Having heard Mr Sears, I do not think it does.

It appears to me that the result of the events that have now happened may lead to certain problems of interpretation. For instance Article 16.12 refers only to Article 11.1 surviving termination of the agreement, and it is part of Mr Sears' case, of course, that Article 11.3 must also be treated as having survived -- at least in a case where it has already been invoked. One can see a powerful commercial argument to that effect, although I am far from saying that it is right. If it is right, then it would mean, to my mind, the fact that the agreement has come to an end pursuant to Article 14.3 does not make this appeal academic.

As to the fact that the appeal in practice will relate only to the claim under paragraph 33.3, that is a very substantial claim, on its face at any rate -- over $9 million. The fact that it only relates to one of several claims does not therefore cause me to wonder whether permission should be given on the grounds of proportionality.

If the appeal were only concerned with costs, which is Mr Sears' other point, I rather doubt I would be minded to give permission to appeal. But since, as I say, I consider (a) that the arguments which are sought to be raised by the claimant on interpretation are arguable; and (b) the facts that there has been an acceptance of the payment into court and all but one of the claims settled and that the contract is now determined, does not, to my mind, clearly put an end to the practical force of the claimant's arguments. It means that it is unnecessary for me to decide that point.

Accordingly, I would, for my part, allow this application.

LORD JUSTICE WALLER: I agree.