Hurst Stores and Interiors Ltd. v M.L. Europe Property Ltd.

The two particular members of Hurst’s personnel who feature in this case are Mr Michael Grant, Hurst’s Commercial Director, and Mr James Mell, Hurst’s Project Manager.

The contract provided for the works originally required to be carried out between 10^th January 2000 and 11^th December 2000, with commissioning continuing thereafter up to 5^th February 2001.

Mace, as Construction Manager, was empowered to issue formal contract instructions (“CMIs”) to Hurst. These instructions were sequentially numbered. By CMIs 51 and 288, especially the latter, extensive additional works were instructed. CMI 51 dated 28^th February 2000 (Bundle 10, pages 326 to 326B) reinstated a gym changing room which had been included in Hurst’s original tender and which had then been omitted as a tender adjustment in December 2000. The £11,000 which had been deducted from the “preliminaries” when it was omitted was added back to the Trade Contract Sum as part of the value of this CMI. CMI 288 dated 28^th September 2000 (Bundle 11, pages 295 ff) added extensive additional works which I describe in more detail later (see paragraph 11 below). At this point, I simply note that this CMI recognised that time for completion of the contract works, including the additional works, needed to be extended by about 4½ months. The Trade Contract Sum increased by £832,631.45 which included an addition of £233,462.90 for “preliminaries”.

The additional preliminaries claim was computed by reference to actual (or deduced) contract rates which were then applied (in most instances) to the 95 weeks of Hurst’s site involvement. The sums which had been included for preliminaries in the original contract sum, in CMI 51 and in CMI 288 were deducted to leave an unrecovered balance, which Hurst claimed, of £241,040.31.

The disruption claim was computed by calculating the “total cost of site labour” and then deducting amounts recovered elsewhere plus an amount for work which Hurst accepted it had been at fault. Hurst thereby arrived at an extra over sub-total of £1,473,927.26. An uplift of 75% was then applied, on the basis that this was the tender allowance for overheads and profit, to produce the claim of £2,579,372.71 (see Bundle 3 at pages 37 to 43 for details). In the context of the present case, the factual merit of this very sizeable claim does not fall to be considered but, the method adopted to calculate the claim should be noted. What was claimed was the calculated shortfall in recovery of labour costs over the whole period of Hurst’s involvement on site. The claim was not limited to disruption costs incurred after 27^th April 2001 – the significance of that date is explained below.

“The delayed releases and failure of Mace to manage other Trade Contractors involved frustrated all attempts made by Hurst to implement the Works in an efficient, economic, sequential and continuous manner, the result was enforced fragmentary implementation of the Works. The same factors also compelled the deployment of substantial additional and extended resources, including labour, site supervision, plant and equipment.

Relative to the productivity achieved (which is a reflection of the above factors) the labour resources actually and necessarily deployed upon the works resulted in major loss emerging from the consequential reduction in productivity………..

It is a matter of record that Toilet B2.3, the last toilet to be fitted out, was the only one where the other Trade Contractors complied with the programme. B2.3 was completed less than eight weeks after Hurst were given possession of it verifying that if the other Trade Contractors had been properly managed by Mace, and programmes adhered to, Hurst could have carried out their works in an economic and cost effective manner.”

The reference to the toilets at B2.3 was to part of the works added to the contract by CMI 288. On any view (see paragraphs 28 and 29 of the Defence for MLEP’s case), through no fault of its own, Hurst was not able to complete these toilets by 23^rd April 2001. According to Hurst’s claim, the area concerned was not made available until 10^th September 2001 and the works were completed by 31^st October 2001.

“We had already got an agreed and signed final statement of account for all works up to 27 ^th April 2001, as agreed with [Mr Mell]…….”

Faced with the rejection of its Final Account, on 18^th December 2001, Hurst referred the matter to adjudication. Clause 31.3 of the contract gave either contracting party the right to refer any dispute arising in connection with the Trade Contract to adjudication under the TeCSA (Technology and Construction Solicitor’s Association) Adjudication Rules. The 1999 version of the TeCSA Rules provided –

“[MLEP’s] primary case is that, as Hurst have not complied with the notice provisions contained within Clause 17.2 of the contract in respect of extension of time and/or loss and expense, Hurst’s claim for additional preliminaries and disruption must fail. Further [MLEP] contend that Hurst has compromised its claims by virtue of Hurst’s Project Manager, Mr Mell, signing a Stage 1 Final Statement of Account on 27 ^th April 2001 (“the 27th April 2001 Document”) and the existence of an Interim Statement of Account dated 4 ^th September 2001 (“the 4 ^th September 2001 document”). In reply to [MLEP’s] primary case in relation to notices, Hurst contends that:-

In respect of the 27th April 2001 Document, Hurst contends that the document is limited to the valuation of Construction Manager’s Instructions (CMIs”) 1 to 399 inclusive and does not compromise its claim for additional preliminaries and disruption. In respect of the 4 ^th September 2001 document, Hurst contends that it cannot compromise its claims as it is not signed.

[MLEP’s] secondary case is that, even if Hurst were able to ignore the notice provisions contained within the contract in respect of extension of time and/or loss and expense, Hurst’s claim is global and that, as it does not evidence cause and effect, it must fail. In reply, Hurst contends that its claim is not a global claim or, alternatively, if it is a global claim, that this is not fatal to its claim for additional preliminaries and disruption.”

[my emphasis and, for convenience, I shall also adopt the expression “the 27th April 2001 Document”]

Mr Molloy mentioned in his decision that MLEP had requested that he gave reasons but Hurst had not agreed that he should. In the absence of agreement between the parties, he said that he was obliged by Rule 27 of the TeCSA Rules not to give reasons. The decision indicates that although Mr Molloy appears to have been unimpressed by MLEP’s reliance on the notice provisions contained in Clause 17.2 of the contract, he accepted MLEP’s contentions that Hurst had compromised the claims for additional preliminaries and disruptions. The relevant part of his decision was –

“ THE 27th April 2001 Document

Does the 27th April 2001 Document constitute a binding agreement between Hurst and [MLEP] ?

If so, what is its nature, scope and effect ?

Does it prevent Hurst from making any of the claims in Referral Notice and, if so, which?

EXTENSION OF TIME

What is Hurst’s entitlement in respect of its claim for an extension of time ?

DISRUPTION

Was Hurst disrupted by events for which it is entitled to recover loss and expense and/or damages and, if so, what events and where ?

What is Hurst’s entitlement in respect of its claim for additional preliminaries ?

What is Hurst’s entitlement in respect of its claim for disruption ?

What is the gross valuation of Hurst’s final account ?

What is Hurst’s entitlement in respect of its claim for interest ?

The overall result of the adjudication was that MLEP was ordered to pay a further £65,110.58 (net of a 1½% retention on the value of the contract works) to Hurst.

ISSUES

9. These proceedings were begun by Hurst in August 2002. The claim was for four declarations. The first three declarations require the Court to consider whether the conclusions stated by the Adjudicator at paragraphs 35 and 36 of his Decision, which are provisionally binding on the parties, should be overruled. The fourth declaration represents Hurst’s ultimate fall back position. It requires the Court to consider whether MLEP is estopped from relying on the 27th April 2001 Document as a binding compromise agreement which (ex hypothesi) the Court has agreed it is. During the course of closing submissions on 6^th May 2003 Mr Marcus Taverner QC, who appeared for Hurst, informed me that the claim for the fourth of the declarations was “not pressed” but it was not formally withdrawn and, accordingly, I must deal with it – albeit, I do so as briefly as I can in view of what I perceive to be its self evident lack of merit if (which must be assumed) all of Hurst’s other claims have failed.

Hurst also claimed rectification of the 27th April 2001 Document. This claim followed on as the logical consequence if Hurst’s unilateral mistake case, which was the third of the declarations claimed, succeeded. The declarations which Hurst claims are –

April 2001 - see paragraph 29 of the Particulars of Claim; further or alternatively,

10. MLEP does not accept that Hurst is entitled to any of the declarations or the rectification which is claimed. MLEP contends that, as Hurst’s project manager, Mr Mell had authority to deal with all matters concerning progress and payment under the Trade Contract; that he had authority to sign the 27th April 2001 Document on behalf of Hurst or in the alternative he was “clothed with such authority”; that he compromised Hurst’s claims (up to a point in time) by signing the 27th April 2001 Document on Hurst’s behalf; that there was consideration for the compromise agreement recorded in the 27th April 2001 Document; and, that Hurst is estopped from denying that compromise and from attempting to bring additional claims for loss and expense for events prior to 27^th April 2001 (the representation relied upon being the signing of the 27th April 2001 Document – the detriment relied upon being payment of the agreed sum, being unable or in a worse position to assess Hurst’s claims and being deprived of the opportunity, which timely notification would have provided, to take steps to avoid the disruption) – see, in particular, paragraphs 7, 12, 36, 41, 42, 45, 46 and 49 of the Defence. MLEP contends that in about January 2001 it asked Hurst to prepare a draft final account. MLEP pleaded the motivation for the request and the sequence of material events which occurred between January and April 2001 and the effect of the 27th April 2001 Document as follows –

“14. ………. It is admitted that in or about January 2001, [MLEP] asked [Hurst] to prepare a draft final account. It is denied that [MLEP] wished to agree a figure for labour, plant and material costs only for CMI’s 1-399 ……. . Such final account was to include all sums/claims owing to [Hurst] up to a given date.

15. The reason for [MLEP’s] request was to be in a position to agree [Hurst’s] final account up to a point in time (agreed with [Hurst]) and not have to revisit any aspect of those work costs up to that point in time. Although it is referred to as a final account it would only be so if no further CMI’s were issued after CMI 399. It is [MLEP’s] case, therefore, that this was no more than a statement of account as at 27 April 2001…..

(b) It is noted that Mr Mell did not read and/or paid little attention to the [27th April 2001 Document];

paragraph 21 [of the Particulars of Claim – see paragraph 17 below] is admitted. It is averred that the whole purpose of the two meetings referred to above (as was known to Mr Mell, or ought to have been known) was not simply to agree the final value of the CMI’s 1-399 but in addition to include all claims for additional costs as provided for by the contract. Indeed, in signing ISAs [Hurst] was taken to agree and accept “the final valuation of the instruction detailed in the interim statement of account” (see clause 23.6.4 of the Trade Contract………which in certain circumstances gives interim statements final effect).

46. ……… It is [MLEP’s] case that Mr Mell was aware, or ought to have been aware, that the document he was signing on behalf of [Hurst] was in full and final settlement of all of [Hurst’s] claims arising out of or in connection with the Trade Contract Works up to 27 April 2001. Mr Mell’s alleged failure to read the [27th April 2001 Document] when signing is noted but irrelevant.”

As can be seen, MLEP contends that Mr Mell’s failure to read the 27th April 2001 Document - a fact which was “noted” at paragraph 22(b) of the Defence but said to be “alleged” at paragraph 46 of the Defence - was a matter of no legal relevance.

THE TRADE CONTRACT

Drawings/specifications for the toilet fit-out works in the POB, Newgate Street buildings and the area B2.3 were forwarded to Hurst in June 2000. Negotiations in respect of these proposed additional works continued until the end of September 2000 when they were formally added to the Trade Contract Works by CMI 288. The additional works instructed by CMI 288 were to begin during the initial contract period but, at the time they were priced, it was recognised that time needed to be extended as shown on Mace’s completion programme dated 24^th August 2000. The negotiated and agreed sum of £832,631.45 (the value of CMI 288) included “preliminaries” of £233,462.90 in recognition of, inter alia, an extended contract period up to 23^rd April 2001.

By clause 17.2, Hurst was required to give prompt written notices of delay, or likely delay, to whole or part of the Trade Contract Works and to provide details of causes/expected effects (including an estimate of the expected delay). The giving of the required notices and details was expressed to be a condition precedent to Hurst’s entitlement to an extension of time and/or loss and expense.

By clause 17.3, after receipt of due notification from Hurst, if Mace was of the opinion that the regular progress of the whole or part of the Trade Contract Works had been, or was likely to be, delayed by any of the reasons stated in that clause, Mace had either to issue an instruction to accelerate or grant a fair and reasonable time extension. The list of events which might give rise to such a time extension entitlement included acts of prevention or impedance by MLEP or those for whom MLEP was responsible (Clause 17.3.4) and the issuing of CMI’s which included a variation to the works (Clause 17.3.6).

By clause 17.4, if Mace granted an extension of time or issued an instruction to accelerate, it was required to issue a revised Trade Contract programme with which Hurst was then to comply.

20.3 Provisos on Variations or Instructions

Unless otherwise instructed by [Mace] pursuant to clause 20.6, [Hurst] shall not execute any Variation required by [Mace] nor comply with any instruction issued by [Mace] (save where Clause 3.10 applies and subject to the Clauses 20.5 and 20.6) unless [Hurst] shall have first submitted to [Mace] in writing within 5 Working Days of [Mace’s] Instruction:

20.4 Agreeing Trade Contractor’s assessments

[Hurst] and [Mace] shall thereupon take reasonable steps to agree [Hurst’s] assessments. Subject to the approval of the Cost Consultant, any agreements so reached shall be binding on [Hurst] and [MLEP] and if agreement is reached on all matters referred to in Clauses 20.3.1 to 20.3.4 [Hurst] shall then execute the Variation in accordance with [Mace’s] Instruction.

By Clause 23.1 Hurst was to submit to Mace interim applications for payment by stipulated dates. Within 14 days of receipt of a duly submitted application Mace was to issue a “payment certificate”. On receipt of the “payment certificate” Hurst was to raise a VAT invoice (in the sum certified) directed to MLEP. MLEP was then to pay that invoice within 14 days of receipt. In Clause 23.2 the amount which was to be stated as due in a payment certificate was expressed in conventional terms. In Clauses 23.4 to 23.6.3 retention (before and after practical completion) was dealt with in conventional terms, with the final release of retention monies being made after the issue of a Certificate of Making Good Defects. And, in Clause 23.7, final certification/payment were also dealt with in conventional terms. However, superimposed on this conventional payment regime were two further Clauses viz 23.6.4, dealing with “interim statements of account” (“ISA’s”) and 23.6.5, dealing with “a final statement of account” (“FSA”). Again, in view of the significance which these Clauses assumed during the course of evidence and argument, I set them out in full –

Paragraph 7 of the Annex to the Trade Contract contained further provisions relating to the matter of “accounting in connection with the works”. Paragraph 7.1 stated that interim application dates would be monthly on dates stipulated by Mace. Hurst would receive a disk in Excel 7.0 containing all data required “To submit application and agreed works carried out” (sic). Paragraph 7.3 consisted of a detailed schedule of application and payment dates, column 2 of which set out the application dates stipulated by Mace. Paragraph 7.2 provided further in relation to ISA’s in the following terms –

Interim Statement of Accounts

[Hurst] is to return on a monthly basis priced Interim Final Accounts (in the format and using the forms supplied by [Mace] which schedules instructions issued to [Hurst]. Supporting details of the sum claimed in respect of any instruction issued are required within 5 working days of given instruction. Monies will be deducted if this process is not rigorously adhered to.

A cash flow should be submitted with each application, which reflects anticipated value of all future applications.

The ISA Forms which Mace supplied contained the following wording on the last page:

We have examined the above Interim Statement of Account and we agree:

The items shown represent a complete list of instructions issued to us under our Trade Contract at the current date.

The values shown represent the full and final value of all the work so instructed and nothing further remains to be charged against them.

The total for the list represents the full and final value of our contract works at the date of his statement.

Current ISA total £[ ] Specified Excepted Items……..

Variation and Waiver

This Trade Contract may not be varied except by an agreement in writing signed by the parties. No waiver by either party of any default by the other shall operate or be construed as a waiver of any other or further default whether or not of a similar nature.

Complete Trade Contract

This Trade Contract constitutes the complete understanding of the parties concerning the Project and supersedes all prior negotiations and agreements (written or otherwise) between them.

THE 27th April 2001 Document

The 27th April 2001 Document was a variant of the monthly ISA statements contemplated by Clause 23.6.4 of, and Paragraph 7.2 of the Annex to, the Contract (see paragraph 16 above). It showed CMIs 1 to 474 with computer generated ticks against each entry in the “Agree? Value” column for CMIs 1 to 399 and unticked “0.00” entries for each of CMIs 400 to 474. The intended significance of the computer generated ticks as part of the interim contractual accounting procedures is explained at paragraph 25 below.

The 27th April 2001 Document differed from the monthly ISA statements in two significant respects. First, the bold headings at the top of each page were changed; the word “final” was substituted for “interim” in the typescript; the word “draft” was added to the typescript but it was crossed through in manuscript and the words “Stage 1” were added in manuscript. Secondly, in place of the standard wording which was included as the last page of each of the monthly ISAs (see paragraph 16 above for the text of this) there was a very obviously different last page for this document. It read:

Total of Final Account 3,445,815.06

Less total of sums previously paid to the Trade Contractor 2,839,960.90

___________ THE FINAL PAYMENT payable to the Trade Contractor £605,854.16

In consideration of the agreement that final payment is to be made by the Client, we hereby agree that payment to us of THE FINAL PAYMENT will be accepted by us in full and final settlement of all our claims (other than claims in respect of Value Added Tax) arising out of or in connection with the Trade Contract Works which have accrued up to and including the date of this statement.

We agree that nothing contained in this statement shall relieve us of any of our obligations pursuant to the Trade Contract including, but not limited to, our obligations set out under clause 8 (“Practical Completion and Defects Liability”) of the Trade Contract.

We agree that, notwithstanding the provisions of the Complete Trade Contract clause (clause 32.5) of the Trade Contract, the instructions listed in this statement (whether agreed before or after the date of the Trade Contract) form part of the contract between the Client and the Trade Contractor in relation to the Trade Contract Works.

If any instructions are issued to us under the Trade Contract after instruction Nr 399 which entitles us to an adjustment to the Final Contract Sum, we reserve our rights to seek such an adjustment in accordance with the terms of the Trade Contract.

We hereby agree to the value of the adjusted Trade Contract Price as shown above.

Mr Mell routinely signed and dated the monthly interim statements for Hurst and, as I have already said, he signed the “Final Statement of Account….Stage 1” giving the date “27.04.01” alongside his signature. At paragraph 21 of the Particulars of Claim Hurst allege that Mace’s Mr Rumsey gave that document to Mr Mell who “did not read and/or paid [it] little attention….. proceeding on the basis that it merely reflected….. agreements [already reached between the two of them]”.

EVIDENCE

19. Hurst called Mr Michael Grant and Mr James Mell to give evidence. During the course of closing submissions I was told that Hurst and MLEP had agreed that I should be supplied with a transcript of their evidence. This was done and I have had the advantage of reading through the transcript (which is generally accurate but there are some errors and/or omissions) as well as being able to make my own assessment of the witnesses, having seen them and heard them cross-examined. They were the only witnesses and gave evidence. At the close of Hurst’s case Mr Paul Darling QC (Counsel for MLEP) said that MLEP elected not to call evidence. Arising therefrom two points should be noted –

Accordingly, I now have to consider whether, by the evidence which is before me (including the “Statement of Facts” at Bundle 1, pages 38 to 42 insofar as it records agreed facts) Hurst has established its case on one or more of the issues raised in these proceedings – see generally CPR 32.1.6 and in particular the observations of Mance L.J. in Miller –v- Cawley [2002] EWCA 1100 at paragraph 11.

20. In its closing submissions MLEP expressly and implicitly criticised some aspects of Mr Grant’s evidence (e.g. it was submitted that there was no satisfactory evidence provided by Hurst of the circumstances in which Mr Mell’s authority was conferred on him; and it was submitted that there were no discussions which limited Mr Mell’s authority – see paragraph 18 of the written closing submissions) but he was not personally criticised.

In contrast, in those same submissions, MLEP expressly criticised Mr Mell who was said to be a “deeply unsatisfactory witness” – see paragraph 30 of the written closing submissions. MLEP submitted that his evidence was of “little value” because he could recollect so little of the events of early 2001 apart from that which could be reconstructed from contemporary documents; because of his inability to give fluent/articulate answers on some matters (e.g. the meaning of the term “cut-off date” in his letter of 12^th January 2001); and, because of significant discrepancies between parts of his statement(s) made in the adjudication and his witness statement in the present proceedings – see in particular, paragraphs 30, 31, 33, 35 and 38 of the written closing submissions.

I do not accept the personal criticisms of Mr Mell and I did not find him to be an “unsatisfactory witness”. In my judgment, he was an honest witness, entirely lacking in guile who did his best to recollect what had happened in the early months of 2001. Without the aid of contemporary documents he was unable to recollect the sequence of events and, even with the assistance which they gave, he did not pretend to have a detailed recollection of the discussions which he had had with Mace’s Mr Rumsey. He could, however, be sure that certain things were not raised by Mr Rumsey at any time during the discussions which took place between January and April 2001 and, as to that, I believe his memory is reliable – had these matters been raised not only would they have stuck in his memory but, more importantly he would have acted differently at the time; most significantly, I think he would have informed Mr Grant and involved him in the ongoing process.

The chronology to which Mr Mell testified was supported by the contemporary documents and it was obviously correct – that which had been given in the witness statement which he signed in the adjudication was equally obviously misleadingly truncated. I do not think that Mr Mell had the contemporary documents in mind when he made his earlier statement. Insofar as MLEP drew attention to the wording of paragraph 5.1 of Mr Mell’s witness statement of 29^th January 2003 and contrasted it with that to be found at paragraph 25 in his adjudication witness statement of 11^th January 2002, I do not believe that Mr Mell’s unaided recollection had changed over the course of the year. I do not think that the personal criticism levelled at him in cross-examination and in closing was justified. To my mind, paragraph 5.1 of the witness statement was carefully drafted to keep open a possible line of defence and, from paragraph 38 of MLEP’s written closing submissions this was something which was well understood. I am sure that Mr Mell did not personally decide on the phraseology used but, when shown the draft, he saw no reason to object and was content to adopt it.

FACTS/FINDINGS

Mr Grant was a director of Hurst and he was notified to Mace/MLEP as the Account Director with overall responsibility for the project. He had full authority to act for Hurst in all matters, including if it were to arise, agreeing on Hurst’s behalf to a variation to the terms of the Trade Contract and signing the necessary written agreement (see Clause 32.2 cited at paragraph 17 above). In my judgment the fact that Hurst notified Mace in July 2000 that Mr Grant was one of the authorised contract signatories neither enhanced nor detracted from the authority which he would have as a director of the company in any event and/or the general authority which the company had specifically conferred on him in relation to this particular project and notified to Mace/MLEP.

Turning to Mr Mell, he was a freelance Project Manager who had previously been engaged by Hurst on other jobs. His intended/actual employment status was not notified to Mace – and, in my judgment, there was no reason why it should have been. This was a matter of indifference to MLEP. When the Trade Contract was being negotiated, Mace were informed (by what was said in the Organisation Chart and the “further details”) that, if awarded the contract, Hurst intended that Mr Mell would be its Project Manager. He was to be site based and he was to be responsible for successful execution of the project. His position was described in the “further details” document which accompanied the Organisation Chart –

“Jim Mell, Project Manager

Jim will be based on site and will be responsible for the successful delivery of the project to the specified quality, in accordance with the programme and within budget constraints, and for producing method statements in accordance with Health and Safety requirements.

He will be team leader and chief point of contact with Mace… ”

I agree with Mr Darling’s submission that it is also relevant to note the functional description given for the Quantity Surveyor in the same document –

“Quantity Surveyor

One of our Quantity Surveying staff will be allocated to this project to assist Jim Mell . He will be head office based with site visits.”

(my emphasis)

After Hurst was awarded the contract, terms of engagement were agreed between Hurst and Mr Mell. Mr Mell was engaged as Hurst’s Project Manager from the intended commencement of the Trade Contract works. In my judgment, the extent of his authority as Project Manager for this project was stated in the Organisation Chart and the accompanying “further details” and/or it is to be deduced from the statements made therein (read in the context of the Trade Contract as a whole).

I do not accept the plea at paragraph 7 of the Defence that Mr Mell “… was furnished with all the powers and responsibilities traditionally held by a Project Manger” or the further plea at paragraph 42 of the Defence that Mr Mell “……. was clearly held out as having been appointed by his principal [Hurst] to carry out the duties of a project manager” (my emphasis). In my judgment, the title “Project Manager” does not, of itself, confer any particular extent of either power or responsibility; it is necessary to look at the particular facts of the particular case to see what authority has been given to a person with the title “Project Manager”. When that is done in this case, I agree with the summary which appears at the end of paragraph 7 of the Defence - Mr Mell had “express and/or implied power to deal [on Hurst’s behalf] with all matters concerning progress and payment under the Trade Contract” (my emphasis). He was Hurst’s team leader and its chief point of contact with Mace; insofar as the extent of his authority was not expressly stated, it was implicit (given the details of his rôle and the stated fact that the Head Office based quantity surveyor would be assisting him) that he had full authority to act for Hurst, in respect of the financial aspects of the Trade Contract viz. all accounting requirements and all payment matters required by the terms of the Trade Contract, as well as being responsible for the proper execution of the Trade Contract Works in accordance with the terms of the Trade Contract.

In my judgment, the emboldened words in the previous paragraph are crucial. Mr Mell was not engaged by Hurst to act generally on the company’s behalf in the management of its business nor did anyone with actual authority to manage Hurst’s business (e.g. Mr Grant) hold him out as having that authority. Mr Mell was engaged by Hurst to act on the company’s behalf in the management of a particular project undertaken on contractual terms agreed between MLEP and Hurst. It is well established that, persons engaged by a contracting party to act on its behalf in the fulfilment of a contract, are not to be taken to have power to vary the terms of the contract – see Sharpe v San Paulo Railway Company (1873) LR 8 Ch App 597 where the extent of the authority of the Railway Company’s engineer-in-chief in relation to the construction of a railway in Brazil was considered. The point was succinctly dealt with by Lord Romilly M.R. at page 605, where he contrasted the engineer’s power to give directions “within the limits of the contract” with his inability to vary the contract itself. Of course, a power to agree to vary some or all of the contract terms might be expressly given to a particular Project Manager in a particular case but, in this case, when Mr Mell’s job description is examined no such power was expressly given to him and I cannot see any possible basis for its implication. Clause 32.2 of the Trade Contract provided for variations to the terms of the Trade Contract to be written and signed by the contracting parties; a director of the company, Mr Grant, was actively involved with the project and he was notified to Mace/MLEP as the person with overall responsibility for it; it was Mr Grant, not Mr Mell, who had a general authority to act for the company in the management of its business.

Looking at Clause 20.3 (see paragraph 14 above) Mr Mell said that he had authority to deal with the assessment of the labour plant and materials value (i.e. Clause 20.3.1) and, had it arisen, to provide other information which Mace might require (i.e. Clause 20.3.5). He said that he was not authorised to deal with time and/or disruption issues (i.e. Clauses 20.3.2, 20.3.3 and 20.3.4) – Transcript 45/40-49. He was asked if he had ever informed Mace of his authority was so limited. He said he had not; the issue “never raised its head” – Transcript 45/50 to 46/4. I have no hesitation in accepting that last part of his evidence. Earlier, Mr Grant had explained that Mr Mell had estimating experience but he had no experience of dealing with loss and expense claims. Looking at Clause 20.3 he said that whilst Mr Mell was able to value CMIs involving variations on the basis of the contract rates as required by Clause 20.3.1, he would not have been able to deal with the assessment required by Clause 20.3.4. However, in Mr Grant’s view, Mr Mell’s authority was more extensive than Mr Mell himself thought it was. In Mr Grant’s view Mr Mell was authorised to deal with the time issues addressed in Clauses 20.3.2 and 20.3.3 as well as the assessment of value required by Clause 20.3.1 – Transcript 6/31 to 13/19.

Mr Grant said that he thought MLEP and Mace were aware of the limitations on Mr Mell’s authority – Transcript 13/42 to 46 – but, when the basis for that statement was explored, it became apparent that Mr Grant was unable to support it. Not only did the terms of the Organisation Chart and the accompanying “further details” go against the suggestion but, when the sequence of events leading up to the issue of CMI 288 was examined in some detail and when the pricing of CMI 177 was reviewed, it became obvious that, so far as Mace was concerned, Mr Mell was the person dealing with all aspects of the pricing of these proposed additional works on behalf of Hurst. Mr Mell appears to have been personally involved in calculating the extended “preliminaries” of £233,462.90 which formed part of the agreed value of CMI 288 (see particularly the letter of 6^th September 2000 at Bundle 1, page 149 and Mr Mell’s evidence – Transcript 47/10 to 43, 67/1 to 68/29 and 70/23 to 72/3) and he was also involved in calculating the direct disruption costs claimed for unproductive time when CMI 177 was priced (see Bundle 10, pages 129 and 130, Transcript 60/39 to 45 and for further details see paragraph 27 below). These examples demonstrate very clearly that, in their evidence, both Mr Grant and Mr Mell were misunderstanding the nature and extent of Mr Mell’s authority. The fact that he needed to and/or was expected to consult internally if and when time or disruption issues arose whereas he was well able to deal with pricing by reference to established contract rates without needing to and/or being expected to consult internally, did not mean that he lacked authority to act, so far as Mace/MLEP was concerned, on Hurst’s behalf. In my judgment, whatever may have happened internally within Hurst (e.g. assistance provided to Mr Mell and/or approvals given by Mr Grant) had no impact of any sort on the ambit of the authority conferred on him as Project Manager – see paragraph 22 above.

Contract Sum of £2,397,884.17. Many of the CMIs had a typescript “0.00” valuation. A comparatively small number of the CMIs had a typescript value (either positive or negative) shown against them. A computer generated tick against the value shown for the CMI indicated that this value had previously been agreed between Hurst and Mace. When forwarded to Hurst, the ISA did not contain any manuscript figures, comments or ticks. These were added by Mr Mell to indicate the following –

Mr Darling Was it your understanding that, once that agreement was reached, the figure was therefore final?

(Transcript 32/40 to 50)

This finality point was also considered in cross-examination, by reference to the standard wording which was to be found on the last page of each of the monthly ISA statements, which I have set out at paragraph 16 above. Mr Darling drew Mr Grant’s attention to the middle paragraph – “The values shown represent the full and final value of all the works so instructed and nothing further remains to be charged against them” – and invited his agreement to the proposition that an agreed value would include any entitlement which Hurst might have to “direct disruption costs” under Clause 20.3.4 of the Trade Contract. Mr Grant did not agree. In his view, under the system which Mace adopted for dealing with CMIs, disruption costs were not included in the agreed values – Transcript 31/43 to 32/10.

23.6.5 of the Trade Contract at paragraph 16 above.

The figure of £8,324.28 was the amount shown in Mr Mell’s letter dated 25^th May 2000 (Bundle 10, pages 129 and 130). What, to my mind, is self-evidently the Clause 20.3.1 valuation which Mr Mell said he “put together”, was £3,646.24 for the work involved in each of the two disabled toilets required plus £172.00 for the additional design work i.e. £7,464.48 in total. In addition, Hurst claimed £860.00 for the unproductive time involved in relation to one of the two areas where this work was required. To my mind, this part of the quotation was a claim for “direct disruption costs” covered by Clause 20.3.4 of the Trade Contract. Mr Mell explained that the £860 was the charge proposed for 40 hours of actual unproductive time rather than an advance assessment of the likely unproductive time which would be involved – Transcript 60/3 to 49.

This part of his evidence was not explored/challenged in cross-examination but, the make up of the additional preliminaries of £11,000 which were included in the value of CMI 51 is apparent from the documents and I have dealt with this at paragraph 3 above. I have not attempted to find the make up documents relating to other CMIs – they are probably somewhere in the voluminous documentation (originally prepared for the adjudication) which was placed before the Court – to see if any of the other values included sums in addition to a Clause 20.3.1 valuation of the work involved. I do not think this matters. In my judgment, consideration of CMIs 51, 177 and 288 is sufficient to illustrate the principles, which are:

The interim payment certificates issued by Mace after Hurst’s application had been considered were generally sent direct to Hurst’s head office for Mr Grant’s attention. The invoice, addressed to MLEP, was prepared at Hurst’s head office. That invoice was sent to Mace who authorised payment and forwarded it to MLEP. BACS payments were made by MLEP to Hurst – Transcript 21/16 to 22/27 see e.g. Bundle 12, pages 374, 392 and 393.

Twelve CMIs were shown in each of these ISAs with agreed monetary values; in the January ISA, a thirteenth CMI – CMI 331 – was added to the list of those where the value was agreed because Mace accepted a figure which Mr Mell had stated on the

December ISA. The CMIs where the value was agreed were –

CMI No. Brief Description Agreed Value (£)

1 Appointment of Hurst 2,397,884.17

58 Certain screeding works 7,569.90

106 Telephone charges to Hurst (260.56)

165 Saving (changes to Specification) (5,300.00)

168 Addition (changes to Specification) 2,241.45

273 Addition (stainless steel mirror surrounds) 2,163.00

282 Addition (drylining works) 1,160.44

331 Addition (alterations to lockers/ showers) 12,450.30

In addition, a number of CMIs were shown as having unagreed “0.00” values. As would be expected the latest CMIs, which were featuring on the ISA Form for the first time, were shown with such unagreed “0.00” values and these can largely be ignored. CMI 274 can also be ignored - here the lack of a computer generated tick appears to have arisen either from an error, or from uncertainty on Mace’s part as to the meaning of Mr Mell’s earlier observations. CMI 51 which Hurst had priced at £159,110.65 appears in this list. As I have said at paragraph 3 above, this CMI concerned the reinstatement of a Gym Changing room. It was dated 28^th February 2000 and the price had appeared in Mr Mell’s manuscript on face of the ISA dated 2^nd June 2000 (Bundle 10, page 431). If what Mr Mell said about this CMI in his witness statement was correct (see paragraphs 3.2 and 3.3 at Bundle 1, page 64) this figure should have appeared in typescript in both the December 2000 and January 2001 ISA Forms with a computer generated tick beside it. The only other point that need be noted in respect of the twelve of these unagreed “0.00” value CMIs that fall to be considered in this litigation, relates to the two of these CMIs which appeared for the first time in the December ISA, CMI 331 and CMI 333. These were priced by Hurst in Mr Mell’s manuscript - CMI 331 at £12,450.30 and CMI 333 at £19,290.37 As I have said above, when Mace issued the January ISA the value for CMI 333 was shown to be agreed. The twelve CMIs that need to be considered are:

CMI No. Brief Description Mr Mell’s Value (£)

or Comment

51 Reinstatement gym changing room 159,110.65

108 Additional walls 2,106.78

140 Plasterboard linings 27,908.00

233 Return of submittal to follow

263 Stop ends to screeds 3,852.20

285 Installation of rebate kits 2,701.75

333 Variations – Executive Area 19,290.37

The figures or comments for all these CMIs up to and including CMI 289 had all been established by September 2000. They were repeatedly included on the returned ISA Forms and used in the payment application calculations (see e.g. Bundle 12, pages 336 to 341 and 352).

I turn to the letter which Mr Mell wrote in consequence of the conversation. The letter read:

“Further to our discussions we herewith enclose draft final account in respect of the above.

The cut off date is still to be agreed.

I trust that the information provided meets with your approval.”

(Bundle 1, page 185A)

The enclosed “Final Account” was a simple document which read:

Merrill Lynch Financial Centre

Toilet fit-out

Package 4200

FINAL ACCOUNT

CMI No. 274 SEE CMI No. 288

CMI No. 282 1,160.44

CMI No. 285 2,701.75

CMI No. 288 832,631.45

CMI No. 289 800.00

CMI No. 331 12,450.30 CMI No. 333 19,290.37

Totals 38,206.76 3,476,822.18

38,206.76 3,438,615.42

Additional Items, Requiring CMIs

1.00 Ceiling Height Reductions 825.00

2.00 Additional walls Disabled

West Core 3 Levels 486.18

3.00 Ground Out wall West

Building 3 levels 729.27

4.00 Wall reinstatement Level 1 –

4 East Core 2,176.000

Total to Final Account £3,442,831.87

(Bundle 1, pages 185B and 185C).

When this “Final Account” is compared with the December 2000 and January 2001 ISA Forms, it is apparent that Mr. Mell had done nothing more than list, in numerical order, the CMIs which had had values attributed to them (either agreed values or a Hurst value), the CMIs where the words “to follow” had been included and, in the case of CMI 274, where it had been indicated that its value was included in CMI 288. The only additional and possibly new information shown was that given below the list, where Mr Mell noted four further items which were said to require CMIs.

32. The explanation for the production of these documents given by Mr Mell in his witness statement was, that he had been approached by Mr Rumsey:

“…..who asked whether it would be possible to agree a cost for a number of the CMIs. Whilst there was no particular need for me to do this whilst they were being dealt within the interim applications, I did appreciate that Mace were faced with the task of doing this with numerous other trade contractors and therefore it would be of assistance to them if we could tie up these items. It was certainly of no disadvantage to [Hurst] and it was my understanding that David Rumsey was to leave the Project at some stage and certainly it was to Mace’s advantage that someone with first-hand knowledge was able to deal with this ….

At Mr Rumsey’s request, I submitted a document to Mace headed “draft Final Account” on 12 January 2001. It was clear that the document could not be a “final” account given that we were still on site and so intervening events could effect our actual carrying out of the works. Further, there were further CMI’s to price which would be included in the final account. However, the document was what could be described as the first element of the final account as it finalised the cost to carry out CMI’s 1 to 399 in terms of labour, plant and material together with the additional preliminary costs agreed within CMI’s 51 and 288.

(paragraphs 3.1 and 3.5 of Mr Mell’s witness statement – my emphasis)

Apart from the erroneous reference to CMI 399 rather than CMI 333 in paragraph 3.5 of the witness statement, the last sentence of this paragraph conveniently encapsulates one of the essential submissions which Hurst makes. The description given by Mr. Mell to the sum of £3,442,831.87 at which he had arrived as “Total to Final Account” is consistent with his believing that the exercise being undertaken was that described in this final sentence. Certainly, at the start of the exercise it does not appear to have registered with Mr. Mell that he was embarking upon an accounting exercise of a markedly different kind to the consideration he had had to give each month to the value of the CMIs in order to complete the ISA Form.

Although Mr Grant was the senior representative of Hurst with whom Mace/MLEP had regular dealings, he stated in his reply witness statement that the concept of a “final account Stage 1” was never confirmed in writing to him nor was it ever announced at the Director’s meetings that were held (paragraph 1 of Mr Grant’s Reply witness statement). This seems surprising if what was being embarked upon was an accounting exercise of potential significance and of a markedly different kind to the established monthly interim accounting exercises.

33. A number of matters concerning the nature of the exercise upon which Mr Mell and Mr Rumsey embarked were explored with Mr Mell in cross-examination.

On several of occasions during the course of the cross-examination Mr Mell repeated his point that the initial discussion (and the subsequent discussions) with Mr Rumsey concerned simply valuing CMIs with the purpose of putting the CMIs, up to a certain number, “to bed” – Transcript 42/31 to 33, 43/23 and 24, 53/12 and 13 and 63/41 to 43. Mr. Mell said that at no stage in their discussions had Mr Rumsey stated that he was looking for CMIs 1-399 to be priced to include all disruption/loss and expense claims. He said that he had regarded the discussions as routine/day to day events at which values of some only of the CMIs which, in the overall context, involved only comparatively minor sums had been raised. What Mr Mell said appears to me to be consistent with what MLEP stated at paragraphs 19 and 20 of the Defence (cited at paragraph 10 above).

Mr Mell was asked why he had used the expressions “draft final account” or “final account”. He said that he had done so because Mr Rumsey had encouraged the use of it – Transcript 42/35 and 36, 43/26 to 50 and 45/12 to 38 – and, at one stage, he was prepared to agree with the suggestion made to him by Mr Darling that the likely reason why he had used the expression was that Mr Rumsey had asked him to provide a final account – Transcript 61/47 to 50.

He was also asked what he had meant when he had said in his letter “the cut-off date is still to be agreed” – Transcript 50/21 to 53/13. Before I heard this part of the crossexamination, I had thought I understood this expression. Although I still believe that its meaning (objectively ascertained) is clear, it seems that Mr Mell was using language rather inappropriately; he appears to have had in mind uncertainty as to the last numbered CMI which was to be “put to bed” as part of the exercise which he was undertaking with Mr Rumsey. This uncertainty arose in his mind because it was Mr Rumsey who would call the necessary meeting(s) to carry the process forward and he (Mr Mell) did not know when it (they) would be. I have also noted in this context that in the last sentence of paragraph 20 of the Defence MLEP refer to a cut-off date being “agreed at CMI 399” (see again paragraph 10 above). This appears to be consistent with Mr Mell’s usage of the expression.

However, having noted what Mr. Mell had said in his witness statement and all that he said when cross-examined, the overwhelming impression which I had was that Mr. Mell was unable to recollect in any detail the conversation which he and Mr Rumsey had which had resulted in the letter of 12^th January 2001 being written. In my judgment, the answers given by Mr Mell to the effect that, beyond being able to recall (because he had re-read his letter of 12^th January 2001), that it had been preceded by some discussions he had no detailed recollection, accurately reflect the position – Transcript 53/11 to 41.

For convenience I also mention at this point that Mr. Mell was equally unable to recollect in any detail the follow-up meetings of 22^nd February 2001, and 9^th April 2001 and/or the explanatory letters that he wrote on 16^th March 2001 and 9^th April 2001.

It was common ground that Mr Mell and Mr Rumsey met again on 9^th April 2001 for a further discussion of matters which remained outstanding from 22^nd February 2001. Although the date when this important second meeting took place was agreed between Hurst and MLEP, no file note (if any was made) was produced and there was no direct evidence concerning the meeting itself. Mr Mell did not remember the date of the second meeting or any of the discussions which took place. Mr Mell simply had a general recollection that at some stage he and Mr Rumsey had decided to stop the exercise at CMI 399. He said:

“…. My best recollection is that we stopped at CMI 399, as at the time I was not in a position to estimate the cost of CMI 400 due to lack of information on the scope of works involved. I note that at paragraph 20 of the Defence, the Defendant’s state ( sic ) that it was at the meeting of 9 April 2001 that the cut off of CMI 399 was agreed. I must say that my recollection is that the cut off at CMI 399 was agreed earlier than this.”

(paragraph 3.7 of his witness statement)

What he said there about CMI 400 is supported by the “to follow” observation which had been included on the returned ISA Forms for February 2001 and March 2001 and, on that point, I accept his evidence. It does not matter whether his recollection concerning the timing of the decision to stop the exercise at CMI 399 is correct; it is sufficient to say that agreement on this point was reached, at latest, at the meeting on 9^th April 2001.

Mr Mell said, in respect of a statement Mr Rumsey had made – that he (Mr Rumsey) had personally handed over the 27th April 2001 Document to him (Mr Mell) – that he had no recollection of Mr Rumsey’s handing him the document. He questioned whether this suggestion was correct. He wondered why Mr Rumsey would have departed from the established internal mailing system (paragraph 5.4 of his witness statement). At paragraph 23 of the Defence, it is simply stated that the document was “provided to” Mr Mell. Given Mr Mell’s lack of recollection I am not able to make any finding as to the method by which the document was provided to him.

Whilst Hurst contends that, when Mr Mell signed the document, he believed it merely reflected the agreement on CMI values which had previously been reached with Mr Rumsey, MLEP’s very different view of the nature of the exercise which was undertaken and of the agreement between them is apparent from paragraphs 14 and 22 of the Defence (see paragraph 10 above). Although at paragraphs 19 and 20 of the Defence MLEP accepted that, at the meetings on 22 February 2001 and 9^th April 2001 it was the value of variations that was agreed, MLEP contended that the final account which Mr Rumsey had wished to receive from Hurst was an account including “all sums/claims owing up to a given date”; and, that the whole purpose of the February and April meetings “as was known…..or ought to have been known [to Mr Mell] was not simply to agree the final value of CMIs 1 – 399 but, in addition to include all claims for additional costs as provided for by the Contract.”

In my judgment, when Mr Mell prepared his “Final Account” of 12^th January 2001, when he met with Mr Rumsey in February and April 2001, and when he signed the 27th April 2001 Document, he did not understand that he was being requested to deal generally with the issue of contractual claims and to allow for them, and there was no reason why he should have thought that he was. Mr Mell can be criticised for not reading the 27th April 2001 Document with some care before he signed it, copied it (or arranged for someone else to copy it) and placed the copy in the site files. However, in my judgment the fact is that he did nothing more than glance at it before he signed it. He did not appreciate at the time that he was being invited to do more than “firm up” valuation figures which would continue to be included on the ISA forms for the remainder of the project and then be taken into the FSA in due course. He did not appreciate that, by the terms included on the last page, Mace was inviting Hurst to forego any and all as yet unrecognised contractual claims for additional costs that it might have. These terms had been included, without any prior hint that they were to be there and they were, unfortunately, overlooked by Mr Mell.

THE DECLARATIONS

Unilateral Mistake

Mr. Taverner and Mr. Darling were agreed that, for the purposes of this case, the legal principles could be taken from the decision of the Court of Appeal in Commission for the New Towns v. Cooper (Great Britain) Ltd. [1995] Ch 259 at pages 277 to 282 in the judgment of Lord Justice Stuart-Smith and page 292 in the judgment of Lord Justice Evans. There the Court of Appeal reaffirmed that in cases of unilateral mistake rectification is not ordinarily appropriate because, in general, contracts fall to be objectively construed and it is inequitable to compel a contracting party to accept the other’s mistaken view. But the Court will intervene if there are “additional circumstances that render unconscionable reliance on the document by the party who has intended that it should have effect according to its terms” Spry, Equitable

Remedies, 4^th Edition at page 599, cited by Lord Justice Stuart-Smith at page 277.

The debate in this case, as in that case, can be said to turn on what amounts to unconscionable conduct. Knowledge of the other’s mistake is clearly established to be such an additional circumstance but it may be that this is simply a paradigm example. Mr Derek Wood QC (who appeared for the Commission) submitted the Defendant in that case had been guilty of such sharp and unconscionable practice that rectification should be granted. He submitted that the original “bargain” should be undone so as to render enforceable the intention which, the mistaken party had if two questions received the necessary answers. The questions were –

If the answer to the first question is “Yes” and the answer to the second question is “No” then, Mr Wood submitted, the Court would rectify the contract. Lord Justice Stuart-Smith stated that he saw “great force in this submission” (and in the suggested application to the facts of that case). If such an approach were to be adopted, it may be that rectification might be ordered in a somewhat wider category of cases than those in which it has previously been thought appropriate but, it seems to me that this is a case which simply turns on whether Mr Rumsey knew of the mistake which Mr Mell had made.

The Judge in the Commission for New Towns v. Cooper (Great Britain) Ltd case had decided that nothing less than proven actual knowledge of the other party’s mistake was sufficient for rectification. The Court of Appeal disagreed. The Court of Appeal drew attention to the careful consideration that had been given to the various mental states which might constitute “knowledge”, by Mr Justice Peter Gibson in Baden v Société Générale pour Favoriser le Développement du Commerce et de L’Industrie en France SA (Note) [1993] 1 WLR 509 which was cited by Mr Justice Millett J in AGIP (Africa) Ltd v Jackson [1990] Ch 265 at page 293:

“Knowledge may be provided affirmatively or inferred from circumstances. The various mental states which may be involved were analysed by Peter Gibson J. in Baden’s case [1993] 1 W.L.R. 509 as comprising: (i) actual knowledge; (ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; and (v) knowledge of circumstances which would put an honest and reasonable man on inquiry. According to Peter Gibson J., a person in category (ii) or (iii) will be taken to have actual knowledge, while a person in categories (iv) or (v) has constructive notice only. I gratefully adopt the classification but would warn against over refinement or a too ready assumption that categories (iv) or (v) are necessarily cases of constructive notice only. The true distinction is between honesty and dishonesty. It is essentially a jury question. If a man does not draw the obvious inferences or make the obvious inquiries, the question is: why not ? If it is because, however foolishly, he did not suspect wrongdoing or, having suspected it, had his suspicions allayed, however unreasonably, that is one thing. But if he did suspect wrongdoing yet failed to make inquiries because ‘he did not want to know’ (category (ii)) or because he regarded it as ‘none of his business’ (category (iii)), that is quite another. Such conduct is dishonest, and those who are guilty of it cannot complain if, for the purpose of civil liability, they are treated as if they had actual knowledge.”

Lord Justice Stuart-Smith cited this passage at pages 280 to 281 and stated that categories (i), (ii) and (iii) of Mr Justice Peter Gibson’s list all constituted actual knowledge in law in the context of an allegation of unilateral mistake. At page 292 Lord Justice Evans expressly agreed with that view. Lord Justice Farquharson simply expressed his agreement in the result. I am bound to follow that decision.

had it been proved that Mr. Mell was mistaken as to the contents of the 27th April 2001 Document in that it went further than the oral agreement(s) which had been reached concerning the values of the CMIs ? and

had it been proved that the mistake was one calculated to benefit MLEP ?

It is clear from the findings which I have made, in particular at paragraphs 31 to 41 above, that my answer to each of these questions is “Yes”.

Mr. Taverner and Mr. Darling differed as to the correct formulation of the second question but, as Mr. Darling recognised at paragraph 74 of his written closing, whichever I might prefer there was likely to be little practical difference in the result. I agree with that observation but I also accept Mr. Darling’s submission that it is better to avoid the term “suspicion” when formulating the question. Accordingly, I pose it in the way he suggested –

had it been proved that Mr Rumsey had actual knowledge that Mr. Mell was mistaken as to the contents of the 27th April 2001 Document or that, in this regard, Mr. Rumsey wilfully shut his eyes to the obvious or that he wilfully and recklessly failed to make such enquiries as an honest and reasonable man would make ?

“…..in our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party, may be either reduced or nullified…..”

Having heard Mr. Mell’s evidence concerning of the accounting exercise which he and Mr. Rumsey carried out between 12^th January 2001 and 9^th April 2001 (insofar as he could recollect it), having taken into account Mr Grant’s evidence that he was not informed about the accounting exercise, having considered the facts that were agreed/admitted and having carefully considered the contemporary documents, my answer to this second question is “Yes”.

In the absence of positive direct evidence as to the way in which the 27th April 2001 Document was provided to Mr Mell, there are two possible factual situations to consider. The first possibility is that Mr Mell signed the 27th April 2001 Document in Mr Rumsey’s presence. If so, in my judgment, Mr Rumsey probably had actual knowledge that Mr Mell was mistaken i.e. he fell into Mr Justice Peter Gibson’s first category. The alternative possibility is that Mr Rumsey was not present when Mr Mell signed the 27th April 2001 Document. If so, in my judgment, the probability is that Mr Rumsey was a person falling into either the second or third of Mr Justice Peter Gibson’s categories, and it matters not which of them he fell into. I explain these alternatives more fully below.

Mr. Mell’s Authority

I have dealt with the extent of Mr. Mell’s authority at paragraph 22 above. As I have said, he was Hurst’s senior site-based representative; he was there (and known by Mace/MLEP to be there) to deal with all aspects of Hurst’s contract works, but his authority did not extend beyond dealing with matters pursuant to and in accordance with the terms of the Trade Contract. The Trade Contract contemplated interim accounting and interim payments continuing until the project was completed; the Trade Contract contemplated the FSA being produced after completion of the Trade Contract works – see particularly clause 23.6.4 (taken together with paragraph 7 of the Trade Contract Annex) and clause 23.6.5 of the Trade Contract, all cited at paragraph 16 above. The Contract did not provide for the production of a “Final Statement of Account, Stage 1” whether in the terms of the 27th April 2001 Document (or in other terms) and, in my judgment if a document of this type was to have contractual effect, its production must have been authorised in advance by the contracting parties themselves or it needed to be ratified after the event by the contracting parties themselves. Given the fact that both contracting parties were corporate entities, authorisation or ratification must have been by an appropriate individual. In this case, so far as Hurst was concerned, Mr. Grant was the director of the company with responsibility for the project. He was the obvious person for Mace/MLEP to notify if MLEP desired to vary the contractually agreed accounting procedure. He was not informed of such a proposal by Mace/MLEP prior to 27^th April 2001 nor was he asked to ratify what had been done on 27^th April 2001 after the event. Mr Mell was not authorised (either expressly or impliedly) to agree to vary the terms of the Trade Contract nor did Hurst ever hold him out as having any such authority.

The Absence of an MLEP or Mace Signature

The Consideration Issue

Where parties to a contract for work and materials negotiate and agree upon the sum which will be paid by one party and be accepted by the other there is an accord (or compromise) for which there is ample and obvious consideration. That accord is binding on them both. In the normal case, and in this regard I see nothing at all abnormal in the facts of this case, the accord provides a new certainty of obligation which is substituted for the pre-existing contractual rights (and obligations), the nature and extent of which were to some extent at least uncertain/ debatable.

Estoppel

“unjust to allow MLEP to resile from this position.”

“49. ……it is [MLEP’s] case that in signing the [27th April 2001 Document] [Hurst] is estopped from denying that the sums stated were in full and final settlement of all claims as at 27 ^th April 2001 and from attempting to bring additional claims for loss and expense for events prior to 27 ^th April 2001. [Hurst] has made a clear and unequivocal statement that all claims up to 27 ^th April 2001 are compromised by payment “of the sum agreed”. [MLEP] has acted to its detriment on that representation by paying the agreed sum and now being unable or in a worse position to assess any alleged claims the Claimant now says it has. Had Mace been made aware “timeously” of any alleged disrupting events they might have been able to reprogramme or manage other trade Contracts in such a way as to avoid any disruption for [Hurst].”

Although this part of MLEP’s case was maintained with apparent enthusiasm by Mr Darling, in my judgment it cannot possibly succeed. No evidence was called to support the factual matters raised in the final two sentences (which, at first blush, fall to be viewed with considerable scepticism) but, even if they had been established in view of the findings I have made in relation to Hurst’s claim for a declaration based on unilateral mistake and in the alternative, its claim for a declaration based on Mr Mell’s lacking the necessary authority to bind Hurst to the terms of the 27th April 2001 Document, I see no possible basis upon which Hurst can be prevented from vindicating its true legal rights.

Costs

Dated 25^th June 2003 COLIN REESE QC

[Recorder, sitting as a Deputy Judge of the TCC]

CLAIM No: HT-02-322

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION

COURT

MR RECORDER COLIN REESE Q.C.

B E T W E E N :

HURST STORES AND INTERIORS

LIMITED

Claimant

and

M.L. EUROPE PROPERTY LIMITED

Defendant

______________________________________

J U D G M E N T

______________________________________

This is the official Judgment of the Court and I direct that no further note or transcript be made.

25 ^th June 2003 COLIN REESE QC

(Recorder – Sitting as a Deputy Judge of TCC)