P C Partitions Ltd v Canary Wharf Contractors Ltd & Anor

The Defendant in this action, Canary Wharf Contractors Ltd. (“CWC”), is a subsidiary of Canary Wharf Group plc. Canary Wharf Group plc carries on business as a developer of commercial property, particularly, or perhaps solely, on sites in the area of Canary Wharf on the eastern side of London. CWC carries on business as a design and build contractor, operating only, as I understand it, for Canary Wharf Group plc in relation to the projects of that company.

In 2002 and 2003 one of the projects being undertaken by CWC for Canary Wharf Group plc was the fitting out of a building called HQ5, or Heron Quays 5, (“the Building”) at North Cofferdam, off Aspen Way, London E14. The Building comprised four basement floors, thirty floors of offices and associated facilities and two upper levels of plant and equipment. The area to be fitted out comprised a total of some 785,000 square feet.

The Building had been pre-let to the service company of the well-known firm of solicitors Clifford Chance LLP. That service company was in fact a company called Legibus Thirty-Three Ltd. The deal done between Canary Wharf Group plc and Clifford Chance LLP was on a turnkey basis and provided for works to be complete and rent to be payable as from the end of July 2003.

Part of the fitting out works to be undertaken in the Building comprised what was called work package 4205 (“the Work Package”). In general terms the Work Package included drywall partitions, demountable partitions and suspended ceilings.

On 15 May 2002 CWC entered into an agreement (“the IES Agreement”) with the Part 20 Defendant, Infinite Environmental Services Ltd. (“IES”), under which IES agreed to undertake the Work Package for CWC.

For tax reasons the agreement between CWC and IES provided for CWC to make an advance payment of the total sum due under the IES Agreement as originally made (that is to say, the sum due for the work the subject of the IES Agreement, leaving aside the possibility that that work might be the subject of instructions for variations) in exchange for what was called a lump sum payment bond (an “LPSB”). The idea was that the advance payment would in fact be made to an institution which would provide CWC with a bond initially in the amount of the advance payment. As work was completed CWC would authorise the body providing the bond to release money to IES and to reduce the amount of the bond proportionally.

IES in fact subcontracted the undertaking of the Work Package, or at least of parts of it, to a number of contractors. One of those contractors was the Claimant company, PC Partitions Ltd. (“PCP”). The contractual arrangements between IES and PCP were not very formal. In the first place all that seems to have happened was that IES sent PCP an order which essentially set out a list of rates for labour. PCP began work at the Building on about 6 May 2002, but there were difficulties over payment for the work done. As no payment had been made by the beginning of July 2002 PCP then withdrew from the site.

Following further discussions between representatives of IES and PCP, IES placed with PCP a sub-contract order numbered IES-299-SCO1005 dated 11 November 2002 (“the IES Order”). Again the IES Order essentially just set out a schedule of rates, but the schedule was introduced with the narrative:-

“To carry out works as instructed by the Suspended Ceiling Package Manager on the Clifford Chance HQ5 project.

Agreed rates for the suspended ceilings on level 5 and all lower floors below:”

PCP re-commenced work on the Work Package following receipt of the IES Order. However, it experienced further difficulties in obtaining payment from IES in respect of the work which it had done. In those circumstances a meeting (“the Meeting”) took place on 19 March 2003. It was common ground that the Meeting was attended by at least Mr. Paul Carden of PCP, Mr. Kenneth Smith of IES and Mr. David North, a senior costs manager employed by CWC. PCP’s case in this action is that at that meeting Mr. North on behalf of CWC agreed that thenceforth CWC engaged PCP directly to undertake works in the Building. That was denied on behalf of CWC. It was common ground that following the Meeting CWC issued to PCP a purchase order numbered 02/79943 dated 28 March 2003 (“the CWC Order”). The material part of the text of the CWC Order was in these terms:-

“Please furnish the following subject to the Conditions of Purchase on the reverse.

Description

HQ5 fit-out/0056

HQ5 F/O = provision of ceiling fixers, dryliners & joiners and associted [sic] plant to complete works on level 1 & 2 to agreed “price” (to be agreed by CWCL/IES/PC Partitions)

Provisional amount @ 25,000.00”

Subsequently an agreement in writing dated 20 June 2003 (“the Direct Payment Agreement”), entitled “Direct Payment Agreement – HQ5 Fit Out Package 4205”, was made between CWC, IES and PCP. The Direct Payment Agreement included the following provisions:-

“WHEREAS:-

A.

CWCL and IESL have entered into a trade contract, dated 15 May 2002 for the design manufacture and installation of certain partitions, demountable partitions and ceiling fit-out works at the Canary Wharf South HQ5 Development (“the trade contract”). The HQ5 development consists of an office building for the occupation of Clifford Chance LLP.

B.

CWCL pre paid a Lump Sum to IESL and in return IESL procured a Lump Sum Payment Bond in favour of CWCL. Pursuant to the terms of the Trade Contract, CWCL issue a monthly reduction notice to IESL reducing the value of the Lump Sum Payment Bond in line with the amount of works (excluding variations) carried out by IESL in the previous month. The cost of variations is paid by CWCL in the normal manner by way of cheque.

C.

IESL have entered into a sub-contract/purchase order dated 11/11/02 with the Sub-Contractor/Supplier [that is, PCP] for the design manufacture and provision of certain materials or provision of labour (the Sub-Contract) which are required pursuant to the Trade Contract.

D.

In consideration of CWCL agreeing to the Sub-Contractor/Supplier’s appointment, CWCL, IESL and the Sub-Contractor/Supplier agree that in relation to payments due from CWCL to IESL for variations, CWCL will pay the Sub-Contractor/Supplier directly for the design manufacture and delivery of such materials or provision of labour to be provided by the Sub-Contractor/Supplier to IESL under the Sub Contract.

It is hereby agreed that:

1.

On the final day of each month (or at a date identified by CWCL), IESL, the Sub-Contractor/Supplier and CWCL will agree the amount due to be paid to Sub-Contractor/Supplier. If the Sub-Contractor/Supplier has not provided any labour or materials in connection with the relevant variations then the amount due may be nil. If no such agreement is reached, CWCL’s decision as to the amount to be paid to Sub-Contractor/Supplier shall be final. Such amount will be in respect of design manufacture and delivery to site of the said materials or proper provision of labour relating to variations by Sub-Contractor/Supplier. CWCL shall rely on IESL's statement of conformity with the Trade Contract of all design manufacture and delivery of the said materials for which CWCL directly pay Sub-Contractor/Supplier.

2.

Further to agreement or CWCL’s decision as to the amount due to be paid to the Sub-Contractor/Supplier pursuant to Clause 1 IESL will invoice CWCL for the said amount indicating clearly on the invoice that the amount is to be paid to the Sub-Contractor/Supplier. Within 30 days after receipt by CWCL of the invoice, CWCL will pay the amount ascertained in clause 1 to Sub-Contractor/Supplier. …

4.

CWCL may apply to the amount due to the Sub-Contractor/Supplier in clauses 1 and 2 any rights of set-off or abatement which it might have under the Trade Contract in respect of equipment and materials supplied and/or the work carried out by IESL.

5.

IESL acknowledges that all sums paid to the Sub-Contractor/Supplier under this agreement are on account of and shall be deducted from the Contract Sum (as defined in the Trade Contract) and receipt of payment by the Sub-Contractor/Supplier shall be a proper and sufficient discharge of CWCL’s obligations to IESL for that proportion of IESL’s monthly application under the Trade Contract.

6.

Subject to the agreement reached with the Sub-Contractor/Supplier and IESL pursuant to Clause 1, CWCL shall have no liability to the Sub-Contractor/Supplier whether under this agreement, under the Sub Contract or otherwise; and the Sub-Contractor/Supplier shall have no rights of action against CWCL in respect of monies which the Sub-Contractor/Supplier considers are due to it. CWCL shall not be bound by any adjudicators’ awards which may be made under the Sub Contract. ….

9.

CWCL may determine this agreement upon giving one week’s written notice to both IESL and the Sub-Contractor/Supplier. Otherwise, this letter of agreement shall expire upon payment of the final amount due from CWCL to the Sub-Contractor/Supplier. …

12.

The effects of the Contracts (Rights of Third Parties) Act 1999 are expressly excluded in relation to this agreement. For the avoidance of doubt, but save where IESL, the Sub-Contractor/Supplier and CWCL agree the amount due to be paid to IESL as set out in clause 1 hereof, neither the Sub-Contractor/Supplier nor any other supplier to the Sub-Contractor/Supplier or IESL may rely upon this agreement to require direct payment by CWCL or any of its associated companies. …

14.

To the extent that there is any conflict between the terms of this agreement and the Trade Contract or Sub Contract, the terms hereof shall prevail as far as necessary to give effect to this agreement and the Trade Contract and Sub Contract shall be deemed to have been varied accordingly by the parties. In all other respects the terms of the Trade Contract and Sub Contract and the rights and liabilities of the parties under them shall continue in full force and effect.”

It was the case of PCP in this action that the terms of the Direct Payment Agreement had no effect upon its entitlement to be paid by CWC in respect of all the work which it undertook at the Building after the Meeting. That was not accepted on behalf of CWC. CWC’s case was that the terms of the Direct Payment Agreement were clear and enforceable.

Although the Direct Payment Agreement was not formally signed until 20 June 2003, CWC’s case was that its terms had been agreed in principle and operated in practice since the end of March 2003, or thereabouts. Towards the end of July 2003 CWC came to feel that it had been overcharged under the Direct Payment Agreement and indicated to PCP that it would not make any further payments until the final account of IES was settled. At that point PCP left the site for the last time.

PCP’s case as to what occurred at the Meeting and the effect thereof was set out in paragraphs 15 to 18 inclusive of the Particulars of Claim:-

“15.

As a result thereof, a meeting between Mr. Paul Carden of the Claimant, Mr. Dave North of the Defendant and Mr. Ken Smith of IES was held between 19^th March and 28^th March 2003.

(a)

The Claimant informed the other parties that it would no longer work for IES as it had consistently failed to make timeous and/or proper payments to the Claimant for work it had done.

(b)

It was agreed at this meeting (“the CWC Agreement”):-

(i)

The Defendant directly engaged the Claimant to carry out works associated with the suspended ceilings.

(ii)

To that end, the Defendant agreed to issue a Purchase Order to the Claimant.

(iii)

The said Purchase Order would be in the initial Provisional Sum of £25,000, exclusive of VAT, as a higher value would have required the Purchase Order to be authorised separately and, as such, could cause delay and/or disruption to the Project or part(s) thereof.

(iv)

The Claimant would prepare fortnightly valuations for the work carried out on Site for payment by the Defendant.

(v)

The Defendant could, from time to time, request and require the Claimant to carry out additional works, not specifically covered by the Purchase Order, so that the Project as a whole could be completed and the Defendant would pay for the same.

16.

Alternatively, insofar as paragraph 15(b)(v) above was not a term of the agreement between the Claimant and the Defendant, the Defendant’s Mr. David North made representations to the Claimant in materially similar terms.

17.

On the basis of the said meeting and agreement concluded between the parties and/or the Defendant’s representations, the Claimant did not in fact leave Site.

18.

On 28^th March 2003, the Defendant issued a Purchase Order, Number 02/79943, to the Claimant showing a Provisional sum of £25,000, thereby evidencing the CWC Agreement.”

At paragraph 34 of the Particulars of Claim it was contended that it was an implied term of the so-called CWC Agreement that “where the Defendant requested the Claimant to carry out additional or varied work, the Defendant would pay the Claimant any agreed sum for the same, alternatively, a reasonable sum.”

In the Particulars of Claim what I have called the Direct Payment Agreement was called the “Tripartite Agreement”. PCP’s case about it was put in this way:-

“35.

It is the Claimant’s primary case that the so-called Tripartite Agreement does not regulate the respective parties’ rights and obligations. The Claimant relies upon the following facts and matters:-

(a)

the Claimant was engaged by the Defendant pursuant to the CWC Agreement to execute divers works at Site;

(b)

the Claimant executed works at the request of the Defendant’s servant or agents with the common understanding and expectation that the Defendant would pay for the same;

(c)

the Claimant executed works in reliance upon the Claimant’s representation set out in paragraph 16 above.

(d)

the Tripartite Agreement was signed by the Claimant in about April 2003. The relationship between the Claimant and Defendant continued after that date to be governed by the CWC Agreement. In the premises, the Tripartite Agreement:-

(i)

Insofar as it constituted an offer from the Claimant to be accepted by the Defendant, such offer lapsed and was no longer capable of acceptance by 20^th June 2003:-

(1)

by reason of effluxion of time; and/or

(2)

as the Defendant’s continued reliance upon the CWC Agreement being inconsistent with the concept of the Defendant having accepted the Tripartite Agreement within a reasonable time; or,

(ii)

Insofar as the Claimant’s signature of the Tripartite Agreement constituted an agreement between the parties, the parties implicitly agreed that such an agreement would have no effect on the parties respective rights and obligations as a result of the parties continued reliance upon the CWC Agreement. …

37.

Further, the following were implied terms of the said Tripartite Agreement to give the same business efficacy:-

(a)

In making any decision as to the amount to be paid (if any) to the Claimant:-

(i)

the Defendant must act reasonably and upon evidence provided to it by the Claimant and/or IES;

(ii)

the Defendant must make any decision in good faith;”

(iii)

in relying upon IES’s Statement of Conformity, CWCL should accept the same, save where it has good reason to depart from the same.

(b)

Insofar as the Defendant does not accept the Claimant’s valuation and/or IES’s Statement of Conformity, the Defendant should provide reasons for not accepting the same.

38.

It is the Claimant’s case that insofar as the Tripartite Agreement is found to govern the respective rights and obligations of parties, the Tripartite Agreement:-

(a)

The Tripartite Agreement does not regulate work for which the Claimant was directly engaged by the Defendant and/or executed at the Defendant’s request;

(b)

Alternatively, insofar as the Tripartite Agreement is found to regulate all the rights and obligations between the parties, it is averred the payments to be made by the Defendant related to all works carried out by the Claimant.

39.

For the avoidance of doubt, the Claimant avers insofar as Clauses 6 and/or 12 of the Tripartite Agreement seeks to limit or extinguish the Claimant’s causes of action against the Defendant, the same is contrary to public policy and/or an unfair contract term and, in the premises, unenforceable.”

On the basis that an agreement in the terms of the alleged CWC Agreement had been made and that the obligations of CWC under it were unaffected by the terms of the Direct Payment Agreement, PCP claimed that CWC was bound to pay it sums totalling £703,978.36 plus Value Added Tax.

The answer of CWC to the allegations contained in paragraphs 15 to 18 inclusive of the Particulars of Claim was set out in paragraphs 7 to 10 inclusive of the Defence and Counterclaim:-

“7.

As to paragraph 15:-

(i)

the first sentence is admitted. The meeting was held at the Defendant’s site offices on 19 March 2003. At this time, the Defendant was becoming increasingly aware that IES had problems paying its various subcontractors (including the Claimant). The purpose of the meeting was substantially concerned with a single issue viz. how to ensure that the Claimant’s cash flow was secured, so that the Claimant’s work for IES could be progressed to its conclusion;

(ii)

sub-paragraph (a) is denied. The Defendant’s representatives have no record or recollection of the Claimant informing the meeting that it would no longer work for IES as it had consistently failed to make timeous and/or proper payments. The Defendant’s recollection of the meeting is that it was not as confrontational as sub-paragraph (a) suggests, but was concerned with the practical problem of cash flow;

(iii)

as to sub-paragraph (b):-

(1)

sub-paragraph (i) is denied. The purpose of the meeting was simply to ensure that the Claimant was paid sufficiently, and at sufficient intervals, to enable them to carry out and complete the works described in the Sub-Contract between it and IES. Mr. North of the Defendant suggested that the quickest and most effective way to obtain payment for the Claimant, in terms of the Defendant’s accounting system, was for the Defendant to raise a purchase order in favour of the Claimant. As was made clear to the Claimant at the meeting held on 19 March 2003 the process of raising a purchase order in favour of the Claimant was an accounting mechanism necessary within the Defendant in order to raise a payment;

(2)

as to sub-paragraph (ii), the Defendant agreed to issue a Purchase Order to the Claimant for reasons of accounting (made plain to the Claimant at the time) set out above;

(3)

as to sub-paragraph (iii), the concern of those present at the meeting was to provide rapid authorisation of a payment to the Claimant. It is admitted that a Purchase Order with a value higher than £25,000 would have required separate authorisation. The Defendant will rely at trial on the entirety of the Purchase Order for its full terms, true meaning and effect;

(4)

sub-paragraph (iv) is denied. The period of valuations following the Purchase Order was not a matter discussed at the meeting pleaded in paragraph 15;

(5)

sub-paragraph (v) is denied. This was not a matter discussed, still less agreed, at the meeting pleaded in paragraph 15. It would of course always be open to the Defendant to have requested the Defendant to carry out work, so that an agreement in the terms of sub-paragraph (v) would be otiose and/or an agreement to agree and/or unenforceable for lack of certainty. It is further denied that it was agreed that the Claimant was or would be required to carry out further work as pleaded by the Claimant in this paragraph.

(6)

in the alternative, the alleged “CWC Agreement” pleaded in paragraph 15(b) is in truth an agreement to agree and/or void for uncertainty.

8.

As to paragraph 16:-

(i)

The Claimant is invited to state precisely the words allegedly used by David North which, on the Claimant’s case, amounted to a representation; the person(s) to whom the alleged words were spoken; and to provide any contemporaneous note or record of the words allegedly spoken;

(ii)

there was no representation by Mr. David North in the terms pleaded in sub-paragraph 15(b)(v) and paragraph 16 is denied;

(iii)

sub-paragraph 7(iii)(5) above is repeated;

(iv)

the Defendant notes the use of the word “could” (rather than for example “should”) in paragraph 15(b)(v). The case based on representation is simply not understood.

9.

As to paragraph 17:-

(i)

agreement is denied (see paragraph 7(iii) above);

(ii)

the case based on representation is denied (see paragraph 8(ii) above);

(iii)

the Defendant is not in a position to admit or deny the reason now advanced by the Claimant for not leaving site. The allegation is not admitted and the Claimant is specifically required to prove the allegation that there is a causal connection between the alleged (but denied) “agreement” and/or the alleged (but denied) “representations” and the Claimant not leaving site.

10.

Save that it is admitted that a Purchase Order Number 02/79943 (“the Purchase Order”) was issued by the Defendant to the Claimant dated 28 March 2003, paragraph 18 is denied.”

The case of CWC as to the Direct Payment Agreement and its terms was set out in the Defence and Counterclaim at paragraphs 30 to 32 inclusive and paragraph 34:-

“30.

Paragraph 35 is denied. The Tripartite Agreement constituted a clear and enforceable agreement between the parties. When the Claimant refers to the so-called “CWC Agreement”, this is in truth a reference to the alleged agreement (denied by the Defendant) allegedly evidenced by the Purchase Order referred to in paragraph 15(b)(ii). The issue of the Purchase Order, on the basis very clearly set out on the face of the Purchase Order and for the accounting reasons explained to the Claimant by the Defendant, was rapidly superseded by the Tripartite Agreement. Paragraph 35 is denied.

31.

It is admitted that paragraph 36 contain [sic] citation of certain provisions within the Tripartite Agreement. The Defendant will (like the Claimant) refer to the entirety of the Tripartite Agreement for its full terms, true meaning and effect.

32.

Paragraph 37 is denied. There is no basis for the implication of the terms alleged. There is no basis for implication as a matter of law. The pleaded terms are not necessary; they are not obviously to be implied in fact; and they are not reasonable. …

34.

As to paragraph 39:-

(i)

it is denied that clause 6 and/or clause 12 operates so as to limit or extinguish a right of action which the Claimant would, but for those provisions, have under the terms of the Tripartite Agreement, or at all;

(ii)

the case based on the Tripartite Agreement (or else clauses 6 and/or 12 thereof) being allegedly contrary to public policy is not explained by the Claimant or understood by the Defendant. The allegation is denied;

(iii)

the case based on clause 6 and/or 12 being “… an unfair contract term …” is surprisingly poorly pleaded. It is denied that the Unfair Contract Terms Act 1977 applies. It is further denied (if it be alleged) that the Unfair Terms in Consumer Contracts Regulations 1999 apply. If (which is denied) the Unfair Contract Terms Act 1977 applies, it is averred that clauses 6 and 12 are reasonable in all the circumstances surrounding their agreement;

(iv)

it is denied that clause 6 and/or clause 12 are unenforceable.”

Overall, CWC’s case was that, far from it owing PCP £703,978.36 plus Value Added Tax, it had overpaid PCP £849,182.

In the light of the parties’ respective cases as to what happened at the Meeting and as to the effect of the Direct Payment Agreement Counsel for each suggested, and I agreed, that the following preliminary issues should be tried:-

This judgment is concerned with those preliminary issues.

In order to address the preliminary issues it is first of all necessary to consider the evidence led before me as to what happened at the Meeting on 19 March 2003 and subsequently, so far as relevant to reaching a conclusion as to what, if anything, was actually agreed at the Meeting.

Each of Mr. Paul Carden, Mr. Kenneth Smith and Mr. David North gave evidence before me as to the Meeting and was cross-examined as to his evidence.

The evidence in chief of Mr. Carden, who is the managing director of PCP, as to the Meeting was set out in his witness statement dated 8 April 2004 at paragraphs 10 to 14 inclusive:-

“10.

In the circumstances I subsequently met with Mr. David North of CWCL and Mr. Ken Smith of IES between 19 and 28 March 2003. I advised those present at the meeting that PCP would no longer work for IES as it had continuously failed to make proper payments to us for work which had been undertaken. This was understood by Mr. North who accepted that it was inappropriate for sub-contractors to be expected to work in any circumstances where payment for works being undertaken was not forthcoming. I was advised by David North that they required PCP to remain on site and indeed wherever possible increase the number of men on site and assist with all aspects of work that were required. The stumbling block was of course payment.

11.

In those circumstances David North advised me that CWCL would engage PCP directly to carry out works on their behalf. In addition, were we to enter into that form of agreement then CWCL required us to place as many personnel on site as was possible. Given the assurances which had been provided to me by CWCL I was happy to receive a purchase order from Canary Wharf. In the circumstances whilst at the meeting, steps were taken to have the purchase order raised. The purchase order was dated 28 March 2003 and numbered 02/79943. At the time of our meeting we had discussed the considerable amount of work which required undertaking on levels 1 and 2 of the project which was to be where the vast majority of the work was to be concentrated. As mentioned earlier, a considerable amount of work needed to be stripped out and redone as a result of poor workmanship previously. The purchase order was returned to me with a provisional sum of £25,000 noted upon it. This was explained to me by Dave North on the basis that if a larger sum were to be placed in the purchase order then it would require alternate authority before it could be signed off. In the circumstances he wished to give comfort to PCP, allow the contract to move and encourage us to retain and indeed increase our personnel on site.

12.

The wording of the purchase order in my view made it clear that PCP were being engaged for all manner of different types of work. It stated as follows [the terms were then set out]

13.

In the circumstances the wording of the purchase order encompassed all the various types of work which we had undertaken on site thus far namely the fixing of ceiling, the installation of dry liners for partitioned walls the provision of joiners and associated plant. It is important to note that plant was extra upon this project as, in being employed on a labour only basis, which technically had been the case to that point would simply have meant that either IES or CWCL would have had to provide appropriate plant for completion of all work. IES could not afford plant or in some instances materials so PCP were paying for them.

14.

At the same meeting the method of our submission of claims for payment was also agreed. We were to prepare detailed valuations of the work which we undertook. Those valuations were to be forwarded to IES for their consideration and agreement and indeed IES were to have the authority to sign off the documents as accurately reflecting the work which had been undertaken. As and when the application for payment were [sic] appropriately signed off they would be submitted to CWCL who would make payment of the same. In short therefore for the purposes of all appropriate valuations our contacts were to be IES.”

At paragraph 15 of his witness statement Mr. Carden put the date of the Meeting as 28 March 2003. In cross-examination he contended that that had been a mistake and his evidence was that the Meeting was in fact on 19 March 2003. He also said that, contrary to the impression which might have been created by the reference in paragraph 11 of his witness statement that, “In the circumstances whilst at the meeting, steps were taken to have the purchase order raised.”, his evidence was simply that Mr. North told him at the Meeting that he would be raising a purchase order that day. Mr. Carden’s evidence in cross-examination was that only he, Mr. Smith and Mr. North had attended the Meeting. He agreed that the Meeting had lasted 10 to 15 minutes. He also agreed that there was no discussion in the Meeting of precisely what work PCP was to do, what total sum was to be paid for that work or any programme of work. Questions of specification and drawings were, Mr. Carden told me, to be dealt with by IES, which was to continue to have a management role in relation to the work which, according to him, PCP was henceforth to be carrying out directly for CWC.

Mr. Kenneth Smith was, at the date of the Meeting, working as a quantity surveyor for IES. He was called as a witness on behalf of PCP. His evidence in chief was contained in a witness statement dated 28 June 2004. The material part of his witness statement dealing with the Meeting and events thereafter was contained in paragraphs 6 to 9 inclusive:-

“6.

Numerous meetings were taking place around this time as all parties were under pressure to complete the project on time. The project could therefore ill afford to loose [sic] sub-contractors from site. In the circumstances, arrangements were made for PCP to meet with representatives of Canary Wharf Contractors Limited (“CWCL”) direct to see whether or not arrangements could be put in place whereby some agreement to satisfy PCP could be put in place. A meeting was attended by Canary Wharf Contractors Limited via Mr. North their Quantity Surveyor and Mr. Morgan one of their Senior Project Managers. I attended on behalf of IES and I believe Joe O’Neil was also in attendance. PCP were represented by Paul Carden.

7.

The meeting itself took place on site at Canary Wharf. Paul Carden repeated his position that he would not work for IES as he simply would not be paid. As at the time of the meeting the relationship was at an end. PCP were no longer working for IES at that time. Mr. North and Mr. Morgan were anxious to have PCP on site. The job was at a critical stage and as many men as possible were needed to complete the work. In the circumstances CWCL proposed that they make payments to PCP direct. In such circumstances they agreed that they would raise an appropriate purchase order for them to work directly for Canary Wharf if that was an agreeable way forward. Paul Carden confirmed that if he were to work for Canary Wharf and they were to guarantee his payments then he would be happy to remain on site. In the circumstances an appropriate purchase order was drawn and handed to Paul Carden. My recollection is that the value of the purchase order was not considerable however PCP were advised by CWCL at the meeting that the purchase order would continue to be topped up and cover all work that they undertook on site and that they should not worry at all. The reason for a small sum being placed upon the purchase order was that were they to seek a purchase order for more substantial value then that would have to be handled higher up within Canary Wharf.

8.

In the circumstances given the assurance which were [sic] given Paul Carden agreed to return to site with PCP and thereafter began, at the request of Canary Wharf to considerably increase the number of men he employed on site.

9.

In accordance with the agreement reached I was requested to value the work undertaken by PCP and consider and where appropriate sign off their applications for payment as these sums would be recovered by CWCL from the IES final account. On certain occasions it was necessary to reduce the applications for payment which were made as I did not agree with them however where appropriate the applications for payment were signed off and forwarded through to Canary Wharf for payment. My recollection is that I signed off some 8 applications submitted by PCP.”

In cross-examination Mr. Smith frankly admitted that he did not recall the date of the Meeting. He said that he thought that Mr. O’Neill had been at the Meeting, but he accepted that he could be wrong about that. So far as the comment in paragraph 7 of his witness statement, “In the circumstances an appropriate purchase order was drawn and handed to Paul Carden.” was concerned, Mr. Smith told me that he had not intended to convey that that had happened at the Meeting. What he had meant to convey was that it was agreed at the Meeting that there would be a purchase order. He agreed that there had been no discussion at the Meeting of rates of charge or an overall price for what work PCP was, according to him, henceforth to be undertaking directly for CWC. Equally, there was no discussion of exactly what work was to be done, specifications or drawings, or the timing of any work.

The account of the Meeting given by Mr. North in his witness statement dated 2 April 2004 was rather different from the accounts of Mr. Carden and Mr. Smith. It was this:-

“17.

On 19^th March 2003 I met with Paul Carden of PCP and Ken Smith of IES, as they had requested. This was my first direct contact with PCP. It was an informal meeting, and centred on cash flow concerns. No allegations were made or blame cast for the delays and cashflow problems: the meeting was informal, open and not at all confrontational. In fact it only lasted about 10 minutes.

18.

There was no mention of any debt owed by IES to PCP. Both IES’s and PCP’s key concern was to get some cash to PCP to enable them to pay their men to keep working. I certainly had no idea how much money IES owed PCP at that time, nor that PCP had tried and failed several times to recover that money.

19.

Having already had the authorisation to do so from Eugenio [Caruso, CWC’s Director of Tenant Fit-out], I told Mr. Carden and Mr. Smith that I would be able to assist with the immediate cashflow crisis. I said that I could arrange for a payment to PCP of up to £25,000 fairly quickly. I explained that the only way to do this with the speed they required was to raise a purchase order.

20.

A company the size of Canary Wharf, with a number of different projects being carried out at the same time by a multitude of different Canary Wharf companies via hundreds of trade contractors, simply can not write cheques and hand them out without proper paperwork and an audit trail. Each project has its own budget, and different source and method of funding. We have established procedures in conjunction with those banks involved in funding and our own internal auditors. Our accounts department, headed by Kathy Frank, is strict about complying with these procedures, as she needs to know precisely where money is coming from, where it goes to, and why. She can not (and will not!) simply raise cheques when requested by cost managers: proper paperwork such as a purchase order has to be presented in order to provide a proper audit trail for all payments going out.

21.

I explained that the purchase order could not be for more than £25,000 if PCP wanted the money quickly, as a higher amount would need authorisation at a higher level and would inevitably take longer to get through. Eugenio Caruso would be able to sign it as soon as I put it in front of him. A larger sum however would have needed the second signature of John Pagano, CWCL’s Managing Director, who was often not around and always had a mountain of paperwork to sign, so anything that needed his signature took an unpredictable length of time to be authorised. Therefore I explained to Mr. Carden and Mr. Smith that from past experience a larger sum would take longer to get to PCP.

22.

Therefore we agreed that I would raise a purchase order for this maximum sum, and that PCP would invoice against it. We did not discuss what work the invoice would be for. We did not discuss the terms of the purchase order. I just knew that I had to get some money to PCP to keep them on site, and in particular at levels 1 and 2 which IES were due to complete by the end of June 2003.

23.

I made it clear to PCP and IES that the purchase order was an accounting mechanism only. We did not discuss what would happen after the £25,000 was exhausted. We did not discuss anything at this meeting other than how to get some money to PCP quickly in order to persuade them to stay on site. We didn’t even discuss what the £25,000 would be for. I didn’t have any idea of what work PCP was carrying out for IES on the HQ5 project: I thought they were providing some labour on levels 1 and 2. I can now see from their dayworks sheets that their subcontract work went far beyond this however.

24.

I certainly did not make any of the statements or representations alleged by PCP in its Particulars of Claim. CWCL does not have the resources to take on the subcontractors of its trades – plus it would be impossible to manage. Also if we suddenly entered into a separate contract with a subcontractor like PCP without omitting a substantial element of IES’s scope of work from IES’s contract then we would have to pay twice for this work. I didn’t know what the basis of their subcontract was; what the price or scope was; what PCP’s rates were, or anything on which we could have based any meaningful discussions on PCP’s work even if we had wanted to.

25.

We did not discuss any regular timing for valuations as PCP have alleged in their Particulars of Claim. The timing that we did discuss was this: after the purchase order was raised, PCP would send us an invoice. We would then pay that amount. I don’t think I made any promises about when they could expect a cheque, as I knew that our accounts department was likely to take some time to complete the paperwork for the purchase order and I didn’t want to put PCP off. I just said that I would try to get it through as quickly as I could, and Mr. Carden seemed happy with that.

26.

Finally, we certainly did not at the meeting discuss or agree that CWCL could or would ask PCP to carry additional works, nor that we would pay for such additional works. I did not say anything about future or additional work to PCP. It wasn’t my role to discuss how to manage their works – this would have been for the CWCL Project Manager to do. I had not had any detailed discussions with Eugenio Caruso or Trevor Morgan on how to manage the way forward with PCP at all by this time. If I had wanted to tell PCP that CWCL would instruct them directly and bypass IES on payments, I would have had a private meeting with Paul Carden to suggest this: it is not something IES would have agreed to! As I have already said, the one and only issue discussed at the meeting on 19 March 2003 was how to get some money to PCP quickly.

27.

The day after the meeting with Mr. Carden and Mr. Smith I began the paperwork to raise the purchase order.”

Mr. North in cross-examination stood firmly by the account which he had given in his witness statement. He confirmed that his recollection was that only he, Mr. Carden and Mr. Smith had attended the Meeting.

One further witness was called, in fact on behalf of PCP, as a witness of what had actually occurred at the Meeting. He was Mr. Kenneth Howe, who was engaged on the work at the Building as site manager for PCP.

Mr. Howe’s position in his witness statement dated 5 April 2004 was that he had himself attended the meeting at which the so-called CWC Agreement had been made. He also considered that Mr. Alan Pither of IES had been present. No one else who gave an account of the Meeting said that either Mr. Howe or Mr. Pither had attended. Mr. Smith, of course, considered that Mr. Morgan of CWC and Mr. O’Neill of IES had attended, but again he was alone in that recollection. For what it is worth the account given by Mr. Howe in his witness statement was this:-

“9.

Shortly thereafter Mr. Pither made contact with us confirming that he had arranged a meeting between himself, Paul Carden of PCP, Ken Smith, IES’ Quantity Surveyor and David North (CWCL’ Quantity Surveyor). In addition I was in attendance at this meeting again.

10.

After discussions during the course of that meeting it was concluded that PCP would have their payments guaranteed by CWCL on an open ended purchase order number 02/79943. The purpose of issuing a purchase order in this fashion were [sic] to enable PCP to receive monies urgently as CWCL did not want any interruption with the ongoing works and were desperate to finish the program [sic] so keeping within their overall timeframe. The purchase order itself stated that it was for the sum of £25,000 and referred to specifically one level of the HQ5 project. CWCL stated that the reason for this was simply that it would not be possible to create an alternate form of purchase order without their [sic] being significant delay and the appropriate paperwork being passed further up the Canary Wharf hierarchy for signature. In granting the purchase order in this fashion however CWCL advised that they could be flexible and instruct alternate works to be done under the same.

11.

It was further agreed between the parties that if IES’ Quantity Surveyors agreed PCP’s valuations as set out with any application for payment then a certificate for payment would be issued to CWCL by IES upon receipt of which CWCL would issue payment to PCP for the value of the certificate as drawn.

12.

Whilst payment terms had been agreed and put in place, on numerous occasions IES had severe shortages of materials on site due to the fact their suppliers would only deliver to them on a cash on delivery basis or upon receipt of cleared funds. When shortages arose PCP were requested by CWCL to provide emergency materials. In such circumstances these would be transported directly to site from PCP’s suppliers by PCP’s own van and driver. Materials would include plasterboards, metal studs, MF sealing materials and jointing tape and materials etc. The reason for this was to ensure that [at] all times operatives were kept busy on site and the contract was moved forward. I was clearly concerned on occasion when I was aware that we were only required to supply the labour to site. In such circumstances however the representatives of CWCL would indicate that they were paying PCP themselves so there was no reason why the request should not be complied with. When requests for emergency supplies were made these would be made by the immediate floor manager from CWCL. In turn I would then obtain appropriate authorisation from Rick Martin the Senior CWCL Package Manager. After he had proved [sic] the purchase of material we would make arrangements for them to be delivered to site.”

In cross-examination Mr. Howe was adamant that he had been at the Meeting. He was unmoved by the suggestion that he must be in error as no one else who had been at the Meeting remembered him as having been there. He said that he did not participate, but listened throughout. He told me that he thought that the meeting had been in mid-March 2003 and had lasted 15 minutes at most.

At the trial of the preliminary issues both Mr. Simon Cavender, who appeared on behalf of PCP, and Mr. Simon Hughes, who appeared on behalf of CWC, relied to a degree in support of their client’s respective cases as to what had been agreed at the Meeting on what happened subsequently. In the case of Mr. Cavender the reliance was in particular upon the understanding of various gentlemen whose statements were relied upon on behalf of PCP as evidence of what had been agreed. Mr. Hughes did not require those gentlemen to attend for cross-examination, his position being that their evidence was irrelevant. Mr. Hughes himself relied upon documentary evidence as to what had followed the Meeting in terms of procedures adopted being consistent only with the version of the Meeting for which CWC contended being correct.

Those whose evidence was relied upon on behalf of PCP in addition to that of Mr. Carden, Mr. Smith and Mr. Howe were:-

Mr. Davies dealt with the giving of instructions by CWC to PCP. At paragraph 4 of his witness statement dated 17 February 2004 he said:-

“I became aware that IES were in some form of financial dispute with Canary Wharf Construction Limited though I was not party to the issues relating to that dispute. I was however instructed directly by the management at Canary Wharf Construction Limited that as Managers on the project we were to liaise directly with PCP to carry out works for and on behalf of Canary Wharf Construction Limited directly. In short, where it was necessary for additional works or re-work to be carried out we were given authority to instruct P C Partitions to undertake that work. I would confirm that this course of action was followed in the full knowledge of both Canary Wharf Construction Limited and P C Partitions Limited.”

In his witness statement at paragraph 3 Mr. Locke recorded his understanding that by the time he was working for PCP PCP had been retained directly by CWC. He did not set out why that was his understanding.

Mr. Gary Smith explained at paragraphs 3 and 4 of his witness statement that on his first day at the Building he attended a meeting also attended by Mr. Martin, Mr. Sexton, Mr. North and Mr. Davies of CWC at which Mr. North and Mr. Martin “repeated on a number of occasions that there was absolutely no problem with money as P C Partitions and Mr. Carden were being paid directly by Canary Wharf Contractors Limited”. Mr. Gary Smith also said in his witness statement:-

“7.

I recall one meeting which I was involved with which took place on the 3^rd floor of the building. This took place with Mr. T. Morgan, Mr. D. North and Mr. P. Sexton of Canary Wharf Contractors Limited and Mr. J. O’Neil of IES. In addition the Architect was present. Mr. Morgan asked why no one had started building the expansion gap detail between the two buildings. Mr. O’Neil said that it was not in the IES package and that the finalised drawings had not yet been produced by the CAD office. Mr. Morgan was anxious to see the matter moved forward and simply stated that if those works were not in anyone’s package then P C Partitions were to be requested to do the job and that Canary Wharf Contractors Limited would pay them in respect of that work.

8.

At an alternate meeting in the Canary Wharf Contractors Limited office I again found myself in discussions in respect of these matters with Mr. Martin, Mr. Jones, Mr. North of Canary Wharf Contractors Limited and Mr. Carden and Mr. Howe of PCP. On that occasion we were asked to explain the reasons why certain aspects of the job which we had been undertaking had not been completed. It was explained that this was simply as a result of lack of materials. Mr. Carden was asked whether or not he could actually source materials quickly and he confirmed that he could. In the circumstances after some little debate Mr. North and Mr. Martin instructed Mr. Carden that he should proceed to purchase materials and have them delivered to site and place the value of those materials upon his next valuation. Whilst I had no part in the preparation of valuations for PCP I understand that this did in fact take place.”

Mr. Barns’s evidence was really limited to saying that he had been told by Mr. Carden that “as and when he had been approached to take on the substantive partitioning work which was now required that he had told them that unless he was paid directly by Canary Wharf he was not interested in undertaking the contract” and:-

“6.

During the course of our working with P C Partitions both myself and my men worked on six floors of HQ5 during which time we had day to day dealings with floor managers employed by Canary Wharf direct. All of the managers were delighted with the progress which had been made by P C Partitions. They indicated to us that they were completely fed up with IES and their ongoing incompetence. During the course of all the conversations which I had with the floor managers they were all of the understanding that P C Partitions worked directly for Canary Wharf. This they stated was backed up by the fact that they were able to work directly with both P C Partitions and indeed sub-contractors of P C Partitions and direct exactly where works were to be undertaken and indeed supervise those works. At no time were these works supervised by IES.”

The evidence of Mr. Welsman in his witness statement dated 3 February 2004 was particularly relied upon by Mr. Cavender. It included:-

“2.

Throughout the period of my employment I worked closely with many of the trades and contractors working on site to complete the project within the relevant period. One of the companies with whom I was familiar was P C Partitions Limited a company specialising in undertaking the installation of ceilings and partition walls. It was made clear to me by my superiors Mr. Rich Martin, the Senior Construction Manager for Canary Wharf and Trevor Morgan, the Projects Manager that P C Partitions had been hired directly by themselves to urgently undertake the reworking of a large section of work which had been undertaken by Messrs. Futures Limited. Futures Limited had been employed directly by Canary Wharf to undertake a certain amount of work although their work had been of an exceptionally poor quality and had not been completed. The work which had in fact been undertaken was so defective as to require stripping out and redoing. In the circumstances, on the basis that P C Partitions were performing well on site they were instructed to undertake the entirety of that work.

3.

Whilst I was not party to all contractual documentation operated by Canary Wharf Contractors it was generally the policy during my employment that Canary Wharf would operate on a preferred trade contract basis with the majority of the contractors having previously worked directly with them on alternate contracts. In addition, once on site, those contractors are expected to operate on a pro-active basis and respond to all verbal instructions issued by Canary Wharf Construction Limited Managers to progress works without, in many instances, appropriate paperwork for those instructions being in place. It must be remembered that during my period on site, enormous numbers of trades were on site as steps were being taken to ensure that the building was completed and fitted out within the appropriate timeframes which had been set. Financial issues in relation to verbal instructions of this type would be addressed as between the parties in due course. …

5.

As stated at the outset of this statement I would confirm that Canary Wharf Contractors Limited were at that stage operating directly with their preferred contractors one of whom was P C Partitions Limited. P C Partitions were, so far as I was concerned employed directly by Canary Wharf Contractors Limited. I was required on a number of occasions to provided [sic] appropriate verbal instructions to P C Partitions to undertake works. In doing so I was giving instructions for and on behalf of Canary Wharf Contractors Limited.”

It was in fact no part of the case of PCP in this action that it had been retained directly by CWC specifically to rework a section of work undertaken initially by Futures Ltd. Again, no PCP employee, and in particular not Mr. Carden, contended that PCP was a “preferred trade contractor” of CWC.

The contribution to the evidence made by Mr. Williams was what he said at paragraph 3 of his witness statement dated 10 February 2004:-

“I was informed directly by the management at Canary Wharf that Canary Wharf had reached agreement with PCP to make payments to them directly. I was advised that this was on the basis that they were now under pressure to complete the works and indeed P C Partitions were completing works in the manner that they had originally required.”

Apart from the evidence of Mr. North the only witness called on behalf of CWC was Mr. Caruso. His evidence was really directed to the commercial background to the dealings between CWC and PCP and was not substantially in dispute. I accept the evidence of Mr. Caruso, but it does not impact particularly on the question of what, if anything, was agreed at the Meeting.

CWC did, however, rely upon various documents the authenticity of which was not in dispute as indicating that the effect of the discussion at the Meeting was not, and was known at the time by PCP not to be, that an agreement along the lines of the so-called CWC Agreement was made. The critical point was that PCP’s case was that the agreement made at the Meeting was to the effect that PCP, which previously had been simply a sub-contractor to IES and not at all in direct contractual relations with CWC, now became a direct contractor to CWC, pro tanto, at least, in substitution for IES. The documents relied upon by CWC were all contended to be, and were in fact, as it seems to me, inconsistent with that position because they showed PCP still after the Meeting to be acting as a sub-contractor to IES.

The first category of documents relied upon by CWC were orders placed by IES with PCP for work included in the Work Package to be done. In particular,

The next category of documents upon which CWC relied were valuations and invoices addressed by PCP to IES after the date of the Meeting and concerning works undertaken at the Building, that is to say, works which, if the agreement for which PCP contended had been made at the Meeting, would have been undertaken directly for, and at the cost of, CWC.

Where CWC requested works extra to those included within the Work Package to be undertaken and the requests were made after the date of the Meeting and were in writing they were addressed not to PCP, but to IES. Moreover, where a request for extra works was made verbally after the date of the Meeting it was made the subject of a Confirmation of Verbal Instruction in a standard printed form headed “Infinite Environmental Services Ltd.” and addressed to an appropriate representative of CWC, one of whom was Mr. Welsman. In addition, PCP recorded time spent on extra works on dayworks sheets upon which it sought and obtained the signature not of a representative of CWC, but of a representative of IES, often Mr. O’Neill.

An agreement was made in writing dated 10 April 2003 between IES and PCP which included the following:-

“PCPL agreed to act as a labour only sub-contractor for I.E.S. on the HQ5 – Clifford Chance fit out project to carry out works on certain floors.

I.E.S. agreed to pay PCPL on a monthly basis, in accordance with the valuation and payment schedule agreed between I.E.S. and Canary Wharf, and as revised to a twice-monthly valuation and payment cycle.

It is agreed that due to circumstances the regular flow of monies have been disrupted and that payments due to PCPL have been delayed.

It is now agreed to rectify the payment situation over the next two/three months.

Payments will be made on or before the following dates at the sums shown, which includes VAT.

Added to these figures will be the agreed value carried out in the previous application/valuation period (if applicable).”

IES sent a memorandum dated 18 June 2003 addressed to “all Sub-Contractors” to PCP. The subject of the memorandum was said to be “Applications & Payments HQ5 – Clifford Chance”. The text of the memorandum was:-

“CWCL have insisted that as from 25^th May 2003 all applications and payments revert to a monthly cycle.

IES have been trying to negotiate with them to maintain fortnightly application and payments, but CWCL have confirmed that there will be no change to this decision.

This means the following schedule shall apply:-

Application Date Payment Date

25^th May 25^th June (+3 days)

25^th June 25^th July (+3 days)

25^th July 25^th Aug (+3 days)

25^th Aug 25^th Sept (+3 days)”

Mr. Carden responded to the memorandum dated 18 June 2003 in a letter dated 19 June 2003. In that letter he said:-

“I am in receipt of your memo dated 18^th June regarding applications and payments.

As of Friday 20^th June we will be reducing our labour to 40 operatives due to your revised payment terms, as we are already an application behind we can not fund this project because we pay our work force every two weeks by BACS and we will have a shortfall of approximately £175,000.00 - £200,000.00 funding to cover our wage bill. We have three payments before the 28^th July 2003.

The terms agreed with P C Partitions Limited were that we invoice on the 11^th and the 25^th of each month and get payment on the 14^th and 28^th of each month.

As you are aware all payments have constantly been late.

We regret this action but unless we receive an on account payment of £200,000.00 by Wednesday 2^nd June [sic] labour will be reduced. Can you please confirm if an on account payment will be made on the above date. If you can confirm this we will not reduce labour tomorrow.

The 6^th valuation we have just submitted is for £339,055.40 plus vat and approximately £100,000.00 is being held until account is agreed on valuation 4 & 5.

As you would agree funding of this project is quite substantial for a company of our size.”

It was not in dispute that the effect of the Direct Payment Agreement, if construed literally by reference only to its express terms, was that CWC was prepared to pay directly to PCP only sums referable to variations to the Work Package and not sums in respect of matters the subject of the Work Package. If, up until the conclusion of the Direct Payment Agreement, the position had been that under an agreement made at the Meeting CWC had been bound to pay PCP for all work which it did in the Building, by entering into the Direct Payment Agreement PCP, subject to the arguments concerning the Direct Payment Agreement to which the preliminary issues give rise, gave up something of considerable value to it. Mr. Cavender in his written skeleton argument at paragraph 26 submitted that:-

“PCP signed the Tripartite Agreement in circumstances where it had little or no commercial option – PCP had to sign or no further direct payments were to be made by CWC [1/2/88/20]. The agreement only deals with variations and applied to all sub-contractors. ”

The reference alleged to support the submission that PCP had little or no commercial option but to enter into the Direct Payment Agreement was paragraph 20 of the witness statement of Mr. Carden on page 88 of volume 1 of the trial bundle behind divider 2. However, Mr. Carden did not there say what Mr. Cavender submitted that he said. What Mr. Carden actually said was:-

“On the basis that various trades were now being paid direct I subsequently received at my office a copy of a direct payment agreement which has subsequently been referred to in correspondence as the tripartite agreement. All sub-contractors on site were forwarded a copy of the agreement and advised that unless the same was signed up immediately no further payments would be made direct to them by CWCL. The document was signed by me and returned directly to CWCL as was requested. The document itself however was not signed and dated by CWCL until 20 June 2003 when the tripartite agreement was returned to me. I assumed that the agreement would effectively come into existence as and when both parties had signed up to it. By 20 June however CWCL had already paid to P C Partitions significantly more than the original purchase order had been valued at, in accordance with the verbal instructions and agreed systems discussed between us. After 20 June however no further payments were made whatsoever by CWCL to P C Partitions Limited and in such circumstances it is unclear to me whether or not any payments made by CWCL to PCP had been made in accordance with that agreement or not.”

While Mr. Carden said in that passage that CWC had said to all sub-contractors that no further payments would be made directly to them unless they respectively signed direct payment agreements, he did not seek to explain why he signed the Direct Payment Agreement if PCP was already, as contended, the beneficiary of an agreement made at the Meeting. If, of course, no agreement such as that contended for on behalf of PCP had been made at the Meeting, far from being disadvantageous to PCP, the Direct Payment Agreement was advantageous in providing a mechanism under which CWC would at least pay directly for variations to the Work Package.

I was very impressed by Mr. North as a witness and I accept his evidence as to what was said at the Meeting. His evidence was supported by the contemporaneous documentary evidence of how each of PCP, IES and CWC acted after the Meeting. On the other hand, not only was the evidence as to what had been said at the Meeting called on behalf of PCP inconsistent with the contemporaneous documentary evidence, but it was itself, in my judgment, unsatisfactory for various reasons. Mr. Carden was indefinite in his evidence in chief as to exactly when the Meeting had taken place. He seemed to emphasise the fact of the placing of the CWC Order and his interpretation of its terms at least as much as any professed recollection of what had been said at the Meeting. He did not really grapple with why, if the agreement for which he contended had in fact been made, IES had any continuing role in dealings between CWC and PCP, yet he was firm in his evidence, as set out in paragraph 14 of his witness statement, that in effect the verification of the propriety of the applications for payment made by PCP was to be in the hands of IES, which on his account had no subsisting contractual obligations in relation to the work which PCP was doing, and not in the hands of the allegedly paying party, CWC. Mr. Carden also in his witness statement clearly indicated that his recollection at the time he made it was that steps were taken at the meeting to prepare the CWC Order. He accepted in cross-examination, correctly as I find, that that was not accurate. Mr. Kenneth Smith spoke of numerous meetings taking place and of the one which he remembered being attended not only by himself, Mr. Carden and Mr. North, but also by Mr. Morgan of CWC and probably Mr. O’Neill of IES. Neither Mr. Carden nor Mr. North recalled either Mr. Morgan or Mr. O’Neill being present at the Meeting. His recollection at the date of his witness statement, made only 8 days before he gave evidence orally before me, seemed to be that the CWC Order had been handed over at the Meeting. In cross-examination he accepted that that was wrong. My conclusion as to Mr. Smith’s evidence is that it is unreliable as he seemed either to be confusing the critical Meeting with another also attended by Mr. Morgan and, perhaps, Mr. O’Neill, or to have an erroneous recollection to such degree that he was mistaken as to who attended the Meeting. None of Mr. Carden, Mr. North or Mr. Kenneth Smith recalled Mr. Howe being at the Meeting and I am satisfied that he was not. It follows that his professed recollection of the Meeting is at fault.

In his written closing submissions Mr. Cavender recognised that the accounts of the Meeting given by Mr. Carden, Mr. Kenneth Smith and Mr. Howe were inconsistent. However, he submitted that I should accept the evidence of Mr. Howe and went on to say, in paragraph 11 of his submissions:-

“Much play is made by CWCL of the discrepancies in the recollections of the 19^th March meeting by PCP’s witnesses. Such minor discrepancies point, if anything, toward the veracity of those witnesses, rather than toward fabrication.”

That submission seemed to me to miss the point. No suggestion was made by Mr. Hughes that any of Mr. Carden, Mr. Kenneth Smith or Mr. Howe had deliberately concocted evidence which they knew to be false. Mr. Hughes’ submission was that the discrepancies in the evidence of Mr. Carden, Mr. Kenneth Smith and Mr. Howe, and the changes of position of Mr. Carden and Mr. Kenneth Smith in cross-examination concerning what, if anything, was done at the Meeting concerning the CWC Order, were of such significance as to show that the evidence of each of them was unreliable. As I have indicated, I accept that submission. I do not at all accept the characterisation of the differences between the evidence of Mr. Carden, Mr. Kenneth Smith and Mr. Howe as “minor”. The discrepancies were very important, especially over the fundamental matter of who actually attended the Meeting.

The evidence called on behalf of PCP from gentlemen who were not at the Meeting as to their respective understandings of the arrangements between CWC and PCP needs to be considered with some care. None of the witnesses in this category actually had any direct interest in what contractual arrangements, if any, existed between CWC and PCP. Thus whatever they picked up was in the nature of casual information which they had no reason to check or to query. It was not in dispute that CWC knew that IES had sub-contracted various parts of the Work Package and that it knew that one of the sub-contractors was PCP. It was not in dispute that in relation to the works which it physically undertook PCP was, as it were, the on-site representative of IES. It was accepted on behalf of CWC that its representatives actually gave instructions to persons known to be representatives of PCP. The case of CWC was that that was done treating the representatives of PCP as indistinguishable from representatives of IES. That case was supported by the documentation generated contemporaneously to which I have referred. It was not disputed by CWC that it in fact intended to operate as from about the end of March 2003 the system of direct payment for which in due course the Direct Payment Agreement provided and that direct payments were made in pursuance, as it was thought at the time, of that system. The system was intended, so far as CWC was concerned, only to apply to variations to the Work Package, but that would have the consequence that any variation to the Work Package which CWC wanted PCP to carry out it would see itself as paying PCP directly for. In the context which I have explained it seems to me that the evidence of Mr. Davies, Mr. Locke, Mr. Gary Smith, Mr. Barns, Mr. Welsman and Mr. Williams is not inconsistent with the position as it was contended on behalf of CWC to be and as I have found it to be. Any apparent inconsistencies are, in my judgment, explicable on the basis that the understanding of the relevant witness of a matter in which he had no direct interest was incomplete because he was not aware of the full circumstances. Mr. Hughes submitted that the evidence currently under consideration was irrelevant anyway as it was not direct evidence of the making of the agreement for which PCP contended. I am sympathetic to that submission. The reasons why evidence as to the understanding of persons not present at a meeting at which an oral agreement has allegedly been made of what was agreed is not in general admissible is because it is susceptible to exactly those objections which have prompted me to reject it in this case.

I find that the only agreement made at the Meeting was that CWC would make a payment to PCP of a sum of up to £25,000 generally on account of what was owed to it by IES as at 19 March 2003 if PCP raised an invoice in the sum which it wished to be paid, and that to facilitate the making of such payment under its internal procedures CWC would raise an order addressed to PCP which would meet the domestic criteria of CWC for making the payment. Thus the answer to Issue 1(a) is that there was a concluded agreement. The answers to Issue 1(b) and (c) are that the terms of the agreement are those which I have identified in this paragraph, which also indicate the terms and effect of the agreement.

I do not find that Mr. North made any representation to Mr. Carden to the effect alleged in paragraphs 16 and 15(b)(v) of the Particulars of Claim.

Issue 3 raised in respect of the Direct Payment Agreement the questions what were the terms of the agreement and what were the nature and effect of it. Those questions do not really reveal what the real issues were. There was no dispute as to the terms of the Direct Payment Agreement insofar as those terms were set out expressly in writing in the agreement itself. That Mr. Cavender made clear at paragraph 31 of his written closing submissions. There was, I think, no dispute as to the literal meaning of any of the express terms. The real point at issue was whether PCP was bound by the terms set out in the Direct Payment Agreement in accordance with their literal meaning.

In his written skeleton argument Mr. Cavender set out his submissions in relation to Issue 3 as follows:-

“26.

PCP signed the Tripartite Agreement in circumstances where it had little or no commercial option – PCP had to sign or no further direct payments were to be made by CWC [1/2/88/20]. The agreement only deals with variations and applied to all sub-contractors.

27.

At this stage PCP was not a sub-contractor of IES. It had ceased working for IES as a result of the 19^th March 2003 meeting and/or the representations made at that meeting. In any event, the agreement does not limit CWC’s liability to PCP and does not affect CWC’s liability to PCP under PCP’s direct engagement alternatively any claim for quantum meruit. As noted in the Defence and Counterclaim [1/1/18/2(iii)c)], the Tripartite Agreement did not seek to impose any legal liability upon CWC. In the premises, it cannot have removed the obligations already assumed by CWC to PCP.

28.

Alternatively, if the Tripartite Agreement does have a bearing upon the relationship of PCP and CWC, it is contended that the following terms must be implied as a matter of law or to give the agreement business efficacy:-

(a)

In making any decision as to the amount to be paid (if any) to the Claimant:-

(i)

the Defendant must act reasonably and upon the evidence provided to it by the Claimant and/or

(ii)

the Defendant must make any decision in good faith;

(iii)

in relying upon IES’s Statement of Conformity, CWC should accept the same, save where it has good reason to depart from the same.

(b)

Insofar as the Defendant does not accept the Claimant’s valuation and/or IES’s Statement of Conformity, the Defendant should provide reasons for not accepting the same.

29.

Further, insofar as CWC seeks to rely upon Clauses 6 and/or 12 of the Tripartite Agreement [they] are unenforceable and/or unreasonable.”

In his written closing submissions Mr. Cavender essentially repeated those submissions. Concerning the nature and effect of the Direct Payment Agreement Mr. Cavender said in his written closing submissions:-

“33.

The Tripartite Agreement does not regulate the relationship between PCP and CWCL. The Tripartite Agreement was a standardised document. It is clear on its face that it did not regulate the freestanding agreement between PCP and CWCL. In the absence, of any on-going contractual relationship between PCP and IES, the Tripartite Agreement seeks effectively to remove all liability for variations from CWCL.

34.

PCP rely upon the matters set out in the Particulars of Claim [1/10/35] as demonstrating that the Tripartite Agreement is irrelevant to the parties’ respective rights and obligations. It cannot sensibly be construed in the light of the factual matrix, namely, PCP was directly contracted to CWCL.

35.

If and to the extent that the Tripartite Agreement is relevant, it is relevant only to variations. The Agreement does not seek to regulate any direct obligation upon CWCL to pay PCP by reason of the CWC Agreement.”

The main thrust of the submissions of Mr. Hughes in relation to Issue 3 was set out in paragraphs 29 and 30 of his written opening submissions as follows:-

“29.

PCP offer no cogent reasons [wh]y the Tripartite Agreement should not simply be given effect according to its express terms. Notions of unfairness and/or duress are hinted at but they are not spelled out in the pleadings, in the witness evidence, or in PCP’s Opening Submissions. This is really not good enough, it is submitted.

30.

The Tripartite Agreement had as its principal aim making direct payments possible from CWCL to IES’ Sub-Contractors (including PCP) because of IES’ financial difficulties. However, by Clause 6, the parties all agreed that PCP would have no direct right of action against CWCL.”

At paragraph 26 of his written opening submissions Mr. Hughes asserted that:-

“To the extent that it is relevant, CWCL says that there is no basis in fact or in law for the implication of terms contended for by PCP.”

In his written closing submissions Mr. Hughes repeated that CWC’s case was that the Direct Payment Agreement should be given effect in accordance with the ordinary meaning of its express terms.

The submissions set out in paragraph 27 of Mr. Cavender’s written opening skeleton argument and in paragraphs 33 to 35 of his written closing submissions were all premised on the success of PCP’s case as to the so-called CWC Agreement. As that case has failed it is not really necessary to consider those submissions further. However, subject to questions of construction, there is no obvious reason why a contract made between parties should not be capable of being varied by a later contract.

No real question as to the construction of the express terms of the Direct Payment Agreement was raised on behalf of PCP. Rather Mr. Cavender submitted that if the Direct Payment Agreement was binding upon PCP – and in my judgment there is no obvious reason why it should not be – terms were to be implied into it and it should be held that clauses 6 and 12 were unenforceable or unreasonable. An express term of an agreement can only be held to be unenforceable if to enforce it would be contrary to law. The reasonableness of an express term is not relevant unless it affects the enforceability of the term. The most obvious context in which the enforcement of a term considered to be unreasonable would be contrary to law would be if the term in question fell for consideration in the context of Unfair Contract Terms Act 1977. However, in his oral opening on behalf of PCP Mr. Cavender made plain that PCP was not seeking to rely upon the provisions of that statute, and thereafter the issue of the reasonableness of the Direct Payment Agreement or of any of the terms thereof fell away. Mr. Cavender also made clear in his oral opening that PCP was not contending that it had entered into the Direct Payment Agreement under duress.

The principal commercial objectives sought to be achieved by an agreement like the Direct Payment Agreement under which provision is made for a party, A, to make payments to a party, C, with whom he is not in direct contractual relations, but who is a sub-contractor to a party, B, with whom A is in direct contractual relations are, first, that any payment made by A to C should be agreed by B to be treated as pro tanto a discharge of the contractual obligations of A to make payment to B, and, second, that by entering into the agreement A should not be taken to have assumed obligations to C which prior to the making of the agreement did not exist. The express terms of the Direct Payment Agreement seem to me to achieve these objectives.

I accept the submission of Mr. Hughes that there is no warrant in fact or in law for implying into the Direct Payment Agreement any of the terms for which Mr. Cavender contended on behalf of PCP.

A formulation of the test to be applied in considering whether it is necessary or appropriate to imply terms in a contract was set out by Lord Pearson in Trollope & Colls Ltd. v. North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 at page 609A-D:-

“Faced with the conflict of judicial opinion in this case, I prefer the views of Donaldson J and Cairns LJ as being more orthodox and in conformity with the basic principle that the court does not make a contract for the parties. The court will not even improve the contract which the parties have made for themselves, however desirable the improvement might be. The court’s function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term which went without saying, a term necessary to give business efficacy to the contract, a term which, although tacit, formed part of the contract which the parties made for themselves.”

It does not seem to me that any of the terms which Mr. Cavender submitted should be implied into the Direct Payment Agreement satisfied the test formulated by Lord Pearson.

The short answer to Issue 3 is that the only relevant terms of the Direct Payment Agreement were the express written terms and the agreement took effect in accordance with those terms.

Issue 4, which was formulated as “Do the circumstances arising out of the “CWC Agreement” and/or the “Tripartite Agreement” amount to requests for work and/or services from the Defendant to the Claimant?”, again, as it seems to me, did not reveal entirely clearly what the point of it was. The point actually was whether the circumstances referred to amounted to requests which, if complied with, gave rise to an obligation on CWC in restitution to compensate PCP for the work done or the services rendered. In the light of my findings indicated above in this judgment the answer to the point is negative.

For the reasons set out earlier in this judgment the answers to the preliminary issues are:-