Case No: HT - 07 - 74
St Dunstan’s House
133-137 Fetter Lane
London, EC4A 1HD
Before :
HIS HONOUR JUDGE TOULMIN CMG QC
Between :
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FELTON CONSTRUCTION LIMITED |
Claimant |
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- and - |
|
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LIVERPOOL CITY COUNCIL |
Defendant |
Miss Karen Gough (instructed by Martin Amey & Co) for the Claimant
Mr Piers Stansfield (instructed by Halliwells) for the Defendant
Hearing dates: 5th 6th 7th November 2007
Judgment
HIS HONOUR JUDGE TOULMIN CMG QC:
By amended Particulars of Claim, Felton Construction Ltd (Felton), a building contractor, claims further payment for work carried out for Liverpool City Council (“The Council”) at Stockton Wood Primary School, Speke, Liverpool on the basis of a quantum meruit. Felton claims that a reasonable sum for the works which it has carried out is £4,133,214.10 and that, having given credit for sums paid by The Council, the unpaid balance due to Felton amounts to £941,490.25.
Having been told by the parties that the answers to the following questions might well enable the parties to resolve the dispute, on 25 July 2007 I ordered a trial of the following preliminary issues as formulated by the parties:
What are the terms of the contract [relationship] between the parties?
What are the terms of the contract under which the Claimant’s works should be valued?
Is the Claimant estopped from denying the terms of the contract relied upon by the Defendant in the Amended Defence and if so, on what basis?
Does the contract, as found by the court, include an arbitration clause?
Before the hearing on preliminary issues the parties completed the pleadings and exchanged witness statements relating to the Preliminary Issues.
The witness statements which were filed included a long witness statement from the current Managing Director of Felton, Mr Carter. Unfortunately he joined the company on 23 May 2005 by which time the works at the Primary School had been completed. Most of his witness statement is hearsay and takes matters little further than the documents which are before me.
There was also a short witness statement from Mr Fox who joined Felton as Managing Director on 8 March 2004 by which time the works at the Primary School were substantially complete.
There was also originally a short witness statement before me from Mr John Lamprell, Felton’s estimator at the time of the formation of the contract. The statement did not go into any relevant detail although it is clear from the documents that it could have done, and at the start of the hearing Felton gave notice that they did not propose to call him to give evidence and withdrew his statement.
At the start of the hearing Mr Lightfoot, an Associate Quantity Surveyor, employed by Markhams, chartered quantity surveyors on behalf of The Council and Mr York, a partner in the firm of Wilson, Hindle, Halsall, Lloyd Partnership (WHHL), later the Halsall Lloyd Partnership (HLP), were prepared to give oral evidence on behalf of The Council. Following the Claimant’s decision not to call Mr Lamprell, the Defendant decided not to call Mr York or Mr Lightfoot to give oral evidence.
After further discussion between the parties I have before me Mr Lightfoot’s witness statement and a short note relating to paragraph 7 of Mr York’s original statement. The rest of Mr York’s statement is not before me.
In essence the Claimant contends that although the parties hoped to agree a contract, on the facts they failed to reach a sufficient degree of agreement and certainty to conclude a binding contract on agreed terms and therefore Felton is entitled to be paid on a quantum meruit basis.
In essence the Defendants contend that a written agreement was concluded which governs the relationship between the parties.
I first set out the law, then I consider the facts and the contentions of the parties and then I reach my conclusions.
THE LAW
In essence there are three basic essentials to the creation of a contract: agreement, contractual intention and consideration. The normal test for determining whether the parties have reached agreement is to ask whether an offer has been made by one party and accepted by the other. Even where an apparent agreement has been reached it may fail to give rise to a binding contract because the agreement is incomplete or insufficiently certain.
As set out in Chapter 2 on Chitty on Contracts ( edition):
“In deciding whether the parties have reached agreement, the courts normally apply the objective test. Under this test, once the parties have to all outward appearances agreed in the same terms on the same subject matter, then neither can, generally, rely on some unexpressed qualification or reservation to show that he had not in fact agreed to the terms to which he had appeared to agree. Such subjective reservations of one party therefore do not prevent the formation of a contact.”
In relation to the claim that there was an incomplete agreement it is right to note that parties may reach agreement on matters of principle but leave important points unsettled so that their agreement is incomplete. On the other hand an agreement may be complete and enforceable although it is not worked out in meticulous detail. Even failure to agree the price is not necessarily fatal.
The principles to be applied to construction of documents were set out by Lord Hoffmann in ISC Ltd v West Bromwich BS [1998] 1 WLR 896 and are as follows:
Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would be available to the parties in the situation in which they were at the time of the contract.
The background may include anything which would have affected the way in which the language of the document would have been understood by a reasonable man or woman.
The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.
The meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.
Words should be given their “natural and ordinary meaning”. However this does not require Judges to attribute to the parties an intention that they plainly could not have had.
To these propositions must be added the following when considering whether the parties have concluded an enforceable contract.
The fact that a clause in a contract may be difficult to interpret does not mean that it is meaningless. The court must do its best to select among contending interpretations the one that best matches the language of the parties as expressed in the language they adopted – see Steyn LJ in “ The Star Texas ” [1993] 2 Lloyds Rep 445 at page 452.
The Judge is entitled to look behind the apparent or literal meaning of the words of a letter in order to determine the true intent of the parties, see Latham LJ in Harvey Shop Fitters v Adi [2003] EWCA Civ 1757.
Where there are contemporary exchanges and the carrying out of what was agreed in those exchanges, the course of dealing may create on one side a right to performance and on the other a right to be paid on an agreed basis – see Steyn LJ in Trentham Ltd v Archital Luxfer [1993] 1 Lloyds Rep 25 at 29.
In principle it is for the parties to decide whether they wish to be bound and if so by what terms – see Lloyd LJ in Pagnan v Feed Products [1987] 2 Lloyds Rep 601 at 619.
Although the more important the term is the less likely it is to have been left by the parties for future decision, there is no legal obstacle to the parties agreeing to be bound now while deferring important matters to be agreed later – see Pagnan at page 619 (see above).
In Trollope v NW Met Hospital Board [1973] 1 WLR 601 at 609 Lord Pearson emphasised that “the court’s function is to interpret and apply the contract that the parties made for themselves … an unexpressed term can be implied only if the court finds that the parties must have intended the term to form part of the contract.”
In each case the courts must consider whether or not the terms of a contract have been agreed. In British Steel Corporation v Cleveland Bridge [1983] 24 BLR 94 Robert Goff J held that there was no binding executory contract since the claimants were asked to and did proceed with the work pending the preparation and issuing of a form of sub-contract being a sub-contract which was plainly in a state of negotiations not least on the issues of price, delivery dates and the applicable terms and conditions. It was impossible to say what the material terms of the contract would be.
In commercial contracts the court, whilst applying established legal principles, will strive to uphold a commercial bargain:
In Sykes v Fine Fare [1967] 1 Lloyds Rep 53 Lord Denning MR said that in a commercial agreement the further the parties have gone on with their contract, the more ready are the courts to imply any reasonable term so as to give effect to their intentions. “When much has been done the courts will do their best not to destroy the bargain.”
In Sudbrook Trading Estate v Eggleton [1983] 1 AC 444 at 460 the court said that it will even provide a substitute machinery to fill a gap in the contract when it is appropriate to do so.
In Mamidoil v Okta [2001] Lloyds Rep 76 at 89 Rix LJ said at paragraph 66 of his judgment:
“In a commercial contract which when dealing with the future and sometimes the long-term future, of necessity leaves out certain matters to be worked out over time - an arbitration clause assists the court to find certainty by means of the implication of what is reasonable. Which is not to say that the Court will not itself provide the dispute resolution machinery even in the absence of an arbitration clause.”
At paragraph 69:
“However, particularly in commercial dealings between parties who are familiar with the trade in question, and particularly where the parties have acted in the belief that they had a binding contract, the courts are willing to imply terms where that is possible that enable the contract to be carried out … For these purposes an express stipulation for a reasonable or fair measure or price will be a sufficient criterion for the courts to act on. But even in the absence of express language the courts are prepared to imply an obligation in terms of what is reasonable.”
I emphasise that none of these principles derogate from the overriding requirement that, judged objectively, there was an offer from the offeror and acceptance by the offeree in order to form a contract. The court must consider whether there was any agreement and, if necessary, define the extent of the agreement.
THE FACTS
By a letter dated 17 December 2002 Mr Lightfoot of Markhams on behalf of The Council sent an invitation to tender for work at Stockton Wood Primary School.
The letter said:
“Following your agreement to tender for the above scheme we now have pleasure in enclosing herewith the following:
(i) One copy of the Bills of Quantities.
(ii) One copy of the Form of Tender.
(iii) One set of the Architect’s and Structural Engineer’s tender drawings as listed in the specification page 1/3 Clause 110.
(iv) One set of the Mechanical and Electrical Technical Specifications plus listed drawings.
(v) Tender Envelope …”
The letter said that the Form of Tender was to be sealed and delivered to reach the offices of the architects Wilkinson, Hindle, Halsall, Lloyd Partnership by not later than 12 noon 3 February 2003. The letter noted that the Site work and Steel work Sections of the Bills were outstanding and would be forwarded early in 2003. The letter was copied to Mr York at WHHL.
By a letter dated 20 December 2002, Mr Lightfoot sent Felton Bill No.3 – Sub-structures “which is to be incorporated into your tender package”.
The Council’s letter dated 9 January 2002 to Felton enclosed Bill No.5 Drainage, Bill No.6 Site works and Final Summary which were to be incorporated in Felton’s tender package. The letter noted that Bill No.5 had been amended to reflect the works associated with the Site works. Felton was asked to acknowledge the letter and the enclosure “and confirm that your tender submission will make full allowance”.
Felton submitted its Form of Tender on 3 February 2003, the date sent for tenders to be submitted. The Form of Tender was signed by Mr Lamprell on behalf of Felton and was dated 3 February 2003. The original Form of Tender is dated December 2002.
The Form of Tender expressed to be “for Liverpool City Council” says that:
“Having read the Conditions of Contract and Specification and having examined the drawings referred to herein and visited the site do hereby offer to execute and complete the Works described in a workmanlike manner to the reasonable satisfaction of the architect/ca for the FIRM PRICE of £3,191,800.”
The Form of Tender set out Felton’s undertaking to complete and hand over the works within 52 weeks and to set out the percentage additions to be applied to Daywork Variations under Clause 13.5 of the Conditions of Contract.
The section relating to specialist contractors was left blank, the explanation being “to be submitted should our tender be under favourable consideration.”
On the following day, 4 February 2003, Mr Lightfoot wrote to Felton enclosing a blank copy of the Bill of Quantities. He said:
“Please will you price out the Bill in its entirety including the preliminary section by next Tuesday at the latest?”
The letter went on:
“In respect of the Preliminaries please can you price each “fixed” and “time related” item as applicable. The measured sections should not include all-encompassing rates that cover a number of items.”
By a letter dated 12 February 2003 Mr Lamprell replied to Mr Lightfoot as follows:
“We enclose herewith as requested our priced Bill of Quantities.
Please note that we have included alternative suppliers/subcontractors in some instances.”
The Form of Tender signed by Mr Lamprell on 3 February 2003 on behalf of Felton was addressed to The Council. It states:
“I/We having reading the Conditions of Contract and Specification and having examined the drawings referred to therein and visited the site do hereby offer to execute and complete the Works described in a workmanlike manner to the reasonable satisfaction of the architect/CA for the FIRM PRICE sum of …”
It continues:
“I/We further undertake and agree when so required to execute a Form of Contract in the form referred to in the said Conditions of Contract …”
The priced detailed Bills of Quantities made up the total sum of £3,191,800.
It appears that Mr Lightfoot wished to obtain some further savings and on 26 February 2003 he prepared a document which identified elements of the external works on which he wanted savings by reference to the Bills of Quantities. They amounted in total to £133,765.70. This he hoped to achieve by reducing the amount of work for the site works, by omitting the hard surfacing, the landscaping, the fencing in its entirety and shrubs. This one page document was not sent to Felton although The Council clearly thought that it had been. The schedule has at the bottom “saving”.
On 26 February 2003 Mr York, a partner in WHHL, wrote to Mr McAlister, Managing Director of Felton (letter copied to Markhams). He referred to a meeting which had taken place with Felton on the previous day. He said that WHHL was close to being able to appoint Felton to construct the new school.
The letter went on:
“However, as discussed, savings are necessary in order to achieve an agreed contract sum. In the mean time we would very much welcome offers from yourselves where meaningful savings might be found.”
The letter went on to ask Felton to review a revised roof layout design which WHHL anticipated would, if adopted, yield a £30 - £40,000 saving. If adopted, the letter said that a bill of addendum would not be forthcoming. The letter said that WHHL would issue shortly a revised slab and foundation design for Felton to undertake a similar review.
On 7 March 2003 Mr Lightfoot wrote to Felton (Mr Lamprell) enclosing two copies of a revised drawing showing PC floor units and the:
“Employers Requirements for Contractor Designed Pre-Cast Floors. Felton is requested to provide a price for carrying out these revised works.”
The letter dated 7 March 2003 also said:
“You will recall a phone conversation we had when we asked you to indicate the minimum requirement of external works you required in order to provide your necessary hardstanding during the contract. Please will you advise on this in order that we can calculate the level of saving achievable.”
On 12 March 2003 Mr Lamprell responded to the request. In relation to the request for a £30 - £40,000 saving for the revised roof layout in the letter dated 26 February 2003, he offered £32,400. In relation to the minimum hardstanding which Felton required, Mr Lamprell said:
“We advise that the minimum hardstanding requirement for construction purposes would be a 5 metres wide strip to the perimeter of the building plus the access road, car park and service area.”
The letter concluded:
“We would endeavour to submit a price for the precast units on Monday next.”
On 14 March 2003 Mr York sent Felton a schedule of proposed amendments. It contained 19 items. Item 1, Amendment to area of Patent glazing and Item 11 “omit all pin board” were priced at £32,000 and £14,637 respectively. The other items were “item” ie, an item which was still to be priced.
On 17 March 2003 Mr Lamprell responded to Mr Lightfoot’s letter dated 7 March 2003 by quoting a price of £101,789 for contracted design precast floors.
Also on 17 March 2003 WHHL’s site architect wrote to Mr McAlister enclosing copies of a revised drawing for the sports facility to assist in Felton’s costing exercise.
On 21 March 2003 Mr O’Connor sent Mr Lightfoot an internal memorandum “re Bill of Reduction”. He said:
“We have received a revised ironmongery schedule and would advise after subsequent discussions that we recommend a reduction in the provisional sum of £10,000 for this item.”
In his witness statement, Mr Lightfoot says that this potential saving was originated by Felton against the sum of ironmongery in the Bill of Quantities, Bill no.4, item P21 of £26,857.15.
By a letter dated 25 March 2003 Mr Lamprell offered a further reduction for contractor designed precast floors from the figure in his letter dated 17 March 2003. The further reduction was from £101,789 to £89,315. The letter refers to the schedule of proposed amendments 15ii alternative to Amwell on which Felton could offer no reduction and 15iii “reduce cistern enclosure from full height to cistern height (add door head tiling and “shelf” over cistern)” on which in the attached schedule Felton was prepared to offer a reduction of £1,078 (amended by letter dated 26 March 2003 to £1,400).
It is therefore clear that there was a good deal of continuing discussion between Mr Lightfoot and Mr Lamprell to achieve the further savings required by The Council. On 31 March 2007 Mr Lamprell wrote to Mr Lightfoot:
“Further to your telephone call last Friday we offer a saving of £400 for air filled double glazed units to windows (not doors) in lieu of argon filled.”
Also on 31 March 2003 Mr Lightfoot sent a fax to Mr Lamprell dealing with a number of items. First he said that he had been given a revised lay out of the Sports Hall and the Main Hall which he proposed to wrap-up with the savings exercise presently being undertaken. He then identified a group of items relating to sliding doors which he required Mr Lamprell to price. Following this Mr Lightfoot had a number of queries after checking Felton’s priced Bill of Quantities.
Mr Lamprell responded to the fax on the same day. He said that he was awaiting prices for the sliding doors and he dealt with Mr Lightfoot’s queries agreeing with most of them. On 4 April 2003 Mr Lamprell sent the estimates for the sliding doors and later in the day a further estimate with a significant reduction. This took place after a telephone call between Mr Lamprell and Mr Lightfoot.
On 1 April 2003 Markhams asked Mr Lamprell to quote for concrete and insulated lintels. This were provided on the same day.
On 16 April 2003 Mr Lightfoot sent Mr Lamprell a letter which enclosed a schedule of the savings which he said that he and Mr Lamprell had agreed. The savings amounted to £210,000. It is apparently common ground that not all the savings had in fact been agreed before that date. The Claimants contend that they had no opportunity for input in relation to the reduction of specified external works amounting to £133,766, to the provisional saving of £10,000 on ironmongery and on the omission of pin boards. In view of the letter dated 14 March 2003 in relation to pin boards and Mr Lightfoot’s evidence in relation to the ironmongery I doubt that this contention is factually correct in relation to these items. It is also suggested that the reduction of the contingency sum was not discussed in advance. Mr Lightfoot thought that he had sent the one page schedule of savings for external works to Felton on 26 February 2003 but, as I have already outlined, he had not done so.
Bill no.8 concerns PC and Provisional Sums. Under “generally” the Bill of Quantities provides that:
“B. The contractor must include for all costs associated with all preliminary items and make due allowance in the programme for all works indicated by the following PC and Provisional Sums.”
and
“C. The CA reserves the right to deduct the whole or any part of any PC or Provisional Sum indicated in this Bill and the contractor shall take the instructions of the CA regarding the estimates of specialists etc.”
In Bill 8 there is “allow the provisional sum of £10,000 for shrubs and the provisional sum of £25,000 for contingencies”.
In a letter dated 10 November 2005 from Markhams to Mr Carter, Mr Lightfoot explained the items in detail. It is only necessary to refer to a number of the items.
Item 1- as we have already seen, this represented an amendment to the area of patent glazing and was a saving of £32,400 offered by Felton, see Felton’s fax of 12 March 2003.
Item 2 – this is the reduction of “specified” external works £133,766. This was said to refer to the build-up dated 26 February 2003. Mr Lightfoot in paragraph 14 of his witness statement says that it was the subject of ongoing discussions. This is not disputed in the evidence before me.
Item 4 – relates to the reduction in the ironmongery specification (provisional saving). In his letter dated 10 November 2005 Mr Lightfoot said that the ironmongery was adjusted in A1 No. 9.3 (June 2003 architect’s instruction).
Item 14 – omits pin boards £14,637. This was said to be a deduction of Bill Items 4/49 C to Q and 4/50 A to G. Mr Markham explained the subsequent history:
“Following the finalisation of the measurement of the omission for the external works, the saving against the pin boards was not necessary and consequently they remained in the contract sum.”
Item 20 – reduced contingency sum £4,930. I was told that this was not discussed with Felton and was a balancing item. Mr Lightfoot explained that:
“Item 20 was an adjustment of the contingency sum in order than an overall saving of £4,930 was achieved following the final measurement for the reduction to the external works for inclusion in the Addendum Bill the saving against contingency was not as high as had been anticipated in the “list of saving”.”
On 25 April 2003 Mr Hilton, Executive Director of the City of Liverpool (and Chief Executive) wrote to Felton:
“I refer to your tender reasonably submitted for the above scheme and write to confirm that the City Council has decided to accept your tender and conditions which we have agreed.
Whilst the City Council will embody the agreed terms and conditions in a formal contract document as soon as possible, it is the full intention of the City Council (as evidenced herein) that once the duplicate of this letter has been signed by your company a binding legal contract shall arise between the parties enforceable by each.”
The letter sets out the parties as The Liverpool City Council and Felton, the price of £2,981,800 and the date for possession on site of 27 May 2003. It is to be noted that the price of £2,981,800 is the original tender price less the £210,000 reduction referred to in the schedule enclosed with Mr Lightfoot’s letter dated 16 April 2003.
The letter sets out the time for execution of the works as 52 weeks. The description of the works is “the work comprises the construction of a new building for Stockton Wood Primary School together with the construction of a dance/drama studio for the connected Space for Sports and Arts (SSA) Project.
Item no.5 – General Terms and Conditions reads as follows:
“All those within the JCT Standard Form of Building Contract Local Authority with Quantities 1999 Edition incorporating Amending 1, 2 and 3 with Amendment 4 all as adapted by the JCT Contractor’s Designed Portion Supplement 1998 edition revised May 2000 and as amended by the Project Specific Amendments and in the conditions referred to in the “Tender Letter” dated 26 February 2003 as prepared by Markhams.”
The Invitation to Tender sent by Markhams on behalf of The Council on 17 December 2002 enclosed with it the documents which I have already described. There was no invitation or tender letter dated 26 February 2003, this was clearly an error and it is one on which the Claimants rely.
By a letter dated 30 April 2003 Mr McAlister as Managing Director of Felton wrote as follows:
“We enclose a copy of the signed letter of intent for your attention and look forward to receiving the contract documents in due course …”
The Claimants contend that although the parties may have possessed the necessary intention to enter into legal relations they failed to reach agreement on the scope of the work.
Enclosed with the covering letter from Mr McAlister was a copy of the signed letter of intent also signed by Mr McAlister on behalf of Felton. The acceptance reads:
“I/We acknowledge receipt of a letter of which this is a duplicate and agree that, upon my/our signature hereof, a contractual relationship exists between Felton Construction Ltd on whose behalf I/we sign and Liverpool City Council.”
I have no evidence from Felton that it was in fact misled by the reference to the date of 26 February 2003 but nevertheless it is, as I have already said, contended by Feltham that it is a very serious if not fatal error to the formation of the contract.
The JCT Form included General Conditions. These included amendments and variations to the standard terms. The standard terms include (Article 7A) provisions relating to referral to arbitration.
Among the modifications is Clause 1.3 which has a definition of “contract documents”. A new Clause 2.3 deals with the resolution of discrepancies between any of the contract documents.
Clause 13.4.1 sets out that all variations required by the architect/contract administrator or subsequently sanctioned by him, all work which under the contract is to be treated as variations, all work in respect of which provisional sums have been included and all work for which an approximate Quantity has been included “shall, unless otherwise agreed by the Employer and the Contractor, be valued …” The Clause then sets out a mechanism for valuation.
The General Conditions are extremely detailed. Clause 2 deals with contractor’s obligations. Clause 2.2.2.1 provides in relation to the method of preparation of the Bills “the Contract Bills (or any addendum bill) issued as part of the information” (for obtaining a quotation) “unless specifically stated therein in respect of any item or items are to have been prepared in accordance with the Standard Measure of Measurement” (SMM7).
Clause 2.2.2.2 provides that if there is any departure from the method of preparation in the previous clause, or any error in description, or in quantity, or omission of items:
“Then such departure or error or omission shall not vitiate this contract but the departure or error or omission shall be corrected; where the description of a provisional sum for deferred work does not provide the information required by the Standard Method of Measurement the correction shall be made … Any correction under this clause 2.2.2.2 shall be treated as a variation ….”
Clause 13 sets out detailed provisions for dealing with variations and provisional sums. Clause 13.4.1 was, as we have seen, varied by a special condition.
Clause 14.1 sets out that “the quality and quantity of the work included in the contract sum shall be deemed to be that which is set out in the contract bills”.
Clause 14.2 provides that the contract sum can only be adjusted in accordance with the express provisions in the contract.
Clause 26 sets out detailed provisions for dealing with matters materially affecting the regular progress of the Works. Clause 30 deals with certificates and payments including Retention and final adjustment of the contract sum.
Finally Clauses 41A and B deal with Adjudication and Arbitration. The Appendix provides that Clause 41B applies. Clause 41B sets out detailed arbitration provisions.
SMM7 sets out the standard method of measurement of building works. Paragraph 10 sets out the procedure where a provisional sum is given for either defined or undefined work. Ironmongery, a matter in contention, is dealt with under paragraph 21 of these Rules.
The Bills of Quantities rehearse the Tender and Contract documents, provide a description of the work and set out the amendments to the standard terms. They make it clear that Clause 41B, the arbitration clause, applies to the contract and that the adjudicator and the arbitrator shall be appointed by the President or Vice-President of the Royal Institute of British Architects (A20).
At paragraph 297 it provides that:
“All items marked PROVISIONAL in the Bills of Quantities are to be priced out at the same rates as other similar items of measured work and would be subject to re-measurement on completion …”
The items referred to in the document entitled “agreed list of savings” of 16 April 2003 are directly referable to the Bills of Quantities. Indeed the note which was not disclosed by Felton dated 26 February 2003 identifies the items which make up The Council’s target saving of £133,765.70 by reference to specific items in the Bill of Quantities No.6 – Site work.
On 2 May 2003 there was a pre-start meeting attended by, among others, Mr McAlister on behalf of Felton, Mr Lightfoot and Mr York. The Minutes were subsequently recorded as having been accepted as a true and accurate record (Minutes of 3 June 2003 meeting). The Claimants say that this was a matter of form and I should disregard it but in the absence of evidence to the contrary I am unable to do so.
The Pre-Start Meeting Minutes record the issuing of a Letter of Intent by Liverpool City Council. It noted the contract value as £2,981,000, the same figure as the Letter of Intent. The Minute set out that:
“The contract is the JCT Standard Form of Building Contract Local Authorities with Quantities 1988 Edition incorporating Amendments 1, 2 and 3 with Amendment 4 all as adapted by the JCT Contractor’s Design Portion Supplement 1988 Edition revised 2000.”
This is in accordance with the letter accepting Felton’s tender countersigned by Mr McAlister to which I have referred in detail.
The Minute noted at paragraph 3.04 that:
“Two blank copies of the Bill of Addendum will be issued to Feltons week commencing 6 May 2003.”
And at paragraph 3.05 of the Minute that:
“A completed Bill of Addendum will be issued by Markhams to include the agreed changes to that tendered.”
On behalf of the City Council the Halsall Lloyd Partnership (HLP) (formerly WHHL) issued Architect’s Instruction No.1 to Felton on 13 May 2003. In relation to the finishes of internal doors 1495T012 it refers to the Bill of Addendum which was about to be issued.
On 14 May 2003 HLP issued the second Architect’s instruction referring to the Bill of Addendum. It referred to site works and drainage layout:
“All revised as Bill of Addendum – omitting hard/soft landscaping, fencing, gates, safety barriers, reducing parking and access road to kerbs and hardcore only; adding 5m wide hardcore working zone.”
The reference to the 5m wide hardcore working zone is a clear reference to Felton’s earlier requirement.
On 22 May 2003 Mr Lightfoot sent a fax to Mr Matthews, Felton’s quantity surveyor, who had been at the pre-start meeting. The fax said:
“John,
Find attached the Addendum Bill for the above scheme. There are a couple of items which require further information from you in order that the descriptions reflect the changes made. [Reference to two savings amounting to £10,236)]
Once the information requested has been provided I will be in a position to finalise the addendum and be in a position to complete the contract documents and the two “blank bills”.”
There followed a draft addendum bill running to nine pages setting out in detail by reference to the original Bills what changes were to be made.
The total contract price remained at £2,981,800.
It is agreed that work commenced on site on about 27 May 2003.
The first regular site meeting took place on 3 June 2003. Mr Lightfoot, Mr Herd and Mr Matthews of Felton were there along with others. The post meeting note (paragraph 2.13) recorded that the Bill of Addendum was to be issued on 3 June 2003.
HLP continued to give and Felton to receive and act upon architect’s instructions eg, 1495022 Rev B with reference to “site compound added, omit protection to retained turf area”.
Part of instruction no.5 said:
“2.0 Carry out works as described on drawing 1495013 – timber fencing, security fencing, hard landscaping details 1-3 omitted as per Bill of Addendum – Pallisade gate, games court fencing and vehicle crossing detail retained.”
This relates to a number of items of external works which had been omitted in the contract price but which were to be reinstated. These items had already been priced in the Bill of Quantities before they were omitted.
Felton’s date stamp indicates that the instruction was received on 16 June 2003 and that action would be taken upon it by Mr Herd.
The second monthly site meeting took place on 1 July 2003. Mr Herd, Mr Hennessy and Mr Matthews were present from Felton. Mr Lightfoot was present from Markhams. Point 2.07 recorded that the Bill of Addendum had been issued by Markhams. There is no record to suggest that it had not been accepted by Felton.
By a fax dated 24 July 2003 Mr Matthews sent a letter to Mr O’Connor of HLP enclosing a quotation for insurance in compliance with Clause 21.2.1 of the JCT Terms. The Council contends that Felton did so on the footing that the JCT Contract was a valid contract.
The work proceeded. Near the end of the 52 weeks specified under the contract Ms Gill in the Legal Services Section of The Council sent the formal contract to Felton for signature on 24 February 2004.
On the same day, Mr Manley, a quantity surveyor at Felton, wrote on the firm’s notepaper as follows:
“Re: Stockton Wood
Delay to the Contract
In accordance with Clause 25.2.1 of the contract we write formally to advise you that the progress of the works is likely to be delayed. The cause and material circumstances of the delay is due to compliance with Architect’s instructions 31 and 32 relating to external works requirements …
This is a relevant event under Clause 25.4.5.1 of the contract …”
Mr York of HLP responded rather unhelpfully on 26 February 2004.
Mr Manley wrote again on 1 March 2004 saying that:
“The delay notice has been issued as we are contractually obliged to do so under the terms and conditions of the contract should such an event become apparent.”
On 27 February 2004 Mr Lightfoot wrote to Mr Manley:
“Please find enclosed the Bill of Quantities for the site works. Please will you check the rates and confirm that they are in accordance with your previous submissions.” (ie, previous Bills)
Bill No.6 was valued at £182,000.
On 4 March 2004 Mr Manley responded in relation to the site works:
“Further to you(r) issue of priced BOQ (Bill of Quantities) in respect of the above, we would confirm that the rates are in accordance with our tender submission.”
There is then a gap in the correspondence until 28 April 2004. Mr O’Connor of HLP wrote to Mr Herd of Felton referring to Felton’s notice of delay dated 24 February and called a meeting for 11 May 2004 to resolve outstanding issues relating to the contract including any extensions of time. Mr O’Connor noted that:
“… This discussion will be held in light of the stated position of the client on this issue not to pursue damages provided costs are not raised by Felton Construction in relation to any extension of time and the project is delivered satisfactorily by 20 August 2004.”
On 11 May 2004 Felton followed up its notification of delay of the progress of the works by setting out further particulars of the “Relevant Event” under the contract. It assessed the revised completion date as 30 July 2004, an assessed period of delay of 10.60 weeks. It attributed the delay to the:
“External Works start date and the increase in the period to completion for the revised works from 21.60 Working Weeks to 24 Working Weeks”.
On 19 May 2004 Mr O’Connor responded formally giving a notification of revision to completion date to 11 June 2004. The letter went on:
“At present we have not received any information in support of or notification of delay to progress for the ten week period beyond 11 June 2004 up to your reported programme completion date of 20 August 2004. In the absence of this information, we will be issuing a certificate of non-completion at the end of the revised contract completion date …”
This letter was accompanied by a formal Notification of Revision to the completion date to 11 June 2004 signed by Mr O’Connor. The revision is expressed to take into account the following: “Relevant Events”. “Compliance with Architects Instruction number 31 (Clause 25.4.5.1).
It was on 25 May 2004 that Mr McAlister, who was still Managing Director of Felton, wrote to Ms Gill at Liverpool City Council:
“We have reviewed the contract documents for the above project and we are unable to sign the contract, as the drawings do not reflect the post tender revisions. For instance you have included the drawing for external works. These were omitted as a cost saving exercise.
I would recommend that the document be reviewed with your design team to ensure the relevant information is applicable.”
I understand this letter to mean simply not that there was no contract but that the drawing schedule did not reflect the revisions that had been agreed for the external works.
There was site meeting on 8 June 2004 (Site Meeting No. 13). Minute 2.04 explained Felton’s concern as expressed by Mr McAlister:
“TH (Mr Herd of Felton) reported some anomalies in the tender package is to prevent FC from sign documents. HLP to contact Melanie Gill to establish the extent of anomaly.”
Under Contractor’s Report, paragraph 3.01 of the Site Minute records Mr Herd as presenting contractor report number 13 detailing the programme to date and noting that the works were two weeks behind programme Revision C.
Mr Fox attended the site meeting on 8 June 2004 and a further meeting at WHL’s office on 11 June 2004. Mr McAlister, Mr Herd and Mr Manley are recorded as also being present with Mr O’Connor, Mr York and Mr Lightfoot. We have Mr Fox’s note of the meeting.
From Mr Fox’s note of the meeting, it would appear that Mr McAlister reiterated his problems with some of the drawings. Mr York appears to have conceded that “There may be some issues whereby there were no drawings and revisit the Addendum Bill.” Mr McAlister appears to have conceded on the other side “we are in delay – we all know that.”
These issues were carried forward at Site Meeting No. 14 on 6 July 2004, Site Meeting No. 15 on 27 July 2004 and Site Meeting No. 16 on 10 August 2004.
Paragraph 2.04 of the note of the 6 July 2004 meeting records that:
“HLP and FC (Felton) to progress extent of anomalies in tender documentation. HLP to contact City Solicitors.”
Paragraph 3.01 of the same minute notes that Mr Herd presented Contractor’s Report No. 14 with a detailed finishing programme indicating completion and handover on 20 August 2004.
In the Minute of 27 July 2004 meeting, paragraph 2.03 noted that TF (Mr Fox) to establish extent of anomalies in contract documentation in discussion with HLP.
The minute of 10 August 2004 noted at paragraph 2.01 that it was in fact Mr McAlister not Mr Fox who was dealing on behalf of Felton with the alleged anomalies. This, of course, made sense because Mr McAlister had been involved in the discussions around the time of the formation of the alleged contract and since that date. The Contractor’s Report noted that Mr Herd presented progress report No.16 indicating that the works would be substantially complete by 27 August 2004 (14 weeks behind programme). The minute noted:
“Latest slip in programme due to late installation date for gas meter given as 18 August – additional of CCTV system and over painting to teaching walls.”
There appeared to have followed various discussions including one on 24 August 2007. As a result Mr York wrote to Mr Fox to record the current position arising out of those discussions particularly at that meeting at which Felton had a solicitor from Waterfords present.
Felton contended that the three week extension of time which they had been granted did not reflect their true legal entitlement (1.01).
There had been a number of recent variations not properly accounted for (1.02).
Felton had written a letter dated 3 August 2004 (not in the bundle) relating to landscape work and other matters which were discussed extensively.
Felton “categorically deny in accordance with Peter Coleman’s advice” that a construction programme had ever been issued for the contract but only Tender programmes. Mr Coleman was the solicitor from Waterfords.
Felton offered (for discussion purposes only) that they should be entitled to a full extension of time to 6 September 2004 and be paid the full sum to which they were entitled on the final account.
The letter goes on to set out HLP’s further comments. These included at 2.03 reference to the pre start meeting on 2 May 2003 and the fact that a contractor’s programme was issued prior to the meeting on 3 June 2003.
On 1 September 2004 Mr Manley (who had been at the meeting on 24 August 2004) wrote on behalf of Felton to say that:
“In accordance with Clause 25.2.1 of the contract we write formally to advise you that the progress of the works has been delayed due to exceptionally adverse weather conditions and that this is a relevant event under Clause 25.4.2 of the contract.”
The certificate of practical completion was issued on 12 September 2004.
On 11 January 2005 Felton (Mr Fisher, now the Commercial Director) wrote to Mr York at HLP. He noted that Felton had submitted its final account on 16 December 2004 in the sum of £3,795,469.81 The last interim certificate issued on 16 November 2004 had certified a gross sum of £3,240,328.78. The letter went on:
“We believe that it is pertinent to refer to Clause 30.1.3 of the Main Contract in this respect. Practical Completion has been achieved and therefore interim certificates shall be issued as and when further amounts are ascertained as payable to the contractor …”
By a letter dated 7 April 2005 Mr Fox wrote to Mr York in relation to Felton’s entitlement to extensions of time as follows:
“We should point out that it was for you to review extensions of time under Clause 25.3.3 within 12 weeks of the date of Practical Completion of the Works and to convey your decision to us irrespective of whether we had provided any further information. However the parties to the Contract are free to agree to extend such time and we are prepared to extend the period sufficiently to enable you to consider our claim when we re-submit it …”
The letter goes on to discuss the extension of time period which Felton had for submitting all documents for adjustment of the contract sum and to suggest that Felton’s final account would be in the region of £3.85 million.
It appears that at some date before 11 May 2005 Felton was taking the position that the addendum bill as incorporated into the Bills of Quantities was incorrect in some respects and therefore should be totally disregarded. The letter from Mr Lightfoot to Mr Golding, a quantity surveyor at Felton, responded with the contrary view:
“The correspondence between Feltons and me was in respect to the ongoing preparation of the addendum. When the extent of the omission of finished external surfaces had been finalised it was found that the saving was greater than originally envisaged. Consequently the pin boards were added back and the contingency sum adjusted.
The revised addendum was sent to John Matthews on 22 May 2003. I did not at that point in time receive any correspondence from Feltons stating that they disagreed with the contents. Consequently the addendum was incorporated into the contract documents.
During the course of the contact the addendum has been accepted as being part of the contract documents and has been used repeatedly including in the preparation of valuations. At no point did Feltons question the validity of the document.
I consider that reverting back to a list of potential savings, other than the addendum bill, will just serve to confuse the issue and ultimately will lead to little financial adjustment. Time will be spent adjusting various instructions upon which the quantities in the addendum form an integral part. For example, the adding back of the site works will have to be re-assessed on the basis that the original bill contains more items than had been the case.”
There does not appear to have been a response from Felton to this important letter.
On 8 July 2005 Mr Lightfoot wrote a letter to Mr Carter at Felton summarising the differences between the parties in relation to the Final Account. He said that the difference between Felton’s valuation and Markham’s was £371,000. The disputed items, which were in Markham’s opinion readily capable of resolution, amounted to £119,433.20 and were set out in detail in the letter. The letter is clearly more than two pages in length but only the first two pages have been put before me.
On 11 August 2005 Mr York wrote to Mr Fox asking Felton to sign the contract.
On 16 August 2005 Mr Fox replied to say that he was unable to do so because the contract documentation was incorrect. The letter did not specify in what respect it was said to be incorrect.
In response, Mr York wrote on 14 September 2005 setting out the history that in February 2004 the contract documents were signed by The City Council. They were delivered to Felton in March/April 2004. The letter noted that HLP’s letter to Felton dated 14 July 2004 requested Felton to sign the documents and that Site Meeting No.16 noted that Mr McAlister would be identifying anomalies in August 2004. The letter again requested Felton to set out anomalies that had since been identified by Felton.
After chasing letters from HLP on 19 September 2005 and 14 October 2005 Felton wrote two letters dated 18 October 2005 to Mr York. The first letter from Mr Carter said that Felton had appointed an independent third party adviser to provide an opinion on each matter in Markham’s list of matters in dispute.
The second letter dated 18 October 2005 from Mr Fox was copied to Liverpool City Council and to Markhams. The key paragraph of the letter suggests for the first time that there was no contract between Felton and The City Council. This is expressed as follows:
“As to your letter of 14 October 2005, given there is no executed Contract Agreement, the JCT conditions of contract to which you allude are not at all relevant to the matter under discussion and we are certainly under no obligation in terms of clause 2.3 of those conditions.”
In the final paragraph of the letter the claim is made that Felton would be entitled to be paid on a quantum meruit basis and would now prepare such an account and submit it to The City Council.
In response, Mr York wrote on 21 October 2005 to say that given the totality of the documents it was unrealistic to argue that a contract did not exist and unreasonable now to suggest that it was never Felton’s intention to enter into one.
On 31 October 2005 HLP wrote to Felton to insist that:
“If indeed this position has not already been reached HLP will meet with the employer and quantity surveyor to establish a complete and accurate set of contract documents.”
Work continued on the Final Account under the Contract. On 10 November 2005 Mr Lightfoot wrote to Mr Carter suggesting that the addendum schedule dated 16 April 2003 represented a list of agreed savings subject to the approval of Liverpool City Council. He said that it was prepared:
“On the basis of the list an addendum bill would be produced which would pick up the changes in measurement and specification.”
Markhams continued to check Felton’s Final Account and on 23 January 2006 wrote to Felton with very detailed comments in relation to various items in the Final Account. In the summary, Markhams concluded that at the completion of its assessment of the Final Account:
“We conclude that the variations amount to an addition of £258,311.14 compared to your application for £631,190.86 (excluding the claim and VAT). Taking into account our valuation of the variations our Final Account for the contract amounts to £3,240,111.14 excluding any substantial claim and VAT. The Final Account is therefore £217,000.64 less than Valuation No.17 issued on 16 November 2004.”
Kerrigans, who are cost consultants, produced what is called a “position statement” on behalf of Felton which was submitted to The Liverpool City Council solicitors, Halliwells, on 16 January 2006.
It is appropriate to set out Felton’s case as it is put in the Particulars of Claim. Felton contends that in December 2002/ January 2003 it received an invitation to tender for the works and that it submitted a tender on 3 February 2003 in the sum of £3,191,800.
By a letter dated 4 February 2003 Markhams asked Felton to price out the Bill of Quantities in its entirety and it did so. The Particulars of Claim (paragraph 3) refer to super structure (pin boards and ironmongery) totalling £59,211.15; site work totalling £208,327.07 and a sum for contingencies of £25,000 as relevant items. They total £292,538.22 or less than 10% of the Tender sum.
It is claimed that no Addendum Bill of Quantities was ever produced as required by Clauses 1.3 and 2.2.2 of the JCT Form. It is claimed that as at 16 April 2003 there was no possibility of reconciling four items:
the external works amounting to £133,766;
provisional savings on ironmongery of £10,000;
the omission of the pin boards amounting to £14,637; and
the reduction of the contingency sum by £4,930.
Paragraph 15 of the Particulars of Claim sets out the terms of The City Council’s letter of intent. Felton notes that it never received a tender letter dated 26 February 2003.
Paragraph 17 of the Particulars of Claim admits that its Managing Director signed a copy of the Letter of Intent acknowledging that upon his signature a contractual relationship existed between Felton and The Council. However at paragraph 18 of the Particulars of Claim the plea is made in the original form:
“18. It is Felton’s case that, notwithstanding the signature of the said Letter of Intent, as a result of ambiguities and uncertainties in the scope and therefore the price of the Works to be carried out, there was in fact no binding contract between the parties as a result of the exchange of correspondence.”
By amendment these following words were added:
“Accordingly The Council is put to proof both as to the existence of any contract and the terms thereof under which the works undertaken by Felton should be valued and paid.”
Felton claims in paragraph 19 of the Particulars of Claim that as at 30 April 2003 there was no certainty as to the items of Site Work in Bill No.6 which amounted to £74,621.07. Equally, complaint is made as to the provisional saving of £10,000 for ironmongery.
At paragraph 34 of the Particulars of Claim the plea is made:
“In the premises Felton contends that as at 30 April 2003 the parties did not enter into a contract as contemplated in the Letter of Intent dated 25 April 2003.”
By amendment the following words are added:
“Moreover it is Felton’s case that not only did they not do so then, they did not do so subsequently.”
It is argued in paragraph 36 of the Particulars of Claim that if the submission by The Council of documents on 24 February 2004 for Felton’s signature constituted an offer to contract on the terms stated therein, Felton rejected the same. In short Felton argues that the parties failed to reach any agreement and claims that it is entitled to be paid on a quantum meruit basis which, after giving credit for sums already paid, amounts to £941,490.25 plus VAT.
In addition Felton claims interest at 2.25% above Bank of England Base Rate. If the conditions of the JCT contract are found to be applicable Felton claims interest at 5% above Base Rate under Condition 30.1.1 of the Conditions of Contract. Finally by Schedule 2 of the Particulars of Claim, Felton claims an additional £175,325.35 interest from 12 September 2004 to 11 January 2007 and continuing at a daily rate of £225.46.
The Claimant’s case is in essence therefore that the signing of the Letter of Intent by Felton did not constitute a contract in the terms set out in the letter and accompanying documents. This was because uncertainty surrounded particular aspects of the works. The parties therefore failed to reach agreement on the precise scope of the works.
The Claimants contend that Markham’s list of savings was not finalised and agreed by 30 April 2003. The draft Addendum Bill dated 22 May 2003 was not agreed with Felton and differed from the earlier savings proposed on 16 April 2003.
In these circumstances Felton was entitled to reject the contract documents which The Council sent to Felton for signature in February 2004 on the grounds that they were not complete and accurate.
Although I shall not refer to them individually I note the specific items of which complaint is made in Ms Gough’s summary points in closing.
Mr Stansfield in his supplemental submissions contends that there was an enforceable contract between the parties contained in:
Markham’s letter dated 17 December 2002;
Felton’s tender, the priced Bills of Quantities, the drawings and documents referred to therein;
the correction of errors agreed in the faxes between Markhams and Felton on 31 March 2003;
the document entitled “agreed list of savings” dated 16 April 2003;
The Council’s letter dated 25 April 2003; and
Felton’s response dated 30 April 2003 together with the countersigned letter.
The Council contend that there is in this case clear offer and acceptance. The parties had the requisite intention to enter into legal relations. Unless the terms of the agreement are so uncertain that they cannot be enforced there is therefore a binding contract between the parties. The Council contends that there was more than a sufficient degree of certainty to found an enforceable contract.
The Council contends that any potential uncertainty only concerns the External Works and the ironmongery.
In relation to the External Works the amount in question is £133,766. The Council contends that the items can be identified although it is conceded that they were not identified to Felton at the time. It is not, so they say, correct to say that the provision is so uncertain that it cannot be enforced. The Council contends that Felton has been unable to put forward any alternative interpretation which might induce uncertainty in the court.
In relation to ironmongery, it is said that the task of the court is to construe the contract and that the ordinary rules of construction apply. A reasonable person would understand “provisional saving” as meaning that instructions might be given in the future which would achieve all or part of the provisional savings. In other words it amounts to no more than an expression of hope that the savings will be achieved in the future.
The Council relies on subsequent conduct to this limited extent. It contends that where a contract has been partly performed, the court should strain to the utmost to supply any want of certainty in the contractual terms so as to give effect to the contract. In this case Felton constructed the school. There is no evidence that Felton suffered any practical difficulty during the construction in operating the contract and at all times at least until after 7 April 2005, nearly seven months after practical completion, conducted itself as though the contract incorporating the JCT Standard Form was valid and subsisting.
CONCLUSIONS
On 17 December 2002 Mr Lightfoot sent Felton an invitation to tender for the work at Stockton Wood Primary School. It enclosed with it:
the Form of Tender;
the Bills of Quantities;
the architect and structural engineers Tender drawings; and
the Mechanical and Electrical specifications and the Tender envelope.
On February 2003 Felton submitted a signed form of tender offering to carry out the work for the overall price of £3,191,800 on the terms set out in the tender documents but subject to Felton pricing the Bills of Quantities. This Felton did on 12 February 2003. The priced Bills of Quantities came in total to the offer price of £3,191,800.
It appears that The Council wished to achieve a reduction in the price. Mr Lightfoot set out in an internal memorandum how the omission of certain external works could contribute £133,765.70 of the required savings. There is no evidence that this document dated 26 February 2003 was shown to Felton.
There was clearly considerable discussion between Mr Lightfoot and Mr Lamprell, Felton’s Estimating Manager, on other proposed savings as well as minor arithmetic queries. Many of these were agreed on 31 March 2003. On 16 April 2003 Mr Lightfoot sent Mr Lamprell an attached list of savings which amounted to £210,000. By far the largest item was the £133,765.70 for the External Works. The list included, for example, Item 1 amendment to area of patent glazing which represented a saving of £32,400 which had been offered by Felton in the course of these end negotiations and accepted by The Council.
It is most surprising (if it was indeed the case) that neither Mr Lamprell nor anyone else at Felton queried the significant reduction in relation to the External Works. Complaint is also made as to the uncertainty of Item 4 – reduce ironmongery specification (provisional saving) £10,000. In my view this is to be construed as an expectation that it will be possible at a future time to achieve savings of £10,000 against the priced specification. The provisional reduction had been initiated by Felton – see paragraph 44 above. In any event insofar as it could be dealt with under the contract the method of dealing of provisional sums and variations is set out in full in the contract.
Complaint has also been made in relation to “omit pin boards”. This is an identified item in the Bill of Quantities. By reference to the proposed contract price of £2,981,800 the saving on pin boards is identified. I have dealt with this at paragraph 40 above. In fact, as I understand it, they were introduced as extras at a later stage in accordance with the terms of the contract.
Finally complaint is made with regard to the reduction in the contingency of £25,000 by the sum of £4,930. This is clearly a balancing item for The Council and it must have been so understood by Felton.
There is no suggestion that Felton did not receive the letter dated 16 April 2003 setting out how the reduction in the contract price to £2,981,800 would be achieved.
The next document is The Council’s acceptance of Felton’s tender at the reduced price of £2,981,800, ie the original tender price less the reduction of £210,000 by the letter dated 25 April 2003. This offer was accepted by Mr McAlister as Managing Director of Felton in a signed acceptance of a covering letter dated 30 April 2003. The covering letter says that the Guarantee Bond Agreement required by The Council would be forwarded once it had been received from Felton’s broker. At this stage there was a concluded and enforceable agreement between the parties unless it could be suggested that Mr McAlister signed the letter of acceptance under a mistake. Such a plea has not been made by Felton. Indeed it is difficult to see how it could have been made since at the pre start meeting on 2 May 2003 the minutes record that the contract value was £2,981,000 which of course is the same figure as the Letter of Intent. Mr McAlister was present at that meeting and there is no suggestion that the minute was incorrect.
It is claimed that there are ambiguities in the “agreed list of issues”. It clearly contains some items, eg Item 1, which was agreed between the parties. Other items relate to omissions by reference to Felton’s priced Bills of Quantities which leave no room for ambiguity. The only two items which might have required further discussion are the External Works and the ironmongery. I have already dealt with the ironmongery and found that it was an agreed provisional reduction. As far as the External Works are concerned, they relate to the omission in the contract price of the specific works in the priced Bill of Quantities. It may be that there was no real ambiguity here because even without the note of 26 February 2007, the note of 16 April specifies on its face savings of £133,765.70 in relation to the External Works which Felton offered when Mr McAlister signed the Letter of Intent dated 26 April 2003. This was after all a reduction of the total sum by reference to the omission of works and not the reduction of the price of works to be carried out from that which is set out in the Bills of Quantities. If Felton had not had the breakdown of the sum they could easily have asked for it. As far as the sum of £4,365 is concerned, this was not queried by Felton as a method of reaching the overall contract sum which was to be agreed and was actually agreed between Felton and The Council. It can therefore be taken to have been agreed.
Whatever the position in relation to these items there is no question that the contract was in other respects a valid contract, there was a clear meeting of the minds and I am not surprised that until October 2005 (or perhaps April 2005) no-one suggested that there was no contract between the parties and that all items should be revalued on a quantum meruit basis. My only surprise is that such a plea was put forward by Felton after that date and in these proceedings.
I answer the preliminary issues as follows:
There was a binding contract between the parties as set out in or evidenced by The Council’s letter dated 25 April 2003 and Felton’s signed response dated 30 April 2003.
The contract price was that set out in the letter from The Council dated 25 April 2003.
It incorporated Felton’s priced Bills of Quantities and the tender and drawings and other documents referred to therein. It also incorporated any savings which were offered by Felton during the end negotiations and accepted by The Council, and any savings suggested by The Council to reduce the price to £2,981,800 of which Felton had had due notice and not registered their disagreement.
The JCT Standard Form subject to amendments set out in The Council’s letter and further identified in the Bill of Quantities No.1 with the appendix completed as set out in Bill of Quantities No.1.
Markham’s letter dated 17 December 2002.
I add that the contract provided for variations to the contract works to be dealt with in accordance with the provisions of the contract. These were agreed variations to the original contract.
If I am wrong about this I hold that there was a binding contract except for any specific item on which there was no agreement on 30 April 2003.
I reject Felton’s plea that there was no binding contract.
Issue 2 – what are the terms of the contract under which the Claimant’s work should be valued?
Felton’s work (including any variations) should be valued in accordance with the JCT Standard Form as amended, the priced Bills of Quantities and the Tender drawings and the specification referred to therein.
Items 2, 4, 14 and 20 relied on by Felton are priced items which were omitted from the agreed work to be carried out as the contract works (as opposed to variations).
These are:
Finished surfaces: Bill of Quantities No.6, items 6/3A & C; 6/6H & J; 6/7N & M; 6/9E; 6/12B to 6/14A; 6/14B to 6/19B.
Soft landscaping: Bill of Quantities No.6, items 6/12B to 6/14A.
Fencing: Bill of Quantities No.6, items 6/14B to 6/19B.
Pin boards: Bill of Quantities No.4, 4/49C to 4/50G.
As Mr Stansfield notes correctly, provisional sums are omitted from all valuations unless work falling within them is instructed by the architect.
Again, I reject Felton’s plea that there was no binding agreement as to how these items were to be valued.
Issue 3 – Is the Claimant estopped from denying the terms of the contract relied upon by the Defendant in the amended defence, and if so on what basis? It is difficult to see how this issue arises. It would no doubt be possible to consider this case but the legal precedents, not surprisingly, direct the court towards considering the affirmative case of whether there is and if so what are the terms of a contractual relationship between the parties. The issue of estoppel was not in fact argued before me.
Issue 4 – Does the contract as found by the court include an arbitration clause?
This is clearly set out in Article 7A and clause 41B of the JCT Standard Form. Clause 7B and clause A20 of the Bills of Quantities set out detailed provisions including the method of appointing the arbitrator.