Jacobs UK Ltd v Skidmore Owings & Merrill LLP

INTRODUCTION

When two parties compromise commercial litigation, it is not uncommon for them to do so on the basis that one will give the other work up to a certain value as part of the settlement. This case illustrates the need to ensure that, if that is the basis of the compromise, the terms are clear and comprehensive. If they are not, another round of litigation may ensue.

In 2008 the claimant, Jacobs, issued proceedings against the defendant Skidmore Owings & Merrill LLP (“SOM”) for what was said to be unpaid fees relating to a project in the Middle East. The claim was in the sum of £4,000,000 odd. In November 2008 I heard a lengthy application for summary judgment which I allowed in part in a judgment at [2008] EWHC 2847 (TCC). Thereafter, the parties compromised the litigation by way of a Tomlin Order. The critical element of the order was the agreement contained in the letter from Jacobs to SOM of 23^rd June 2009 (“the June 2009 agreement”).

THE JUNE 2009 AGREEMENT

The letter of 23^rd June 2009 set out the agreed terms of settlement. Those relevant for present purposes are as follows:

“1.

SOM shall pay to Jacobs the sum of £1,500,000. Payment of that sum shall be made in three instalments. The first instalment will be in the sum of £750,000 and made within 14 days of the date of the Tomlin Order staying Claim No. HT-08-225. The subsequent two instalments will be each of £375,000. The first of these will be made by 24^th August, 2009 and the second by 26^th October, 2009. In addition, the sums paid into court following judgment in the Summary Judgment Proceedings on 21^st November 2008 will be paid out to SOM following payment of the first instalment.

2.

Within a period of two years from the date of this letter SOM will award Jacobs or any other subsidiary or affiliate of Jacobs Engineering Group Inc one or more contracts for the provision of not less than 33500 hours of construction, design and engineering services. These services will be executed at the prevailing hourly rate charged by Jacobs as at the date of execution in respect of work of similar nature character and quality. If we are unable to agree on the hourly rate then a reasonable commercial rate will be decided by Dr Robert Gaitkells QC of Keating Chambers, 15 Essex Street, London WC2R 3AA (or his mutually agreed successor) who shall act as an expert in this respect not as an arbitrator. If and to the extent that the obligation to provide services is not fulfilled or is not the subject of contracted services in the course of execution within the two year period SOM shall pay Jacobs £15 per hour per every hour of shortfall up to a maximum of 33500 hours.

3.

Within a period of two years of the date of this letter Jacobs or any other subsidiary or affiliate of Jacobs Engineering Group Inc will provide to SOM not more than 33500 hours of construction, design and architectural services. The services will be executed prevailing hourly rates charged by SOM as at the date of execution in respect of work of similar nature character and quality less £15 per hour. If we are unable to agree on an hourly rate then a reasonable commercial rate will be decided by Dr. Robert Gaitskell of Keating Chambers, 15 Essex Street, London, WC2R 3AA (or his mutually agreed successor) who shall act as an expert in this respect and not as an arbitrator. If an to the extent that the obligation to provide services is not fulfilled or is not the subject of contracted services in the course of execution within the two year period then the obligation of Jacobs to provide the services and the obligation of SOM to perform the services at discounted rates will be forgiven.

4.

SOM and Jacobs will pay their own legal costs of the proceedings in the Technology and Construction Court in London under Claim No. HT-08-225. Jacobs will however retain the costs paid by SOM to Jacobs following the Summary Judgment Proceedings in November 2008…

9.

This Agreement shall be governed by, and construed in accordance with, the laws of England and Wales and exclusive jurisdiction shall reside in the English courts.”

SUBSEQUENT EVENTS

Subsequently, SOM awarded Jacobs a small contract for the provision of services in relation to the laboratory facilities for the East Side Biomedical Commons in New York. Jacobs earned fees of $30,100 or £20,067. That equated to 250 hours of work. Thus on Jacobs’ case contracts worth 33,250 hours have not been awarded to them. They claim 33,250 hours x £15, which equates to a lump sum of £498,750, pursuant to Clause 2 of the June 2009 agreement.

However, SOM allege that in February/March 2011 they sought a fee proposal from Jacobs in respect of a large conference centre project in Riyadh, Saudi Arabia, which, if a contract had eventuated, would have been worth at least 33,250 hours to them. SOM say that the fact that Jacobs refused to provide a proposal was immaterial, and the seeking of such a fee proposal in the first place discharged their obligation to Jacobs under Clause 2.

THE ISSUES

Accordingly, it seems to me the issues are as follows:

ISSUE 1 – CONSTRUCTION OF THE JUNE 2009 AGREEMENT

In my view, the commercial background to the June 2009 agreement was as follows:

The regime provided by Clauses 1, 2 and 3 of the June 2009 Agreement was as follows:

It is against that commercial background, and that contractual regime, that I construe Clause 2 of the June 2009 agreement and, in particular, the phrase “SOM will award Jacobs…one or more contracts for the provision of not less than 33,500 hours of construction, design and engineering services”.

Jacobs say that the word “award” in Clause 2 means the entering into of a contract or contracts between the parties, so that, in the absence of such concluded contracts, SOM have failed to fulfil their obligations under Clause 2. Accordingly, they say that they are entitled to the remedy provided by the last part of Clause 2, namely the payment of the lump sum referable to the unspent hours at £15 an hour. SOM’s primary case is that “award” must, in this context, mean an offer of a contract by SOM to Jacobs.

For a number of reasons set out below, I conclude that the word “award” means what it says. It is the award of a concluded contract by SOM to Jacobs. The “award” envisaged here is not merely the making of an offer by SOM to Jacobs. Still less do I accept SOM’s even more extreme interpretation (developed by Mr Harding QC during his oral submissions), that SOM’s obligation did not even extend to the offer of a contract, but merely to the giving of an opportunity to Jacobs to bid to carry out work.

First, the starting point for any interpretation of Clause 2 is that those in the construction industry commonly refer to the awarding of a contract. It is the process whereby the employer accepts the offer put forward by the contractor, or where the main contractor accepts the offer put forward by his sub-contractor. It denotes a binding agreement. It is the granting of the contract by one party, with its binding rights and obligations, to the other.

That interpretation of the word “award” is, I think, entirely consistent with the definitions in the dictionaries. The Oxford English Dictionary has, as one of its meanings of “award”, “to grant or assign”; another definition is “to grant or assign (a contract or commission)”. The example that is given is telling: “the company was awarded a contract to refurbish the timber mill”. In my judgment, that is using the word “award” in a contractual context in precisely the way that I would expect.

By contrast, of course, an “offer” is something very different. In contract law, it is something which has happened much earlier in the process. You cannot have a contract award unless you have had an offer which has been accepted. The acceptance of the offer is then formalised by the award of the contract.

By reference to the speech of Lord Steyn in Sirius International Insurance Company v FAI General Insurance Company [2004] 1 WLR 3251, Mr. Harding, on behalf of SOM, warned me of the dangers of adopting too literal a construction of a Tomlin Order such as this. I acknowledge that it is always dangerous to adopt too literal a construction but, in my view, to conclude that awarding X a contract is different to offering X a contract (or offering X the opportunity to bid for a contract) does not amount to an inflexibly literal construction. On the contrary, it seems to me, that it is construing the word which the parties used, and contrasting it with the very different consequences of another word (“offer”), which the parties did not use.

That brings me onto the second reason for my interpretation. The difficulty with arguing that the word “award” actually means “offer” is the obvious one: if that was what was meant, why did the parties not say so? To have used one clear word, which you now say should be taken to mean another word entirely, is a formidably difficult argument, even for Mr. Harding.

The principal reason why the argument must fail here is because the whole agreement would have been very different if all SOM had to do was to offer contracts (or possible contracts) to Jacobs. SOM could have offered Jacobs any number of possible contracts, irrespective of Jacobs’ availability, capability or suitability, knowing that they could quickly discharge the liability created by Clause 2 without actually entering into any binding contracts with Jacobs at all. That would have been a very different, and obviously much inferior, agreement from Jacobs’ point of view. But it would have been the agreement if the word “offer” had been used instead of the word “award”.

I should add that, in my judgment, the benefit provided by Clause 2 would have been even more nugatory from Jacobs’ point of view if, as SOM now suggest, their obligation to Jacobs was fulfilled if they merely offered Jacobs the opportunity to bid for contracts, regardless of outcome. Mr. Harding accepted by the end of his extremely clear and concise submissions that, in essence, that was what SOM were saying: that, provided they offered the opportunity to Jacobs, then regardless of what else happened subsequently, they had fulfilled their obligation. In my view, and for the reasons I have given, that is not what the June 2009 agreement provided.

On the contrary, I find that the use of the word “award”, rather than the use of the word “offer”, was intended to short-circuit matters such as implied terms relating to the nature of the contracts or possible contracts offered by SOM to Jacobs. Jacobs did not need to worry about turning down any obviously unsuitable contracts that may have been offered to them by SOM merely to discharge the latter’s liability under Clause 2. On this interpretation, the hours noted in Clause 2 would only be reduced when the contract(s) had actually been agreed by both parties and then awarded to Jacobs.

Notwithstanding the decision of the Court of Appeal in Cobbe v Yeoman’s Row Management Limited [2006] EWCA Civ 1139, I consider that there were general obligations of good faith on both sides in order to make this agreement work. This was not an agreement concerned with negotiations, which was the subject matter of the decision in Cobbe, but about mutual commercial conduct. SOM had to consider awarding contracts and Jacobs had to consider accepting such awards, both in good faith. Only when an agreement was reached in good faith could there be an award of a contract. Beyond that, on this interpretation, I can see no need for implied terms to achieve mutuality. The obligations were plain, and so too were the consequences if they were not fulfilled: namely the payment of the lump sum calculated by reference to the last part of Clause 2.

Very properly, Mr. Harding conceded that it was not alleged that the absence of contract awards by SOM to Jacobs arose out of any absence of good faith on the part of Jacobs. For the avoidance of doubt, my analysis of the facts, set out later in this judgment, makes plain that there can be no question of any lack of good faith on their part.

Accordingly, as a matter of the construction of the June 2009 agreement, it seems to me clear that SOM’s obligation to award contracts up to a certain value to Jacobs meant just that, and could not be fulfilled by the mere offer of a contract, let alone the offer of an opportunity to bid for a possible contract.

ISSUE 2 – IS THERE ANY OTHER DEFENCE ON THAT CONSTRUCTION OF THE CONTRACT?

Having construed Clause 2 in favour of Jacobs, the only other defence raised by SOM was the suggestion that an agreement to award contracts would depend on the agreement of both sides, and would therefore amount to an agreement to agree which was incapable of being enforced: see May and Butcher v The King [1934] 2 KB 17 (HL).

I reject that submission. An agreement is not incomplete merely because it calls for some further agreement between the parties: see Foley v Classique Coaches Limited [1934] 2 KB 1 (Court of Appeal). In the present case, the parties expressly agreed a mechanism for dealing with any dispute as to the level of fees payable. They had also agreed what would happen if further contracts were not awarded. The rest of the agreement, although dependant on the parties’ negotiations in respect of particular contracts, seems to me to operate very much like a framework or call-off agreement, pursuant to which X has a right to bid for contracts of a particular type to be let in the future by Y. Sometimes that option will be for contracts up to a certain minimum value; sometimes it will be open-ended. Under such an arrangement, there is no guarantee that X will be awarded every contract that Y lets; each separate contract must be negotiated under the framework agreement. That is an enforceable agreement and common in various public procurement sectors.

In any event, even if SOM were right and the first part of Clause 2 was unenforceable because it was no more that an agreement to agree, that would not affect the last part of Clause 2, which expressly provides for what would happen if the contracts were not awarded to Jacobs. The agreement was that, in those circumstances, a lump sum would be payable. That agreement was clear and unambiguous. It would be unaffected by any other finding as to the unenforceability of the provision concerned with awarding contracts. In my judgment, the lump sum fall-back would be enforceable, even if the first part of Clause 2 was not. Accordingly, if, as I have found, the June 2009 agreement required SOM to award contracts to Jacobs rather than just offer them contracts (or indeed, offer them the opportunity to bid for such contracts), there is no other defence to this claim. In those circumstances, I conclude that Jacobs are entitled to the sum claimed of £498,750.

ISSUE 3 – DID THE EVENTS IN RESPECT OF THE RIYADH CONFERENCE CENTRE FULFIL SOM’s OBLIGATIONS UNDER CLAUSE 2?

It is only if I am wrong on both my previous findings, namely as to the construction of the June 2009 agreement, and as to its effect, that it is necessary to consider Issue 3 at all. Issue 3 assumes that SOM’s interpretation of the June 2009 agreement is correct and that the word “award” is effectively a reference to SOM offering contracts to Jacobs. Then the only remaining issue is whether or not the events in respect of the Riyadh conference centre fulfilled SOM’s contractual obligations. I set out the history first, and then come on to deal with that last issue.

The Rayadah Investment Company (“RIC”), were responsible for the conference centre project in Riyadh. They sent a detailed Request for Proposal (“RFP”), to SOM in July 2010. The workscope involved SOM acting as the lead consultant. SOM responded at the end of August 2010. It then appears that there was a period of four months, doubtless for contract negotiations, before SOM were appointed on 4^th January 2011. The design timetable set out in the RFP was very tight, calling for some early conceptual design, late in 2011, and then the schematic design by mid-March 2011. Indeed, that whole design process was to be completed by the end of July 2011.

On 11^th February 2011, Jacobs wrote to SOM reminding them of the June 2009 agreement, and pointing out that no work had been awarded to Jacobs. Other than the laboratory contract referred to in paragraph 4 above, that was true. On 18^th February 2011, Mr. McGill of SOM, wrote back to Jacobs in these terms:

“It has been some time since we have spoken. I would like to bring you up to date with regard to recent developments and the real prospect of collaborating with your firm. First, and you may know, I recently received a letter from John Stewart reminding SOM of their requirement to award Jacobs Design and Engineering contracts within a two year period. The letter states that SOM has not awarded work to Jacobs as of the date of the letter. This is not true. We have, in fact awarded contracts to GPR/Jacobs. I will provide you with an account of hours and fees so that we may accurately evaluate the extent to which we have addressed a portion of our contractual obligation to Jacobs.

In addition, I am in a position to directly award an MEP engineering contract to Jacobs for a significant new project in Saudi Arabia. The project is a conference centre in Riyadh, in the King Abdullah Financial District. Can you provide the name of a contract representative so that we may get a proposal from Jacobs for MEP Design Services?”

Mr. McGill said in evidence that it was a coincidence that this possibility arose so soon after the Jacobs chasing letter, reminding him of the terms of the June 2009 agreement. Although nothing really turns on it, it is a little difficult to accept that, given that SOM had been approved for the Riyadh conference centre project some six weeks before that, but had not notified Jacobs of any opportunity, and had instead carried out the conceptual design using their own MEP teams.

For reasons which are not clear, nothing then happened for a fortnight. It was not until 2^nd March 2011 that SOM made formal contact with Jacobs in respect of the Riyadh conference centre. On that day, they sent a short email to Jacobs which included the long and very detailed RFP, which RIC had sent SOM the previous year. Having identified the other sub-consultants, almost all of whom were based on the East Coast of America, the email went on to say this:

“Please review the attached RFP for the new conference centre and submit to my attention your proposals to provide MEP/fire alarm/fire protection services. The new conference centre will be fed from an existing remote central utility plant.”

There was then a reference to phases. The email concluded:

“Construction services will be addressed separately once design has been completed. Please submit to your most competitive fee to my attention by Friday March 4^th. ”

The RFP made plain that what was required was a lump sum fee proposal. That proposal was being sought within two days which was, on any view, an impossibly tight timetable. Subsequently, an extension was granted from the Friday to the following Monday 7^th March.

Mr. Stewart was the Vice-President of Jacobs UK Buildings. He told Jacobs staff that, because of the June 2009 agreement, they needed “to respond positively” to the email of 2^nd March. I find that he was anxious that, if all possible, Jacobs would undertake the Riyadh project. Not unreasonably, other Jacobs representatives were rather sceptical about the situation they suddenly found themselves in. Mr. Alan Southcott, Jacobs Operations Director in the United Kingdom said:

“Can’t help feeling suspicious as to why at the 11^th hour we have to put a bid in by Friday.”

On March 3^rd, Mr. Southcott provided an email which explained that, because of the tight timetable, and the fact that SOM and most of the other sub-consultants were based in the USA, Jacobs UK were not in a position to bid for the project. That meant that it was up to Jacobs in the USA to decide whether or not a bid could be prepared. Mr. Brad Simmonds, the Buildings Director there, was a little more positive in his email of 4^th March, but he pointed out that Jacobs USA had no “conference centre specific experience”. He also warned that the timetable for a response was impossible and concluded: “my sense is, we might be best to pass.”

In a series of internal emails, Mr. Stewart endeavoured to get Mr. Simmonds to view the proposal in a more positive light. Reminding him of the terms of the June 2009 agreement, Mr Stewart said that “I think we’ll have to make them an offer unless we have defendable grounds not to.” Mr. Simmonds repeated his concerns about his team’s lack of conference centre experience.

Meanwhile, Jacobs had asked SOM some questions about the Riyadh project, including what stage had been reached and why they were being asked to bid so late. In answer to the latter question, SOM said on 4^th March that they were seeking Jacobs’ help because SOM’s MEP teams were “committed to other large scale projects recently awarded to the firm.” It was not explained why none of those other projects had been offered to Jacobs. SOM also said that, not only did Jacobs have to provide their own schematic drawings by 29^th April, but they also had to validate the design work which had already been done by SOM.

In an email sent on Saturday 5^th March, Mr. Southcott set out all reasons why Jacobs Building UK could not bid. These included the use of unfamiliar American standards, the difficulties of interfacing with numerous other sub-consultants based in the USA and the tight timetable. Mr. Stewart was still endeavouring to persuade his American colleagues to bid but Mr. Simmonds continued to maintain his objections.

On 8^th March 2011, there was a transatlantic call involving all of the relevant personnel at Jacobs. Following that, on 9^th March 2011, Jacobs wrote to SOM in the following terms:

“We have now received the RFP for the above project for our team. We have carefully evaluated it as a prospect with which Jacobs could assist you and have a number of concerns which we believe would make it very difficult for us to make a positive contribution to the project namely:

•

Your team who are delivering it are based in New York where we have no MEP design resources. The nearest relevant resources would be in St. Louis or Fort Worth, which would make communications difficult.

•

It is a complex project of a type of which we have no track record in MEP.

•

Our relevant local teams have no previous experience of working on projects located in the Middle East.

•

Its fast track nature would make familiarisation and rapid delivery a real challenge for the whole team by introducing a new MEP designer at this stage.

If your options are limited and considering the concerns noted above you still wish to proceed or engage Jacobs for this work, then we would be willing to assist you on a time charge basis plus expenses until such point as a lump sum offer could sensibly be made.

In these circumstances, and bearing in mind that this is the first offer of work which you have made to Jacobs since entering into out agreement 18 months ago, it seems likely that there will be better, more relevant and timely opportunities for us to work together in future. We would therefore suggest that Jacobs assisting on this project would not be in the best interest of the project, SOM or your client…”

Originally, Mr. McGill sought to persuade Jacobs to reconsider their concerns and work with SOM on the project. That can be seen in his draft response of 10^th March. But the letter that was actually sent a week later, on 17^th March, deleted that attempt, and instead expressed “regret” that Jacobs were not interested in teaming up with SOM on the project. The letter went on:

We will continue to look for opportunities on which we can work together. We would appreciate your timely feedback on opportunities we identify. We would request that SOM be granted a one year extension on our agreement until June 2012. This would enable us to work together to identify projects that you believe to be appropriate for our firm and allow us to meet the outstanding amount of our obligation…”

In the reply of 31^st March, Jacobs noted that the conference centre project had been offered shortly after SOM’s receipt of their original letter and was the first significant offer of work that had been made. They also said that, not least because of the limited timeframe, it was not an offer which Jacobs were capable of supporting locally. Jacobs went on to agree an extension of six months to the June 2009 agreement.

On 11^th May 2011, Mr. McGill wrote to say that he would instruct his team to vet potential projects with Jacobs at the proposals stage, in order to better assess their project type experience. Again he sought a year’s extension. However no further extension beyond the six months was agreed. Thus the June 2009 agreement came to an end on 23^rd December 2011 without there having been any further contracts awarded by SOM to Jacobs.

It appears that WSP Flack and Kurtz of New York were engaged to do the MEP work at the conference centre in Riyadh. The only evidence that I have concerning that contract is that it was apparently dated 30^th June 2011, some three months or so after the events that I have set out above. That was broadly consistent with the time that it had taken for SOM to agree their contract with RIC.

On SOM’s interpretation of the contract, they had to offer a contract or contracts to Jacobs. They maintain that they complied with that requirement in connection with the Riyadh conference centre. The first question therefore, is: what constituted the SOM offer? Mr. Harding originally said that it was the letter of 18^th February, but that cannot possibly be right. That letter, noted at paragraph 28 above, gave no specifics or details at all. It seems to me that it was not an offer; it was just advanced notice of an intended offer that might be made in future.

The other candidate identified by Mr. Harding as constituting SOM’s offer, is the email of 2^nd March. But, I ask rhetorically, in what sense was that an offer of a contract to Jacobs? In my view it was no such thing. It was a request for a lump sum fee proposal. It did not offer anything specific to Jacobs; it was simply an opportunity for them to bid for a contract under an enormously tight time constraint.

There are two other reasons why I conclude that the email of 2^nd March was not an offer of a contract by SOM to Jacobs. First, it was plain that any such offer was dependant on the detailed response given by Jacobs to the RFP. That was presumably why they were being asked to complete it in the first place. Accordingly, at the time that the RFP was provided, it was entirely unknown whether or not the contract would actually be awarded or offered to Jacobs. Nothing would be known until Jacobs had complied with that request. Thus, even on SOM’s case, the email of 2^nd March was not an offer of a contract to Jacobs.

Secondly, the email of 2^nd March made the offer (or the award) dependant on the lump sum quoted by Jacobs. But such a pre-condition was not in accordance with the June 2009 agreement, because that expressly provided a mechanism to ensure that cost (that is to say the level of fees), was not relevant to the award of contracts by SOM to Jacobs. That was why there was a separate mechanism for the fees to be fixed if they could not be agreed. Accordingly, SOM’s request for a lump sum proposal does not seem to me to be in accordance with the June 2009 agreement in any event, even if one assumes that SOM are right in their interpretation of Clause 2.

Finally on this point, it is perhaps important to note that not even SOM thought that the exchanges in respect of the Riyadh conference centre amounted to a discharge by them of their obligations under Clause 2. That was why, in his letter of 17^th March, Mr. McGill asked for the two year period to be extended. He would have had no need to do that if he had thought that his obligations under Clause 2 were at an end. When asked about that in cross-examination, he very fairly accepted that he believed at the time that he remained under this ongoing obligation.

I find, therefore, that even if the word “award” is to be read as “offer”, SOM’s letter of 18^th February and email of 2^nd March did not constitute an offer of a contract to Jacobs. So for those reasons too, SOM’s case fails: even on their interpretation of the agreement, they did not comply with it.

In view of my other findings, it is not necessary for me to deal with this aspect of the case in any detail. However, it does seem to me that, if SOM’s email of 2^nd March 2011 was an offer in accordance with the June 2009 agreement, then that could only be because SOM envisaged, before they actually awarded that contract to Jacobs, that they were entitled to go through the usual stages of negotiation (that is to say, addressing things like workscope, price and timetabling). Any such entitlement on SOM’s part to fulfil this process would require implied terms as to the timing of such offers, their content and the like, because there was nothing express about any of that in the June 2009 agreement. If that is right, of course, then Jacobs’ entitlement to respond, and if appropriate, to decline any offered bid, would also have to be the subject of similar implied terms, and for similar reasons.

My primary view is that implied terms are unnecessary because of my interpretation of Clause 2 of the June 209 Agreement. They would not be necessary for the contract to work: see Liverpool City Council v Irwin [1977] A.C. 239. But it seems to me that SOM cannot have it both ways; if they are entitled to seek a bid from Jacobs before deciding whether or not to award or offer Jacobs a contract, then Jacobs are entitled to consider, and if appropriate, to refuse to bid for that contract. Both parties’ rights and liabilities in that situation would have to be governed by implied terms because the June 2009 agreement was entirely silent on such matters.

On behalf of Jacobs, Ms. Ansell submitted that for an offer to comply with Clause 2, it had to be a suitable project, which meant a project which Jacobs could reasonably be expected to undertake, or could not reasonably refuse to undertake.

In this situation (which is, as I have explained, some way from my primary findings), I accept that there would be an implied term that would allow Jacobs to refuse to bid for work which they reasonably considered that they could not undertake for reasons of capability, logistics or timetabling. It would, I think, be a nonsense if the June 2009 agreement meant that Jacobs were required to bid for any contract of which SOM chose to notify them, regardless of their other capabilities or commitments. In that situation, as Ms. Ansell rightly noted, Jacobs would be forced into either foregoing their rights under Clause 2, without proper compensation, or bidding for what they felt was work they could not, or should not, do. That, it seems to me, would make the June 2009 agreement unworkable, so the necessity test, and the implication of terms to make the agreement workable, would then be met.

It does seem to me that the necessity for such terms on this interpretation of the agreement is emphasised by SOM’s own position on the facts. According to the information that they provided to Jacobs at the time, SOM were only asking Jacobs for a bid at all because SOM’s own MEP teams, who had been involved in the conference centre project at the outset, were suddenly committed elsewhere. If SOM could, for wholly acceptable commercial reasons, pick and choose which contracts they offered to Jacobs, and which they did not, then Jacobs were entitled to respond in kind and, again for wholly acceptable commercial reasons, decline to bid for such contracts if, in the circumstances, that was a reasonable and appropriate course.

For the avoidance of doubt, I find that through Mr. Stewart, Jacobs tried hard to find ways in which they could bid for this project. In the end they felt they could not do so. Their reasons for not bidding, which are both in writing and were emphasised in the oral evidence yesterday, are summarised above. I consider they acted reasonably in all the circumstances. Thus, even if the email of 2^nd March was an offer of contract in accordance with Clause 2, Jacobs were entitled to decline to bid without adversely affecting their rights under the June 2009 agreement.

CONCLUSION

For all of those reasons, I consider that Jacobs’ claim succeeds in the sum of £498,750. I will deal separately, if requested, with all matters of interest and costs.