Mi-Space (UK) Ltd v Bridgwater Civil Engineering Ltd (BCE)

This is a judgment in two sets of proceedings. The claimant in the first action is Bridgwater Civil Engineering Ltd (“BCE”) and the defendant is Mi-Space (UK) Ltd (“Mi-Space”), a company in the Midas group. BCE’s claim in the first action is to enforce the decision of an adjudicator dated 8 May 2015 by which he ordered Mi-Space to pay BCE the sum of £346,177.54 (plus VAT) by 15 May 2015. That sum was not paid.

The claimant in the second action is Mi-Space. In that action it seeks a declaration that BCE’s claim for payment that gave rise to the referral to adjudication was settled by an exchange of e-mails between the parties on 3 March 2015 or, alternatively, by that exchange and the conduct of the parties during the remainder of that week consisting of, on the part of BCE, returning to site following a suspension of work and, on the part of Mi-Space, paying the sum that was agreed in the exchange of e-mails.

In effect, therefore, the principal issue before the court is whether or not the dispute in relation to BCE’s claim for payment was settled during the week of 3 March 2015 as Mi-Space contends. Subsequently, both parties purported to terminate the sub-contract, but the court is not presently concerned with the financial consequences of that termination.

If Mi-Space is right about this, a further issue is whether, as BCE contends, the parties subsequently agreed to proceed on the basis of the original unamended sub-contract or in some way released each other from the 3 March agreement.

The hearing took place on 1 and 2 October 2015 and three witnesses were called. Subsequently each party put in written closing submissions and there was short oral argument on 6 November 2015.

Mi-Space was represented by Mr Rupert Choat, instructed by TLT LLP, and BCE was represented by Ms Chantal-Aimée Doerries QC, instructed by Foot Anstey LLP. I am grateful to both of them for their helpful submissions.

On 24 February 2014 a sub-contract was entered into under seal between Mi-Space, as the contractor, and BCE, as the sub-contractor, for the carrying out of certain groundworks for a residential development known as Mount Wise at Plymouth. The start date for the sub-contract works was 2 January 2014 and the date for completion was March 2015. It was a lump sum fixed price sub-contract for £1,828,000 plus VAT.

The sub-contract was in the form of the JCT Design and Build Sub-Contract 2011. Appendix 2 provided a timetable for payment applications and dates of payment. For example, in the case of Valuation No. 15, BCE’s payment application was to be received on 27 December 2014, the payment due date was 17 January 2015 and the final date for payment was 13 February 2015. There was a small problem with Appendix 2 because it envisaged a start date of October 2013 and so the valuation numbers had to be changed: thus Valuation No. 15 became Valuation No. 12.

The dispute in this case centres on the application that was to be made in December 2014, which has been referred to for convenience as the December 2014 application. That application was in the net sum of £346,177.54 (plus VAT as applicable). However, Mi-Space failed to serve a payment notice in time and so, as the adjudicator held, BCE was entitled to be paid the amount claimed.

Mi-Space did not pay the sum claimed in the application and in due course, following service of the relevant notices by its solicitors, BCE suspended work as it was entitled to do under the sub-contract.

The settlement defence was advanced and relied on by Mi-Space during the adjudication but the adjudicator rejected it. However, he did conclude that if it was a good defence, then it would have overridden BCE’s entitlement to payment. That conclusion is not challenged.

Mi-Space did not make the payment ordered by the adjudicator and so BCE started proceedings to enforce the adjudicator’s decision in the usual way. Mi-Space indicated that it proposed to defend the application for summary judgment by relying on the alleged settlement agreement. It was therefore directed that the court should decide whether or not there had been a settlement as Mi-Space contended.

The primary case advanced by Mi-Space was that a settlement was concluded by an exchange of e-mails on 3 March 2015. Its case was that it made an offer in an e-mail timed at 16:21 which was accepted by an e-mail from BCE timed at 18:54. By its offer Mi-Space proposed, amongst other things, to make an interim payment on 6 March 2015 in the sum of £79,862.62 plus VAT. In return, it was proposed that BCE would immediately withdraw its claim in respect of the December 2014 application and return to site. Both these things happened.

A Mr Nicholas Acheson, who had just taken over as the project surveyor for Mi-Space, arranged a without prejudice meeting with Mr David Caddick, a director and the principal shareholder of BCE, to be held on 27 February 2015. In order that there should be a neutral venue, it was agreed that they would meet at a Sainsbury’s cafe outside Plymouth. Mr Caddick was in fact on holiday at the time and therefore came to the meeting without having read a spreadsheet which had been sent to him by a Mr Kightley who, until then, had been the project surveyor for Mi-Space. The meeting was attended by Mr Kightley also.

It is common ground that no agreement was reached at the meeting, which really took the form of an exploratory discussion, although it was Mi-Space’s case that it centred around a schedule of key differences in relation to 11 items of work. Mr Acheson and Mr Caddick attempted to agree the value of BCE’s final account as at the date of the meeting assuming that all outstanding work that had been instructed to date was subsequently completed. After some negotiation Mr Caddick indicated the lowest figure that he was prepared to accept but Mr Acheson told him that he did not have authority to agree that figure. There was some discussion about the cost of completing the outstanding work, which Mr Kightley estimated at about £89,000. It seems that Mr Caddick did not accept this figure although the parties are at issue as to what exactly was said about it.

A point which has given rise to acute disagreement is whether or not Mr Acheson stated at the meeting that, should proposals be agreed in principle, there would have to be a formal agreement to that effect signed by both parties. This, as Mr Caddick said in his witness statement prepared for this hearing, would involve Mi-Space (or its lawyers) drawing up a new sub-contract which would be forwarded for scrutiny and possible amendment by BCE before taking effect. On the basis of this, it is BCE’s case that the agreement said to have been reached in the exchange of e-mails on 3 March 2015 was always “subject to contract” and therefore not binding. Whether or not that is correct is the central issue before the court.

A further point raised by BCE was that no agreement would take effect unless and until Mi-Space provided substantiation of Mr Kightley’s estimate of the cost of the works to complete.

Following the meeting on Friday, 27 February 2015, Mr Acheson sent an e-mail to Mr Caddick at 16:56 that afternoon, headed “without prejudice”, in which he said that he was able to make the following proposal:

“We will commit to aiming to agree to an anticipated forecast final account value, based on all the instructions received to date and valued in accordance with the contract, of £2,350,000.

Furthermore we will reduce the retention percentage from 5% to 4%

This would result in the following payment being made by CHAPS on the 06/03/14.

Anticipated final account £2,350,000.00

[Further figures were then set out]

The above offer is made on the understanding that acceptance of this will result in the immediate withdrawal of the notice to suspend works on site on the 03/03/15 and the withdrawal of the claim made on your behalf by Messer’s (sic) Foot Anstey in respect of the December 2014 valuation payment.

If we do not hear from you by close of business on Monday 02/03/15 we will assume that you find the above acceptable and will continue with your contractual obligations.”

The reply from Mr Caddick, at 18:42 on the same day, which was also headed “without prejudice”, said this:

“Thanks for your proposals as set out below.

My concern is that you state “we commit to aiming to agree” that is not the same thing as stating that you WILL commit to the agreement.

We believe that in principle and subject to the foregoing substantiation, the terms as set out could form the basis of an agreement with the following proviso:

That any further works other than as set out within and forming part of the original Sub-Contract will be subject to a variation. Such variations will be subject to a Mi.Space Variation/CDI and that all such works will be accurately defined as to requirement and agreed prior to carrying out the works.

Furthermore, the sum of £2,350,000.00 must be agreed as the definite Final Account Sum, subject to any further extra works. All other proposals as set out below would be acceptable.

On receipt of your signed agreement to these proposals we will instruct Chris Hoar of Foot Anstey to withdraw the Notice of Suspension of Works, though for clarity, we are unable to withdraw the notice until full agreement has been achieved.”

On Monday, 2 March 2015, Mr Acheson sent a short e-mail to Mr Caddick explaining that Mr Acheson’s line manager Mr Benson had had to rush into hospital with his son and that he had not been able to discuss Mr Caddick’s proposal with him. This provoked an irritable response from Mr Caddick expressing surprise that there was no other director with whom Mr Acheson could discuss the proposals.

In the meantime, Mr Caddick sent an e-mail to Mr Kightley at 16:20 on 2 March 2015, in which he said:

“Just a quick correspondence to clarify and confirm that (as per our e-mail at the weekend) in the absence of any firm agreement/commitment to make the payment which has been discussed, Bridgwater Civil Engineering Ltd are going to proceed with suspending the works (as per the notice) from midnight tonight.

. . .

Therefore unless we receive confirmation within the next hour or so, we will be instructing our site staff to secure our works, materials etc. before leaving tonight with a view to the suspension coming into effect at midnight.”

I pause to observe that this e-mail shows very clearly that what was uppermost in the mind of Mr Caddick was prompt receipt of the proposed interim payment and that it was receipt of an unequivocal assurance that this payment would be made that would dictate whether or not BCE remained on site. By this time the notice of suspension of work that had been issued by BCE’s solicitors was due to take effect imminently - from 00:01 hours on 3 March 2015.

By an e-mail timed at 09:45 on 3 March 2015, again headed “Without Prejudice”, Mr Acheson made an offer to Mr Caddick to agree the final account in full and final settlement in the sum of £2,300,000 in respect of all works carried out to date. The figures used in the calculation of the interim payment which was to be made on 6 March 2015 included a figure of £89,570 for works instructed but yet to be completed and a reduction in the retention for the purposes of that payment from 5% to 3%. The e-mail concluded as follows:

“The above offer is made on the understanding that acceptance of this will result in the immediate withdrawal of the claim made on your behalf by Messer’s (sic) Foot Anstey in respect of the December 2014 valuation payment and no loss and expense costs will be levied in respect of legal or suspension costs. Also that you will return to site immediately and continue to complete your contractual obligations in a timely manner.

Please confirm that you find the above acceptable and I will then put this a formal proposal with the "without prejudice" heading removed to allow you to formally accept.”

As this e-mail shows, BCE had by then left site as they had said they would do.

Mr Caddick replied the same day, at 12:25, in the following terms:

“For Clarity, we believe that £2,350,000.00 should apply and be agreed in respect of the Contract works, subject only to any further extra works as/when requested by Mi-Space.

All further extra works (not forming part of the Contract Works) to be subject to Mi.Space - “Contractors Direction Instruction”.

All such extra works should be detailed and agreed by Oliver Kightley or equivalent, and to contain sufficient information/dimensions to allow the surveyor to agree all and any such works contemporaneously and prior to carrying out the works.

Whilst we are interested in Saw Close works and here we would like to negotiate the “concrete frame package” also, as that would make your proposals more attractive and therefore more acceptable.

We would place a long stop date on the inclusion of the £50,000.00 at July 2015 valuation date for Saw Close. Should Mi-Space not have received the project order by July or be in a position to value/include the £50,000.00 within the first valuation date then Mi-Space must agree to pay the sum of £50,000.00 at that time. Bridgwater Civil Engineering Ltd would also accept the retention percentage on Mount Wise will be cut from 5% to 3%.

On receipt of your agreement to these variations to your correspondence and with the “without prejudice” heading removed, Bridgwater Civil Engineering will undertake the withdrawal of the claim made by our Messrs Foot Anstey in respect of the December 2014 payment.

And that no loss and expense costs will be levied in respect of legal or suspension costs we will also return to site immediately and continue to complete our contractual obligations in a regular and diligent manner.

We would suggest that the sooner these amendments are agreed the sooner we are able to return to complete the works.”

It is to be noted that in this e-mail Mr Caddick effectively prescribes the mode of acceptance of his counter offer, namely (a) notification by Mi-Space of its agreement to the revisions to its offer set out in Mr Caddick’s e-mail and (b) the removal of the “without prejudice” qualification. That mode of acceptance would not be satisfied by the sending of a draft deed of variation for agreement by BCE.

I should add, by way of explanation, that Saw Close was another project for which Mi-Space was a potential contractor. It was contemplating engaging BCE as the groundworks sub-contractor. Mr Acheson’s explanation for this, somewhat curious, proposal was that Mi-Space was in a position to increase the sub-contract price for the Saw Close project without going over budget, whereas there was no leeway in the budget for Mount Wise. He said that attributing £50,000 to the Saw Close project was therefore much more satisfactory from an accounting point of view. However, as Mr Caddick saw it, a delayed payment of £50,000 - particularly if deferred until December 2015 as originally proposed - would give rise to a serious cash flow problem.

Reverting to the narrative, Mr Acheson responded to this e-mail at 16:21 on the same day in the following terms:

“Further to our recent telephone discussion I am pleased to confirm the revised agreed proposal to resolve the account issue at Mount wise [sic] (with the requested additional comment in the last line of item 6) as follows:

1)

Mi-Space (UK) Ltd and Bridgwater Civil Engineering Ltd (BCE) agree to a final account in full and final settlement of £2,300,000 for all contract works and instructions instructed to date at the project known as Mount Wise phase 2, Plymouth

2)

Mi-Space (UK) Ltd further agree to proceed, on the receipt by Mi-Space (UK) Ltd of a formal order from their client, to place an order with BCE to carry out the ground-works package at Saw Close, Bath based on your ground-works quotation for the sum of £440,682.26 less 2.5% MCD plus the sum of £50,000.00.

This is an effective agreement to the £2,350,000 figure, albeit split across the two projects.

The amount of £50,000 would be included in BCE’s first valuation for Saw Close, Bath. Should Mi-Space (UK) Ltd have not received the project order by September 2015 or be in a position to value/include the £50,000.00 within the first valuation date then Mi-Space will agree to pay the sum of £50,000.00 in full and final settlement by the September 15 sub-contract valuation payment date (i.e. the BACS run of the 02/10/14)

3)

In the event that Mi-Space (UK) Ltd do not receive an order for Saw Close, Bath then no claim will be made by BCE for loss of profit.

4)

For the avoidance of doubt it is currently not our intention to place the concrete frame package with BCE at Saw Close and that does not form part of this agreement, but we would be pleased to discuss this further.

5)

As the effect of paying the £50,000 on the Saw Close project later in the year will have an effect on BCE’s cash-flow Mi-Space (UK) Ltd will reduce the retention percentage on Mount wise from 5% to 3% in the next payment, which will have the effect of releasing £44,208 of retention now.

6)

Upon receipt of BCE’s formal acceptance in writing of this agreement Mi-Space (UK) Ltd will make the following payment to BCE by CHAPS on the 06/03/15

[the figures are then set out - resulting in an interim payment of £79,862.62]

The above payment will supersede and therefore replace the December 2014 and January 2015 valuation Mi-Space UK Ltd payment notices

7)

Any further variations (not forming part of the above agreement) will be subject to Mi-Space (UK) Ltd’s “Contractors Direction Instruction”. All such extra variation works will be detailed therein and it is the intention, where possible, for these to contain sufficient information/dimensions to allow Mi-Space (UK) Ltd’s project surveyors and BCE to agree any such works contemporaneously and prior to carrying out the works. Where this is not possible due to the nature of the works, such variations will be agreed as soon as possible.

8)

It is agreed that BCE will immediately withdraw their claim made on BCE’s behalf by Messer’s (sic) Foot Anstey in respect of the December 2014 valuation payment and no loss and expense costs will be levied in respect of legal suspension costs. Also BCE will return to site immediately and continue to complete their contractual obligations in a timely, regular and diligent manner.

Please confirm your agreement to the above.”

By his e-mail of 18:54 on the same day Mr Caddick replied as follows:

“Nick

Yes we are in agreement with this now.

Can you carry on formalising the paperwork.

Thanks for your efforts

Regards

Dave”

Following this exchange Mi-Space made the promised payment on 6 March 2015 and BCE returned to site. Mi-Space submitted that this amounted to partial performance of the agreement.

On 11 March 2015 Mr Acheson sent to Steve Wilkinson, of Mi-Space, an e-mail enclosing a draft Deed of Variation, that he had prepared with Mr Kightley, “to formally capture the agreement” that had been made the previous week. Mr Wilkinson was a commercial manager of the Midas group who, according to Mr Benson, provided advice to business units within the group. He was not, according to Mi-Space’s evidence, a person who was either required or authorised to approve the terms of the agreement: he was merely a person who was being asked to give advice about the form of the deed of variation. This was put in issue by BCE, who suggested that Mr Wilkinson’s approval was required before any agreement could be entered into.

The deed of variation was then sent by Mr Acheson to Mr Caddick as an attachment to an e-mail of 12 March 2015, timed at 08:45, in which he said:

“Further to our payment on the 06/03/15 please find attached the formal deed of variation capturing the agreement we have reached.

Can you please sign and return a copy and I will get it signed our end and return a copy to you”

Mr Caddick then sent the draft deed to his solicitors, Foot Anstey, who returned it to him promptly with some suggested amendments. Mr Caddick returned the draft deed to Mr Acheson later the same day, at 15:31, saying that he hoped that the amendments would meet with Mi-Space’s approval.

However, on the morning of the following day, 13 March 2015, Mr Caddick saw Mr Kightley and told him that he was not prepared to sign the deed of variation and that matters were back in the hands of BCE’s solicitors. In an e-mail timed at 10:41 to Mr Acheson, Mr Kightley said:

“He has also confirmed that he is not happy with the £50k on Saw Close as he does not wish to work with Midas again.

His theory behind his decision to go back on his previous agreement is as follows; Dave has calculated around £150k of work to complete on Mount Wise and as he sees it, there is only £90k left to draw based on his £2.3m Final Account.

I did my best to explain to him that he had the £50k on Saw Close (total 2.35m), which actually gives him a further 140 K (total) but he seemed to have his mind made up before he came in to see me.”

Later that day Mr Kightley sent Mr Acheson a further e-mail saying that he had just seen Mr Caddick again who had said that he was no longer interested in Saw Close and that if the Mount Wise deed sum was £2.35m and the amendments put forward by Foot Anstey were incorporated, he (Mr Caddick) would sign. On 16 March 2015 Mr Caddick sent an e-mail to Mr Acheson in which he said much the same as he had said to Mr Kightley and suggested that they should have an urgent meeting.

A meeting was subsequently arranged for 20 March 2015 at Mi-Space’s offices. It was attended by Mr Benson and Mr Acheson on behalf of Mi-Space, and by Mr Caddick on behalf of BCE. According to notes that Mr Acheson said that he made at the meeting, Mr Caddick reiterated his demand that the £50,000 that was to be paid in respect of Saw Close should be brought back into the contract for Mount Wise. Mr Caddick said that he had no recollection of Mr Acheson taking notes at the meeting and so there is an issue as to whether the notes that Mr Acheson said he made at the meeting were in fact made contemporaneously.

Mr Caddick’s account of this meeting is in direct conflict with those of Mr Benson and Mr Acheson. He disagreed that Mr Benson ran through a timeline of events with which Mr Caddick was said to have agreed. Mr Caddick says that he had a rather heated exchange with Mr Benson during which he made it quite clear that no binding agreement had been reached. He said that he explained in particular that he would never have agreed to sign a formal legal agreement until Mr Kightley had backed up his figures. In his witness statement Mr Caddick said that he went to great lengths to explain to Mr Benson that he was unhappy with the way that Mr Kightley had dealt with previous valuations and with the valuation of the works currently outstanding. One of his complaints was that Mr Kightley reopened valuations that had previously been agreed.

Mr Caddick said that once it was made clear to Mr Benson that he was not prepared to agree the current proposal, Mr Benson became agitated. In addition, he said that Mr Benson confirmed his understanding that until a written agreement had been signed, no binding agreement would be reached. He said that Mr Benson told him also that he was the only person with authority to agree to any settlement on behalf of Mi-Space. Following that meeting Mr Caddick instructed his solicitors to serve a fresh notice of intention to suspend the works.

Following the meeting BCE’s solicitors, Foot Anstey, served a fresh notice giving notice of BCE’s intention to suspend performance of its obligations under the sub-contract. At 18:41 that day, Mr Acheson sent an e-mail to Mr Caddick in the following terms:

“We refer to our recent discussions in relations to the amounts due under the Sub-contract. We note your position regarding the agreement reached between the parties on 3 March 2015 (the Agreement) and in particular that you do not wish to be bound by the terms of the Agreement. You have failed to comply with the terms of the said Agreement. We accept that you do not wish to be bound by the terms of the Agreement reached and that you do not wish to perform the agreed terms. On this basis we have no choice but to accept your intention not to perform the terms of the Agreement and bring to an end the Agreement. We shall revert back to the terms of the Sub-contract. Please note any payments made to you to date are on account and shall be treated as payments under the Sub-contract.”

BCE’s case is that this e-mail reflects an agreement by the parties that, in the absence of any agreement between them, they would revert to the unamended (or unvaried) sub-contract.

Mr Benson is a Divisional Director of Mi-Space. He was not at the meeting of 27 February 2015 and so his evidence on the crucial issue in dispute is necessarily of limited value. He said in his witness statement that Mi-Space uses a system known as Alchemy to process payments and that, once a payment request is lodged, it goes through an internal approval process before it is submitted to Alchemy.

He said that he would not have approved the payment on 6 March 2015 unless he thought that the parties had concluded an agreement that was binding.

I found Mr Benson to be an honest witness, although I did not find him to be a very precise one. His evidence was sometimes given with some hesitation.

Mr Acheson is a Project Surveyor at Mi-Space, but he did not become involved in this project until 19 December 2014. He took over the role of lead surveyor at the end of February 2015: in other words, just before the meeting of 27 February 2015.

Mr Acheson impressed me as a careful and straightforward witness. To the extent that the evidence as to what was said at the meeting of 27 February 2015 is relevant and admissible, for the reasons given below I prefer the evidence of Mr Acheson to that of Mr Caddick. In particular, I am not satisfied that Mr Acheson said that any agreement reached at or after the meeting would have to be the subject of the execution of a formal agreement signed by both parties, or anything to similar effect.

Mr Caddick is the major shareholder in BCE. He conducted all the negotiations on behalf of BCE and is, I find, the controlling mind of the company.

Whilst I have no reason to doubt that Mr Caddick is an able businessman, I formed the clear impression that his understanding of contractual obligations was not sophisticated. I am not satisfied that in early 2015 he really understood the meaning of the expression “subject to contract”, as he admitted was probably the case (Day 2/112).

BCE asserted at the time of the adjudication that it relied on a representation by Mr Kightley as to the true value of BCE’s works to complete. For the reasons that I give later in this judgment, I find that this is simply not plausible. Mr Caddick’s own evidence about this was not consistent: he was unable to explain satisfactorily the discrepancy between BCE’s case as presented during the adjudication (as identified below) and what he said in his witness statement prepared for this hearing (Day 2/92).

All in all, whilst I did not form the view that Mr Caddick was a witness who was being dishonest, I think that he made a bargain on 3 March 2015 that he came to regret and so he looked for a way out of it and that, in the course of doing so, he has persuaded himself that the agreement was made on a “subject to contract” basis.

However, having heard both Mr Caddick and Mr Acheson give evidence, and for the reasons developed more fully below, I am not satisfied that Mr Acheson said anything at the meeting on 27 February 2015 to the effect that any agreement reached between them in discussions would be subject to contract or would have to be signed by both parties. Apart from anything else, if this had been the case, I would have expected to find it reflected in at least one of the e-mails exchanged between the parties following the meeting: but there is not a hint of it.

Mr Caddick’s evidence was to the effect that there had been a long history of valuations for varied work being agreed by Mr Kightley, on behalf of Mi-Space, but then later being reopened. This is why, he said, he was not prepared to be bound by an agreement that was not signed by Mi-Space. The other principal theme of his evidence was that both at the meeting of 27 February 2015 and during the subsequent telephone conversations with Mr Acheson, his principal concern was to establish the true cost of BCE’s work to complete because that was an important ingredient of his assessment of the appropriate figure for the final account sum.

Strictly speaking, as Mr Acheson pointed out, the cost of the works to complete has no bearing on the true value of the final account. The amount of the final account (ignoring delays and the like) is simply the contract sum plus the true value (as arrived at in accordance with the terms of the sub-contract) of any varied work. In the paradigm situation of a contract where there has been no change to the scope of the works, no delays and no unexpected problems, the cost of the work to complete at any valuation date should be the difference between the contract sum and the amount paid to date (after making a suitable adjustment for any percentage retained by the main contractor). Various factors can change this. For example, the sub-contractor may encounter unexpected ground conditions for which, under the sub-contract, he has to take the risk, or if the scope of the work has been varied and the value of the varied work has been agreed in advance, it may have been undervalued. Events such as these would increase the costs to complete. Another obvious factor would be if the sub-contractor had undervalued the cost of the job in the first place when submitting his tender.

Nevertheless, it is quite understandable that Mr Caddick was concerned to know the likely cost of completing the work before committing himself to a figure at which he could agree the anticipated final account - even if it was not logically relevant. However, if he was really reliant, as he says, on being given a properly substantiated figure by Mr Kightley of his estimate of BCE’s costs to complete, it is remarkable that he never mentioned this in any of the relevant e-mails.

In his witness statement dated 11 September 2015 prepared for the purposes of this hearing, Mr Caddick said this, at paragraph 40:

“Mr Acheson also stated at the meeting that, should the proposals be agreed, the terms of the existing sub-contract would cease and that both parties would need to sign a formal agreement to that effect. I thought that this was the only way of progressing things, especially in light of Mi-Space’s apparent inability to stand by previous valuation agreements. Thereafter, a new sub-contract would be drawn up and forwarded for scrutiny and any proposed amendments before taking effect. Mr Acheson explained that the new sub-contract would encapsulate the work remaining to be undertaken and variations from CDI 106 onward. In other words, any variations prior to that date would in effect be valued and rounded off within the proposed agreement.”

However, in BCE’s Reply to the Response and Mr Caddick’s witness statement in the adjudication proceedings, both dated 5 May 2015, there is no reference to any such statement by Mr Acheson at the meeting of 27 February 2015. In paragraph 18 of the Reply to the Response BCE said this:

“BCE says that in this instance and by reference to the background given in the following paragraphs, looking at all the relevant facts and assessing both parties intentions/state of mind (as the Adjudicator is with respect required to do), no final agreement was ever concluded pending a formal deed of variation which it was clear was never concluded.”

And then, at paragraph 19:

“It was at all times understood (and indeed Mi-Space’s subsequent conduct confirms) that what was in legal/contractual terms being negotiated was a formal deed of variation to the existing (and indeed continuing) building contract between the parties.”

Finally, at paragraph 20:

“That Mi-Space and particular (sic) Mr Acheson as an experienced construction professional (see the introductory paragraphs to his witness statement) were familiar with this process is clearly evidenced by the fact that a draft “Deed of Variation of Building Sub-contract” was issued by Mr Acheson to Mr Caddick of BCE by way of his e-mail at 0845 on 12 March 2015. BCE will rely on the fact that the draft Deed of Variation was issued as evidence of Mi-Space’s (and indeed the parties’) clear understanding that the commercial compromise which may well have been reached by way of the e-mail exchange on 3 March 2015 needed to be reflected in a formal amendment to the existing contract between them.”

But not only is there is no reference in these passages to any express statement by Mr Acheson at the meeting on 27 February 2015 to the effect that any agreement reached in the negotiations would have to be the subject of a formal document signed by both parties, but also the submissions proceed by inference on the basis that nothing to that effect was said.

Mr Caddick’s witness statement served in the adjudication proceedings contained passages to similar effect. For example, at paragraph 26 Mr Caddick said this:

“Mr Acheson himself within his 3 March 2015 e-mail clearly envisaged a signed agreement (see clause 6) as a pre-condition to any formal binding contract between the parties. Given my previous experiences of Mi-Space failing to comply with their undertakings, I was absolutely insistent that a proper agreement was concluded between the parties. Such agreement certainly would not be constituted by a simple exchange of e-mails and both I and I believe Mr Acheson were well aware of this.”

Yet again, there is no reference to any express statement by Mr Acheson at the meeting on 27 February 2015: indeed, it implies the contrary. As I have already said, it is clear that Mr Caddick is the controlling mind of BCE and I infer that the Reply to the Response was prepared on his instructions. It is in my view legitimate to conclude that at the time of the adjudication Mr Caddick said nothing to anyone in terms that reflected paragraph 40 of his witness statement of 11 September 2015.

As I have already indicated, another point on which I find Mr Caddick’s written evidence to be inconsistent concerns what was said about BCE’s costs to complete the work. In his witness statement of 11 September 2015 Mr Caddick said, at paragraph 46:

“In the course of discussing a potential deal during the meeting, Mr Kightley suggested that there was £89,570.00 worth of works left to carry out on site. I believed this figure to be wrong and immediately took issue with it. Whilst it is fair to say that I had not carried out any assessment of the works left to do at that stage, I was aware (as should have been Mr Kightley) that Mi-Space’s purported “Payer Notice” for the December Application (No. 15) clearly set out that £1,701,900.10 was Mi-Space’s assessment of the value of the measured works, whereas £1,828,000.00 was the contract sum (plus variations). On the basis of this calculation, the figure for the remaining works at that time was £126,099.90. This was of course considerably higher than the figure which Mr Kightley was stating. Obviously not being able to undertake the actual calculation on the spot at the meeting, I informed Mr Kightley and Mr Acheson that I thought the value was well in excess of £100,000 and was closer to £140,000 on a broad mathematical sum. I made the point to him at the meeting that he needed to provide the calculations for his figures, as the figures discussed were far from being suitable to found the basis of a final agreement. It was my understanding that as an agreed action Mr Kightley was to go away to check his figures and come back with a revised sum with substantiation. He never did this.”

Mr Caddick said something rather similar in his witness statement of 5 May 2015. For example, at paragraph 20 he said:

“I was actually of the view that potentially the figure was in excess of £140,000 albeit that I was prepared initially to take Oliver Kightley’s alternative amount at face value. In hindsight, I should have been more sceptical of Mr Kightley’s figures from the outset.”

And, at paragraph 42:

“There was with respect no offer from Mr Acheson capable of being accepted. He did not offer anything. He simply suggested that he may be able to get an agreement but did not know at that stage. Oliver Kightley acknowledges here that I “did not agree with my [ie. Kightley’s] figure for the works”. Indeed, I suggested to Oliver Kightley that £146K plus was a realistic figure for works yet to complete.”

These passages are to be contrasted with the way in which the case was put at paragraph 41 of BCE’s Reply to the Response. There BCE contended:

“BCE relies on the comments of Mr Caddick within his witness statement as to the basis upon which Mr Kightley on behalf of Mi-space misrepresented as a matter of fact the true value of the works that remained to be undertaken on site and will rely in this connection on the precision of the valuation undertaken in the purported payment notice of 27 January 2015. If any agreement was concluded on 3 March 2015 (which is obviously denied) such agreement was concluded on the basis of a material misrepresentation relied on by Mr Caddick on behalf of BCE. Such an agreement would be capable of being rescinded and indeed (if it is appropriate) is rescinded in light of the actionable misrepresentation of the true position.”

In paragraph 11 of its Defence to the claim brought by Mi-Space BCE pleaded this:

“The negotiations were conducted on the understanding:

(a)

that a formal written document signed by both parties would need to be executed in respect of any proposed agreement;

(b)

that Mr Kightley would check his assessment of £89,570 of the extent and value of the outstanding works and would revert with any revised sum and with substantiation of the assessment.”

An obvious comment that is prompted by this paragraph is: how can Mr Caddick be said to have relied on Mr Kightley’s figure of £89,570 as being accurate if he was expecting him to check his valuation and “revert [to Mr Caddick] with any revised sum and with substantiation of the assessment”?

But, more fundamentally, I can see no way of reconciling Mr Caddick’s statement that he had told Mr Kightley that £148,000 was a more realistic figure for the costs to complete and the assertion in the Reply to the Response that BCE relied on a material misrepresentation by Mr Kightley as to the value of the works to complete. I am unable to see how Mr Caddick could have relied on a statement that he did not believe to be correct and Mr Caddick himself could provide no answer to this conundrum. In my view, these inconsistencies in BCE’s pleadings and evidence significantly undermine the credibility of BCE’s case as put forward in evidence through Mr Caddick.

For the purposes of this hearing Mr Acheson made two witness statements, one dated 19 May 2015 and the other dated 11 September 2015. Mr Benson made a witness statement dated 11 September 2015. In addition, Mr Acheson made a witness statement for the purposes of the adjudication. That was dated 24 April 2015. A witness statement for the purposes of the adjudication was made also by Mr Kightley, but that was his only witness statement and he did not give evidence before me.

Mr Acheson was cross-examined at some length, particularly about the meeting of 27 February 2015. His evidence in cross examination did not differ from that given in his witness statements in any material respect, save that in evidence he said that at the end of the meeting he gave Mr Caddick a copy of the single page spreadsheet, the figures on which had, according to Mr Acheson, been discussed at the meeting. He was challenged about this because he had not mentioned handing over this spreadsheet in any of his previous witness statements. Mr Acheson said that he had forgotten about it when he was making his witness statements and that he only remembered much later. I see no reason not to accept this evidence because in all other respects Mr Acheson’s evidence was consistent and I formed the view that he was a reliable witness.

Mr Acheson consistently denied that anything was said, either at the meeting of 27 February 2015 or during the telephone conversations that followed it up to and during 3 March 2015, to the effect that before any agreement was binding there would have to be an agreement signed by both parties. His notes of the meeting of 20 March 2015, which of course are challenged, make no reference to anything having been said previously by Mr Caddick about the need for any deal done on 3 March 2015 to be recorded in writing and signed by both parties before it would be binding.

In cross examination Mr Benson said that it was his recollection that Mr Acheson took notes at the meeting on 20 March 2015. He said that he had sat with Mr Acheson in many meetings over the years where he had taken notes - “It’s something that he does” (Day 1/161). However, he said he did not read the notes after the meeting because Mr Acheson made them for his own purposes. In relation to what was said at the meeting, Mr Benson said this (Day 1/161):

“So my stance was in effect taking him through the timeline to try and explain in a logical fashion how we’d got to where we’d got to, and why it was I didn’t understand why he was now thinking that he could unpick it because, in effect, my view was that he’d already made that commitment and it was in operation.

He explained a number of points. I’m sure he made lots of points, but the ones that particularly stick in my mind are the ones that I’ve put in my witness statement.”

It was suggested to Mr Acheson that the second page of the notes which he says that he made on 20 March 2015 cannot have been made on that date because on the other side of the page there was a note that must been made on or after 21 April 2015. Unless the two pages which had been torn out of the notebook were removed very shortly after the meeting on 20 March 2015, this point may not go very far. This is because, and I accept, Mr Acheson says that he probably shut his notebook after the first part of the meeting when Mr Caddick was present and then opened it again, after a short break, on some random blank page in order to continue making a note. He said that the two pages were not torn out of the notebook until sometime later. Mr Acheson may have had a very unmethodical approach to note taking, but that is what he says he did and for the reasons given in more detail at paragraphs 122 to 126 below I accept it.

Both parties referred me to the decision of the Supreme Court in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH [2010] 1 WLR 753, and, in particular, to paragraph 45 of the judgment of the Court delivered by Lord Clarke, where he said:

“The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement.”

Although other cases were also cited to me, in my judgment it is not necessary to go any further than this statement of principle in order to resolve the issues in the current dispute. Issues such as this are notoriously fact-specific, and citation of other cases where the result has turned on the particular facts of each case is of limited assistance.

The essential plank of BCE’s case, as Ms Doerries readily accepted, was that during the course of the meeting on 27 February 2015 it was agreed that any agreement that was reached then or subsequently would have to be put into writing and signed by the parties before it could take effect: in other words, it would be “subject to contract”.

If that submission was not accepted, then, subject to the point about the verification of the costs to complete, I understood Ms Doerries to accept that the exchange of e-mails on 3 March 2015 could have brought about a binding agreement.

Ms Doerries realistically accepted that BCE’s case could only succeed if Mr Acheson’s evidence about what was said at the meeting on 27 February 2015 was rejected. She submitted that his evidence could not be relied on for six reasons:

The first and second of these points are really interrelated. They arose in part out of an exchange with Mr Benson during cross examination which went as follows:

“MS DOERRIES: So, Mr Benson, what I was asking about was I think you use the words “standard procedures” in terms of expectation . . . What I wanted to ask you is Mr Wilkinson clearly is proceeding on the basis that it would be signed by the parties and that that would happen before a payment was made. That’s what the e-mail says, doesn’t it?

A. I think, to try and make it clear, Steve Wilkinson doesn’t act in a position of authority. He acts mainly in a position of guidance and giving advice, commercial advice, and ultimately the business units are autonomous in terms of decision-making. Clearly if we have a resource that is a specialist in understanding commercial risk, commercial management, providing advice to my commercial team, then we would look to involve that wherever possible. That would be a common business practice, but did Mr Wilkinson have the ultimate ability to sign-off the agreement or to make the decision that we shouldn’t have it as a binding agreement until payment had been made? No, he didn’t. That was my decision.

Q. What his e-mail reflects is the standard policy that final account agreements or variation agreements should be signed by the parties and in writing?

A.

Yes, but, as I said, he wasn’t completely aware of the full situation that’s going on. And, at the end of the day, as a division director for the business, if I wanted to take his advice and not follow it because I had some other reasoning, which I think I did, then that would be perfectly acceptable as well.

So what I’m trying to say is Mr Wilkinson would - is clearly being involved. He is clearly a knowledgeable man and has a good understanding of contracts and commercial management, but ultimately the decision was mine to make. And what I would say is, in my own mind, and I think from what I’ve read, you know, we had in effect reached agreement and we had already got on with it. So to some degree this was, you know, it was an exercise just make sure it was recorded properly.”

In my view there is no reason whatever to doubt Mr Benson’s evidence that Mr Wilkinson was being approached in the capacity of an in-house adviser, not as a person who had to authorise the terms of any agreement made with BCE. Mr Benson’s apparent agreement to the suggestion that there was a standard policy that final account agreements or variation agreements had to be in writing does not in my view take matters very far. (Footnote: ¹) It was explored no further and BCE’s attack on the credibility of Mr Acheson under this head was based principally on this one single answer, in which Mr Benson appeared to agree that it was standard policy within the Midas group that final account agreements or variation agreements should be signed by the parties and be in writing.

In my view, BCE may be placing more emphasis on this passage in the evidence than it will reasonably bear. Further, I would not accept the proposition that the deal done on 3 March 2015 was in truth either a final account agreement or a variation agreement. It was not a final account agreement because the work had not been completed. In Mr Acheson’s e-mail there was a reference to “Final account on all works instructed to date”, but that was no more than an interim agreement as to the value of the contract sum plus the value of all variation instructions given to date. It was not a final account within the usual meaning of that term. Further, for the reasons that I give below, I do not accept that any agreement concluded on 3 March 2015 constituted a variation of the terms of the sub-contract.

I do not consider that much can be drawn from Mr Acheson’s reference to having the changes in the proposed deed “signed off”. That expression can refer to simply getting something finalised. For these reasons I consider that there is nothing in BCE’s first two grounds of criticism of Mr Acheson’s evidence. Taking the evidence as a whole, I am quite satisfied that Mr Acheson had authority, both actual and ostensible, to conclude an agreement in the terms set out in the exchange of e-mails on 3 March 2015.

Turning to the question of Mr Acheson’s notes of the meeting on 20 March 2015, by the time of the hearing of the closing submissions Mr Acheson’s notebook had been found and other pages had been copied which contained references to BCE. I discuss the notebook in detail, and set out my conclusions on it, at paragraphs 122 to 126 below.

I think that Ms Doerries’s point (d) may be based on a misunderstanding of the evidence. Mr Acheson said that he wrote down the relevant figures containing the offer on a copy of the spreadsheet that had been prepared for the meeting, which he then gave to Mr Caddick at the end of the meeting. It is true that this should have been mentioned in his witness statements, but in my experience it is the sort of detail that can be omitted from the statements of the most reliable witnesses. What Mr Acheson said about this in evidence was quite unprompted: it was not something that he was driven to say during cross-examination when he was in a difficult predicament.

So far as Ms Doerries’s point (e) is concerned, I am not persuaded that there is any significant inconsistency between Mr Acheson’s evidence and the telephone records. As Mr Acheson pointed out, if the points in the e-mail were not contentious they could be passed over very quickly. By the time of the final telephone call on 3 March 2015 it seems that it was only the timing of the Saw Close payment that remained a source of disagreement. Mr Acheson’s evidence was that, once the most important matter of the figure for the anticipated final account had been agreed early that morning, what remained were only relatively minor points of detail (see paragraphs 21-22 of his witness statement dated 11 September 2015).

Ms Doerries’s last point had rather more substance. In evidence, Mr Acheson said that he had never considered recording the agreement reached on 3 March 2015 in a formal deed until he had a conversation on site with Mr Kightley and a Mr Lord on 10 March 2015. He said that during that conversation they suggested that the agreement should be “captured” in a deed of variation. This does not sit easily with what he said in his witness statement in the adjudication, which was that he felt it “advisable” to formalise the changes to BCE’s sub-contract by way of a deed of variation.

However, in his witness statement of 11 September 2015 prepared for this hearing Mr Acheson said that it was following discussions with the team on site on 10 March 2015 that he decided to prepare a formal agreement to “capture the specific variation numbers”. This is broadly consistent with what he said in evidence.

One document that does not fit easily with Mr Acheson’s evidence is the e-mail from Mr Kightley to Mr Caddick dated 5 March 2015 in which he said that he understood that “the legal aspects of the “line in the sand” are being drafted”. Although this appears to be inconsistent with Mr Acheson’s evidence, Mr Kightley was not a party to the final exchange of e-mails on 3 March 2015. The last e-mail from Mr Acheson which was copied to Mr Kightley on 3 March 2015 was the e-mail timed at 09:45 which referred to “a formal proposal with the “without prejudice” heading removed to allow you to formally accept”.

In the absence of any evidence from Mr Kightley on this issue, I do not consider that too much should be read into his e-mail of 5 March 2015.

Attractively though Ms Doerries put her submissions on these points, I am not satisfied that any of them give rise to grounds for impugning the credibility of Mr Acheson. As I have already said, Mr Acheson struck me as a careful and straightforward witness and I do not consider that either his overall credibility or his reliability is damaged by the points made by Ms Doerries.

Ms Doerries relied also on the background to the events leading up to 3 March 2015 and, in particular, to the frustration felt by BCE at Mr Kightley’s practice of revisiting valuations that BCE regarded as having been agreed. In my view, this does not take matters very far: if the problem was a lack of trust in Mi-Space’s word, then all that was required was an unequivocal agreement that was recorded in a manner that left no room for argument. This did not need a deed: an exchange of e-mails would do just as well. This point is, therefore, neutral.

In her written closing submissions Ms Doerries did not place much emphasis on BCE’s case that any agreement was subject to a condition subsequent, namely that Mr Kightley would substantiate his assessment of the cost of the work to complete and then revert to Mr Caddick. She was right not to do so. This point is hopeless: leaving aside the inconsistencies in BCE’s case on this at different stages of the proceedings to which I have already referred, there is not a word about it in any of the e-mails sent on 3 March 2015. If this was a stipulation which had to be fulfilled before the agreement came into effect, it would surely have been mentioned.

Mr Choat’s first point was that BCE’s case on the subject to contract issue had been constantly shifting. It varied from a requirement for a formal variation of the sub-contract, to “signed agreement to these proposals” (presumably by Mi-Space alone) or a “formal acceptance in writing”. This is a legitimate point.

Put shortly, Mr Choat’s submission was that, objectively viewed, Mr Caddick did not deploy the term “subject to contract” or any other words to that effect and so no reasonable observer of the transaction would conclude that the parties intended anything other than to reach a binding agreement. There was an offer and there was acceptance of it.

Mr Choat made a number of criticisms of Mr Caddick’s evidence. His principal submission was that it was unreliable having regard to what Mr Choat described as implausible evidence on the work to complete issue. In addition, Mr Choat made the fair point that, on at least two occasions after 3 March 2015, Mr Caddick reneged on a position that he had taken previously. He was described by Mr Choat as a man “who changes his mind readily”. In my view, this was a fair comment.

A possible explanation of the exchange of e-mails, suggests Mr Choat, is that Mr Caddick thought that the words “without prejudice” meant the same as “subject to contract”, so that the initial exchanges were, on Mr Caddick’s understanding, truly subject to contract. If this is correct, the difficulty for BCE is that Mr Caddick must also have understood that removal of the “without prejudice” label would mean that the negotiations were no longer subject to contract and that any offer not so marked would be capable of immediate and binding acceptance.

It will be seen at once that nowhere in the exchange of e-mails up to and including 3 March 2015 is there any reference to the execution of a formal deed of variation or some other document that required the signature of both parties. On the face of it, Mr Acheson’s e-mail of 16:21 on 3 March 2015 contained an offer, the prescribed mode of acceptance of which was “formal acceptance in writing”.

In opening BCE’s case, Ms Doerries made two submissions based on the wording of these e-mails. First, that the reference to “formal acceptance in writing” reflected the prior agreement that any agreement was subject to the execution of some form of document signed by both parties. Second, that this was supported by Mr Caddick’s reference to “formalising the paperwork”. This, she submitted, supported Mr Caddick’s account of what was said by Mr Acheson at the meeting of 27 February 2015.

I do not accept that the reference to “formal acceptance in writing” is a reference to the execution of a deed of variation or some similar document signed by both parties. This is for two reasons. The first is that the submission of a draft agreement in response to this e-mail (as Mr Caddick postulated) would not be an available means of accepting the offer. I am unable to see how it could possibly amount to an acceptance. The submission of such an agreement would in effect be a counter offer that Mi-Space could then either accept unconditionally or accept conditionally if certain further terms were included.

The second is that I do not agree that this is what the words mean. In my view, “formal acceptance” in this context means an acceptance that it is clear and properly recorded. I would not, for example, consider that acceptance by conduct could be described as “formal acceptance” or that a telephone call purporting to accept the offer would suffice. This is because in both cases there would be room for a potential dispute as to whether or not the offer had been accepted. By contrast, I see no reason why a clear acceptance communicated by e-mail would not be sufficient because the existence of the e-mail would be a matter of record.

As to Mr Caddick’s use of the word “paperwork”, this seems to me to be entirely neutral. As Mr Choat pointed out in cross examination, in an internal spreadsheet of BCE’s, apparently prepared by Mr Caddick, setting out the payments received from Mi-Space between January 2014 and March 2015 the column showing the date of the application was headed “Date of Paperwork”. If “paperwork” is an appropriate term to describe the documents comprising a payment application, then it must be an equally appropriate term to describe the documents that Mr Acheson said that he would have to put together in order to process the payment (Day 2/32 - where Mr Acheson said he told Mr Caddick that Friday 6 March would be the earliest date on which the payment could be made because of the need to raise the paperwork). However, I accept also that “paperwork” could be a loose reference to a formal agreement.

It must be remembered that the meeting on 27 February 2015 and the subsequent exchange of communications all arose out of Mi-Space’s refusal to pay the sum demanded in the December application, having failed to issue its own payment notice, and the subsequent threat (by then carried out) made on behalf of BCE to suspend work. What Mr Acheson and Mr Caddick were seeking to do was to find a solution to that dispute and to get BCE back on site. For the reasons that I give in more detail at paragraphs 105 to 113 below, it was not a meeting to renegotiate the sub-contract.

It is now settled that the question of whether or not there was a binding contract between the parties, and if so upon what terms, requires consideration of what was communicated between the parties by words or conduct and whether it led objectively, in accordance with the reasonable expectations of honest sensible businessman, to a conclusion that the parties had intended to create legal relations: see, for example, the passage already cited from RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (UK Production) [2010] 1 WLR 753.

If the exchange of e-mails on 3 March 2015 stood alone, then, applying these principles, I would not have had the slightest hesitation in holding that the e-mail from Mr Caddick of 18:54 on 3 March 2015 was an unequivocal and sufficiently formal acceptance of the offer made in Mr Acheson’s e-mail of 16:21. Mr Acheson’s offer covered all the matters in dispute, was expressed in clear terms and contemplated a prompt acceptance that would enable BCE to return to site at the earliest opportunity and Mi-Space to make an interim payment to BCE on 6 March 2015 in the sum of £79,862.62. The response by BCE was an unequivocal acceptance and was clearly recorded. On the basis of these two e-mails alone, in my judgment no sensible businessman could have thought that the other was intending anything but the achievement of a legally binding agreement.

In these circumstances it seems to me that reasonably cogent evidence is required to show that this was not what was intended, but instead that the parties contemplated nothing more than arriving at an agreement in principle that would not be binding until it was the subject of a formal written agreement signed by each of the parties. Ms Doerries effectively submitted that the burden was on Mi-Space to show that BCE had waived its right to assert that any agreement would be subject to contract. But this submission involves assuming what BCE is seeking to prove, namely that such an understanding was in fact reached at the meeting on 27 February. Since Mr Caddick’s evidence about this is wholly unsupported by any contemporaneous document, it is not an assumption that can properly be made.

From a purely practical point of view to reach such a non-binding agreement in the circumstances of this dispute would be unsatisfactory. There were two important requirements of the agreement that had to be implemented as a matter of urgency. BCE had agreed to return to site immediately and Mi-Space had agreed to make a CHAPS payment on 6 March 2015. As Mr Benson explained, such a payment had to be made through the Alchemy system and involved the completion of internal approval procedures before the payment could be authorised.

However, Mr Caddick said in his witness statement of 11 September 2015 that:

“Thereafter, a new sub-contract would be drawn up and forwarded for scrutiny and any proposed amendments before taking effect.”

This is revealing for two reasons. First, as I have already pointed out, the submission of a new sub-contract “for scrutiny” would not be capable of constituting an acceptance of the offer by Mi-Space: it would be a counter offer. Second, if this is really what Mr Caddick believed, I cannot see he could have thought realistically that such an agreement could be drawn up by Mi-Space, sent to BCE, scrutinised and probably amended by BCE and then returned to Mi-Space all within the space of about 24 hours. (Footnote: ²) In addition, he said also that he was expecting Mr Kightley to reassess the costs to complete and then revert to him with a figure (revised or otherwise) with appropriate substantiation. That had to be done, as I understand Mr Caddick, before agreement could be reached - even in principle.

BCE’s current case on this aspect seems to me to be inconsistent also with what Mr Caddick said in his e-mail of 2 March 2015 (quoted above) in which he referred to the requirement for a firm agreement/commitment from Mi-Space to make the interim payment as a pre-condition of BCE’s staff remaining on site.

Further, as I have already indicated, the statements by Mr Caddick in his e-mail of 3 March 2015 at 12:25, namely that

“On receipt of your agreement to these variations to your correspondence and with the “without prejudice” heading removed, Bridgwater Civil Engineering will undertake the withdrawal of the claim made by our Messrs Foot Anstey in respect of the December 2014 payment.”

and

“We would suggest that the sooner these amendments are agreed the sooner we are able to return to complete the works.”

are, in my judgment, inconsistent with the suggestion that there would be no binding agreement until a formal variation to the sub-contract had been drawn up and signed by the parties. If Mi-Space had accepted BCE’s counter proposals in the manner envisaged by Mr Caddick in that e-mail, so that BCE then withdrew the claim made by Foot Anstey in relation to the December 2014 application, as it had promised to do in return, there could be no going back. It is also, in my view, wholly inconsistent with the suggestion made subsequently by BCE that it returned to site as a gesture of good faith.

Similarly, Mr Caddick’s e-mail to Mr Kightley of 2 March 2015 is also inconsistent with the suggestion that BCE returned to site as a gesture of good faith: in that e-mail Mr Caddick made it clear that BCE would proceed with suspension of the work “in the absence of any firm agreement/commitment to make the payment” which had been discussed, that is to say the proposed interim payment set out in Mr Acheson’s e-mail of 27 February 2015. The clear inference from this was that if there was a firm agreement/commitment to make the payment, the suspension of work would not proceed.

Ms Doerries submitted that the matters set out in the exchange of e-mails amounted to more than just the settlement of a dispute about the December 2014 application because they purported to vary the terms of the sub-contract. She submitted that, first, there was a variation to the Sub-Contract Sum. Second, that the effect of the agreement would be to amend the contractual mechanism for ascertaining future interim payments because these would have to reflect what she called “the revised Sub-Contract Sum”. Third, the replacement of BCE’s entitlement to interim payments in December and January by a single payment, which would have to be included in “the sums previously due as interim payments” in valuations constituted a variation of the sub-contract. Fourth, there was an agreement to vary the retention from 5% to 3% for all payments going forward, which was therefore an amendment of the terms of the sub-contract. Fifth, a sum of £50,000 was removed from the scope of the sub-contract. Sixth, the agreement in effect replaced the contractual mechanism in relation to the instruction of variations in that, where possible, Mi-Space should include sufficient information and dimensions on the Contractor’s Direction Instruction in order to allow the parties’ project surveyors to agree the value of the works prior to those works being carried out. Finally, the agreement provided that BCE would return to site immediately and continue “to complete their contractual obligations in a timely, regular and diligent manner”.

I do not accept any limb of this submission. Taking the first limb, I consider that there was no attempt to renegotiate the original contract sum. What the parties were seeking to do was to attempt to agree the value of the variations instructed up to 3 March 2015 (whether or not that varied work had by then been completed) that would have to be added to the original contract sum in order to arrive at the final sum payable under the sub-contract, assuming no further variations or delays. By agreeing a figure for the anticipated final account the parties were, after subtraction of the contract sum, arriving at a value for the variations instructed to date. There was a dispute about the value of the work that had been instructed by way of variations and the purpose of the agreement was to resolve it. In my view there is nothing in this point.

Whilst Ms Doerries’s second point is in one sense correct, that is what always happens when the parties agree the value of a variation. It makes no difference if they choose to agree the valuation of two variations at the same time, thereby agreeing on a single sum. The fallacy in the point is the reference to a “revised Sub-Contract Sum”. As I have explained, there was no revision to the sub-contract sum.

Ms Doerries’s third point seems to me to be no more than a variant of the second. There is nothing in it.

The point about the retention fails in my view for the simple reason that Mr Acheson’s e-mail of 16:21 on 3 March 2015 refers to a reduction in “the retention percentage on Mount wise [sic] from 5% to 3% in the next payment” (my emphasis). I do not see how this can be construed as referring to all future payments from then on. It can be contrasted with the reference in Mr Acheson’s e-mail of 27 February 2015 to the reduction of the retention from 5% to 4%, without the words “in the next payment” (see paragraph 18 above). Ms Doerries relied also on a page in Mr Acheson’s notebook that was disclosed after the hearing in which various figures were set out, the last being as follows:

“Offers put at meeting (subject to directors approval)

£2,300,000 reduce ret to 3%

£2,320,000 ret remains at 5%”

Ms Doerries submitted that these figures referred to retention going forward. She may or may not be right about this, but in my view it is irrelevant. The offer that was accepted was that set out in Mr Acheson’s e-mail, not that set out in this page of the notebook. The reference to the “meeting” must be a reference to the meeting of 27 February 2015, and so in any event whatever may have been discussed then was overtaken by events. I therefore reject the submission that the terms of the sub-contract in relation to retention were varied. This reduction in the retention for the next payment was just part of the deal to settle the disputed valuations.

Turning to the point about the £50,000, I do not agree that the sub-contract was varied because £50,000 was to be attributed to the Saw Close project. This involved no variation of the sub-contract sum, rather it was just part of the consideration for Mi-Space’s agreement to a particular figure for the value of the variations.

So far as the procedure for the instruction of variations is concerned, Contractor’s Directions were the subject of clause 3.4 of the sub-contract, and these included the power to instruct variations. Clause 5.3.1 of the sub-contract entitled the contractor to direct the sub-contractor to provide a quotation for the cost of carrying out a variation, which the sub-contractor was required to do subject to receipt of sufficient information, unless it gave notice within 4 days that it objected to the application of that procedure to the variation in question. I cannot see anything in the paragraph numbered 7 of Mr Acheson’s e-mail of 16:21 on 3 March 2015 which contradicts the provisions of the sub-contract. I think that Ms Doerries was suggesting that the reference to “sufficient information/dimensions” went further than the simple reference to “sufficient information” in clause 5.3.1. To my mind, this is a distinction without a difference. In my view what this paragraph in the e-mail appears to be doing is giving an undertaking that, where possible, BCE would be provided with sufficient information with a variation instruction so as to enable it to make a quotation for agreement by Mi-Space prior to the work being carried out. That in my view is not in conflict with the procedure contemplated by clause 5.3.1: it was simply an undertaking by Mi-Space that - going forward - it would operate the machinery in clause 5.3.1 where it was possible to do so. So in my judgment there is nothing in this point also.

Ms Doerries’s final point was one that she had cleverly and neatly extracted from Mi-Space’s opening submissions. In a footnote to those submissions Mr Choat had submitted that the requirement to “continue to complete . . . in a timely, regular and diligent manner” was an addition to BCE’s express duties under the sub-contract. Quite why Mr Choat wanted to make this point I do not understand, but in any event it involved slicing the salami far too thin. I am wholly unable to see the difference between proceeding “regularly and diligently” and proceedingin a “timely, regular and diligent manner”. A persistent failure to do the former is a ground of termination, and so it reflects a basic obligation on the sub-contractor. It seems to me that in the context of Mr Acheson’s e-mail, the addition of the word “timely” adds nothing, particularly because it followed the verb “continue” - implying that BCE was to go back to work and continue as before. Far from imposing a fresh obligation, it was simply reminding BCE of its contractual obligation in relation to the progress of the works.

I therefore reject Ms Doerries’s submission that the terms set out in Mr Acheson’s e-mail of 16:21 on 3 March 2015 amounted to an offer to vary the terms of the sub-contract. In my judgment they were nothing more than an offer to settle the disputed December 2014 application and to agree a figure for the value of the variation instructions given up to that date (whether the work had been completed or not).

For all these reasons, I have reached the clear conclusion that the parties reached a binding agreement by the exchange of e-mails on 3 March 2015. The “subject to contract” argument is an afterthought that was advanced by BCE once Mr Caddick came to appreciate that he should not have made the bargain that he did.

This leaves the argument that at the meeting on 20 March 2015, or by the e-mail sent by Mi-Space shortly after it, the parties agreed that no binding contract had been entered into between 3 and 6 March 2015 or, alternatively, that any such agreement was to be treated as discharged.

I have to confess that I have some difficulty in understanding the legal basis for this argument. In my view the e-mail sent by Mi-Space after the meeting is entirely consistent with an acceptance by Mi-Space of a repudiation of the 3 March 2015 agreement by BCE. It is basic contract law that an acceptance by the innocent party of a repudiatory breach of contract by the other discharges the innocent party from any further performance of its obligations under the contract. It does not amount to a rescission of the contract: obligations already performed pursuant to the contract are not reversed or undone.

The words in the e-mail of 20 March 2015 “we have no choice but to accept your intention not to perform the terms of the Agreement and bring to an end the Agreement” are, to my mind, a clear expression of acceptance of a repudiatory breach. Although Mi-Space was then discharged from any further performance of its obligations under the Agreement, it remained bound to perform its obligations under the original sub-contract. I have already held that the agreement of 3 March 2015 was an agreement to settle the dispute arising out of BCE’s December 2014 application: it was not an agreement to vary the existing sub-contract, which remained in full force and effect.

BCE’s acceptance of the offer by Mi-Space made in its e-mail timed at 16:21 on 3 March 2015 replaced its rights in relation to the December 2014 application and substituted a fresh set of rights and obligations. One of those obligations was to withdraw its claim under the December 2014 application.

Mr Caddick said, at paragraph 82 of his witness statement dated 11 September 2015, that at the meeting on 20 March 2015 Mr Benson confirmed his understanding that until a written agreement had been signed no binding agreement would be reached. I assume that there he was referring to the agreement that Mi-Space says was reached on 3 March 2015. When Mr Benson was asked about this in cross examination, he said that he did not believe that he had said that (Day 1/169). He said that Mr Caddick had made it clear that he was going to go and see his solicitors because, if he did not get agreement to the £50,000 being brought back into the Mount Wise sub-contract, he would have no option but to suspend work again.

I see no reason to doubt Mr Benson’s evidence on this point. In his witness statement he said that he was annoyed that Mr Caddick had “reneged on the deal” on the ground that he now felt that it was a bad deal and did not want to be bound by it (at paragraph 25). It strikes me as most implausible that he would have conceded that no binding agreement had been reached on 3 March 2015.

However, Mr Benson’s position is further supported by the notes which Mr Acheson says he took during that meeting. They record Mr Benson as saying that in Mi-Space’s opinion the agreement made on 3 March 2015 was enforceable.

As I have already indicated, BCE challenged the authenticity of the notes made by Mr Acheson. They were made in a notebook and the relevant pages were subsequently torn out for use in this litigation. The notes cover these two pages. I have already set out my conclusion about these notes, but in deference to Miss Doerries’s careful submissions I need to go into rather more detail.

The first page has the tear on the right-hand side, which indicates that the notes were made on the back of a page, assuming that the notebook is used in the ordinary way. There is writing on the reverse of the page which relates to some unidentified other project. That note is undated. Mr Acheson explained that he adopted a somewhat erratic approach to taking notes and that he tended to be “pretty unorganised” in the way that he took notes (Day 2/45). He said that after Mr Caddick left he took a comfort break and then continued the discussion with Mr Benson alone. His note of that discussion is on a separate page, which has the tear on the right-hand side. He said that he probably shut the book and then came back and found a fresh page on which to continue his note. What has aroused the scepticism of BCE is that on the reverse of the page on which he took the second note there are some notes dated 21 April 2015. Mr Acheson’s explanation for this is that the pages it cannot have been ripped out of the notebook until sometime later and that he simply used the reverse of the second page (which would then have been clean) in order to take the notes which he took on 21 April 2015.

I have inspected the notebook carefully and it is quite clear that it was used in a fairly haphazard manner. It is also clear that sometimes Mr Acheson started at one end of the notebook and sometimes at the other. There is nothing in the notebook that undermines Mr Acheson’s evidence that he took notes of the first part of the meeting (that at which Mr Caddick was present) in one part of the book and then, after a short break, opened the book at a different place in order to make a note of the discussion with Mr Benson that followed. Conversely, the notebook does not show that his account is necessarily correct.

The pages in the notebook that concerned the meeting of 20 March 2015 were referred to in Mr Acheson’s witness statement served in the adjudication on 24 April 2015. That witness statement was made in response to the Referral Notice, which was served on 20 April 2015. It is therefore quite possible that the two relevant pages were torn out of the notebook in order to be photocopied (prior to being disclosed with the witness statement) at some point between 20 and 24 April 2015. It follows from this that the relevant pages may well have been in the notebook on 21 April 2015, so that notes could have been made on that day on the reverse of the page containing what Mr Acheson now says were the notes of the second part of the meeting on 20 March.

Whilst I can well understand BCE’s scepticism about the provenance of the pages containing Mr Acheson’s notes of the meeting on 20 March 2015, and therefore of his account of how they came to be made, I am satisfied that they are genuine and that they were made in the manner that Mr Acheson has described.

However, it is unsatisfactory that other pages containing notes relevant to the sub-contract with BCE were not disclosed with the pages relating to the meeting of 20 March 2015, but I consider that it is at least arguable - as Mr Choat submitted - that they do not fall within the test for standard disclosure. To my mind it is not self-evident either that they undermine Mi-Space’s case or that they advance the case of BCE. Nevertheless, given the odd features of the notes relating to 20 March 2015, it would have avoided misunderstanding and suspicion if the other pages had been disclosed at the same time.

BCE’s position in relation to this meeting is not assisted by the fact that, at paragraph 83 of his witness statement dated 11 September 2015, Mr Caddick saidthat he and Mr Benson “were unable to reach any agreement”.

Finally, it appears to be BCE’s case that at the meeting on 20 March 2015 Mi-Space agreed that the agreement made on 3 March 2015 (assuming there was one) would be discharged from then onwards. It seems to me at least arguable that any such agreement would fail for want of consideration. BCE had not undertaken to do anything that it was not already contractually bound to do, either under the agreement made on 3 March 2015 or under the original sub-contract. Whilst it might be said that Mi-Space was released from its unperformed obligations under the agreement of 3 March 2015, its only remaining unperformed obligation was to adhere to its agreement to £2,350,000 as the value of the anticipated final account. Since Mi-Space wanted to hold BCE to this figure, abandoning it hardly looks like good consideration.

But irrespective of whether or not there was any consideration moving from BCE, I am quite satisfied that Mi-Space did not agree to discharge BCE from its obligations under the agreement of 3 March 2015. Mi-Space had absolutely no incentive to do so and there is no support for this contention in the contemporaneous documents. I accept that Mr Acheson’s reference in his e-mail to “bring to an end the Agreement” could, if read in isolation, be taken as some sort of mutual discharge of obligations, but that is no more than the ordinary consequence of an acceptance of a repudiated breach by the party not in breach. There was no way in which what had already been done by way of performance of the agreement of 3 March 2015, such as the making of the interim payment and BCE’s return to site, could be undone.

So Mr Acheson’s e-mail of 20 March 2015 is, in my judgment, an acceptance of BCE’s repudiation of the agreement that it had made on 3 March 2015.

BCE claims interest for the period starting on the date when payment should have been made by Mi-Space pursuant to the decision of the adjudicator, namely 15 May 2015, to the date of this judgment.

In her oral submissions Ms Doerries frankly and realistically accepted that in the light of the decision of the Supreme Court in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38 the claim to interest was “difficult”.

At paragraph 24 of his judgment in that case, with which the other members of the Court agreed, Lord Mance said this:

“I emphasise that, on whatever basis the right arises, the same restitutionary considerations underlie it. If and to the extent that the basis on which the payment was made falls away as a result of the court's determination, an overpayment is, retrospectively, established. Either by contractual implication or, if not, then by virtue of an independent restitutionary obligation, repayment must to that extent be required. The suggested implication, on which the preliminary issue focuses, goes to repayment of the sum (over)paid. But it seems inconceivable that any such repayment should be made - in a case such as the present, years later - without the payee having also in the meanwhile a potential liability to pay interest at an appropriate rate, to be fixed by the court, if not agreed between the parties. In restitution, there would be no doubt about this potential liability, reflecting the time cost of the payment to the payer and the benefit to the payee: see eg Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34, [2008] AC 561. Whether by way of further implication or to give effect to an additional restitutionary right existing independently as a matter of law, the court must have power to order the payee to pay appropriate interest in respect of the overpayment. This conclusion follows from the fact that, once it is determined by a court or arbitration tribunal that an adjudicator's decision involved the payment of more than was actually due in accordance with the parties' substantive rights, the adjudicator's decision ceases, retrospectively, to bind.”

In the light of these observations it seems to me quite impossible to argue that Mi-Space should be liable to pay interest on a sum which the court has now decided should not have been paid and if paid to BCE would have resulted in an overpayment. The position is quite different from the situation where adjudicators in, say, two successive adjudications make awards for the payment of money, each by a different party. In that situation each party is bound to comply with each award as it is made because neither will have been overruled by the court.

The effect of this judgment is that the adjudicator’s decision ceases, retrospectively, to be binding. Accordingly, in my judgment Mi-Space can have no liability to pay interest.

For the reasons that I have now given, Mi-Space is entitled to a declaration that BCE’s claim to payment in the December 2014 application was settled by the exchange of e-mails on 3 March 2015. That agreement was not rescinded, or in some other way undone, by the events of 20 March 2015. BCE was in repudiatory breach of contract and that repudiation was accepted by Mi-Space. That acceptance discharged Mi-Space from any further obligations under the settlement agreement of 3 March 2015, but it did not rescind that agreement.

In these circumstances, the decision of the adjudicator dated 8 May 2015 by which he ordered Mi-Space to pay BCE the sum of £346,177.54 was wrong and therefore ceases, retrospectively, to have any effect. Thus Mi-Space is not liable to pay interest on that sum during the intervening period. Rather, as the decision in Aspect Contracts shows, the court would have had the power to order BCE to pay appropriate interest in respect of any overpayment that Mi-Space would have made had it complied with the decision.

It follows that BCE’s application to enforce the decision of the adjudicator fails and must be dismissed.

If there are any outstanding questions of costs or in relation to the form of relief, I will hear counsel on a date to be fixed.