Cleveland Bridge UK Ltd v Sarens (UK) Ltd

In this matter, the parties seek a final determination from the court, following a decision by an Adjudicator, of a dispute over the terms and interpretation of a subcontract.

In short, the dispute arises out of work carried out by the Defendant (“Sarens”) for the Claimant (“CBUK”) on the Heysham M6 link road in 2014-2015 (“the Heysham Project”). Sarens was engaged by CBUK as sub-sub-contractor to provide cranes and ancillary equipment necessary for the installation of six bridges along the route. CBUK was engaged as sub-contractor to Costain Limited (“Costain”) under a modified NEC3 contract (“the Costain Contract”). In turn, Costain was engaged as the main contractor by Lancashire County Council.

At the heart of the dispute is the question of what, if anything, CBUK and Sarens agreed in their subcontract by way of provision for delay damages and/or liquidated damages. CBUK contends that the parties had discussions about the imposition of a 10% cap on liquidated damages but it says, broadly, that no agreement was reached. Sarens, on the other hand, contends that the parties agreed a term that Sarens’ liability for delay damages in general and/or liquidated damages in particular would be capped at 10% of the subcontract price and that a mechanism for the imposition of liquidated damages was also agreed. Each party has alternative cases in the event that I reject their primary case.

Mr Robert Evans (“the Adjudicator”), decided this issue on 11 July 2017 in Sarens’ favour (“the Decision”), but of course the Decision is not binding on me.

I should record at the outset that it has always been agreed that there was a contract between Sarens and CBUK, although there is disagreement as to what it comprises, when and how it was formed and some of its terms. Accordingly, I have not considered the possibility that no agreement was ever reached between the parties in this judgment. I shall refer to the agreement between the parties as “the Subcontract” and identify later how, when and on what terms the Subcontract was formed.

I understand that this dispute is part of a wider dispute, which is not before the Court, between CBUK and Sarens about the responsibility for delays which arose during the course of the Heysham Project. In 2016, CBUK and Costain entered into a compromise agreement in respect of these delays (“the Settlement Agreement”), pursuant to which CBUK agreed to pay to Costain £956,892 and to waive an entitlement to a further £893,107.89. Outside the context of this litigation, CBUK seeks to recover the sum it has paid to Costain under the Settlement Agreement from Sarens. It is Sarens’ position that if I accept its argument that the parties agreed to a 10% cap on its liability, this will have an important impact on the amount that CBUK will be entitled to recover in the wider dispute; in particular, that its liability for culpable delay would be limited to £96,363.44 (being 10% of Sarens’ Subcontract price of £963,634). I am not able to decide whether this is so, as I have been asked to consider only the general question of the terms of the Subcontract and their proper construction and not any underlying issues by reference to the facts of the wider dispute.

CBUK sets out its case as to the terms of the Subcontract in paragraphs 5 and 6 of its Amended Particulars of Claim as follows:

CBUK seeks declarations at paragraphs 12(a) and (b) of the Amended Particulars of Claim in line with its primary case that there was no agreement between the parties in relation to liquidated damages.

Alternatively, if I find (contrary to its primary case) that liquidated damages were agreed, or an operative 10% cap on liquidated damages was agreed, then CBUK seeks at paragraph 12 (c) a declaration that any such liquidated damages (i) only apply to a claim arising from Sarens’ failure to complete the whole of the works which were the subject of the Costain Contract and/or (ii) have no application to any claim arising from Sarens’ obligations in relation to the progress and completion of the individual bridges corresponding to Key Dates under the Costain Contract.

CBUK does not seek to rely on any witness evidence in support of its case.

In an Amended Defence and Counterclaim, Sarens pleads various alternative cases as to the agreement between the parties.

First it says the Subcontract was formed on or before 10 November 2014, the date on which Sarens commenced work in respect of Folly Bridge (paragraph 13), and that it included agreement that Sarens’ liability to CBUK (which is said in Further Information dated 2 March 2018 to be loss and damage for delay) (i) would be capped at 10% of the Subcontract value and (ii) would be recoverable only upon proof of Sarens’ negligence (paragraph 14). Sarens then identifies five documents which it says “contained and/or evidenced” that agreement (paragraph 15). Further Sarens relies on “an established course of dealing” as containing or evidencing the agreement. Sarens then asserts as part of its primary case that the parties reached a further agreement on 18 November 2014 about liquidated damages (in terms set forth in paragraph 17) and it identifies three documents which it says “contained and/or evidenced” this agreement (which Sarens refers to as “the Liquidated Damages Agreement” and which it is alleged is a variation to the original agreement reached on or about 10 November 2014). It says the Liquidated Damages Agreement was accepted by CBUK by an email of 18 November 2014, alternatively it was accepted by Sarens when Sarens continued with work on site after 11 November 2014, or after 18 November 2014.

Second, and by way of alternative, Sarens says that the Subcontract was formed on 18 November 2014 by way of an email of that date or alternatively when Sarens continued with work on site following that email. It says that the parties agreed that loss and damage for delay, alternatively liquidated damages recoverable by CBUK from Sarens would be limited to and capped at 10% of the Subcontract value and that express terms were agreed as to liquidated damages (paragraph 25). This alternative Subcontract is said to be “contained in, alternatively evidenced by” three documents. Again Sarens also relies on “an established course of dealing” as containing or evidencing the agreement.

In respect of both its primary and secondary cases, Sarens asserts by way of alternative, estoppel by representation and estoppel by conduct (paragraphs 16, 22 and 27). This alternative allegation is (on each occasion) firmly tied to identified documents in its statement of case.

I have set out the nature of Sarens’ defence with some care in circumstances where, shortly before trial, it sought permission substantially to amend its Amended Defence and Counterclaim, to rely on a plea that the Subcontract was formed at a meeting on 30 September 2014 (“the September Meeting”) and that it was evidenced by documents not previously relied upon, including internal notes of the September Meeting. This was an entirely new case, never previously intimated and inconsistent with the case advanced by Sarens before the Adjudicator.

The application to amend was refused by O’Farrell J on 22 February 2018 [2018] EWHC 460 (TCC), essentially on the grounds that the proposed amendment was “a material change in case” because “it had always been the parties’ position that there was no oral agreement” and that this new case would require a new approach from CBUK to witnesses, that CBUK would be prejudiced in producing witness statements for a trial starting two and a half weeks later, that its preparation for trial would be disrupted, the trial date would have to be vacated and the trial length increased [24-25]. O’Farrell J also took the view that there was no adequate explanation given for the lateness of the proposed amendment: “…it must have been obvious to everyone that Mr Mitchell’s evidence as to what happened at the meeting was relevant and it must have been obvious that this matter could be of significance to the formation of the subcontract. Mr Mitchell signed a statement of truth in relation to the earlier pleadings submitted by Sarens. Those pleadings did not make any reference to the 30^th September meeting let alone plead any form of agreement being reached at that meeting” [23]. In paragraph 28 of her Judgment, O’Farrell J refused permission to amend “so as to change the pleaded case on the formation of the subcontract and/or the terms of the subcontract”.

Notwithstanding its failure to persuade the court to permit it to amend its statement of case to rely upon the September Meeting, Sarens provided Further Information dated 2 March 2018 in which it sought, effectively, to resurrect its arguments in relation to the September Meeting. In Response 4, Sarens pleads its position in relation to its primary case, relying on statements made at the September Meeting on behalf of both Sarens and CBUK which it now says “constituted an offer by CBUK to cap Sarens’ total liability for delay damages at 10% of Sarens’ Subcontract value” and (that offer having been accepted by Sarens starting work on 10 November 2014) “on that basis, it was a term of the Subcontract that Sarens’ total liability for any delay damages would be capped at 10% of Sarens’ Subcontract value”. In Response 7, Sarens relies on additional documents which it asserts evidence the agreement on which it relies as its primary case, which include internal notes of the September Meeting. In Response 11, Sarens again relies on statements made at the September Meeting in support of its secondary case.

In her skeleton for trial, Ms Bodnar, acting on behalf of Sarens, seeks to advance the case set forth in the Further Information by reference to the September Meeting, a case she also sought to maintain (albeit with rather less force) in her oral submissions. In so doing, Ms Bodnar relied upon a witness statement from Mr Mitchell dated 2 February 2018 (which was before O’Farrell J on the application to amend) in which he gives detailed evidence about the September Meeting and says (in paragraph 39) that he is clear that agreement was reached at the September Meeting.

Mr Lixenberg, on behalf of CBUK, strongly objects to Sarens’ reliance on the September Meeting, which he maintains is “nothing short of shocking in its contempt for the Court’s Judgment of 22.2.18”. Whilst I would not use quite the same terms, I am inclined to agree with Mr Lixenberg. Where the court has precluded a proposed amendment which seeks to introduce a new factual case, it seems to me that it is not open to the party who has been refused permission to amend to seek to rely on the very same facts as the basis for a slightly different legal argument. Ingenious as Sarens’ attempt to bring the discussions at the September Meeting back into play may be, it suffers from the very same problems that bedevilled the application to amend. Had an application been made to amend the defence to rely on these re-worked arguments I have no doubt that it would have been refused for the very same reasons identified by O’Farrell J in her judgment.

If I were to permit these arguments, CBUK would have no evidence with which to respond to them and would, in my judgment, be obviously prejudiced. In this regard I note in Ms Bodnar’s skeleton for this hearing at paragraph 27.2 the reference to Mr Mitchell’s evidence as to the September Meeting which she points out is “not contradicted by CBUK”. In my judgment this is simply not a point that is open to her in relation to the September Meeting and illustrates neatly the problems that would be created if I permitted this line of argument. In the circumstances, I decline to have regard to any evidence as to what took place at the September Meeting (including notes made of that meeting and the evidence in Mr Mitchell’s statement) on the basis that it does not form part of the pleaded case advanced by the parties in the Amended Particulars of Claim and the Amended Defence and is therefore inadmissible. I should add, that my decision on this also goes to the use of the September Meeting as part of the factual matrix, which was a yet further argument advanced on behalf of Sarens. Matters which form part of the factual matrix must be pleaded so as to ensure that the other party has an opportunity properly to address them (see Hallman Holding Ltd v Webster [2016] UKPC 3 per Lord Hodge at para 11).

Insofar as Mr Mitchell’s statement deals with matters other than the September Meeting, Sarens relies on it for the purposes of this hearing. CBUK chose not to cross-examine Mr Mitchell and submits that much of his evidence is inadmissible for the purposes of any interpretation exercise that I must undertake.

Before I turn to look in detail at the chronological run of documents passing between the parties, I should set out briefly the well-established and uncontroversial principles that I must (and do) have in mind in dealing with the issues raised in this case:

I now turn to the chronological run of negotiations between the parties with a view to making findings of fact. In looking at the relevant documents, I have, for the most part, concentrated on the exchanges passing between the parties rather than the internal communications staying behind party lines for reasons I shall address in more detail later. I have obviously focussed on the negotiations in relation to the Heysham Project, but I note that at the time of those negotiations, other projects were being discussed between the parties, including at Pudding Mill Lane, Thorley Lane and Crewe Green. These projects, which Sarens prays in aid for its arguments before me, did not involve Costain but did, says Ms Bodnar, exhibit a consistency of approach to which I must have regard in my deliberations in respect of the Heysham Project.

On 5 June 2014, CBUK sent to Sarens two copies of a proposed Subcontract Agreement for the Project, inviting Sarens to sign and return them. The proposed agreement set out CBUK’s standard conditions of contract, including (in an Appendix) Particulars of the Costain Contract (Costain was referred to as “the Client”).

At clause 1(c) the standard conditions provided as follows (in five separate unnumbered paragraphs):

“The Subcontractor shall execute, complete, maintain and remedy defects in the Subcontract Works in accordance with the Subcontract and to the reasonable satisfaction of CBUK and the Client.

The Subcontractor shall be deemed to have full knowledge of the provisions of CBUK’s Contract with the Client (other than details of prices) particulars of which are included in Part 1 of the Appendix. An un-priced copy of CBUK’s Contract with the Client will be made available at CBUK’s Darlington Office for inspection by the Subcontractor on request.

Save where the provisions of the Subcontract otherwise require the Subcontractor shall so execute, complete, maintain and remedy defects in the Subcontract Works so that no act or omission of the Subcontractor in relation thereto shall cause or contribute to any breach by CBUK of any of its obligations under CBUK’s Contract with the Client, and the Subcontractor shall save as aforesaid assume and perform all the obligations and liabilities of CBUK under CBUK’s Contract with the Client in relation to the Subcontract Works.

The Subcontractor hereby acknowledges that any breach by him of the Subcontract may result in CBUK committing breaches of and becoming liable in damages under CBUK’s Contract with the Client and may occasion further loss or expense to CBUK in connection with CBUK’s Contract with the Client and all such damages, loss and expense are hereby agreed to be within the contemplation of the parties as being probable results of any such breach by the Subcontractor.

The Subcontractor shall indemnify CBUK against every liability which CBUK may incur to any other person whatsoever and against all claims, demands, proceedings, damages, costs and expenses made against or incurred by CBUK by reason of any breach by the Subcontractor of the Subcontract”.

In Part 1 of the Appendix entitled “Particulars of CBUK’s Contract with the Client”, at paragraph 10, was the following:

“10.

Liquidated damages payable by CBUK

10.1

Under the CBUK’s Subcontract - £10,000 / per day”.

There was no other reference within the proposed agreement to liquidated damages.

Enclosed with the proposed Subcontract Agreement were various documents relating to (amongst other things) the various phases of the Project referred to in the terms as “the Enquiry Documents”. It is clear from the Enquiry Documents that Phase 1 was going to involve the construction of Folly Railway Bridge and that thereafter it was intended that a further five bridges would be built. Indicative programmes for the construction of (some of) the individual bridges were included. It is common ground that the Enquiry Documents were not provided to Sarens again and that they formed part of the final Subcontract between the parties.

On 6 June 2014, Mr Colin Leonard of Sarens sent an email to Mr Richard Earl of CBUK stating that the proposed Subcontract had been received but that because Sarens was tied up with another tender it would not be able “to respond fully” for a week or so. However, on the back of “a cursory look” he pointed out that there were “several items which would preclude us from signing or accepting the contract in their (sic) present form”. He went on to say that he was sure these items could be discussed and that he would “advise in more detail when able”. In the meantime, he identified various points which he said CBUK “may wish to consider”. Amongst the various points made about the Appendix to the CBUK standard conditions he said this: “10.0 Liquidated Damages 10.1 £10,000 per day. We have never agreed to this and cannot. We have specified that damages of any kind are only acceptable if proven Sarens negligence and are then limited to a maximum of 10% of Sarens contract value”.

I pause here to note that it appears clear from this comment that Sarens had misunderstood the reference to liquidated damages in the proposed subcontract; instead of reading it as a reference to CBUK’s obligations under the Costain Contract, Mr Leonard had apparently read it as a reference to the proposed Subcontract between CBUK and Sarens.

The email ended with the words “as soon as we are free from our current commitments we will contact you in more detail to arrange discussions”. In my judgment, looked at objectively, it is plain from this email that it was intended by Sarens to be a preliminary response to the proposed Subcontract terms and that it was certainly not intended to set out in full all of the points in the Subcontract with which Sarens disagreed or wanted to discuss further. It was plainly envisaged that there would be future discussions as to the detail.

There was no immediate response from CBUK to the 6June 2014 email and so on 16 June 2014, Mr Leonard sent a chaser, pointing out that no response had been received to his email and saying: “we cannot accept the contract for Heysham in its present format”. Mr Leonard went on to explain that “some of the details were explained in our email dated 6.6.14…However on a further check we note that all the lump sum figures are incorrect…The reason for this appears to be that all the agreed and referenced sums have been reduced by 5%, we believe this is probably the 5% credit offered for each invoice paid within 45 days of submittal date…On Heysham we reduced our tender by approx. £125,000 to assist you in winning and we regret that we are not in a position to reduce by a further 5% now. We will not get permission from our parent company to proceed with the contract in its present format and I believe it essential that the issue is clarified ASAP…”

Mr Brian Rogan of CBUK responded just over half an hour later. Having expressed surprise at the tone of Mr Leonard’s email, he said “We really don’t have any disagreement here. If we pay you on time, you have agreed to give us discount – 5% on Heysham, 2.5% on Pudding Mill Lane, Thorley and A1…”. Read in context, this email seems to me to be addressing the specific concern raised by Mr Leonard in his email of earlier that day, namely his concern as to the price. There is no reference to the detailed points made in the email of 6 June 2014 or any attempt to address those points directly and in circumstances where it appears to have been envisaged that there would be further discussions, this seems to me to be unsurprising.

The next key event is the September Meeting. Ms Bodnar referred me to the Agenda for this meeting, handwritten notes made on the Agenda and a note of the meeting itself, together with Mr Mitchell’s statement. From the evidence of these documents, there appears to be no doubt that important and relevant discussions took place at the September Meeting between CBUK and Sarens, including discussions about damages and a cap on damages.

I do not know why these discussions were never previously relied upon (although one explanation may be that Sarens advanced a case before the Adjudicator to the effect that an agreement between the parties was reached on 11 November 2014; an argument which did not need to rely upon the September Meeting), but in light of my decision that they are inadmissible and cannot now be relied upon for any purpose, I must pass over them. I am bound to say that this is with some reluctance because in passing over them it does seem to me that I inevitably bring an element of artificiality to the exercise that I am undertaking (for example, references in later documents to discussions can only be discussions that took place at this meeting). However, that I must adopt a slightly artificial position is a function of the extremely late attempt on the part of Sarens to put the September Meeting centre stage and is not a reason to ignore the requirements of the overriding objective, which, out of fairness to CBUK, precludes any reliance on this meeting, for reasons I have already explained.

Further and in any event, anything said at the September meeting would be inadmissible in interpreting the terms of the finalised Subcontract and could only ever have been relevant to the issue of what the parties in fact agreed and when.

On 14 October 2014, Mr Stephen Osborne of CBUK sent an email to Mr Vince Render of Sarens with the subject heading “Thorley Lane”. He said that CBUK had Sarens’ sub-contracts “for the different jobs in various stages nearly ready to issue”. The email went on to make it clear that these sub-contracts would take account of agreements made at the September Meeting. However, I shall not have regard to this latter statement for reasons already set out.

Under cover of a letter dated 30 October 2014, CBUK sent to Sarens a second iteration of the Subcontract Agreement for the Project, inviting signature. The letter asked Sarens to note that “these documents have been revised from those issued back in June to reflect some of the recent agreements. In particular changes have been made to retention, liquidated damages and daywork rates. All other items and attachments remain as previously submitted”. The reference to “recent agreements” is, I suspect, a reference to the September Meeting, but again I have no regard to this.

Clause 1(c) of the terms had not changed. However, paragraph 10 under the Particulars of CBUK’s Contract with the Client now read as follows:

“10.0

Liquidated damages payable by CBUK

10.1

Limited to 10% of the agreed subcontract price”

Looked at objectively and in light of the June email exchanges and the covering letter which expressly refers to changes to liquidated damages, Mr Lixenberg submits that paragraph 10.1 plainly relates to the rights and liabilities of CBUK and Sarens under their proposed Subcontract, and I agree. I did not understand Ms Bodnar to disagree with this general proposition although, as I shall return to later, the parties place very different constructions on this provision.

The following day, on 31 October 2014, CBUK provided a copy of the subcontract for Thorley Lane to Sarens (“the Thorley Lane Subcontract”). The “Client” in this subcontract was Balfour Beatty Mott MacDonald and the proposed subcontract terms were very similar to those provided in relation to the Heysham Project. Paragraph 10 under the Particulars of CBUK’s Contract with the Client read as follows:

“10.0

Damages payable by CBUK

10.1

Liability for damages shall be limited to 10% of CBUK’s price. (Subcontractor’s damages shall be limited to 10% of the Subcontract Price). Subcontractor’s liability shall only apply if the subcontracted works over-run the Main Contract Programme period of 2 weeks”

It is common ground that Sarens went on site to commence the works on Folly Railway Bridge on 10 November 2014.

On the same day, Mr Render of Sarens sent an email to Mr Earl of CBUK noting that “We’ve had a quantity surveyor look through the Heysham contract for us” and setting out his comments in the form of 20 numbered paragraphs. The covering email also added that “the subcontract sum makes no mention of there being a 5% discount applied and that the sum is conditional on payment being made within 45 days. Otherwise an additional 5% is chargeable”.

The list of numbered comments included proposed amendments to the wording of the Subcontract, suggestions as to the drafting and requests for sight of documents. Relevant paragraphs are as follows:

“2.

Clause 1(c) We are deemed to have knowledge of CBUK contract with Costain and it forms the third item in the order of precedence of the documents after the Appendix and CBUK standard conditions. Have Sarens seen a copy?

3.

Clause 1(c) There is an uncapped total liability (mainly insurance would cover this) but a capped amount on liquidated damages at 10%, i.e. £96,363.44 which can be applied. Discussed later. (This reference to “discussed later” is clearly a reference to the fact that the point arises again later in the comments).

15…Part 1 Section 10 Liquidated damages limited to 10% of the agreed subcontract price. I would suggest that each structure is limited if possible with an understanding of how damages are applied (daily rate). This may be clear from the CBUK s/c with Costain.”

Looked at objectively, these comments amounted to a rejection by Sarens of the second iteration of the Subcontract and a counter offer in the terms of the numbered comments.

On 12 November 2014 at 08:56, Mr Earl of CBUK responded to the comments and queries raised on the terms of the Subcontract in an email. He inserted his comments in red into the text of the original email of 10 November 2014, making it clear whether he agreed with the comments or not and also making his own points in response. In dealing with the point made in the covering email as to the 5% discount, Mr Earl said “We have added an explanatory note about the 5% discount and 45 day terms under clause 1.0 part 6 of the agreement”.

As to the comments, in relation to point 1, which had noted that the Subcontract was not an NEC short form, he said “The existing Subcontract Agreement is adequate for our purposes especially as we now have agreements on most of the major issues going forward”. In response to point 2, he said “A redacted copy of our contract with Costain is attached. The pertinent points of the Contract are also noted on pages 9 and 10 of the Subcontract Agreement”. In response to point 3 he said “This is as discussed and agreed”. In response to point 15 in relation to the Appendix, Part 1, paragraph 10 he said “The concession made by CBUK to limit Sarens liquidated damages liability on all contracts to a maximum of 10% of the subcontract price is lower than the liability under the subcontracts we have with our clients. As it stands what we have agreed for this clause is simple, clear and unambiguous”. What is clear from this is that both parties were now treating the provisions of paragraph 10.1 as being applicable to the Subcontract between themselves. However, there was no attempt by Mr Earl to engage with the suggestion that each structure should be limited and that an understanding as to how damages would be applied was important.

The 12 November email also confirmed that two signed copies of the Subcontract had been handed to Sarens for completion on 11 November 2014 and said “we look forward to receiving one of these documents back once you have had a chance to review the items below.”

This third iteration of the Subcontract (signed by CBUK and handed over on 11 November 2014), reflects the position as recorded in Mr Earl’s red text responses to the Sarens’ list of comments. Thus, by way of example, the comment at point 12 suggested an amendment to clause 17 of the Subcontract. This was “not accepted” in the red text response and this proposed amendment is therefore not in the third iteration of the Subcontract.

Clause 1(c) remained exactly as it had been in the original iteration (and as set out above). Relevant clauses in the third iteration (which were not necessarily new) were as follows:

The provisions of the Appendix, Part 1, paragraph 10 remained unchanged since the second iteration of 30 October 2014 (thereby reflecting the fact that the proposal from Sarens to limit damages by reference to each structure and to agree how damages were to be applied had not been accepted):

“10.0

Liquidated damages payable by CBUK

10.1

Limited to 10% of the agreed subcontract price”

I shall now refer to these provisions simply as “Paragraph 10”.

Part 5 of the Appendix, paragraph 2, made it clear that the Costain Contract was “deemed to be incorporated into the Subcontract”.

Looked at objectively, the third iteration of the Subcontract was a yet further offer by CBUK to be bound in the terms set out therein. It is clear that CBUK recognised at this point that there was now agreement on most major issues and that all that remained was for Sarens to confirm its agreement to the outstanding matters, liquidated damages being one such matter.

On 13 November 2014, CBUK sent to Sarens proposed subcontract terms for the Pudding Mill Lane Bridges Project (“the Pudding Mill Lane Subcontract”). The “Client” in this subcontract was Morgan Sindall Plc and the proposed subcontract terms were very similar to those provided in relation to the Heysham Project. The provisions of the Appendix, Part 1, para 10 were in the same terms as those in the Subcontract:

“10.0

Liquidated damages payable by CBUK

10.1

Limited to 10% of the agreed subcontract price”

Returning to the Heysham Project, Sarens remained unhappy with the position on liquidated damages as set out in the Subcontract terms, which it seems was the one outstanding sticking point. On 17 November 2014, Mr Render of Sarens emailed Mr Osborne of CBUK in the following terms:

“Following our discussion on Friday, attached are the clause 10 liquidated damages sections from the Heysham and Thorley Lane projects. To be able to sign the contracts we need a sentence stipulating the rate of application i.e. 1% per week to a maximum of 10%. This should also apply to any other pending contracts.”

a.

Attached to the email was an extract from the third iteration of the Subcontract and, in particular, Paragraph 10. Next to the wording at 10.1 was written, in hand: “To be applied at 1% per week up to a maximum of 10%”. This was the first time that a specific rate of liquidated damages had been identified. There is no detailed evidence before the court as to the “discussion” to which the email refers.

On 18 November 2014, Mr Don Underwood of CBUK replied to Mr Render’s email in the following terms:

“We discussed the subject of damages last Friday with Richard Selby on the phone and the suggestion of 1% per week to a max of 10% was not acceptable.

We explained that there was not a one size fits all solution that both of us would find acceptable, and by leaving it open then we would need to demonstrate the costs imposed on us.

We thought that had been acceptable but apparently not.

Damages are only there to give an incentive to complete the works in accordance with the agreement, and as such they need to be at a level which means that if you need to employ some additional resources/overtime to achieve a programme, then you consider it is worth it.

Please remember we have already agreed to limit this to 10% of the value.

If we look at Thorley as an example then your proposal would mean that damages on Thorley could be imposed at £400/week. This would give little incentive to work say a weekend or longer days, but the overrun could result in significant costs to ourselves and the main contractor. Therefore the damages should be at a level which is equitable for both of us.

Similarly, I see it would be inequitable for us to charge £96000 on Heysham for a one day overrun (it was never the intention that this would be the case).

Can I suggest that as Thorley will be over this week we ignore.

As far as Heysham is concerned 2% per week for 5 weeks.

Future jobs will be agreed at the time…Can somebody come back to me”.

On 2 December 2014, Mr Render forwarded to Mr Underwood of CBUK an email from Sarens’ sub-contractor, Prosteel Engineering, confirming that “Heysham is fine to sign if CBUK confirm that they will apply the 60 day holiday on damages that they have with Costain prior to invoking the 2% per week”. Mr Render said this: “Can you confirm the below point about the 60 day damages holiday please. This will allow us to sign the contract here.” The email goes on to refer to an anticipated meeting in Darlington which is to be attended by Mr Richard Selby of Prosteel Engineering.

Pausing there for a moment, and as I shall return to later, the reference to the 60 day holiday arises out of amended option Clause X7 of the Costain Contract which provided a 60 day delay damages holiday to CBUK in the event of delay to completion of CBUK’s works.

Later that same day, Mr Underwood replied that Thursday was fine for the meeting and that “with regards to the 60 day damages holiday we should discuss on thurs when both of you can explain why you believe this would be reasonable”.

It is common ground that the planned meeting in fact never took place and the Subcontract was never signed by Sarens.

On 16 December 2014, CBUK sent to Sarens a copy of the proposed subcontract terms for the Crewe Green project (“the Crewe Green Subcontract”). The “Client” in this subcontract was Morgan Sindall Plc and the proposed subcontract terms were again very similar to those provided in relation to the Heysham Project. Paragraph 10 under the Particulars of CBUK’s Contract with the Client read as follows:

“10.0

Damages payable by CBUK

10.1

Liability for damages shall be limited to 10% of CBUK’s price. (Subcontractor’s damages shall be limited to 10% of the Subcontract Price)”

The parties present very different cases on this issue. CBUK essentially advances the case that it and Sarens both advanced before the Adjudicator to the effect that the Subcontract between the parties is in the terms of the third iteration of the Subcontract provided by CBUK to Sarens on 11 November 2014. Before the Adjudicator, Sarens identified the key issue between the parties as “whether that is the entirety of the agreement…or whether it includes the additional terms sought by Sarens in this adjudication”. However, in these proceedings, Sarens advances an entirely different (and new) primary case, which I must consider before turning to CBUK’s submissions.

Sarens pleads in its Defence that the parties agreed that Sarens’ liability to CBUK for damages would be capped at 10% of the Subcontract value and (ii) would be recoverable only upon proof of Sarens’ negligence. In her skeleton and in submissions, Ms Bodnar said that although the agreement between the parties might have encompassed “all damages”, she did not need to go further than to argue that it concerned “delay damages”. The cap agreement is said by Ms Bodnar in her skeleton to have been formed either by way of an offer made at the September Meeting (a case I have already rejected and do not consider further) or an offer made by CBUK in its email of 16 June 2014 (a document on which Sarens relies in its Amended Defence). She then says this offer was accepted by conduct by Sarens in going on site on 10 November 2014.

Originally Sarens also contended that the offer was accepted when Sarens raised its internal work order on 9 October 2014 – however, this obviously unsustainable argument was abandoned at the hearing.

I reject Sarens’ primary case. On an objective reading of the exchanges in June 2014, it seems to me that Sarens had identified various points arising in the CBUK standard terms with which they were not happy (albeit apparently not every detail) and amongst other things they had made their terms as to damages clear on 6 June 2014. Separately in the 16 June 2014 email they had raised an issue about the price. This issue as to price had been immediately addressed by CBUK in circumstances where it was being raised in fairly trenchant terms but, looked at in context, Mr Rogan’s email on 16 June 2014 was not intending to address the more detailed points raised in the 6 June email (which were preliminary points raised in advance of anticipated detailed discussions in any event) and I do not believe that a reasonable sub-contractor in Sarens’ shoes would have regarded his statement that there was “really no disagreement” between the parties as amounting to a final and unqualified statement that everything was now agreed between the parties or understood that he was offering, unequivocally, to go forward on the basis of the Sarens’ emails of 6 and 16 June, without more discussion.

In the circumstances, the commencement of work on site could not possibly be referable to any offer made in the June emails.

In Sarens’ Defence, it relies upon two other documents as “evidencing or containing” this agreement.

First the 30 October 2014 second iteration of the Subcontract, on which Ms Bodnar made extensive submissions as to interpretation. However, I fail to see how this document supports Sarens’ position – Paragraph 10 makes reference to “liquidated damages” such that there is plainly an issue in relation to its construction and in any event it says nothing about the need for proof of Sarens’ negligence.

In some ways, this is the wrong part of my judgment to address Ms Bodnar’s submissions on interpretation (and I shall return to interpretation again later), but because she seeks to pray them in aid in support of her primary case – namely with a view to saying that the 30 October 2014 Subcontract terms evidence the agreement for which she contends, I shall do so. She submits that once I have carried out the exercise of interpretation there will no longer be any ambiguity in the terms of the document. In any event, I undertake this exercise with caution, reminding myself that documents and evidence which would be admissible for the purposes of determining whether an agreement has been reached are not admissible for the purposes of construing a term.

Ms Bodnar tries to neutralise the impact of the reference to “liquidated damages” in Paragraph 10 of the 30 October second iteration of the Subcontract and, indeed the 11 November third iteration of the Subcontract, by seeking to explain that reference away as “an historic quirk of language”. She submits that this is clear if one looks at other contemporaneous contract documents between the parties (which she argues I am entitled to do as part of the relevant factual matrix) and, in particular, she relies upon the Thorley Lane Subcontract. She points out that the equivalent provision in the Thorley Lane Subcontract makes no reference to liquidated damages (but instead makes reference to a general cap of 10% on Sarens’ liability) and she submits that the only reason the Heysham Subcontract was not in the same terms as the Thorley Lane Subcontract is because CBUK decided to amend the existing draft contract for Heysham, rather than producing a new form of contract or a new clause to deal with the cap. It was not to make a distinction between Heysham and “other projects”.

I accept Ms Bodnar’s submission that, in general terms, I can have regard to other contracts in a series of contemporaneous documents between the same parties as admissible factual background when looking to construe one of the contracts in that series (Lewison, section 3.17). I also accept for these purposes that the reference in the Defence to an established course of dealing between the parties taken together with the Further Information dated 22 December 2017 identifying that established course of dealing as arising out of the Thorley Lane Subcontract, the Crewe Green Subcontract and the Pudding Mill Lane Subcontract is probably sufficient to put the point in issue (albeit Sarens also relies on established course of dealing for another purpose to which I shall return in a moment).

However, I do not consider that the evidence of the terms proposed or agreed in the Thorley Lane Subcontract is sufficient to influence my decision on the true interpretation of the 30 October Subcontract terms (or indeed the 11 November Subcontract terms) for the following reasons:

Second, Sarens relies on the 18 November 2014 email from Mr Underwood of CBUK which acknowledges a pre-existing agreement of 10% without any reference to proof of Sarens’ negligence. Ms Bodnar says that CBUK’s insistence in this email that a 10% cap had already been agreed is “consistent with the fact that a general 10% cap on delay damages had been agreed”. However, in my judgment, the fact that this email may be consistent with her primary case (or at least not inconsistent with it), does not mean that I can rely on it in the absence of clear evidence of an agreement in the terms for which she contends. This email does not expressly record to what the 10% cap in fact relates, and I note that Ms Bodnar recognises the difficulty in this regard because in the context of her submissions on estoppel she says only that this email amounts to a clear representation that a “10% cap had been agreed on, at least, liquidated damages”. For this email to assist in the context of her primary case, it would need clearly to refer to an agreement for a 10% cap on delay damages – which it does not.

In her submissions, Ms Bodnar maintained that the existence of the agreement for which she contends in her primary case is even more obvious from emails passing between the parties on 18 and 19 December 2014 about the Crewe Green Subcontract evidencing CBUK’s desire not to have a liquidated damages mechanism and recording its recognition of the existence of a 10% cap. However, again, in the absence of clear evidence as to the agreement for which she contends (there being no offer or acceptance which I can find to evidence that the parties were ad idem on this), I do not see that emails concerning a different project can provide any assistance. In any event, whilst these emails do appear to involve recognition of a 10% cap, it is unclear whether that cap is on liquidated damages or delay damages. The emails are in fact discussing a % weekly rate, which might tend to suggest that they are concerned with liquidated damages. They make no mention of the fact that negligence must be proved against Sarens, a key term in the agreement that is advanced as Sarens’ primary case.

Finally, Ms Bodnar submits that even if the parties did not agree an express term for a cap of 10% on delay damages, their intention to be bound by such a term is clear from the parties’ previous and concurrent dealings, as evidenced by the Thorley Lane, Pudding Mill Lane and Crewe Green Subcontracts. She says these other subcontracts were all the subject of the September Meeting and that they all exhibit a “consistency of approach” which is particularly clear when viewed against the background of Mr Leonard’s email of 6 June 2014. Further, she says that, looking at the wider context, Sarens and CBUK had been working together from (at the latest) 2011, that Sarens was regularly asked by CBUK to submit tenders and enquiries in relation to projects and that Sarens’ responses to these invariably either expressly noted that its damages were to be limited to 10% or referred to its own terms and conditions which include a restriction on liability for delay in clause 4.5 and a general cap of £25,000 in clause 5.3.

I reject these submissions. Contrary to Ms Bodnar’s case, the Pudding Mill Lane Subcontract does (as I have already pointed out) make reference to liquidated damages in paragraph 10. Furthermore, a comparison of all of these contracts does not permit me to find a consistency of approach – the Pudding Mill Lane and Heysham Subcontracts are worded in exactly the same way, whilst the Thorley Lane and Crewe Green Subcontracts are each worded differently. None of these subcontracts is consistent with Sarens’ own terms and conditions.

I agree with Mr Lixenberg that the court is not assisted in this case by seeking to engage in an interpretive exercise in relation to these three other subcontracts.

In her oral submissions, Ms Bodnar appeared to row back slightly on her submissions as to course of dealing, concentrating on the fact that the other subcontracts were admissible background evidence on which she relied to show there was “always a cap of some sort” between the parties. However, this really takes matters no further on her primary case.

For the sake of completeness and in case I have misunderstood the focus of Ms Bodnar’s oral submissions, I also reject the pleaded case that there was an implied term in the Subcontract for a 10% cap on delay damages. I was referred by Mr Lixenberg to the decision of HHJ Waksman QC in Toomey Motors Limited v Chevrolet UK Limited [2017] EWHC 276 in which he sets out relevant passages from the recent decision of the Supreme Court in M&S v BNP Paribas [2016] AC 742 and goes on to consider the law as to the implication of terms by reason of a course of dealing. As to the latter, HHJ Waksman QC makes it clear that it is something of a misnomer to regard standard terms which form part of an agreement by reason of previous dealings between parties (pursuant to a well-established line of cases) as being implied on any conventional basis [98] and goes on to say “what the parties did historically…is not the issue; the issue is whether, applying the test for implied terms [set out in M&S v BNP Paribas], it is right on objective grounds to import an obligation in the terms of what they did” [101].

I can see no objective basis for implying a term that delay damages should be capped at 10% upon proof of Sarens’ negligence. Applying the test identified in M&S v BNP Paribas, such a term is not necessary to give business efficacy to the contract, it is not so obvious that it goes without saying and it is unclear why it would be reasonable or equitable to imply such a term, although Lord Neuberger made it clear that this latter test is unlikely to add anything. I note in particular, Lord Neuberger’s additional comments in M&S v BNP Paribas at [21] to the effect that a term “should not be implied into a detailed commercial contract merely because it appears fair” and that “a term can only be implied if, without the term, the contract would lack commercial or practical coherence”. Commercial coherence must be ascertained objectively and I see no basis in this case to say that the Subcontract would lack commercial coherence absent a cap on delay damages. I certainly did not understand Ms Bodnar to make a submission to this effect.

In all the circumstances, I reject Sarens’ primary pleaded case.

CBUK says that the Subcontract was formed when the third iteration of the terms was provided by CBUK to Sarens on 11 November 2014 and accepted, subject to the one outstanding matter of liquidated damages.

The analysis is as follows:

Mr Lixenberg submits that he is neutral about precisely when the offer was in fact accepted because ultimately it makes no difference to his case.

I am bound to say that, at first blush, it is not easy to identify a clear acceptance from the exchanges and conduct identified above. Thus, for example, the email of 17 November makes it clear that “to be able to sign the contract” the additional provision is required. Further, in circumstances where Sarens went on site before the third iteration of the Subcontract was even provided to it by CBUK, it is difficult to say unequivocally that its continued preparedness to carry out works can only be referable to its acceptance of the 11 November terms, whether on or about 12 November or on or about 17 November.

However, Mr Lixenberg referred me to the following passage at paragraph 51 in the judgment of Coulson J in Arcadis Consulting (UK) Ltd v AMEC (BSC) Ltd [2016] EWHC 2509:

“In circumstances where works have been carried out, it will usually be implausible to argue that there was no contract. In G Percy Trentham v Archital Luxfer Limited [1993] 1 Lloyds Rep 25 Steyn LJ said:

“One must not lose sight of the commercial character of the transaction. It involved the carrying out of work on one side in return for payment by the other side, the performance by both sides being subject to agreed qualifying stipulations…The judge analysed the matter in terms of offer and acceptance. I agree with his conclusion. But I am , in any event, satisfied that in this fully executed transaction a contract came into existence during performance even if it cannot be precisely analysed in terms of offer and acceptance. And it does not matter that a contract came into existence after part of the work had been carried out and paid for”

This case was cited with approval by Lord Clarke in RTS, who noted the fact that the transaction was performed on both sides “will often make it unrealistic to argue that there was no intention to enter into legal relations and difficult to submit that the contract is void for vagueness or uncertainty”.

He submitted that whilst it might not be possible here to analyse the formation of the contract by reference to a clear offer and acceptance, nevertheless, standing back and having regard to the fact that this transaction was performed by both parties, the right approach would be for the court to assess which terms and conditions the parties were in fact ad idem about.

I agree. Doing the best I can to take an objective view, it seems to me that the Subcontract was formed between the parties on the terms of the third iteration of the Subcontract document provided on 11 November 2014, signed by CBUK (but not Sarens). This encompassed CBUK’s Standard Conditions of Subcontract including parts 1-11 of the Appendix (all of which had been referred to in the definition of the Subcontract within the Subcontract Agreement).

That this was agreed (with one exception) is clear from Sarens’ email of 17 November 2014. However, Sarens believed (as is also clear from that email) that the provision in Paragraph 10 as to liquidated damages required further detail identifying a rate for liquidated damages and could not be agreed in its current form.

Mr Lixenberg’s primary case is that, in the circumstances, there was in fact no agreement between the parties as to damages (liquidated or otherwise) at all. He says that the clear challenge to Paragraph 10 in Mr Render’s email of 17 November 2014 and the fact that Mr Render was plainly putting forward a unified proposal in relation to the level of liquidated damages and a corresponding cap excluded any agreement in relation to that provision. My mind has wavered on this point, not least because the Adjudicator found (albeit by a different route) that there was an agreement between the parties to cap liquidated damages at 10% albeit that (at the point of that agreement) there had been no agreement as to the mechanism to be applied for liquidated damages.

However, I am persuaded that, looking objectively at the parties’ exchanges, they had in fact reached agreement by 17 November 2014 on all elements of the Subcontract (as set forth in the 11 November 2014 terms) with the exception of Paragraph 10. I say that for the following reasons:

Sarens contends that by around 18 November 2014, the parties had agreed a specific liquidated damages provision (regardless of whether they had agreed anything as to damages prior to that date). If an agreement on damages had already been reached, then this is said to be a subsequent agreement (by way of variation or in the form of a collateral agreement) as to liquidated damages.

The terms of the provision for which Sarens contends as its primary case under this head (as is clear from Ms Bodnar’s skeleton, but not from the Defence) are that liquidated damages would be payable by Sarens to CBUK in the event of culpable delay by Sarens which would be levied at a rate of 2% of the Subcontract value per week for 5 weeks (i.e. up to a 10% cap on Sarens’ subcontract value).

The analysis advanced by Sarens as to the formation of this agreement is as follows:

In her skeleton, Ms Bodnar suggested that another (albeit less likely) analysis was that this agreement was formed when CBUK sent its email of 18 November 2014 which constituted an acceptance of Sarens’ open invitation made at the September Meeting for CBUK to specify a rate of liquidated damages for a liquidated damages provision. However, in light of my decision as to the September Meeting, this is not an argument that I am prepared to consider.

I reject Sarens’ case on this agreement as to liquidated damages and prefer Mr Lixenberg’s submissions to the effect that there was no concluded agreement. This is for the following reasons:

Sarens has a second argument under this head (referred to in Ms Bodnar’s skeleton as her “fall-back position”), to the effect that it was agreed by the parties that any liquidated damages payable by CBUK to Costain arising out of the Costain Contract, which CBUK seeks to pass down to Sarens and for which CBUK claims Sarens would be liable under the Subcontract would be capped at 10% of the Subcontract value.

Although not clear on the face of the Defence, which puts this secondary argument in a rather different way, it now appears from Ms Bodnar’s skeleton that this fall-back case is dependent on the true and proper interpretation of Paragraph 10 of the Subcontract.

In circumstances where I have found that the agreement between the parties did not include Paragraph 10, there is strictly no need for me to go on to construe that provision to determine its meaning. However, in case I am wrong about that, and in circumstances where Sarens seeks to advance its fall-back case by reference to the proper construction of the provisions of Paragraph 10 (and also relies upon construction arguments in the context of its primary case, as I have already mentioned), I set out below my conclusions on construction.

In interpreting the Subcontract, I remind myself that I cannot have regard to the pre-contract negotiations of the parties, which are inadmissible for this purpose. I cannot look at previous iterations of the Subcontract for assistance and nor can I look at internal documents created by the parties which may or may not evidence their subjective intentions. I must construe the words against the background of the Subcontract as a whole so as to determine the objective intentions of the parties. With the exception of an argument based on an established course of dealing (which I have already addressed), neither party has pleaded any relevant background factual matrix.

The first limb of Paragraph 10 is clearly a reference to the Costain Contract because it falls within the part headed “Particulars of CBUK’s Contract with the Client” and expressly refers to “liquidated damages” payable “by CBUK”. However, Paragraph 10.1 is addressing a limitation that does not appear in the Costain Contract and so it cannot on any view be a reference to that Contract.

CBUK’s case is that the words “Limited to 10% of the agreed subcontract price” were intended by the parties to limit Sarens’ liability for liquidated damages (expressly referred to in Paragraph 10) to 10% of the agreed Subcontract price. In other words, CBUK says that the obvious answer to the question ‘what is limited to 10% of the agreed Subcontract price?’ must be ‘liquidated damages’, because liquidated damages form the subject-matter of this paragraph.

In her primary case and in her fall-back case, Ms Bodnar contends (for different purposes) that these words are to be interpreted as limiting Sarens’ liability to pay liquidated damages which have arisen up the chain pursuant to the Costain Contract to 10% of the agreed Subcontract price.

In her skeleton on her primary case she put this point in the following way (in support of the proposition that the true interpretation of the Subcontract document is consistent with her primary case as to the terms of the concluded agreement on damages): “The proper interpretation of that clause in the document is that any liquidated damages payable by CBUK to Costain under the Costain Contract would be capped at 10% of Sarens’ subcontract value if CBUK were to seek to pass down that loss to Sarens. In other words CBUK’s claim against Sarens would be for unliquidated damages for delay up to a cap of 10% of Sarens’ subcontract value, which would be a pass down of CBUK’s liability to Costain for liquidated damages. That is the general agreed cap”. She makes a similar point for the purposes of her fall-back case, which presupposes that I find that the agreement between the parties is governed by the terms of the 11 November Subcontract, including the terms of Paragraph 10.

However, looking simply at the words of the Subcontract, it seems to me that Sarens’ construction must involve reading in additional wording in order to get around what appears to me to be the clear and obvious construction advanced by CBUK. I accept Mr Lixenberg’s submission to the effect that reading words into the Subcontract is not an exercise that I am permitted to undertake. I have already dealt with Ms Bodnar’s submissions on an established course of dealing in the context of her primary case. They do not advance her case on this point of interpretation.

In summary, therefore, it is my judgment that the parties never arrived at a concluded agreement in relation to damages; the provisions of Paragraph 10 of the Subcontract were never agreed and there was no subsequent agreement as to liquidated damages.

In relation to its primary case, Sarens maintains that the emails of 6 June 2014 and 16 June 2014 “give rise to an operable estoppel by representation on the part of CBUK…that CBUK would not seek to hold Sarens liable for loss and damage of any kind arising out of or in connection with the Subcontract, except [by reference to the terms of the agreement that Sarens’ liability would be capped at 10% of the Subcontract value and that it would be recoverable only on proof of Sarens’ negligence], on which Sarens relied” (Defence, paragraph 16). Sarens contends that it acted to its detriment in commencing and continuing the works and that it would now be inequitable to permit CBUK to resile from its previously stated position.

In relation to its secondary case, Sarens maintains that the Subcontract Agreement provided on 11 November 2014 and the emails of 12 and 18 November 2014 “give rise to an operable estoppel by representation and/or by conduct on the part of CBUK…that CBUK would not seek to hold Sarens liable for liquidated damages for delay except [by reference to the terms of the agreement that any liquidated damages payable by Sarens would be capped at 10% and payable at a rate of 2% per week for 5 weeks; alternatively the agreement that liquidated damages arising under the Costain Contract which CBUK seeks to pass down to Sarens would be capped at 10% of the Subcontract value], on which Sarens relied” (Defence, paragraphs 22 and 27). Again it is said that Sarens acted to its detriment in commencing and continuing the works and that it would now be inequitable to permit CBUK to resile from its previously stated position. During the course of her submissions, Ms Bodnar confirmed that the reference to “estoppel by conduct” is a reference to “estoppel by convention”.

I note in passing, that in her skeleton argument, Ms Bodnar sought to rely on various other documents in support of the estoppel arguments. These included emails that were internal to CBUK including CBUK’s internal notes of the September Meeting. As to the latter, I reject any suggestion that Sarens is entitled to rely on the September Meeting or notes of that meeting for reasons I have already given. As to the former, I fail to see how internal emails which did not cross the line between the parties are likely to be of any real assistance and I note that they are not, in any event, pleaded.

The applicable law is uncontroversial and was summarised by Akenhead J in Mears Limited v Shoreline Housing Partnership Limited [2015] EWHC 1396 (TCC) at [42]-[51]. For present purposes, I need only summarise the key elements of these (sometimes overlapping) but, in legal terms, distinct, doctrines by reference to some key passages in that judgment:

An estoppel by convention can arise when parties to a contract act on an assumed state of facts or law. A concluded agreement is not required but a concluded agreement can be a “convention”. The assumption must be shared by both parties, or there must be an assumption made by one party and shared in by the other. The assumption must be communicated between the parties in question. At least the party claiming the benefit of the convention must have relied upon the common assumption. A key element of an effective estoppel by convention will be unconscionability or unjustness on the part of the person said to be estopped to assert the true legal or factual position [49].

An estoppel by representation arises where first, A makes a false representation of fact to B: second in making the representation, A intended or knew that it was likely to be acted upon: third B, believing the representation acts to its detriment in reliance on the representation; fourth A subsequently seeks to deny the truth of its representation; fifth no defence to the estoppel can be raised by A [50].

For Sarens’ case on estoppel by representation on its primary case to succeed, it needs to convince me that by the email of 16 June 2014 (“we really don’t have any disagreement here”) CBUK was representing to Sarens that it was prepared to contract on the basis of a 10% cap on delay damages, recoverable only on proof of Sarens’ negligence and that Sarens understood this and acted to its detriment in reliance upon it. In light of my analysis of the June emails above, it will already be plain that I am not persuaded.

I have found that the reference to there being no real disagreement was a reference to the issue that had arisen in respect of the price and not a reference to the various factors raised by Sarens in its email of 6 June 2014. In the circumstances, this statement cannot possibly be said to be a false representation of fact as to CBUK’s willingness to agree to a 10% cap on delay damages.

Further and in any event, for these purposes I am permitted to look at Mr Mitchell’s evidence to see how Sarens received the email of 16 June 2014. It is telling that Mr Mitchell does not even try to suggest that the June emails amounted to anything other than a stage in the negotiations between the parties. Indeed he does not refer to the statement “we really don’t have any disagreement here”, and he certainly does not say that Sarens placed any reliance upon it.

In all the circumstances I reject the argument that CBUK is now estopped from relying on the true legal position.

Sarens’ case on estoppel by representation/convention on its secondary case relies heavily on the proposition that Paragraph 10 in the Subcontract Agreement was a clear representation that a 10% cap had been agreed on, at least, liquidated damages; alternatively that the emails of 12 and 18 November 2014 each amounted to similar clear representations to this effect. The case on estoppel by convention is said to arise out of the same documents which evidence, it is submitted, a shared common assumption that a 10% cap had been agreed. In this case, it is argued that the doctrines of estoppel by convention and estoppel by representation overlap.

I reject the suggestion that Paragraph 10 of the Subcontract Agreement was a clear representation that a 10% cap on liquidated damages had already been agreed, as opposed to a representation that CBUK was prepared to agree a clause in these terms. This document was provided on 11 November following the comments received from Sarens in the 10 November 2014 email (which comments were then addressed, consistently with the terms of the Subcontract Agreement in the 12 November email). At the time of its provision, Sarens had raised a query about the terms of Paragraph 10, seeking further details as to rates for liquidated damages.

Looked at against this background, the Subcontract Agreement was not a representation that the terms of Paragraph 10 had been agreed (but rather a counter-proposal in response to the email comments of 10 November). Furthermore, it could not properly be regarded as reflecting a shared assumption/agreement because the issue of Paragraph 10 remained outstanding. Mr Mitchell’s evidence confirms this analysis; he says in terms that when he discovered that the Subcontract did not confirm the way in which liquidated damages for delay would be applied he could not approve the document. In any event, Paragraph 10 was not a representation or assumption/agreement in the terms pleaded in the Amended Defence.

For the same reasons, I reject the suggestion that the email of 12 November 2014 gives rise to an estoppel. CBUK’s statement that “what we have agreed for this clause is simple, clear and unambiguous”, on which Sarens places substantial weight, is a response to a proposal from Sarens to limit liquidated damages to each structure and to agree a mechanism for the application of liquidated damages. In the circumstances, it is not a representation as to a final agreement between the parties on liquidated damages and nor does it reflect a shared common assumption. On the contrary, this email reflects the fact that the parties remained in disagreement over the liquidated damages clause, as Mr Mitchell’s evidence again confirms.

At first blush, the email of 18 November 2014 which said “Please remember we have already agreed to limit this to 10% of the value” appears more promising from Sarens’ perspective, because of its clear reference to an agreement, albeit that it is not clear whether “this” is a reference to liquidated damages or otherwise. Mr Mitchell’s unchallenged evidence is that it was his understanding from the emails of 17 and 18 November that “we had agreed a clear cap on Sarens’ liability for any delays to our works of 10% of the Heysham Subcontract price”, although Ms Bodnar’s skeleton puts Sarens’ case on this at no higher than that there was a “clear representation that a 10% cap had been agreed on, at least, liquidated damages” (emphasis added). CBUK served no evidence as to their understanding at the time.

However, the fact that it is unclear from the email to what the agreement relates (whether it be liquidated damages or delay damages) appears to me to present a problem. Further, and in any event, even if the 18 November email does amount to a representation of fact that the parties have agreed to limit (say) liquidated damages to 10% of the Subcontract value (as Ms Bodnar contends), it is not a representation or shared assumption in the terms identified in the Defence.

First, it is not a representation or agreement that liquidated damages will be payable at a rate of 2% per week for 5 weeks – there is a reference to 2% for 5 weeks at Heysham but this is (on an objective reading of the exchanges between the parties) a counter-proposal made further to Sarens’ email of 17 November 2014. In his witness statement, Mr Mitchell says that he understood from the emails of 17 and 18 November that the agreed cap on Sarens’ liability for any delays to the works “would be calculated using liquidated damages so that if we were late with our works (and the delay was our fault) then CBUK would be entitled to claim liquidated damages at 2% of the subcontract price per week up to a maximum of 5 weeks if the last bridge in our sequence was late”. But the 18 November email makes no such clear representation and nor does it reflect a common assumption or agreement between the parties to this effect.

Second it is not a representation or agreement that liquidated damages arising under the Costain Contract which CBUK seeks to pass down to Sarens would be capped at 10% of the Subcontract value – there are no clear words in the email to this effect and Ms Bodnar did not seek to suggest otherwise. Mr Mitchell does not say in his statement that he understood the 18 November email in this way.

It seems to me that the highest Sarens’ could possibly put its case on the effect of the 18 November email is that it is a representation (alternatively reflects a shared assumption) that the parties are in agreement that there should be a 10% cap on liquidated damages. However, without a mechanism in place to identify the rate at which liquidated damages will accrue, any such shared assumption lacks clarity and meaning. As I have already said, Sarens appears to have recognised this, which is why it was not prepared to agree to the provision at Paragraph 10 without an amendment to address the rate of liquidated damages.

Further and in any event, even assuming a representation or common assumption, I cannot see that Sarens has acted to its detriment in reliance on that or indeed that it would be unconscionable or unjust to permit CBUK to assert the true legal position. As I have already said, Sarens commenced work on site in the absence of any agreement and prior to any of these alleged representations being made. Mr Mitchell’s evidence is that he was not happy when he returned from holiday in mid-November to discover that Sarens had mobilised and started work on site at Folly Bridge on 10 November (while he was away) “even though we still didn’t have something in writing signed between us and CBUK”. Mr Mitchell’s recognition that it was necessary to agree a mechanism for liquidated damages prior to signing the Subcontract did not preclude Sarens from continuing with the work on site, notwithstanding the absence of any such agreed term.

In all the circumstances I reject the argument that CBUK is now estopped from relying on the true legal position.

In light of my decisions above, the issues raised by the alternative declarations sought by CBUK at 12(c) of the Amended Particulars of Claim do not arise. However, in case I am wrong in my analysis I set out below my views on those declarations.

Sarens’ obligations as to completion of its works were either (i) to complete the works to each individual bridge by its identified completion date; or (ii) to achieve an overall completion date. The latter possibility is slightly complicated by the fact that in the end Sarens was only required to install three out of six of the bridges, in which case Ms Bodnar submits that the overall completion date can only be viewed as the last date for the last of the three bridges installed (albeit of course I must construe the contract without reference to what transpired later).

Sarens says that it is neutral as to whether its obligation was to complete individual bridges on time or to achieve a final completion date, but it says that whichever is correct, CBUK cannot claim damages for delay by Sarens both to individual bridges and to an overall completion date as to do so would amount to double recovery, which could not have been the intention of the parties. Sarens also says that if there is an agreed liquidated damages provision, CBUK cannot seek to circumvent that agreement by trying to claim unliquidated damages instead and/or in addition; and further that if the parties agreed a general cap of 10% on damages for delay that agreement would prevent CBUK from seeking to claim any damages for delay (whether liquidated or unliquidated) which exceed 10% of the value of Sarens’ subcontract.

I accept all of these submissions and I did not understand any of them to be contested by CBUK. Indeed, Mr Lixenberg made it clear during his oral submissions that CBUK was not seeking to keep open the possibility of a double recovery and it was not seeking “to step away from the fact that a liquidated damages clause is a complete remedy for delay”. His qualification was simply that there may be other claims that do not arise from delay to completion of the whole of the works which might be recoverable from Sarens. I do not have to decide this latter point for the purposes of this hearing and, in any event, I am being asked to consider these terms in something of a vacuum – CBUK does not seek to pursue any claim before me for damages from Sarens – and in the circumstances, I cannot sensibly opine on whether particular claims, yet to be identified, would or would not fall within the scope of the liquidated damages clause (if it was agreed).

As to the issue which I am asked to decide, I accept CBUK’s case that, if I had found that the parties had agreed on a liquidated damages provision and on a cap thereon, the correct interpretation of the Subcontract is that any liquidated damages and cap can only apply to the completion of the works as a whole and not to the individual bridges. I say that for the following reasons:

My finding in this regard, seems to me to be entirely consistent with the terms of the Costain Contract and to best reflect the objective intentions of the parties. I have disregarded Ms Bodnar’s submissions and Mr Mitchell’s evidence as to what was agreed on this score at the September Meeting, for reasons set out above.

The liquidated damages and/or 10% cap would have no application to any claim arising from Sarens’ obligations in relation to the progress and completion of the individual bridges, corresponding to Key Dates under the Costain Contract, save where a failure to complete one bridge results in a failure to complete the whole of the works so as to cause CBUK to incur a liability to Costain in respect of liquidated damages following a 60 day damages holiday. This is the point CBUK seeks to make in its Further Information provided on 19 October 2017, with which I agree.

In its Counterclaim, Sarens seeks a declaration that if the Subcontract Agreement dated 11 November 2014 forms part of the Subcontract between the parties on a proper construction (i) the parties’ agreement to limit damages and/or delay damages and/or liquidated damages for delay would apply to any claim by CBUK for an indemnity under the final paragraph of clause 1(c) of that document (Counterclaim para 36.1); and/or (ii) CBUK is not entitled to an indemnity under that final paragraph of clause 1(c) in respect of a liability which CBUK may incur to Costain and/or in respect of sums paid or to be paid by CBUK to Costain pursuant to the Settlement Agreement (Counterclaim para 36.2).

In circumstances where I have found that the Subcontract of 11 November does form the Subcontract between the parties, with the exception of Paragraph 10, paragraph 36.1 of the Counterclaim does not arise. There is no agreement to limit damages and/or delay damages and/or liquidated damages for delay.

However, CBUK has expressed itself happy for the court to resolve this issue, making it clear at the same time that it does not seek to argue that a claim based on an indemnity can be used to circumvent a liquidated damages provision. This sensible concession appears to me to deal (insofar as is necessary for these purposes) with paragraph 36.1 of the Counterclaim.

As to paragraph 36.2, I confess to a certain degree of nervousness in circumstances where I have no claim under the indemnity provisions before me. However, the point has been argued as a pure point of principle and I am invited to resolve it on that basis.

Ms Bodnar submits that on its true and proper construction, the final sub-paragraph in clause 1(c) of the Subcontract is not intended to be directed at indemnifying CBUK for liability it has incurred to Costain, but is instead aimed at any liability CBUK may incur to a third party other than Costain. She says this must be so because the final sub-paragraph refers to liability to “any other person” rather than to “the Client” (i.e. Costain) unlike the preceding sub-paragraphs.

Mr Lixenberg responds that there is nothing in the final sub-paragraph of clause 1(c) to make it clear that it is so limited and he says this cannot have been the intention of the parties, objectively construed.

I agree with Mr Lixenberg. On the ordinary interpretation of the words “any other person whatsoever”, the Client would plainly be included and I do not regard the contradistinction between the final sub-paragraph in 1(c) and the other sub-paragraphs to be sufficient to displace this ordinary and natural interpretation.

I have sought to test this interpretation by reference to other clauses within the Subcontract which might shed light on this issue.

The Subcontract contains numerous references to “the Client”, however, clause 4(a) makes reference to “other persons” as follows: “The Subcontractor shall at all times indemnify CBUK against all liabilities to other persons for bodily injury, or damage to property which may arise in consequence of the execution of the Subcontract Works…”. It seems to me that the reference in clause 4(a) to “other persons” must include the Client, not least because it is clear that the parties envisaged the possibility that property would be supplied to the Subcontractor by the Client (see clause 13). Accordingly, the parties must have intended that damage to property supplied by the Client would be the subject of an indemnity.

In the context of negligence claims, paragraph 1.8 of Part 9 of the Appendix provides that “the Sub-Contractor shall indemnify CBUK and their Principals for and against all claims for loss, injury or damage and all costs, charges and expenses in connection therewith, or consequent thereon, due to or arising directly or indirectly from the negligence of the Sub-Contractor or of their employees, servants or agents”. This provision is in different terms, but it is an example of a provision which must clearly have been intended to include an indemnity against claims made by the Client, even though there is no reference to “the Client” in the clause (merely a reference to “all claims”).

I have found nothing in the agreement to displace the interpretation I have arrived at; if anything, the provisions I have referred to tend to lend support to my construction.

By way of alternative, Ms Bodnar contends that the final sub-paragraph of clause 1(c) would not cover a sum which CBUK seeks to claim from Sarens as a pass down of a sum voluntarily agreed between CBUK and Costain in a compromise deal. Because a settlement agreement comes about by reason of a voluntary agreement to settle a dispute, Ms Bodnar says that the sums paid under such settlement agreement are not “by reason of any breach by the Subcontractor of the Subcontract”. Further she says that a sum paid by CBUK pursuant to a settlement agreement is not properly described as a “liability” (since there is no liability, merely a voluntary act by CBUK), or a “claim, demand, proceeding, damages, costs or expenses”.

I agree with Mr Lixenberg that this submission appears unsustainable in light of the decision of Ramsey J in Siemens Building Technologies FE Ltd v Supershield [2009] EWHC 927 (TCC), at paragraphs 62, 76, 80 and 81. However, I re-emphasise that this is a decision I have made in a vacuum without reference to any particular facts and without any information about the Settlement Agreement beyond that set out at the beginning of this Judgment.

In all the circumstances I dismiss Sarens’ counterclaim for a declaration in the terms of paragraph 36.2.

Unless the parties can agree on the terms of an Order, I shall hear them at a convenient time on the Declarations and consequential orders to be made following this Judgment.