Southern Electric v Mead Realisations [2009] EWHC 2947 (TCC)

[2009] EWHC 2947 (TCC)

Case No.No. HT-09-401

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Venue Royal Courts of Justice

Date 4 November 2009

Before

MR. JUSTICE AKENHEAD

B E T W E E N:

Between

SOUTHERN ELECTRICClaimant

MEAD REALISATIONSDefendant

MR. A. DAVIES (instructed by Dundas & Wilson) appeared for Claimant.

MR. G. SOFAER (solicitor, Denniss Matthews) appeared for Defendant.

J U D G M E N T

[1]This claim relates to an adjudication decision dated 21 September 2009 made by Mr. Rudd, an adjudicator. He ordered that the Defendant in these proceedings, Mead Realisations Limited (“Mead”), must pay the Claimant, Southern Electric Contracting Limited, (“Southern Electric”) not later than 7 calendar days after the publication of the decision £124,511.26 plus VAT and interest should be payable on top in the sum of £6,907.13. It is clear from elsewhere in the decision that he was expecting that interest would continue to be paid if payment was late.

[2]The relationship between the parties arises out of a written contract made in May 2007 with regards to the provision of mechanical and electrical installation work by Southern Electric for Mead at a regional rural business centre in Somerset. Disputes arose between them in relation to that construction contract and, with regard to those disputes, Mr. Rudd gave his decision.

[3]Although the money in question was payable on or by 28 September 2009, it is clear from the correspondence that it was not paid within time. There were exchanges between the parties which seem to have started on about 28 September 2009. Mead took the view that it would start to make payments. However, payments were not made or insufficient payments were made to satisfy the decision of the adjudicator. The result was on 2 October 2009 that Southern Electric, who had by then instructed solicitors, wrote via its solicitors (Dundas and Wilson) a letter to Mead indicating that the money should be paid forthwith, and saying, that if they were not in receipt of the money by 5 October, they had been instructed to enforce the decision in the County Court and “seek an order for payment of our legal costs, including court fees and time costs incurred by this firm in respect of this matter”.

[4]Mead responded on 5 October 2009 saying, “a payment had been made in good faith for £50,000 last week and that should have been received by them”. Mead made it clear that it wanted to discuss matters with its bankers and that they would revert with proposals with regard to payment of the balance.

[5]On 9 October 2009, Southern Electric (through its solicitors,) issued its claim form against Mead for enforcement of the adjudication decision. The claim form contained the standard notes attached to it which indicated that “additional costs and interest may be added to the amount claimed on the front of the claim form if judgment is entered against you”. The Particulars of Claim attached to the claim form set out the nature of the issue between the parties with reference to the adjudicator’s decision. Given that £50,000 had already been paid (they had received that sum on 5 October 2009), there was a still a balance due of £102,855.90 and, in the prayer, Southern Electric claimed that substantive sum, interest at £17.87 per day and, specifically, costs. A written statement of Mr. Sharmar (of Southern Electric) accompanied these documents and on 9 October 2009, in accordance with the usual practise in the TCC, Southern Electric procured from Mr. Justice Ramsey a relatively standard form of directions requiring, amongst other things, the lodging of an Acknowledgment of Service within an abridged time of three days (instead of the usual 14 days) following service of the Southern Electric’s documentation. A hearing was fixed for today’s date, 4 November 2009, and the parties were given permission to file further evidence before that time. No Acknowledgment of Service was received within that time. However, on 22 October 2009, Mead through its operations manager, Mr. Biggs, wrote a letter to the TCC (copied to Dundas and Wilson) making it clear that it had received the court documentation from Dundas & Wilson on 14 October 2009 and that Mead was admitting liability. Mr. Biggs had obviously obtained access to a standard form of admission and, on that form, he had ticked the box saying:

“I admit the full amount claimed as shown on the claim form”

. But in that letter, having referred to an apology for the provision of a late Acknowledgment of Service and attaching the form, it then said this:

“We are able to offer to pay £50,000 by the end of October 2009 with another £50,000 at the end of November 2009, with the final balance of payment by 15th December 2009.”

[6]That was responded to by Dundas & Wilson on the same day by fax to Mead where they said this: “We refer to your facsimile transmission to the Technology and Construction Court of today’s date. Thank you for admitting your liability in respect of the full amount claimed. Our client has reviewed your proposed mechanism for payment. It is disappointed that you are not intending to pay this amount in full immediately. A month has passed since the adjudicator’s decision was given and you have had adequate time to organise payment. Despite our client’s frustration at the further delay, it has instructed us that it would be willing to accept a mechanism of payment as follows: £50,000 to be received no later than 29th October 2009 £50,000 to be received no later than 30th November 2009 The balance to be received no later than 15th December 2009 All payments are to be made by direct transfer into our client account and not by cheque. Account details are: [and account details were given]. Interest will continue to accrue in respect of the outstanding amount until settlement has been agreed. We look forward to hearing from you by return in relation to the advanced proposal.” £50,000 to be received no later than 29th October 2009 £50,000 to be received no later than 30th November 2009

The balance to be received no later than 15th December 2009

[7]On 27 October it seems clear that Ms. Donald of Dundas and Wilson had had a discussion and there was agreement that such payments as were to be made, were to be made by BACS payment direct into their client account.

[8]On 28 October 2009, Mr. Biggs on behalf of Mead wrote back in these terms:

“We confirm receipt of your faxed letter of 23 October 2009 and confirm that a CHAPS transfer in connection with the first payment has been organised with our bank. As requested, we therefore confirm our agreement to the settlement terms- -£50,000 to be paid by transfer no later than 29 October 2009. -£50,000 to be paid by transfer no later than 30 November 2009. -Balance of £152,855.90, as per the adjudicator’s decision, which includes- (i) £2,600 (including VAT) paid by SEC to the adjudicator; (ii) Interest as noted in the SEC letter dated 30 September 2009 of £160.83; (iii) The balance of £152,855.90 less these items and less the £150,000 to be paid which is £95.07; (iv) In total this balance is £2,855.90. -The daily interest award of the adjudicator will need to be revised and agreed to take account of the payments made, but can also be paid as part of the balance payment.”

As requested, we therefore confirm our agreement to the settlement terms- (i) £2,600 (including VAT) paid by SEC to the adjudicator; (ii) Interest as noted in the SEC letter dated 30 September 2009 of £160.83; (iii) The balance of £152,855.90 less these items and less the £150,000 to be paid which is £95.07; (iv) In total this balance is £2,855.90.

As requested, we therefore confirm our agreement to the settlement terms-

[9]On the same day (again by fax) Dundas and Wilson replied in these terms:

“Further to our conversation, I confirm that the parties will need to lodge a Consent Order with the court in order to vacate the hearing date and to prevent the accruing of further legal costs (for which you will be ultimately liable) You will need to make the following payments to our client: -£50,000 to be received no later than 29 October 2009. -£50,000 to be received no later than 30 November 2009. -‘the balance’to be received no later than 15 December 2009. As discussed, this final payment on 15 December 2009 needs to include an amount for interest and costs. The calculation for these is set out below.” -£50,000 to be received no later than 29 October 2009. -£50,000 to be received no later than 30 November 2009. -‘the balance’to be received no later than 15 December 2009. The letter then refers to the fact that Southern Electric’s costs to date are said to be £4,700 plus £705 VAT. An explanation is given as to what work that involved and included, and it was made clear that, if the consent order was not signed and filed by the following morning, further fees would need to be incurred in relation to trial preparation. It then set out a calculation with regard to interest, which produced a total up to 15 December 2009 of £3,431.04. The conclusion to the letter was: “Accordingly, the final payment to be received from your client on 15 December is £12,531.94 the breakdown of which is as follows: The balance of the amount outstanding on the adjudicator’s decision is £2,855.90; Interest £3,431.04; Our legal costs - £5,405 including VAT; plus Court fees - £840. Attached is a draft consent order relating to the above…”

Our legal costs - £5,405 including VAT; plus Attached is a draft consent order relating to the above…”

Our legal costs - £5,405 including VAT; plus

[10]It seems not to be challenged as such (although I do not think it makes any difference) that, on 28 October 2009, probably before that letter from Dundas and Wilson was sent, Ms. Donald of that firm had an open conversation with Mr. Biggs. They discussed interest and Mr. Biggs pointed out that interest should be more as a result of the staggering of the payments that had been discussed. Ms. Donald confirmed that she would send a revised consent order. Her attendance note says this:

“SD stating the final payment includes our fees, [Mr. Biggs] okay but requesting a breakdown.”

This suggests that Mr Biggs was aware that costs would be payable additionally.

[6]Following the receipt of Southern Electric’s solicitors’ letter of 28 October, a disagreement arose between the parties as to whether or not a full and final settlement had been reached involving payments by the dates included by which costs were effectively encompassed or included. It is clear that Mead takes the view that a full and final settlement has been reached which does not require it to pay the costs of and occasioned by the proceedings. However, Southern Electric, through its legal team, argues that there was no full and final settlement reached. But even if there was, the balance to be payable on or by 15 December 2009 would necessarily include the costs.

[7]I now turn briefly to the law. So far as interpretation of contracts or the consideration of whether a contract has been formed, the court will consider matters primarily in an objective way. Thus it is not generally of any great assistance to the court to attach much weight, if any, to the subjective beliefs of the individual parties in any negotiation unless and to the extent those subjective beliefs have been expressed to the other party. Cases such as Chartbrook v. Persimmon Homes Limited

[2009] UKHL 38

have confirmed the standing rule of contractual interpretation that one should consider the factual background in reviewing what a contract means. It is obviously necessary to review the factual background in determining whether or not a contract has been formed.

[8]The second matter relates to what is the practice and law in relation to costs, even when there has been an admission filed in respect of a claim. This is a matter that was dealt with in the TCC in Amber Construction Services Limited v. London Interspace HG Limited

[2007] EWHC 3042

TCC. That was a case in which an admission was lodged to a TCC claim which had been brought by the claimant to enforce an adjudication decision. The issue that arose there was whether or not the claimant was only entitled to fixed costs, which in that case were £100, or whether the court retained a discretion to allow a different amount of costs. The Court referred to CPR Part 45 in some detail. It is abundantly clear from that Rule that the court retains a discretion to allow to a party a sum different to the fixed costs regime; this is adumbrated in CPR Part 45. In TCC cases, which involve enforcement of adjudication decisions, at Paragraph 25 of the judgment, the Court indicated that it was wholly appropriate for the court to exercise its discretion to order costs at a greater level than the costs fixed by CPR Part 45. The reasons given recognise matters of general application as well as matters which were specific in that case: “(i) This Court has recognised the importance of a summary and prompt procedure to secure enforcement of adjudicators' decisions properly reached. (ii) In this case, some four weeks elapsed after the issue of the adjudicators' decisions before the enforcement proceedings were issued. (iii) In their letter dated 17 October 2007, the Claimant's solicitors gave very clear warning that, unless the sum due under Mr Price's decision was paid promptly, proceedings would be commenced without further notice. (iv) In correspondence, the Defendant's solicitors made it clear in effect that they would not pay primarily because, they argued, the adjudicator did not have jurisdiction. They were thus putting forward an apparently comprehensible defence to any enforcement proceedings (v) Even in the "without prejudice save as to costs" letter, it was made clear that the offer did not recognise that the sum which Mr Price had decided was due was payable. (vi) It can have come as no surprise that proceedings were issued. A party which makes a "without prejudice save as to costs" offer is not entitled in some way to have it responded to or to assume that threatened proceedings against it will or might be withheld. It would be different if the without prejudice correspondence had revealed some agreement by which the Claimant undertook, at least temporarily, not to issue proceedings. That is certainly not the case here. (vii) The Defendant's argument that the Claimant has acted "secretively" in incurring substantial costs in preparing for its without notice application and its proceedings in general is without foundation. Glovers wrote in terms on 17 October 2007 that, if the amount due pursuant to Mr Price's decision was not paid promptly, proceedings would be commenced in the High Court without further notice. The Defendant obviously knew that Glovers were involved and they knew, because they had been so warned, that proceedings could be commenced at any time without further notice, particularly given that its solicitors had put forward a potential defence, and it must or should have appreciated that significant costs could be incurred if High Court proceedings were issued. They could have ascertained, as was likely, that, if the proceedings were commenced in the TCC, the TCC practice as contained in their Guide would or could be followed. That is exactly what happened. (viii) The procedure, set out in paragraph 9.2 of the TCC Guide (Second Edition, First Revision, October 2007), appears to have been followed substantially by Glovers. The Part 7 Claim Form needed to be accompanied by Particulars of Claim and the Part 24 application needed to be accompanied by a witness statement which exhibited, at least, the construction contract and the relevant adjudication documents. This procedure is now the norm for adjudication enforcement proceedings. (ix) It is inevitable in those circumstances that the costs will exceed by a very substantial amount the fixed costs called for in CPR 45.

[9]So in reviewing whether or not an agreement was reached between the parties on or by 28 October 2009, it is necessary to consider the factual background. It seems to me that the relevant factual background is, firstly, that this was a claim brought in the TCC to enforce an adjudication decision. Secondly, it is clear from the Claim form and the Particulars of Claim that costs were actually and expressly being claimed. Thirdly, it is also clear and must have been clear to Mead that an amount of costs (probably substantially higher than £100) had been incurred in terms of costs by Southern Electric because it had received on 14 October 2009, not only the Claim form but also the Particulars of Claim, witness statements and attached documents. The relevant factual background is that it was known to Mr. Biggs, or certainly should have been known objectively to Mr. Biggs and therefore to Mead, that costs were being claimed and that not insignificant or trivial costs were likely to have been incurred by the time that discussions and correspondence started on 23 October 2009.

[10]It is, of course, always possible for parties to reach a full and final settlement following an admission and it is always perfectly possible for them to agree a figure inclusive of costs. There is nothing inherently wrong or imprudent in that and, indeed, it is sensible for the parties to seek to do that.

[11]I now turn to interpreting objectively what it is that Mr. Biggs (whatever he subjectively thought) was offering in his letter of 23 October 2009. He, on behalf of Mead, was offering to pay three sums, one by the end of October, one by the end of November and a final “balance” payment by 15 December 2009. In the context that I have described (objectively construed) that must mean a balance, including interest and any other ancillary relief that was being sought. That includes costs. Therefore, because he was not (at least at that stage) trying to quantify what the final balance payment was to be, nonetheless he was offering on behalf of Mead that the final amount outstanding following the admission of liability would be payable by 15 December. That wording is effectively picked up in Dundas and Wislon’s letter of 23rd October 2009, which I set out earlier. They indicate that they would accept a mechanism of payment which would involve “the balance to be received no later than 15 December 2009”. “The balance” must in context be not only the balance of any sums under the adjudication decision, but also the balance of any sums due or payable following and consequential upon the admission. That would necessarily, in my judgment, include costs.

[12]When Mr. Biggs replied on 28 October, he purports to confirm the agreement to the settlement terms, but what he seeks to do then is explain what he thinks “the balance” is that is payable by 15 December. He expressed the view that the balance was £2,855.90, but he also accepted that there would have to be a further sum allowable for interest which took into account what was paid and was to be paid pursuant to this arrangement. When, on 28 October, Dundas and Wilson go back they legitimately, in my view, raise the issue of costs. There is also disagreement, apparently, as to interest. It is common ground that, if no agreement was reached on or by 28 October 2009, no agreement was reached thereafter because the disagreement became fairly quickly established along the lines indicated above.

[13]One could properly argue that the letter of 23 October 2009 was, in contractual terms, an offer. It was an offer, in my view, which was offering to make a final “balance” payable including costs and interest by 15 December. The letter of 23 October from Dundas & Wilson was an acceptance of that as such, but what is being offered and accepted is to receive the “balance” no later than 15th December. Therefore, it follows that there is agreement in principle between the parties but it is agreement that the “balance” is payable by 15 December and that is to include any outstanding sum due for interest and costs. Therefore, in my view, the Claimant is correct in the assertion which it has made in this case and, whilst the times for payment are to be reflected in the order, the agreement reached is that costs are to be payable together with or as part of any outstanding balance by 15 December 2009.

[14]There will be judgement for Southern Electric to the effect that Mead should pay its costs of the Claim and the application to be assessed summarily. ___________________