Dacy Building Services Ltd v IDM Properties LLP [2018] EWHC 178 (TCC)

[2018] EWHC 178 (TCC)

Case No HT-2016-000244

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

TECHNOLOGY AND CONSTRUCTION COURT(QBD)

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 5 February 2018

Before

THE HON MR JUSTICE FRASER

Between

DACY BUILDING SERVICES LIMITEDClaimant

IDM PROPERTIES LLPDefendant

Mr Maurice Rifat (instructed by WH Matthews & Co) for Claimant

Mr Samuel Townend (instructed by Stepien Lake) for Defendant

Hearing Hearing date: 16 January 2018

Judgment Approved

Introduction

[1]These proceedings started life as an application by the Claimant, Dacy Building Services Ltd. (“Dacy”) to enforce the decision of an adjudicator, Mr Philip Eyre, which was made on 9 August 2016, evidently some time ago. His decision was to the effect that the Defendant should pay to Dacy the sum of £247,250 plus interest. The sum that he ordered was said by Dacy in the adjudication to arise in respect of works done by Dacy between 3 December 2015 and May 2016 at a site in Camberwell, London. The Defendant, IDM Properties LLP (“IDM Properties”), resisted enforcement on the basis that Mr Eyre lacked jurisdiction. IDM Properties’ position was then, and remains, very simple, and is that there was no contract between it and Dacy. A contract is a pre-condition to the statutory adjudication regime applying at all, and if there is no contract between two parties there can be no dispute capable of being referred to adjudication, and no adjudicator purportedly appointed could have jurisdiction to deal with such a dispute. If IDM Properties’ position were to be the correct analysis, this adjudicator, Mr Eyre, would have lacked jurisdiction to make his decision, and the court would not enforce it.

[2]The application by Dacy for summary judgment on the enforcement of the decision was heard by Jefford J on 22 October 2016. Her judgment on the application is at

[2016] EWHC 3007 (TCC)

. She held at [67] that “this is a case where the Defendant has a realistic prospect of succeeding in its defence that there was simply no contract between it and Dacy.” She therefore ordered that there should be a trial of this specific issue, and also ordered – entirely consistently with the ethos that adjudication is intended by Parliament to be a swift process of dispute resolution – that the trial should be expedited and set down with a time estimate of one day.

[3]This approach accords with that generally in respect of adjudication enforcement, which is to resolve disputes between parties to disputes under construction contracts speedily. It must however be emphasised that it will only be in very rare cases that adjudication enforcement applications will result in trials of issues relevant to that enforcement issue. In Estor Ltd. v Multifit (UK) Ltd

[2009] EWHC 2108

Akenhead J dealt with a similar situation. In that case, Estor resisted enforcement on the basis that it was not the contracting party. Akenhead J pointed out that, in the Technology and Construction Court, if the jurisdictional point was simply a matter of law (for example of contractual or statutory construction) the court would deal with it summarily. The position was potentially different if the jurisdictional challenge was dependent on fact and evidence, where the issue that the court would have to decide would be whether the defendant had no, or a realistic, prospect of establishing that there was no contract. The issue in such cases is often whether or not there was a concluded contract at all. The courts will be reluctant to find that there was no concluded contract if the subject matter of the putative contract has been performed. For example, in Purton (t/a Richwood Interiors) v Kilker Projects Limited

[2015] EWHC 2624

, Stuart-Smith J had little difficulty in concluding that there was a concluded contract between the parties and not a series of works carried out by Mr Purton, for which Kilker had paid, without being under any contractual obligation to do so. It will usually be possible for such issues to be resolved summarily. A trial, with contested evidence given orally, will only in my judgment very rarely be justified. This is such a case; but it should not be seen as encouragement to parties upon enforcement generally to argue that a trial is required in order to determine issues directly relevant to that enforcement. In Macob Civil Engineering Ltd v Morrison Construction Ltd

[1999] EWHC 254 (TCC)

Dyson J (as he then was) made it clear that the court would enforce an adjudicator’s decision ordinarily through summary judgment under CPR Part 24. That approach has been reinforced innumerable times in the cases since then, and that remains the usual route to enforcement.

[4]This case is a little different for reasons that will become clear. Dacy’s case is that a contract was agreed orally at a meeting on 3 December 2015 attended by three people, namely Mr Dacian Keran of Dacy, Mr Brian Cutmore, and Mr Niall Mcloughlin, the latter gentleman being employed by IDM Properties. An oral contract is sufficient for disputes to be governed by the statutory adjudication provisions, due to s.139 Local Democracy, Economic Development and Construction Act 2009, which repealed the requirement in s.107 of the Housing Grants, Construction and Regeneration Act 1996 that construction contracts had to be in writing or evidenced in writing.

[5]Oral contracts that are construction contracts are now therefore sufficient for disputes under them to be governed by the statutory regime of adjudication. IDM Properties’ case is that no such oral agreement was reached at all with Dacy, and that Dacy was working on site for an entirely different entity with whom Dacy had contracted, a company which is now insolvent. This is the central and only point in this trial, to which I will return in some detail. The written evidence before Jefford J reflected these starkly opposing positions, and it was for this reason that she ordered the issue be resolved after a trial, and that the trial be expedited.

[6]It may however strike an objective observer as somewhat difficult to understand why, given this was an adjudication enforcement, and given that the order of Jefford J was made in November 2016, this trial did not take place until mid-January 2018. That lapse of time might give the impression that the Technology and Construction Court could not accommodate a trial of this issue (and, one would assume, the parties’ joint wishes to have this matter resolved speedily) in a period of less than 14 months. Rather the converse is the case, however. The Court did list the matter for a trial date in early 2017, consistent both with the order of Jefford J and with the requirement to deal with such adjudication business as quickly as practicable. Had that trial taken place as originally listed, the matter would have been resolved over a year ago. However, it did not do so and the circumstances in which it was not listed, and eventually came to be listed so long after the order by Jefford J, are controversial. Regardless of what happened in this case, if the court orders an expedited trial it is incumbent upon both parties and their legal advisers to do their best to list the matter. The vexed matter of counsel’s availability lurks in the background, as often happens, and all I can do in that respect is repeat my views in Bates v Post Office Ltd

[2017] EWHC 2844 (QB)

[7]Thus it is that in January 2018 the trial, which was indeed accomplished in one day, finally took place. I heard evidence relating to the one issue solely, namely whether Dacy and IDM Properties had concluded an oral contract pursuant to which Dacy performed the construction works at the Project. The facts of this case are a little unusual.

[8]It is agreed by the parties that if the answer to that single issue is that there was a contract between Dacy and IDM Properties, then the adjudicator did have jurisdiction and his decision should be enforced. If the answer is that there was no such contract, then the decision of Mr Eyre must and would have been reached without jurisdiction on the part of the adjudicator and that is the end of the matter. Although Mr Eyre considered this issue as part of a challenge to his jurisdiction by IDM Properties, and concluded that there was a contract between Dacy and IDM Properties, I refer to that matter for completeness only. The adjudicator’s findings on this issue do not have any bearing upon the issue before me. No presumptions or anything of that nature arise as a result of Mr Eyre’s findings, which I have put firmly to one side and to which I have had no regard at all.

[9]I heard oral evidence from Mr Keran, Mr Cutmore, Mr Mcloughlin (all of whom were at the meeting to which I have referred); and Mr Appleton (for Dacy, who was not at that meeting) and Mr Taylor (for IDM Properties, who was not present either). Mr Keran, Mr Cutmore and Mr Appleton were called for Dacy, and Mr McLoughlin and Mr Taylor were called for IDM Properties. All five gentlemen were cross-examined, and I deal with their evidence below.

[10]I now turn to a more detailed analysis of the situation that has arisen to this unusual state of affairs. There were many documents before the court dealing with 2015 and going into mid-2016. Much of the cross-examination covered matters throughout this period. I have considered all the documents and all of the evidence, but I only deal specifically in this judgment with that evidence which is required in order to enable me to resolve the only issue in the case.

The Project

[11]The project that these proceedings concern is one to construct a mixed development of residential flats and retail space at 315-317 Camberwell New Road, London SE5 (“the Project”). The main contract was made on 9 September 2014 between a company called O’Loughlin Leisure (Jersey) Limited and another called HOC (UK) Limited (“HOC”). HOC feature centrally in the account of what occurred, and HOC was the main contractor. The form of contract was the standard form JCT Design and Build Contract 2011 edition. Under that contract, Scott Walder of IDM Properties was the Employer’s Agent. There are different companies that use “IDM” in their title, and the relationship between them is not always clear. They are all members of one group. The Defendant is IDM Properties LLP. It is described in IDM Properties’ written submissions as a project management services company, providing services only to IDM group companies or their joint venture partners. There is a company called IDM Investment Holdings Ltd. Another is called IDM Construction London Ltd. IDM Investment Holdings Ltd was said by Mr Mcloughlin to have a subsidiary called Fastmild Ltd (“Fastmild”), and he also said that the Project was a joint venture between Fastmild Ltd and O’Loughlin Leisure (Jersery) Ltd. Andrew Curtis is someone who is a director of Fastmild, but he also has an IDM e mail address and at one point in his evidence Mr Mcloughlin referred to an e mail sent to Mr Curtis as notifying “the client”. Quite who “the client” was (or is) is not directly relevant to the issue of whether Dacy and IDM Properties contracted with one another. Mr Mcloughlin referred to himself as “reporting to the client” in his witness statement, and it was not always clear to whom (in terms of a physical person or persons) he was referring when he used that term. He seemed to use these terms interchangeably, and so far as the main contract is concerned, there is no question of there being a joint venture as a party to that contract. However, for present purposes all that needs to be said is that the main contract was between HOC (as Main Contractor, to construct the works) and O’Loughlin Leisure (Jersey) Limited as the Employer (who would obviously have the contractual obligation to pay for them by making payments to the Main Contractor). HOC, as with the majority of main contractors on most construction projects, sub-contracted a great deal if not all of the work to different sub-contractors.

[12]By November 2015 HOC was in financial difficulties, and was potentially liable to the Employer for a large sum by way of Liquidated and Ascertained Damages (“LADs”) as the Project was in delay. HOC eventually went into liquidation on 13 June 2016. Dacy had worked for HOC on five other projects as a sub-contractor to HOC prior to November 2015 but had not worked on the Project as at the end of November 2015. Dacy is a company that was established and owned by Mr Keran. He is a Romanian national who was 38 years old in February 2017 when he signed his first witness statement, and he had come to the United Kingdom in 2001. He speaks perfect English. At the time, Dacy was turning over a sum of in excess of £5 million, with three full time staff (in addition to him) and employing about 120 sub-contractors (by which Mr Keran meant workers who contracted with Dacy to provide their services to Dacy). Dacy therefore seemed to me to be what is sometimes called a classic Small or Medium Enterprise or SME. Such companies are central to the construction industry, if not the economy, as indeed are developers such as the company or companies involved in building the Project itself.

[13]However, Dacy did not enjoy a happy end to its relations with HOC in 2015. The fifth project upon which Dacy was engaged by HOC ended with Dacy leaving that other project being owed a sum of approximately £170,000. It is well known that companies that find themselves in financial difficulties will almost always have cash flow issues before those difficulties come to their ultimate end (whether the end is administration, other arrangements akin to insolvency or even liquidation itself) and not only is this the same in the construction industry, it is sometimes even more acute. Cash flow is the lifeblood of the industry, and it is for that reason that the concept of interim valuations and payments has evolved over many years. Workers are entitled to, and need, their wages every week for the work they have done; sub-contractors have to pay their personnel, and also pay for materials they use in performing the works; payment disputes are not uncommon. Mr Keran took the view, to use the vernacular, that enough was enough and stopped working for HOC due to the large amount of work which HOC had not paid for on the fifth project.

[14]Mr Cutmore was 59 years old in February 2017 and he has worked in the construction industry all his life. He commenced employment with HOC in August 2015 as a senior Construction Manager. As part of this employment, he had encountered Mr Keran and his company Dacy, and formed a favourable view both of the quality of that operation and their usefulness on projects generally. Mr Cutmore was sent by HOC to the Project in Camberwell in late November, when the Project was in delay and (according to Mr Cutmore) the site was “a mess”. Mr Keran described it in similar terms when he first arrived on 3 December 2015. “It was at a standstill. Logistically it was not even secure on the outside. You could see the fences coming off….” This is explained by the fact that work had come to an end due to HOC’s financial difficulties and the sub-contractors had left the site.

[15]Mr Cutmore could not remember when in November 2015 he first went to the Project but thought it was late November or even very early December. HOC had existing sub-contractors in place (in the sense that HOC had already executed sub-contracts with different firms for work packages) but these had not all worked well, some (if not all) of these sub-contractors had left site due to non-payment by HOC, and the Project was in delay. All the contracts that HOC had entered into had been approved by Mr Appleton, who was responsible for this as the Senior Commercial Manager of HOC and a quantity surveyor of approximately 20 years’ experience. Mr Cutmore was basically put in place by HOC on this Project sometime in late November 2015 as a firefighter to get the Project sorted out and back on track. Dacy occurred to him as a potential contractor for involvement in doing the further works that were required, based upon his knowledge and previous experience of dealing with Dacy on some of the other five projects to which I have referred. He therefore telephoned Mr Keran (probably on 2 December 2015) and asked him whether Dacy could become involved, and he also asked him whether he (Mr Keran) could get his people on the site as soon as possible. He did however know that HOC owed Dacy a large amount of money, and he also knew that Dacy would not contract with HOC for what are, in my judgment, obvious reasons of non-payment on the previous project and sums still outstanding.

[16]Mr Keran agreed with Mr Cutmore that Dacy could potentially become involved on the Project at Camberwell and he arranged for some of his personnel (labour and security, as well as a traffic marshall) to go to the site first thing the next morning, which was 3 December 2015. The background to that meeting, and what occurred at it, I will deal with in more detail below. It was at a meeting at about 10.00am on 3 December 2015 that Mr Keran, Mr Cutmore and Mr Mcloughlin had a short meeting and (on Dacy’s case) it was agreed between Mr Keran and Mr Mcloughlin that Dacy would be contracting with, and paid by, IDM Properties. Mr Keran was adamant that he would not work for HOC, and he wished to meet the actual person (or a representative of the company) for whom he would be working and with whom Dacy would be contracting. I shall turn to the actual meeting on 3 December 2015 later in this judgment. In outline terms, however, Mr Keran wished to contract directly with a company other than HOC, and he wished personally to meet someone from the opposite contracting party so that this could be agreed directly between them. It is also the case that he arranged for the Dacy personnel to attend site at 8.00am, even though the meeting was not to take place by that time and was to be held at an indeterminate time later that morning. As he explained, if he had waited until the meeting had taken place to sort out the personnel, they would not be starting first thing that morning, and he was prepared to have personnel present at the site before the meeting to show willing and as a gesture of goodwill.

[17]This account is broadly supported by Mr Cutmore. Mr Cutmore described himself as just a “thick builder” but that was in the context of his describing why, as the person with primary responsibility for getting the works done, he did not trouble himself to read the main contract terms and conditions, or debate the niceties of this, or that, particular clause. I should say that he did not strike me as someone who could or should be described (as he himself had described himself) as “thick” or unintelligent. He was unassuming and modest about his grasp of contractual niceties; he did obviously understand the prime and most important point about who the contracting parties were. He knew that Dacy would not contract with HOC, and to be fair to him, he did not expect Dacy to do so at the time. So far as he was concerned, Dacy would be contracting directly with IDM (he did not specify which IDM company) and that was why Mr Mcloughlin was there, as he was from IDM. Mr Cutmore asked Mr Mcloughlin to be there for such a meeting.

[18]Mr McLoughlin’s account of this meeting is starkly different. He accepts that he met Mr Keran on 3 December 2015. He was introduced to him by Mr Cutmore. He explained that this was what he described as “a meet and greet” and he essentially described meeting Mr Keran as a coincidence, as he said he just happened to be on the site to meet UK Energy about power supplies, and just happened to cross paths with Mr Cutmore and Mr Keran in an alley adjacent to the site. It is common ground that the meeting actually took place in a bus shelter, opposite the bus station, as this was adjacent to the site. Mr Townend, counsel for IDM Properties, relies upon this location as demonstrating the inherent unlikelihood of the meeting being as Mr Keran describes. He also relies upon the very short duration of the meeting – just a few, or 10, minutes – for the same reason. Mr Mcloughlin accepts a discussion took place with Mr Keran at that location and for that duration, but says that this was about future work on another project, the Hoover building. He is clear in his evidence that any contract agreed for Dacy to perform works on the Project was between Dacy and HOC and not with him for IDM Properties. He is also clear that he never agreed anything directly with Dacy at all.

[19]There is no dispute, however, that thereafter Dacy supplied labour, plant and materials to the Project. The payment regime that was adopted was that applications were submitted to HOC for approval and, if HOC were happy (in terms of work done, hours worked and materials) these payments would then be “certified” by Mr Taylor, who is a Quantity Surveyor and who was appointed in either late November/early December 2015. Mr Taylor would pass the paperwork to IDM (and/or as he put it, the client) to process and pay after approval by HOC in terms of amounts. The reason that I have put the term “certified” in apostrophes is that no specific certification process was discussed and agreed, even on Dacy’s case, by Mr Keran and Mr Mcloughlin. What was agreed (on Dacy’s case) was that HOC would approve the amounts (strictly speaking they should be termed applications for payment by Dacy) with approval for payment then being given by Mr Taylor after HOC had verified the expenditure of materials and labour. IDM (and which IDM company it was in each instance is not clear, nor is it in my judgment relevant) then paid Dacy direct. 5% retention was deducted as these monthly valuations were processed.

[20]I should also record that the cost of the works that was to be, and was, paid to Dacy was to be charged against what was said in the oral evidence to be “HOC’s account”, or in other words, the value of HOC’s works under the main contract. Mr Keran said that he asked Mr Taylor for a written contract but was told that Mr Taylor’s monthly certification documents would be sufficient. Dacy’s invoices nos. 1 to 3 were paid in full (save for retention). Dacy’s invoices nos. 4 to 6 were not paid in full. On 4 May 2016 Dacy left site and subsequently commenced this adjudication for the balance of the value of the works that had been performed.

The adjudication

[21]Dacy first attempted to adjudicate in June 2016 and obtained the appointment of Mr Philip Eyre as adjudicator. However, they did not serve their Referral in time and had to serve a fresh Notice of Intention to Refer. By e-mail, Dacy’s solicitors asked whether Mr Barron, a claims consultant acting for IDM Properties, would agree to Mr Eyre’s nomination. Mr Barron confirmed his agreement. Dacy then sought Mr Eyre’s nomination by the RICS. Dacy’s Notice of Intention to Refer was dated 5 July 2016 and Mr Eyre was nominated on 8 July 2016.

[22]The Notice of Intention to Refer alleged an oral agreement reached at a meeting on 3 December 2015 (at a bus station adjacent to the site) attended by Mr Keran, Mr McLoughlin of IDM Properties and Mr Cutmore of HOC. The agreement was that Dacy would carry out works as directed by Mr Cutmore and IDM (referring to IDM Properties). IDM would pay for these works which would be verified in terms of the hours expended and plant, material and equipment supplied.

[23]It is not necessary to recite comprehensively all that occurred in the adjudication itself. However, Mr Barron responded to Mr Eyre (who notified the parties of his appointment) on 12 July 2016 and stated that there was no contract between Dacy and IDM Properties and asking the adjudicator to resign. He expanded on that position the following day and again on 17 July 2016, repeating his request that the adjudicator resign.

[24]On 18 July 2016, Mr Eyre responded. The key point of his response was that whether there was an oral contract turned on the evidence about what was said on 3 December 2015 and, at that point, he had undisputed evidence from Mr Keran that there was such a contract. He, therefore, declined to resign but indicated that he would reconsider his preliminary view in the light of any statement from Mr McLoughlin.

[25]A statement from Mr McLoughlin was then served on 19 July 2016 and led to further exchanges about jurisdiction (which I do not need to recite). IDM Properties’ Response was served on 21 July 2016. The first paragraph of the Response stated that it was served on a without prejudice basis and that IDM Properties maintained that “there is no contract between the Referring Party … and themselves. In consequence there can be no dispute and thus the Adjudicator will have no jurisdiction.” Jefford J found that IDM Properties had sufficiently reserved its position so far as jurisdiction was concerned, as she decided that the reference to the Response being “without prejudice” meant that it was served without prejudice to IDM Properties’ position that the adjudicator lacked jurisdiction. Thereafter the adjudication proceeded. Mr Eyre made his decision on 9 August 2016. He decided that there was an oral contract between the parties and that he therefore had jurisdiction. He decided that IDM Properties was liable to pay and should make the payments claimed by Dacy.

[26]In support of his conclusion that there was an oral contract, he relied on the following matters:(i) that Dacy had not been on site prior to 3 December 2015;

(ii) that all attendees at the meeting on 3 December knew that a new sub-contractor would not agree to provide labour in reliance on HOC’s ability to pay;

(iii) that there was no evidence of a contract between HOC and Dacy and that Mr Cutmore, as site foreman, did not have authority to enter into such a contract;

(iv) that there would have been no reason for the meeting on 3 December 2015 had Dacy been contracting with HOC; and

(v) Mr Taylor’s “due diligence” on Dacy (to which I will return below) would have been unnecessary if they were being engaged directly by HOC.

Preliminary Matters

[27]I have already given some outline of the evidence in the section of this judgment entitled “The Project” above. There are two preliminary matters that must be addressed before I turn to the evidence itself. It should be noted that all of the witnesses, with the exception of Mr Appleton, gave evidence in the adjudication as well as providing other witness statements specifically in these proceedings. Mr Appleton falls into a separate category and I shall now identify the contested position regarding his appearance as a witness, which had to be resolved first at the trial itself. Jefford J summarised the evidence before her at [5] to [10] of her judgment, and also [44] to [65]. However, the parties were not limited to that evidence and further evidence was served for the trial before me. I also heard cross-examination of all five witnesses.

[28]The date for exchange of witness statements was ordered by Jefford J to be served by 27 January 2017. This date was then extended by consent to 24 February 2017. The witness statement of Mr Appleton was served on 14 November 2017, rather obviously somewhat later than this deadline (which was observed for all the other witnesses). The statement had been taken in September 2017 and was dated 18 September 2017. Without going into the full detail of the tendentious correspondence and disagreement of the parties about this matter, although objection was taken to Mr Appleton’s statement by IDM’s solicitors when it was served, the main thrust of this objection was initially relevance rather than lateness. Dacy’s solicitors seemed to take the view that it would simply be admitted without demur. Eventually, it became obvious to Dacy’s solicitors (though very close to the trial date) that those acting for IDM were not going to consent to the statement being adduced, and that a formal application would be required. This application was dated 5 January 2018, and supported by the third witness statement also dated 5 January 2018 of Mr Tasselli, Dacy’s solicitor. Opposition to this also took the form of a witness statement, namely a further one of Mr Starr, IDM Properties’ solicitor dated 11 January 2018. It was accepted by Mr Rifat, counsel for Dacy, that permission was required from the court under CPR Part 32.10 and relief from sanction was required under CPR Part 3.9. I therefore considered the approach identified under the principles in Denton and others v TH White Ltd

[2014] EWCA Civ 906

[29]In doing so, two factors have to be borne in mind. The first is that HOC had gone into liquidation; Mr Appleton had worked for HOC, and it is not always easy to track down former employees of an insolvent company. Secondly, Mr Appleton’s statement, though somewhat late (which might be thought to be putting it mildly) had been served upon IDM two months before the actual trial. Had objection on the basis of lateness been raised as a substantial and serious objection at that time, there is in my judgment no doubt that an application would have been issued promptly and resolved well before the first day of trial. However, those acting for IDM only really elevated this point into a serious objection as the trial loomed very close.

[30]The explanation for the lateness involved as a central point the litigation to which I have already referred in passing, namely AAAEI Construction Ltd v IDM Construction London Ltd

[2017] EWHC 1382 (TCC)

. This litigation was resolved in a judgment by His Honour Judge Klein sitting as a Judge of the High Court in the Technology and Construction Court in the District Registry in Leeds. In those proceedings, which were tried in May 2017, the claimant (“AAAEI”) claimed sums against another IDM company for works done on the same Project. AAAEI was engaged in September 2015 by HOC to perform decorating works on a daywork basis on the same Project. By late November 2015, HOC was in the difficulties financially to which I have already referred and AAAEI were owed approximately £20,000. A meeting was held at which Mr Appleton was present, along with Mr McLoughlin and other subcontractors. After that meeting, invoices were produced by AAAEI addressed to IDM Construction London Ltd. These invoices were paid, as the judge put it at [4] “by a member of the IDM Group”. However, by July 2016 the last invoice in the sum of approximately £140,000 was not paid to AAAEI, who brought an adjudication in which it was successful. It sought to enforce the decision, and upon enforcement HHJ Raeside QC ordered a trial of a preliminary issue. The issue was effectively whether there was a contract. That trial was conducted by HHJ Klein. In his judgment he found at [59] that the IDM Group, at the meeting to which I have referred with the sub-contractors, “did not promise the Claimant [AAAEI] that a member of the IDM group would have a direct liability to the Claimant to pay, thereafter, for work at the Property as part of the development and I have also concluded that, at the Meeting, no such representative endorsed such a promise.”

[31]It is said on behalf of Dacy on its application to rely upon Mr Appleton’s evidence before me that it was only when that judgment was read by those acting for Dacy that it was realised that Mr Appleton had provided a witness statement in support of AAAEI’s claim in that other litigation, and hence might be available and prepared to do so in these proceedings. Enquiries then took place, Mr Tasselli met Mr Appleton, and he provided his witness statement on 21 September 2017. A copy of this statement was then provided to IDM Properties’ solicitors on 14 November 2017 and their agreement sought that it be submitted in evidence. This was before the trial before me had even been listed. Mr Rifat, counsel for Dacy submitted that paragraphs 1 to 25 of Mr Appleton’s statement “repeat almost verbatim” the evidence Mr Appleton gave in the AAAEI proceedings.

[32]The fact that evidence does not come as a surprise to an opposing party in contested litigation is a relevant factor, in my judgment, but does not entirely dispose of an application such as this in Dacy’s favour, and does not justify departing from the approach set down in Denton v White for relief from sanctions. Dates for exchange of evidence are there for a reason, and the modern approach of the courts is not simply to consider prejudice to the other party were the evidence to be admitted. A failure to observe the date set for witness evidence to be served means an explanation for that failure is required. However, it did put into some context the submission that was made by Mr Townend, namely to the effect that IDM Properties had not had the chance to consider the statement of Mr Appleton fully. That submission was not well founded in these circumstances.

[33]The three-fold test or three stages in Denton v White require the following to be addressed where relief from sanctions is sought. Firstly, the seriousness or significance of the breach; secondly, the explanation for why the default occurred; and finally consideration of the circumstances of the case. The conclusion at the first stage is that the breach was serious in terms of the margin by which the deadline was missed. It should be noted that although in his written skeleton argument Mr Townend submitted that the hearing would be imperilled were the statement to be admitted, orally he sensibly accepted that he would not be seeking an adjournment and could deal with its contents. The explanation by Dacy is, at least partially and up to the obtaining of the statement in late September, understandable and in Dacy’s favour. Mr Appleton was not under the control or employment of Dacy, and was a former employee of an insolvent company. The explanation for the period between obtaining it and serving it in November is less understandable, but has to be seen within the context of very little being done by either party to obtain a date for the trial and the general progress and approach that pertained throughout the whole of 2017. The third stage, consideration of all the circumstances, led me to conclude that the evidence should be admitted. Although IDM Properties had been very careful to try, in so far as it could in advance of the trial, to avoid pinning its colours to the mast concerning its case with which entity Dacy had contracted, its case in reality was that Dacy had contracted with HOC. Mr Appleton was the Senior Commercial Manager for HOC and his role involved the formation of, and documentation of, contractual relations between HOC and its sub-contractors on the Project. Although he was not at the meeting of 3 December 2015, his evidence on HOC’s sub-contracts was relevant (and hence, dependent upon the application, admissible), and could be dealt with shortly, and in my judgment ought to be admitted in the interests of justice. Indeed, communications with him (or in which he was copied) were relied upon by IDM Properties. For that reason I allowed the witness statement to be relied upon and I allowed Mr Appleton to be called by Dacy, notwithstanding the lapse of time after the date originally ordered for evidence to be served.

[34]The second preliminary matter relates to disclosure. Mr Keran was called first for Dacy and Mr Townend cross-examined him, including putting a substantial number of questions about allegedly inadequate disclosure given by Dacy, both generally and also specifically about its other contracts with HOC. This led to consideration of whether such specific disclosure had ever been pursued by IDM Properties prior to the trial itself. At the end of closing submissions, Mr Townend produced a copy of a letter dated 14 February 2017 wherein the solicitors acting for IDM Properties, Stepien Lake, had sent their counterparts WH Matthews & Co, a copy of an application dated 10 February 2017 seeking specific disclosure and stating “we have issued the enclosed application for specific disclosure”. In that application, five categories of documents were sought, each drafted in very wide terms.

[35]This application was never returned to Stepien Lake by the court; it was consequently never issued; no hearing was ever set down. It appeared a mystery as to what had become of the application. It was therefore necessary for me to investigate what occurred, and in doing so further witness evidence was provided to the court after the trial by the solicitors. Mr Starr for Stepien Lake accepted that the letter of 14 February 2017 should have stated that the intention was to issue the application, as at that date it had not been issued, and also accepted that the payment (by way of cheque) of the fee that accompanied the prepared application was never cashed (and in fact the cheque was stopped by Stepien Lake on 9 August 2017). It must therefore have been clear to Stepien Lake by August 2017 at the very latest, if not months before then (given no issued application was ever returned to Stepien Lake by the court) that the application had never reached the court, which turned out to be the case.

[36]Regardless of this, and apart from that letter in February 2017, disclosure was simply not pursued in the 11 month period following the preparation of the application of 10 February 2017 and the trial of 16 January 2018. That period of time, and the perceived importance (or otherwise) of specific disclosure of the other HOC contract documentation, puts Mr Townend’s challenging of Dacy’s disclosure in a different light than how it was put to Mr Keran in cross examination. In any event, Mr Keran freely accepted that he knew the importance of keeping accurate contract documentation and that all the contracts with HOC had been written ones on the five previous projects where he had contracted with HOC. It has, however, always been Dacy’s case that the agreement for the Project was an oral contract agreed with Mr McLoughlin on 3 December 2015 made at the bus shelter in Camberwell in the presence of Mr Cutmore. IDM Properties’ case is that it was not. It is to that occasion that the most relevant evidence relates. I shall now turn to the different evidence of the parties on that central issue.

The Evidence

[37]I have provided the outline framework of some of the evidence earlier in this judgment. Watching a witness answer questions, and considering not only what they actually say, but how they say it, and also considering that evidence against contemporaneous documents, can give a tribunal a very good idea of what actually transpired on any particular occasion. Oral statements are not however the whole story.

[38]Further, reliance on recollection alone should not be the sole tool for assessing credibility of witnesses. In Gestim SGPS SA v Credit Suisse UK Ltd

[2013] EWHC 3560

Leggatt J (as he then was) set out at [15] to [23] the limitations on recollection of events, particularly those which occurred several years earlier, and what was described as the “faulty model of memory as a mental record”. His conclusion was at [22] and stated “…..the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

[39]The degree of confidence with which any particular witness has in his or her own recollection can, indeed, sometimes be in inverse proportion to the accuracy of that recollection. Confidence in delivery does not equate to veracity. It all depends, as so much does, on the particular circumstances of the witness, the lapse of time, the case and the nature of the issues. Oral evidence in criminal trials, for example, depends very substantially – if not in many cases almost exclusively – on recollection, or at the very least the view of the jury of the quality of particular evidence (and the credibility of witnesses). In many commercial cases there will be a staggering amount of contemporaneous correspondence, to which now in the days of electronic communication is added thousands upon thousands of emails. This may add to the quality of the evidence, or it may not.

[40]In a case such as this, with the central issue being what was agreed orally at a particular meeting, there are inferences (which is to say common sense conclusions) that can be drawn from certain other matters, not only documents, but also circumstances. However, the oral evidence of what each particular witness said occurred should not be wholly suborned or seen as being of no assistance, and I do not read the dicta in the case referred to as saying that it should. What Leggatt J was saying was that memory, with all its faults, including the risks of subconscious reconstruction, together with the degree of confidence with which those memories are recounted orally, should not be seen as the paramount source of authenticity.

[41]These comments have been endorsed since that case, and in Blue v Ashley

[2017] EWHC 1928

Leggatt J again made further comments on this subject. In that case he had to deal with another case in which the subject arose, and which had also attracted much public attention, not least due to its colourful subject matter. He made further observations on the same subject. In that case, the issue was whether as a result of a conversation in the Horse & Groom public house in London W1, a contract was made between Mr Blue, an investment banker, and Mr Ashley, a well-known businessman and founder of a company called Sports Direct International Plc, under which Mr Ashley owed Mr Blue £14 million. This sum was based on an increase in the Sports Direct share price. The occasion when this agreement was said to have been made was described in the judgment at [10] as “an evening of drinking” during which at least one witness, and Mr Ashley himself, drank “at least 8 to 10 pints of beer” and Mr Blue accepted that he drank at least two or three pints of lager. At the time, the share price was £4.00. The target figure for the share price under the incentive payment, which was said by Mr Blue to have been agreed with Mr Ashley, was said to be either £7.20 or £8.00.

[42]In dismissing the claim brought by Mr Blue, and quite apart from any illumination of the wisdom (or otherwise) of discussing (still less agreeing) incentive payments of such an extraordinary size at an evening of drinking in the Horse & Groom (or any similar establishment), the judge expressed the following conclusion at the end of Part IV of the judgment in the section “Evidence based on memory” which is at [65] to [70]:

“[69] In addition to the points that I noted in the Gestmin case, two other findings of psychological research seem to me of assistance in the present case. First, numerous experiments have shown that, when new information is encoded which is related to the self, subsequent memory for that information is improved compared with the encoding of other information. Second, there is a powerful tendency for people to remember past events concerning themselves in a self-enhancing light.”

[43]In that case, the two stages that fell to be considered were, firstly, what was actually said in the public house, and secondly, was a binding contract made? Although in that case the second stage involved a very different set of circumstances to the one before me, those two stages are a useful way of approaching the central issue in this case. With those introductory points very much in mind, I turn to the individual witnesses and my view of their reliability.

[44]Mr Keran is successful and relatively young to have built up a successful business. He was very clear in his evidence and unshakeable in the central elements of what he said he agreed with Mr McLoughlin, and why he agreed it. His evidence at the adjudication, and at the trial, was very similar to what he put in a text message to Mr McLoughlin some months later than the meeting, sent in May 2016 when he was chasing payment. This text was sent on 4 May 2016 and stated inter alia:

“…..I remember you asking for help and support saying/promising that the money won’t be a problem, they will be paid on time….now when we are approaching the end and everything is near enough done we have started to play games, games that are affecting companies corporation, people’s lives. You are concerned and upset about a letter???....Guess what…I’m upset that I can’t pay my men, my duties as a company…brought on site materials that YOU again stated that they will be paid for, now you are trying to get me to wright an email to say that is no contract….Just trying to reiterate the fact that we have worked in good faith, we have worked day and night, weekends, Christmas period just to get the job done and this is the reward, played like a ping pong ball between IDM and HOC. Last but not least I met you mid December at Camberwell New Road together with Brian, and prior to any work, I have asked the question as in Who was I going to work for and who is going to pay me and YOU looked me in the eye and said that I AM WORKING FOR YOU AS IDM AND YOU AS IDM WILL PAY ME AND BRIAN FROM HOC WILL MANAGE THE SITE FOR YOU. IDM did pay me in full for 3 applications….”

(emphasis present in the original, and text uncorrected)

[45]The response to this text was as follows:

“Keran, My understanding is that there is a final account to be discussed with you which HOC need to be involved in. IDM were only ever funding HOC. That as far as it went. HOC employ you and do need to deal with your account. We are not playing games. We have been trying to get HOC to get themselves sorted to bring this forward for weeks and they are just not doing anything.”

[46]Mr Keran in his oral evidence placed great store in what he said Mr McLoughlin had told him at the initial meeting on 3 December 2015. He said that Mr McLoughlin had looked him in the eye, shaken his hand, and handed over his business card and told him that he, Dacy, would be working for IDM. Mr Keran then, during cross-examination, took the original card from his wallet as he had kept it. The card had been disclosed in the proceedings and copies of it were in the bundle. Production of the original in the witness box appeared to come as a surprise to Mr Townend and those instructing him, and I made the original exhibit 1. On that card Mr Neil McLoughlin is described as “Contracts Manager” and the company name and address given is that of IDM Properties LLP. His e mail address is nm@idmproperties.com.

[47]However, upon disclosure IDM Properties had disclosed another card of Mr Niall McLoughlin as well. This had the very same address, the same phone number, the same website (namely www.idmproperties.com) and the same email address for Mr McLoughlin – nm@idmproperties.com – yet the company name, rather than IDM Properties LLP, is given as IDM Construction London Ltd. Mr McLoughlin had two almost identical cards, and two precisely identical sets of information (address, e mail address, phone number) and the same job title but for two different companies (albeit with two very similar names).

[48]Mr Keran attached great importance to the fact that he was given this card by Mr McLoughlin on this occasion. He also set great store by the fact that he said he had expressly told both Mr Cutmore and Mr McLoughlin that he would not work for HOC. He was adamant that he was owed a great deal of money already by HOC and would not work for HOC (which would simply have increased the amount HOC owed Dacy were he to do so). I do not find that the powerful effect of this evidence was diluted by the production by Mr Townend during his cross-examination of an invoice for a few hundred pounds for a cleaner, and cleaning materials, supplied to HOC by Dacy. I find Mr Keran’s evidence on this to have been remarkably consistent throughout the whole proceedings, including the adjudication. I find Mr Keran to be an accurate and truthful witness.

[49]Mr Cutmore in his written evidence confirmed “that I agree and support what [Mr Keran] says to the extent those matters are within my knowledge”. His occupation was described as Senior Construction Manager and his responsibility on this Project was to manage the works on site. I have already referred to my finding of his self-description as “just a thick builder”. His evidence was that he never had any authority to engage sub-contractors and that this was always done by more senior managers within HOC. He described the financial difficulties that HOC were experiencing in late 2015 as fairly common knowledge at the time, and I accept that. News, or rumours, of the impending financial demise of a contractor in the industry generally spread; in this case progress had stalled at Camberwell as sub-contractors had not been paid and had walked off site in November 2015. Such matters are rarely kept secret, and there is no reason that they should be. It was in that context that he contacted Mr Keran, arranged the meeting with Mr McLoughlin that took place on 3 December 2015, and then managed the works that were instructed to Dacy on site. There was no scope of works due to the circumstances; these works were instructed on a day works basis. Some of the work packages had been left partially completed by the sub-contractors to HOC who had left the site due to non-payment.

[50]His written evidence states as follows in paragraph 15 and following:

“15. I met Mr Keran on site at around 10 am when I was with Mr McLoughlin outside the entrance to the site and Mr McLoughlin suggested the three of us met at the nearby bus station. No one else was present at the meeting. I agree with Mr Keran’s accounts of that meeting including the fact Mr McLoughlin gave his business card to Mr Keran and no mention was made of any other IDM entity. 16. This meeting was not as Mr McLoughlin subsequently claimed just a meet and greet. Mr McLoughlin had an urgent need for labour to progress the works with immediate effect and was specifically aware [Dacy’s] labour was already on site.”

Mr Cutmore strongly refuted the suggestion that someone else had written paragraph 15 of his witness statement for him.

[51]He also stated, in a further passage, the following:

“33. I firmly believe IDM are trying to take unfair advantage of [Dacy] here and not honour the oral agreement made by Mr McLoughlin with Mr Keran in my presence on 3 December 2015.”

I find Mr Cutmore to be an accurate and truthful witness. Also, he is not an employee or director of either Dacy or IDM Properties. He facilitated and was responsible for organising the meeting on 3 December 2015, but had only met Mr Keran in August 2015. He is not a personal friend of Mr Keran (although that was suggested in the adjudication, it was not pursued seriously in cross-examination before me). Mr Cutmore struck me as someone who felt a moral obligation, given that he was there at the meeting of 3 December 2015, to see the right thing done. He has no personal interest in the outcome of this litigation.

[52]Mr Appleton was the Senior Commercial Manager of IDM Properties and I have outlined his involvement above in relation to the ruling I gave at the beginning of the trial on whether his witness statement should have been admitted. He, like Mr Cutmore, did not have any personal interest in Dacy or Mr Keran and in fact he was not even contacted by those acting for Dacy until after the judgment in the AAAEI case in Leeds, at which he was called as a witness.

[53]He explained that he, as the person at HOC responsible for agreeing contracts with sub-contractors, was responsible up to the end of November 2015 for such matters, and after that date HOC no longer engaged any new sub-contractors. He said it was agreed with Mr McLoughlin at a meeting in the evening towards the end of November (attended by another IDM employee or director referred to as Chris, who is likely to be Chris Beacham) that any new contracts going forward would be with IDM. He said this meeting was at their offices. His evidence was that HOC had not agreed a contract with Dacy.

[54]Not only did Mr Appleton’s evidence have the ring of truth, but when viewed objectively against the surrounding circumstances it also makes complete business and common sense. The reason that the parties found themselves in the position, in very early December 2015, with a site that had been virtually abandoned by its existing sub-contractors with no works being performed and hence no progress being made, was that HOC was in financial straits and had stopped paying its own sub-contractors. That any company, newly introduced to this particular Project, would simply turn up and be content to be engaged by HOC, is a fanciful notion. However, for Dacy to do so, when it was already owed £170,000 by HOC on another project, and was aware of HOC’s particular payment record to itself (as well as what could be seen actually at the site when the Dacy personnel arrived on 3 December 2015) would be verging on the commercially suicidal. Also, HOC would have no need of engaging further sub-contractors itself in December 2015. The parties realised at that time – and this includes Mr Mcloughlin – that a new way of working would have to be sorted out for any progress to be made on the Project. HOC could not pay its sub-contractors. The traditional model of main contract, and observance of the usual payment framework in a standard form contract, had essentially broken down and work packages were only partly completed. New sub-contractors could not be given a fully worked out work scope in advance of agreeing a fixed price, for example, because nobody knew what the work scope was, because the work packages were only partially completed.

[55]I find Mr Appleton to be an accurate and truthful witness.

[56]The first witness for IDM Properties was Mr Taylor. Mr Taylor lives in Ireland and was brought on to the Project in November 2015, and attended site on the basis of two days a week from early December. He explained to me that he would usually fly over from Dublin (he lives in the Republic of Ireland) and stay for two consecutive days. He is a qualified Quantity Surveyor. He was appointed by the Employer’s Agent and explained that he was to assist by assessing and certifying payments. The mechanism was as follows, at least so far as it concerned Dacy. An application would be submitted by Dacy and approved by HOC in terms of expenditure of labour and materials. He would consider it and pass it on to be paid by IDM, and the amount of that payment would be deducted from HOC’s account. He considered that this worked satisfactorily for the first three payment applications, but did not do so for the fourth and fifth. He gave evidence, both written and oral, that he was appointed to deal with such payment applications in a fair and reasonable manner. That is undoubtedly the principle that applies to the function of a third-party certifier under a construction contract, and there is much authority to this effect which it is not necessary to recite.

[57]His evidence referred to yet another IDM company, this one called IDM Investment Holdings Ltd, although he said that he only learned later that “IDM” as he referred to it was in fact IDM Investment Holdings Ltd. He was initially asked to invoice IDM Properties, and then was asked to address these to O’Loughlin Leisure (Jersey) Ltd. He said that initially Mr Appleton denied all knowledge of Dacy. Given Dacy had been engaged at a meeting of 3 December 2015 without the involvement of Mr Appleton, this is not surprising. It is also consistent with Dacy having contracted with IDM Properties, and not having contracted with HOC. Mr Taylor said that at all times he understood that the contract was between Dacy and HOC. The source of that belief is not entirely clear, other than what he must have been told. He said Dacy’s 5th payment application was addressed to IDM Properties marked for his (ie Mr Taylor’s) attention and “I recall thinking that this seemed unusual, as all previous applications had been made directly to Brian Cutmore at HOC. As I recall, I did not consider this to be of concern, as there had been no cc on any of the invoices and I just assumed that this one had also been sent to HOC.”

[58]He gave extensive written evidence about the payment mechanics, and the giving of instructions. Essentially, the works had to be approved in terms of labour and materials by HOC, and instructions were given by HOC. However, his understanding of the contractual relations was based upon what he had been told by Mr McLoughlin. He said the due diligence (to use Mr Eyre’s phrase) process was “to establish the authenticity of the sub-contractor”.

[59]I find Mr Taylor’s evidence to be of limited assistance on the central issue in this case; insofar as it is of assistance, it supports Dacy’s case. He was not at the meeting of 3 December 2015, and his only knowledge of it came from what he was told about the contractual arrangement afterwards which came from Mr McLoughlin. His main involvement was in terms of valuing and/or certifying the works. This role would not have been appreciably different regardless of whether Dacy had contracted with IDM Properties or with HOC, save for one crucial difference. Had Dacy been a conventional sub-contractor of HOC, neither Dacy’s rates nor sub-contract value in terms of interim valuations would have needed to be approved or certified by a QS acting for IDM Properties at all. The application/approval/valuation regime established in December 2015 in which Mr Taylor was involved is more consistent, in my judgment on the particular circumstances of this case, with Dacy’s case on the contract at the trial than with IDM Properties’ case, but it is not determinative. It would not have been necessary either for Mr Taylor to have satisfied himself as to Dacy’s HMRC certification and so on had Dacy contracted with HOC. None of that “due diligence” would have been necessary.

[60]The final witness at the trial, and the second witness called for IDM Properties, was Mr McLoughlin. He gave three witness statements in these proceedings and two statements in the adjudication.

[61]He said the meeting with Mr Keran on 3 December 2015 was a “chance encounter” and a “casual ‘meet and greet’” and occurred as he was crossing the road having come back from obtaining a cup of coffee. He said the meeting was not specifically arranged and there was no question of Dacy being engaged by IDM Properties for the Project. The only discussion he had was about potentially engaging Dacy on other jobs, and the Hoover Building was specifically mentioned as a future opportunity for Dacy. He said that Mr Cutmore told him that he “had introduced [Dacy] to HOC and that HOC had brought them to site as a sub-contractor to provide labour.”

[62]He explained that the letters that he had sent out of 1 December 2015 and 4 December 2015 (the contents of which I refer to below) related to direct contracting by an IDM company with sub-contractors on this Project but that these arrangements were never implemented. He was adamant that HOC was the party that had contracted with Dacy. He said in his written evidence that he did not remember giving Mr Keran his business card but gives out his cards on a regular basis and it would not have been surprising had he done so. His oral evidence was similarly confident; he was absolutely clear that there was no question of his having contracted with Dacy on IDM Properties’ behalf and at the end of his time in the witness box suggested that Mr Keran may have misunderstood their conversation.

[63]I accept the account of Mr Keran and Mr Cutmore about the meeting. I reject the account given by Mr McLoughlin. I do so for the following reasons.

[64]I found Mr Keran and Mr Cutmore to be far more convincing and accurate witnesses than Mr McLoughlin. I make this finding taking account of all the notes of caution identified by Leggatt J in the two cases to which I have referred.

[65]Mr McLoughlin is, in my judgment, very capable of glossing over contractual precision when it suits him. For example, he described Mr Taylor as having been brought to the site “under a joint service arrangement between O’Loughlin and HOC to ensure fair play”. This ignores Mr Taylor’s evidence that he was originally asked to invoice IDM Properties. He also described the Project as a “joint venture between Fastmild Ltd, a subsidiary of IDM Investment Holdings Ltd, and O’Loughlin Leisure (Jersey) Ltd, an unrelated company”. The nature of this supposed joint venture is not clear. He said that O’Loughlin was selling a snooker hall on the site and it had been for sale for a long time. However, O’Loughlin was also the Employer under the main contract with HOC. If O’Loughlin had owned the snooker hall, and was also the Employer and hence the contractual party with the obligation of paying for the works, it is unclear how such a venture could be a joint venture with any one of the IDM companies. I find that he is acutely conscious of the importance of which companies actually contract with other companies. He must have been acutely conscious of this on 3 December 2015. The Project was in disarray and HOC were in financial trouble. A new sub-contractor springing up on the site would have been extremely unlikely to be contracting in those circumstances with HOC. He must have known this. He tried to give the impression in the witness box that this was not the case, but he must have attended site that morning at least partly to meet the person in charge of Dacy. I reject the suggestion that this meeting was a chance encounter.

[66]Mr McLoughlin is a very astute businessman, and well aware that a finding that IDM Properties was the contracting party will lead to a financial liability for Dacy’s works performed on the Project that it will otherwise avoid. I find that this has coloured his evidence. I do not find his evidence to be accurate or correct. In the context of the state of the Project as at 3 December 2015, the stalling of the works, and the fact that HOC was in a dire financial situation and had stopped paying their sub-contractors, the suggestion that the meeting with Dacy (who had only just arrived on site that very day) was entirely coincidental is difficult to take seriously and I reject it. HOC was not in a position to engage new sub-contractors at that point, and even if they were (and even if Mr Cutmore were prepared to be the person to do so) those new sub-contractors would not have contemplated contracting with HOC. Even on Mr McLoughlin’s own evidence, he had come to site that day to deal with progress on the works, namely the supply of a transformer by UK Power Networks, its “co-ordination on site, not least with HOC, and to check they were on track”. He was principally involved, in my judgment, at that stage in the Project, with progress of works on site. This had come to an end, to all intents and purposes. Dacy was there to resolve that.

[67]I also find that the number of companies with very similar names, all with IDM in their title, with the consequence that Mr McLoughlin can almost seamlessly and interchangeably attribute acts or relations to whichever IDM company suits him at any particular time, to be an unsatisfactory feature of his business arrangements. I have already dealt with the very close similarities of his two business cards. Whatever the purpose of having this number of highly similarly named companies, all with “IDM” in the title, and sharing the same website address, does not much matter. Many groups of companies do the same. I find that Mr McLoughlin at the meeting of 3 December 2015 was acting for IDM Properties, contracted on its behalf and ultimate benefit, and it was for this reason that he handed Mr Keran his card with that company identified upon it. I also find that he did this consciously and knowingly, to demonstrate to Mr Keran that the company shown on the card was the company with whom Dacy was contracting. In terms of the two questions posed in [43] above, akin to the approach of Leggatt J in another case, the answers are that Mr McLoughlin told Mr Keran that Dacy would be contracting with IDM Properties, who would pay Dacy, and that a binding contract was made. There is no sensible prospect that Dacy contracted with HOC, either on 3 December 2015, or on any other occasion.

[68]Insolvency, or events akin to insolvency that occur to companies in the construction sector, can be seen as making those companies pariahs. There can be few sights as dispiriting, for a sub-contractor or potential sub-contractor, as the site of a construction project where the main contractor has stopped paying its sub-contractors such that those sub-contractors have suspended work and/or left the site (whether left in disarray or not). Such was the situation in early December 2015 given HOC’s financial situation. The physical description of the site by both Mr Keran and Mr Cutmore is consistent with such a scenario. Very few, if any, construction companies would be prepared to be engaged by HOC in those circumstances, and Mr Keran was adamant at the time that he would not do so. He had a specific and recent experience of being owed a sizeable sum by that very company. I find as a fact that he made clear to Mr Mcloughlin as well as Mr Cutmore at the time that he would not contract with HOC. All three people at the meeting knew this.

[69]This has also to be considered against the contemporaneous documents at that time. IDM Properties had already, by the date of the meeting of 3 December 2015, started corresponding with HOC about a way forward which would have involved IDM Properties engaging sub-contractors directly. A letter was drafted and sent to Mr McDonald of HOC on 1 December 2015. Although that letter was sent under cover of an email from Mr McLoughlin of that date, and using his email address of nm@idmproperties.com, he signed it as acting “on behalf of O’Loughlin Leisure (Jersey) Limited”. Its contents were not shown to either Mr Cutmore or Mr Keran, but within it at item 10 page 2 it specifically referred to a proposal whereby new contractors, suppliers and consultants (as opposed to existing ones) would be employed directly by IDM Construction London Ltd. A further draft developed, that draft following comments from Mr McDonald received on 4 December 2015. The revised draft was also dated 1 December 2015 but was sent out on 4 December 2015. It was precisely during this period that Mr McLoughlin met Mr Keran. That second draft had similar sentiments to the previous item 10, but now it was item 12 and stated “For the remainder of the works IDM Construction London Ltd will employ new subcontractors, suppliers and consultants”.

[70]Mr McLoughlin in his evidence did not really have any satisfactory answer to these points, drafted by him at the time, concerning direct engagement by an IDM company of new sub-contractors for the Project, which Dacy undoubtedly was. All he could do was state that these arrangements were not implemented. In my judgment, the contents of these letters undermine his assertion that Dacy had contracted with HOC. I do not consider that the fact these letters did not result in a formal amendment to the main contract between HOC and O’Loughlin Leisure (Jersey) Limited to be relevant. Whether the arrangement resulted in such a formal amendment between those companies under the main contract, or not, does not dilute the principle that was under consideration at the very time he met Mr Keran, namely direct contracting between an IDM company and new sub-contractors in order to finish the works. Nor do I consider it relevant that the draft letters referred to IDM Construction London Ltd as the then-intended direct contracting party, and not the company IDM Properties LLP that was identified on the business card given to Mr Keran by Mr McLoughlin. The principle of direct contracting between an IDM company and new sub-contractors was plainly discussed within the IDM group, and at that stage in the early days of December such direct contracting (that is, without involving HOC) was specifically intended. Mr Taylor could not remember if Mr McLoughlin had ever discussed this with him or not, but regardless of that the draft letters plainly record that it must have been discussed within the IDM personnel as several of them are recipients of the emails sending out the two different drafts. Such direct contracting is consistent with the case of Dacy and the evidence of Mr Keran and Mr Cutmore, and inconsistent with the defence to that case by IDM Properties and the evidence of Mr Mcloughlin.

[71]Mr Taylor asked Mr Keran later in December 2015 for various official documents that he required, such as VAT registration documents and insurance. Mr Eyre, the adjudicator, used the phrase “due diligence” when he referred to these documents. The request for these documents is consistent with Mr Taylor setting up Dacy as a sub-contractor to IDM Properties Ltd. It is inconsistent with HOC engaging Dacy, because had HOC done so, HOC would have been the company requiring such documents and Mr Taylor would not have needed to have done so and would have had no reason to ask for them. Mr Taylor accepted in his evidence that certain sub-contractors were set up with direct contracts, but stated that Dacy was not one of them. That is inconsistent with his requiring such documents from Dacy.

[72]Mr Keran summarised the payment mechanics in an email of 16 December 2015 to Mr Taylor which stated:

“Randol Thanks for your time today and we now understand what are the procedures for that job management instructions timesheets will be done by HOC we will be invoicing HOC and once HOC are happy with the invoices and also with the works performed on site then they will send the invoice to IDM IDM will pay Dacy on a monthly basis”

In my judgment, this is not consistent with Dacy being HOC’s sub-contractor. I find that this arrangement was consistent with Mr Keran’s evidence and is consistent with Dacy contracting directly with IDM Properties, with its applications for payment to be first approved by HOC so far as works, labour and materials are concerned. IDM will pay Dacy on a monthly basis”

[73]Mr Appleton was the person at HOC who would have set up any contractual relations between HOC and Dacy, had those two companies contracted directly. He did not do so. There is no explanation for this from IDM Properties that bears any scrutiny. Mr Appleton is professionally qualified as a Quantity Surveyor and highly experienced. There is no reason to suggest that HOC engaged any sub-contractors other than by his doing so on HOC’s behalf. He also gave evidence that HOC did not engage any more sub-contractors after November 2015. This is consistent with Dacy contracting with IDM Properties, and inconsistent with HOC doing so. However, even absent this factor, and absent Mr Appleton’s evidence, I would still have preferred the account of Mr Keran and Mr Cutmore of the meeting.

[74]Another feature that supports my findings is that Mr Taylor on 10 December 2015 asked Chris Beacham of IDM Properties (at least, the email was sent to him at the email address cb@idmproperties.com) the following question:

“In relation to these guys and the like. We (1) need to understand the procedures IDM intend to follow contract wise and the paperwork required to appoint such to act on this “contract” under the “direction” of HOC whilst effectively being under our control and getting paid by us….. We have been assured by Brian C that these guys Dacy Building Services are the best and can be trusted whilst allegedly being a wee bit more expensive than the average. Can you cast your eye over those rates and give me your view…..”

(emphasis added) There would have been no need or reason for Mr Beacham, or anyone at IDM Properties, to look at or have any view on the rates that Dacy proposed to charge if Dacy had been contracting with HOC. There would, however, on the other hand, be every reason for this if Dacy had contracted with IDM Properties. This again is consistent with the case brought by Dacy and inconsistent with the defence to that case by IDM Properties.

[75]As comprehensively summarised by Jefford J at [42] to [64], there are numerous communications in emails and so on between the parties, including Mr Taylor, and also another individual called Mr Hewson. Her summary in respect of this latter person is illuminating. She said the following at [80] and I adopt it as an accurate comment on the documents:

“I have set this out in some detail because it demonstrates that there was little or no consistency in the issuing of instructions. Mr Hewson appears to be acting on behalf of IDM Construction London but by e-mails that state they are communications from IDM Properties. On some occasions he states that he is acting for and on behalf of HOC.”

Mr Hewson did not give evidence before me. However, the above makes good a factor which is obvious when one considers all the documents, in particular when considering almost everyone on this Project with the exception of Mr Keran, Mr Cutmore and Mr Appleton. It is very difficult to ascertain at any particular point, or regarding any particular communication, exactly for which legal entity someone with an IDM e mail address was acting at any particular time generally. However, for the avoidance of doubt I make it clear that I find as a fact that at the meeting of 3 December 2015 Mr McLoughlin was undoubtedly acting for IDM Properties.

[76]The paperwork generally concerning Dacy and its involvement in the works at the Project is far from satisfactory. There are isolated and scattered references to HOC in various places, and in a sense any allegation of a wholly oral contract will almost inevitably, if not always, result in an analysis that relies heavily upon the oral evidence. However, taken as a whole, and including consideration of some involvement by IDM Properties in Dacy’s rates and so on (which would simply not have occurred had Dacy contracted with HOC), such documentation is more consistent with Dacy’s submissions on the contract, than with that of IDM Properties.

[77]I note in passing only that HHJ Klein, when considering the issues in the litigation between AAAEI and IDM Construction London Ltd, concluded that Mr McLoughlin was not a reliable historian. I have not been influenced by that and have come to my own separate and independent conclusion about him as a witness based upon his evidence before me. My conclusion does however appear to be similar.

[78]Mr Townend in his written submissions relied upon various features of this case as supporting the evidence of Mr Mcloughlin, and the case of IDM Properties, that no contract was agreed between Dacy and IDM Properties. He argued that IDM Properties was not in the business of contracting with sub-contractors. This is rather circular; simply because, in the ordinary process of running construction projects, IDM Properties would not do so, does not mean that in the unusual circumstances of this Project it did not do so. Mr Townend relied upon the fact that it was “a conversation at an impromptu meeting, of some 10 minutes in length, held at a bus station on 3 December 2015.” It is correct it was a conversation – it was argued by Dacy that an oral contract was agreed. The meeting was not impromptu or a chance encounter as I have found. Its location is unusual but the circumstances were unusual, and the date is highly relevant. It is directly in the period that discussions, in which Mr Mcloughlin was centrally involved, were taking place with HOC about direct contracting between an IDM company and sub-contractors. Further, the duration of the meeting reflected the limited, though important, number of points that had to be discussed and agreed. These were the engagement of Dacy; the fact that the work would be directed by HOC; and that the contract was to be direct with IDM Properties.

[79]It is also the case that Mr Townend argued that there were potentially a number of alternative contractual positions – “whether the Claimant had a contract with HOC, no contract at all or a contract with another party, there was no contract with the Defendant.” It is correct that sometimes parties may never agree and there may be no contract under which construction works are performed. This is not one of those situations for the reasons that I have explained. This general approach by IDM Properties was essentially distilled in Mr Mcloughlin’s evidence into there being a contract between Dacy and HOC. There were, in reality, no other alternatives in terms of the party with whom Dacy could have been contracting other than either with HOC or an IDM company. I am aware of, and have specifically considered, the burden and standard of proof, and Dacy must make good its case that the contract was with IDM Properties. I consider that Dacy has done so. It is not simply because there was no contract between Dacy and HOC, that I have then concluded that it must have been between Dacy and IDM Properties. I have found that there was a specific agreement between Mr Keran for Dacy, and Mr Mcloughlin for IDM Properties, that the two companies would contract in this way directly with each other. That agreement was reached orally at the meeting that I have described, but under English law such an oral agreement is enforceable.

[80]The legal principles upon which Mr Townend relies do not assist him in his submissions that there was no such agreement. Homburg Houtimport BV v Agrosin Private Ltd

[2004] 1 AC 715

makes it clear that the question of the identity of the parties to a contract is critical and is a question of fact. This was understandably described as “fundamental” by Lord Millett at [175] who stated that it “goes to the very existence of the contract itself”. I entirely agree, adopt and apply that dicta. He went on to say that “like the nature and amount of the consideration and the intention to create legal relations, it is a question of fact and may be established by evidence”. In my judgment, it has been established by the evidence in this trial that Dacy and IDM Properties agreed an oral contract in the way I have described.

[81]This is not a case in which there was confusion as to which party was the contracting party as in Badgerhill Properties Ltd v Beverley Ann Cottrell

(1990) 54 BLR 23

. In that case, Mrs Cottrell wanted works done and found an advertisement for “The Plumbing Centre”. Having telephoned the number in the advertisement and made an appointment, Mr Twigg arrived and introduced himself as being from “The Plumbing Centre”, making no reference to a limited company. Three estimates were produced by him for different works, two listing Mr Twigg as a director, which were headed “The Plumbing Centre” and with Badgerhill Properties Ltd printed at the bottom. The third estimate had the trading name of Wendell (Builders) on it and did not list Mr Twigg as a director. It can be seen that the facts of that case are very different to this one. That case is distinguishable on its facts.

[82]The other authorities upon which Mr Towend relies are first instance ones with very different facts. Of course, applying the same legal principles to different facts will often if not invariably lead to different results, particularly where the issue is one that is so highly fact-critical.

[83]For completeness – even though it was not specifically argued to this effect before me – I also deal with the intention to create legal relations. In Blue v Ashley Leggatt J stated the following at [99]:

“I have noted that, although the test of whether an offer was made and intended to be legally binding is objective, in a case such as this where the relevant statements were oral, evidence of how they were understood by the parties themselves is admissible. That logic applies equally to the subjective understanding of other people who witnessed or took part in a conversation. It is therefore telling that all three of the ESIB representatives – Mr Tracey, Mr McEvoy and Mr Clifton – perceived the conversation about incentivising Mr Blue as no more than banter.”

[84]There is no doubt from the evidence of both Mr Keran and Mr Cutmore, which I have accepted, that they each understood the outcome of the meeting of 3 December 2015 to be that a contract had been agreed between Mr Keran, acting for Dacy, and Mr McLoughlin, acting for IDM Properties. Mr McLoughlin’s evidence was that he understood Dacy to have contracted with HOC. I reject that evidence. I find that his subjective understanding was that a contract had been agreed with Dacy, and indeed that was the purpose of the meeting. Without such a contract being agreed, Dacy would not have remained on the site (having arrived that morning a couple of hours before) and would not have performed any works. The fact that the meeting was short, and was held in a bus shelter, is not material in my judgment. Mr Mcloughlin required, and was centrally involved in, kick-starting progress of the works. The main and most important points were agreed, and were agreed in person, face to face by Mr Keran and Mr Mcloughlin. That is what the meeting was for. There was an intention to create legal relations. This was a world away from the situation in Blue v Ashley, which was simply banter in a public house during consumption of a gallon of ale (or lager).

Conclusion

[85]Parliament having decided that oral construction contracts should fall within the statutory regime of adjudication, this is not the place to debate the pros and cons of that decision and the possibility of practical difficulties that may arise as a result. However, this case is a good example of such difficulties that may occasionally arise where a contract is purely oral and one party to it flatly denies that such an agreement was made. In Penten Group Ltd. v Spartafield Ltd

[2016] EWHC 317 (TCC)

Coulson J made certain comments to the effect that the Court should and would take a more generous view of the scope of the adjudicator's jurisdiction where an oral contract was concerned. In that case, there had been different adjudications with some history. Adjudication no. 1 was commenced by Spartafield seeking a declaration that there was a valid construction contract which incorporated the terms of a standard form contract and making various financial claims. The adjudicator decided that a valid construction contract existed but that it was on the terms of a letter of intent. Penten commenced Part 8 proceedings seeking declarations that the decision was enforceable. Penten argued that the adjudicator was asked to decide whether there was a valid construction contract and what its terms were. The financial claims were separate and required a decision to be made as to the terms of the contract before the claims could be considered. Coulson J held that to answer the question whether there was a valid construction contract, the adjudicator had to decide what the terms of the contract were. In any case, Penten had relied on the defence that the terms of the contract were those in the letter of intent so that that issue was within the scope of the adjudication. He then said this:

"27. Finally … there is a wider point for consideration here which, although it has been the subject of some commentary, has not been the subject of any previous judicial observation. The point concerns the statutory amendments in respect of written contracts. Before the amendments to the 1996 Act, adjudication could only happen when there was a contract in writing. That was so as to ensure that the adjudicator did not have to deal with complex questions as to contract formation, appropriate terms and the like, in addition to addressing the underlying claims, all in 28 days. Of course, that certainty has now gone, and the adjudicator may have to do all those things within the 28 day period. 28. This case is, I think, a good example of the change. In my view, this would not have been a dispute that could have been referred to adjudication under the old law. However, following the change in the law, it was validly referred to [the adjudicator] for decision in Adjudication 1. Thus, [the adjudicator] had to deal with all of the issues (both contractual and financial) within the limited timetable allowed by adjudication. In my view, in such cases, the courts are going to have to give adjudicators some latitude as they grapple with these difficulties. In an ordinary case, and depending on the words of the notice, it may be unduly restrictive to conclude that an adjudicator could decide what the contract was not, but not what the contract was. Similarly, it may be unduly restrictive to say that any notice of adjudication which raised the existence of the contract and/or its precise terms (on the one hand), and the financial claims thereunder (on the other), somehow involved more than one dispute."

[86]Jefford J described those points as “well made” at [35] in her judgment in this case on the enforcement proceedings and I agree. In this case, although I have had no regard to the findings of the adjudicator, Mr Eyre, on the question of whether there was a contract between Dacy and IDM Properties, and I had the benefit of hearing oral evidence and seeing cross-examination of the five witnesses called by both parties, I have reached the same conclusion as he did. I wish however to repeat the sentiments at [3] above. It will usually be possible for such issues to be resolved summarily. A trial, with contested evidence given orally, will only in my judgment very rarely be justified, even on the question of whether there was a contract at all. It must be remembered that adjudication decisions simply deal with the positions of the parties on an interim basis. The latitude to which Coulson J referred to in that case will not lead to any permanent injustice.

[87]Here, the issue of the existence of an oral contract and whether it was between Dacy and IDM Properties has now been resolved. In this case, I accept the submissions of Dacy that an oral contract was formed with IDM Properties at the meeting of 3 December 2015 and make the necessary finding to that effect. It therefore follows that the Decision of Mr Eyre was reached with jurisdiction and Dacy are entitled to judgment in the sum found by the adjudicator.

Cited in 1 later judgment

Donald Insall Associates Ltd v Kew Holdings Ltd 2019