GMC Utilities Group Ltd v Sumitomo Electric Industries Ltd [2026] EWHC 885 (TCC)

[2026] EWHC 885 (TCC)

Case No HT-2025-000063

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

KING'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NL

Date 16/04/2026

Before

SIMON LOFTHOUSE KC

SITTING AS A DEPUTY JUDGE OF THE HIGH COURT

Between

GMC UTILITIES GROUP LTDClaimant

SUMITOMO ELECTRIC INDUSTRIES LTDDefendant

Luke Wygas (instructed by Charles Russell Speechlys LLP) for Claimant

Jonathan Selby KC and Charlie Thompson (instructed by Watson Farley & Williams LLP) for Defendant

Hearing Hearing dates: 17 March (reading day), 18 and 19 March 2026

JUDGMENT

This judgment was handed down remotely at 10.30am on Thursday 16 April 2026 by circulation to the parties or their representatives by e-mail

Simon Lofthouse KC:

Introduction

[1]The Defendant, SEI, was the main contractor in relation to the construction of an undersea electricity interconnector between Pembrokeshire, Wales and Wexford, Ireland. Under a sub-contract dated 8 August 2022, SEI contracted the installation and associated civil works package for the onshore direct cable work to the Claimant, GMC.

[2]GMC commenced its works in September 2022. Under the sub-contract, practical completion of GMC’s physical works (which has been referred to as “PC”) was meant to take place on 14 June 2024. PC in fact took place on 4 July 2024. Take-Over of GMC’s works was originally certified as having taken place on 27 November 2024, although pursuant to an adjudication between the parties commenced by SEI, the Taking-Over Certificate has been opened up and revised such that Take-Over took place on 31 July 2024.

[3]On 28 October 2024, SEI made a demand under a performance bond dated 24 October 2022 contending that GMC did not fulfil its obligations under the sub-contract due to a failure to meet the Taking-Over Date with the result that delay damages applied. The demand was made of Credendo-Guarantees & Speciality Risks International Guarantees Department (“the Issuer”).

[4]That call on the performance bond prompted discussions between the parties. Those discussions were directed to avoiding payment of the performance bond and instead having GMC pay the sum demanded into an escrow account pending final agreement between the parties.

[5]During those discussions on 8 November 2024 Michelmores, GMC’s then solicitors, wrote a letter to Watson Farley & Williams LLP, solicitors to SEI. The letter is central to the dispute between the parties and I set out the letter in full:

“Dear Watson Farley & Williams LLP Your client: Sumitomo Electric Industries Limited (Sumitomo) Our client: GMC Utilities Group Limited We refer to your email (Megan Parry to Marie-Louise King) dated 8 November 2024 (timed at 12:37) confirming Sumitomo's acceptance of GMC's offer as set out in our letter dated 7 November 2024, and attached to our email (Mare-Louise King to Theresa Mohammed) dated 7 November 2024 (timed at 20:39). We also refer to our exchange of emails (Megan Parry and Marie-Louise King) today (13:54 and 15:16) confirming Sumitomo's agreement to the time period in paragraph 2 below being one (1) business day. We now confirm: 1 Michelmores LLP undertakes to Sumitomo, on behalf of its client GMC Utilities Group Limited (GMC), to pay the sum of €3,936,366 (the Escrow Sum) into an agreed escrow account (the Escrow Account) on the terms set out herein. Michelmores LLP will be immediately released from its undertaking in the event that the Issuer (as defined in the Performance Bond dated 24 October 2022 (the Performance Bond)) makes a payment to Sumitomo pursuant to Sumitomo's Demand dated 28 October 2024 or otherwise. 2 Michelmores LLP will place the Escrow Sum into the Escrow Account as soon as possible, and in any event within one (1) business day of the establishment of the Escrow Account. 3 Upon Michelmores LLP providing the undertaking referred to in paragraph 1 above, Sumitomo will immediately write to the Issuer to confirm that the parties are looking to reach a compromise and that payment is not to be made. GMC is to be copied in on that correspondence. 4 Upon confirmation that the Escrow Sum has been paid into the Escrow Account, Sumitomo will write to the Issuer confirming that: 4.1 the Demand is unconditionally and irrevocably withdrawn; and 4.2 the Issuer is unconditionally relieved of all and any obligation under the Performance Bond and the Bond is unconditionally released. GMC is to be copied in on that correspondence. 5 Sumitomo shall make no Demand or further Demand on the Performance Bond pending its release in accordance with paragraph 4.2 above. 6 The Escrow Sum is only to be released to either GMC or Sumitomo pursuant to an agreement between the parties, a decision by a duly appointed adjudicator, or an order of a court or competent arbitral tribunal on the issue of GMC's claims for extensions of time pursuant to Sub-Clause 8.4 of the Sub-Contract dated 8 August 2022 and Sumitomo's claims for any Delay Damages pursuant to Sub-Clause 8.6 of the Sub-Contract (the Claims). If there has been no agreement between the parties, decision by a duly appointed adjudicator, or commencement of court or arbitral proceedings on the Claims by Friday 7 March 2025, the Escrow Sum will be paid to Sumitomo. 7 Interest on the Escrow Sum shall accrue to the benefit of the party to whom the Escrow Sum is to be paid, in proportion to the amount to be paid. 8 In the event that it is ordered or agreed pursuant to paragraph 6 above that none or a proportion of the Escrow Sum shall be paid to Sumitomo, the Escrow Sum or the balance of the Escrow Sum will revert to GMC. Please confirm receipt. Yours faithfully Michelmores LLP”

Your client: Sumitomo Electric Industries Limited (Sumitomo) Our client: GMC Utilities Group Limited We now confirm: Michelmores LLP will be immediately released from its undertaking in the event that the Issuer (as defined in the Performance Bond dated 24 October 2022 (the Performance Bond)) makes a payment to Sumitomo pursuant to Sumitomo's Demand dated 28 October 2024 or otherwise. 4.1 the Demand is unconditionally and irrevocably withdrawn; and 4.2 the Issuer is unconditionally relieved of all and any obligation under the Performance Bond and the Bond is unconditionally released. GMC is to be copied in on that correspondence. Yours faithfully Michelmores LLP”

Yours faithfully

[6]An Escrow Agreement was subsequently agreed between the parties on 19 December 2024 with The Law Debenture Trust Corporation plc as the Escrow Agent.

These Proceedings

[7]There are two claims before the Court. Central to those claims are the letter of 8 November 2024 and the Escrow Agreement. By a Part 8 claim issued on 9 October 2025 GMC seeks the following declarations at paragraphs 25.1 to 25.3:

“(1) That no agreement was reached between the parties on 8 November 2024 in relation to any monies held in escrow. Alternatively, SEI is not entitled to rely on any agreement reached on 8 November 2024 on account of the entire agreement clause in the Escrow Agreement. (2) That on the true construction of the Escrow Agreement, SEI is not entitled to payment of the sums held under the Escrow Agreement if GMC had failed, by 7 March 2025, to: (i) obtain a decision by a duly appointed adjudicator, or (ii) commence court or arbitral proceedings. (3) That in any event, SEI is not entitled to payment of the sums held under the Escrow Agreement if GMC had failed, by 7 March 2025, to: (i) obtain a decision by a duly appointed adjudication, [sic], or (ii) commence court of [sic] arbitral proceedings.”

[8]SEI counterclaims in the same proceedings seeking the following declaration:

“Because the Claimant had not by 7 March 2025 either (a) reached agreement with the Defendant on the “Claims” (as defined in the agreement reached on 8 November 2024) or (b) obtained a decision by a duly appointed adjudicator on the Claims or (c) commenced arbitral proceedings on the Claims, the Defendant was entitled to payment of the Escrow Sum out of the Escrow Account.”

[9]In separate and earlier Part 7 proceedings issued on 5 March 2025, GMC claims its alleged entitlement under the sub-contract, alternatively damages. The following declaratory relief is also sought:

“(1) A declaration that SEI was not entitled to levy liquidated damages against GMC under the terms of the Sub-Contract. (2) A declaration that SEI was not entitled to make the Bond Call under the terms of the Sub-Contract. (3) A declaration that GMC is entitled to EUR 3,351,158.20 held in escrow and that SEI is not entitled to any of the funds held in escrow.”

[10]There is a related application by SEI to strike out part of GMC’s reply evidence in the Part 8 proceedings. The application notice is dated 23 January 2026 and I can deal with this matter briefly.

[11]GMC’s Reply and Defence to Counterclaim in the Part 8 proceedings comprised a witness statement from Steven Carey of Charles Russell Speechlys dated 24 November 2025. Paragraph 6.2 of that statement stated:

“6.2 In addition to the Declaration sought at paragraph 25 of the PoC, given the Adjudicator’s Decision, GMC seeks the following Declarations: 6.2.1 That GMC is entitled to the sum due to a payment of €2,173,313.58 further to the revised Statement at Completion Date to 17 October 2025. 6.2.2 that GMC is entitled to payment from the monies held in escrow of €2,755,456.20.” 6.2.1 That GMC is entitled to the sum due to a payment of €2,173,313.58 further to the revised Statement at Completion Date to 17 October 2025. 6.2.2 that GMC is entitled to payment from the monies held in escrow of €2,755,456.20.”

[12]In his oral submissions Mr Wygas, who appears on behalf of GMC, conceded that the additional declaratory relief, if to be pursued, should be part of the Part 8 Particulars of Claim. That concession was properly made and is consistent with the decision of Pepperall J. in Martlet Homes Ltd v Mulalley & Co Ltd

[2021] EWHC 296 (TCC)

. It follows that paragraph 6.2 of the witness statement of Steven Carey dated 24 November 2025 is struck out pursuant to CPR Rule 3.4(2)(a). No application was made to amend the Part 8 Particulars of Claim.

The sub-contract

[13]As set out above, GMC was a subcontractor to SEI. For the purposes of the issues before me, the following clauses of that sub-contract are material: “Performance Bond 1 DEFINITIONS AND INTERPRETATION 1.1 Definitions “Dispute” means a dispute, disagreement, difference, controversy or claim of any kind whatsoever arising between the Parties under or in connection with the Sub-Contract, including any dispute, disagreement, controversy, claim or difference in relation to:(a) the existence, validity, invalidity, termination, frustration, repudiation or discharge (or the purported or alleged validity, invalidity, termination, frustration, repudiation or discharge) of the Sub-Contract;

(b) any non-contractual rights or obligations arising out of or in connection with the Sub-Contract or its subject matter; and

(c) any acceptance, rejection, approval, certificate, determination, instruction, opinion or valuation of the Cable Contractor and/or the Cable Contractor’s Representative. …

4.2.1 The Sub-Contractor shall obtain (at the Sub-Contractor’s cost) and deliver to the Cable Contractor, prior to the Commencement Date, the Performance Bond

4.2.2 The Sub-Contractor shall procure that the performance Bond is valid and enforceable at all times until the later of the dates on which: (a) the Taking-Over Certificate is issued under Sub-Clause 10.1 [Taking-Over of the Sub-Contract Works]; (b) the Cable Contractor has received a valid and enforceable Warranty Bond under Sub-Clause 4.2.7.

4.2.3 If the terms of the Performance Bond specify its expiry date and all the conditions set out in Sub-Clause 4.2.2 have not been satisfied in full by the date twenty-eight (28) days prior to the expiry date, the Sub-Contractor shall extend the validity of the performance Bond until the date on which all the conditions specified under Sub-Clause 4.2.2 have been satisfied in full. … 8.7 Delay Damages 8.7.1 If the Taking-Over Date has not occurred by Time for Completion as a result of the Sub-Contractor or any Sub-Contractor Related Persons fault Delay Damages shall accrue at the rate specified in Section 2 of the Sub-Contract Data for each day (or part thereof) which shall elapse between the Time for Completion and the Taking-Over Date. … 10.1 The Taking-Over of the Sub-Contract Works

10.1.1 The Sub-Contract Works shall be taken over by the Cable Contractor when the Cable Contractor has issued the Taking-Over Certificate under Sub-Clause 10.1.3 following receipt of the Sub-Contractor’s notice under Sub-Clause

10.1.2 and the following conditions have been satisfied in full: (a) the Sub-Contractor has successfully completed the Sub-Contract Works (including all testing and commissioning activities and all protection and burial activities) under and in accordance with the Sub-Contract [Time for Completion]; (b) the Sub-Contractor has successfully passed Tests on Completion in accordance with the Sub-Contract; (c) the Sub-Contractor has agreed an updated list of Snagging Items with the Cable Contractor;

(d) the Sub-Contractor has provided copies of all documentation required to be provided by the Sub-Contractor to the Cable Contractor prior to the Taking-Over Date under Sub-Clauses 5.6 [As-Built Documents] and 5.7 [Operation and Maintenance Manuals] and under the Sub-Contract in the form specified in the Sub-Contractor (where not so specified) as required by the Cable Contractor and with sufficient detail to allow the Cable Contractor to continue to properly and safely operate, maintain, adjust, repair and decommission the Sub-Contract Works or any part thereof and to properly store, protect maintain any Spare Parts;

(e) all Spare Parts required to be delivered and replenished prior to the Taking-Over Date under Sub-Clause 5.9 [Spare Parts] have been delivered and replenished;

(f) [Not Used];

(g) the Sub-Contractor has provided the Cable Contractor with the health and safety file under Sub-Clause 6.7.19 [Health and Safety] and the final decommissioning plan required under the CDM Regulations, in the number of copies and format required under Section 6.3 of Part G of Schedule 1;

(h) all Permits (if any) which the Sub-Contractor is obliged to obtain and/or maintain have been obtained and are valid and effective;

(i) the Cable Contractor’s Permits which are required to operate and maintain the Interconnector or the Irish Grid Connection Works have not been rendered invalid or ineffective by reason of an act, omission, neglect or default of any Sub-Contractor Related Person;

(j) the Sub-Contractor has obtained and delivered the Warranty Bond to the Cable Contractor under and in accordance with Sub-Clause 4.2.7 [Warranty Bond]-, and

(k) all other activities specified in the Sub-Contract as being required to be completed by the Sub-Contractor for the purposes of the issuance of the Taking-Over Certificate have been completed. … 20 CLAIMS AND DISPUTE RESOLUTION … 20.2 Consultation 20.2.1 If any Dispute arises under or in connection with this Sub-Contract, the senior management representative of each of the Parties identified for the purposes in Section 1 of the Sub-Contract Data shall meet and attempt to resolve the Dispute amicably. 20.3 Notice of Intention to Refer a Dispute to Adjudication 20.3.1 If a Dispute arises either the Cable Contractor or the Sub-Contractor may at any time give written notice to the other Party of its intention to refer such Dispute to adjudication in accordance with Sub-Clauses 20.4 [Appointment of Adjudicator] to 20.9 [Adjudication Time Periods] (each a “Notice of Adjudication”). … 20.7.12 If either Party is dissatisfied with the Adjudicator’s decision, that Party may within twenty-eight (28) days after receiving the decision, notify the other Party of its dissatisfaction. If the Adjudicator fails to give its decision within the relevant period referred to in Sub-Clause 20.7.9 above after receiving such reference, then either Party may, within twenty-eight (28) days after this period has expired, notify the other Party of its dissatisfaction. … 20.11 Amicable Settlement 20.11.1 Without prejudice to Sub-Clause 20.10 [Failure to Comply with the Adjudicator’s Decision], where notice of dissatisfaction has been validly given in accordance with Sub-Clauses 20.7.12 and 20.12.13 [Referral to Adjudication and Procedure for Adjudication], both Parties shall attempt to settle the Dispute amicably. However unless both Parties agree otherwise, either Party may refer the Dispute for resolution under Sub-Clause 20.12 [Arbitration] on or after sixtieth day after the day on which notice of dissatisfaction was validly given, even if no attempt at amicable settlement has been made. 20.12 Arbitration 20.12.1 Without prejudice to Sub-Clause 20.3.1 [Notice of Intention to Refer a Dispute to Adjudication], any Dispute shall be referred to and finally reserved by arbitration under the LCIA Rules, which rules are deemed to be incorporated by reference under this Sub-Clause 20.12. “Dispute” means a dispute, disagreement, difference, controversy or claim of any kind whatsoever arising between the Parties under or in connection with the Sub-Contract, including any dispute, disagreement, controversy, claim or difference in relation to: (a) the existence, validity, invalidity, termination, frustration, repudiation or discharge (or the purported or alleged validity, invalidity, termination, frustration, repudiation or discharge) of the Sub-Contract; (b) any non-contractual rights or obligations arising out of or in connection with the Sub-Contract or its subject matter; and (c) any acceptance, rejection, approval, certificate, determination, instruction, opinion or valuation of the Cable Contractor and/or the Cable Contractor’s Representative. (a) the Taking-Over Certificate is issued under Sub-Clause 10.1 [Taking-Over of the Sub-Contract Works]; (b) the Cable Contractor has received a valid and enforceable Warranty Bond under Sub-Clause 4.2.7. (a) the Sub-Contractor has successfully completed the Sub-Contract Works (including all testing and commissioning activities and all protection and burial activities) under and in accordance with the Sub-Contract [Time for Completion]; (b) the Sub-Contractor has successfully passed Tests on Completion in accordance with the Sub-Contract; (c) the Sub-Contractor has agreed an updated list of Snagging Items with the Cable Contractor; (d) the Sub-Contractor has provided copies of all documentation required to be provided by the Sub-Contractor to the Cable Contractor prior to the Taking-Over Date under Sub-Clauses 5.6 [As-Built Documents] and 5.7 [Operation and Maintenance Manuals] and under the Sub-Contract in the form specified in the Sub-Contractor (where not so specified) as required by the Cable Contractor and with sufficient detail to allow the Cable Contractor to continue to properly and safely operate, maintain, adjust, repair and decommission the Sub-Contract Works or any part thereof and to properly store, protect maintain any Spare Parts; (e) all Spare Parts required to be delivered and replenished prior to the Taking-Over Date under Sub-Clause 5.9 [Spare Parts] have been delivered and replenished; (f) [Not Used]; (g) the Sub-Contractor has provided the Cable Contractor with the health and safety file under Sub-Clause 6.7.19 [Health and Safety] and the final decommissioning plan required under the CDM Regulations, in the number of copies and format required under Section 6.3 of Part G of Schedule 1; (h) all Permits (if any) which the Sub-Contractor is obliged to obtain and/or maintain have been obtained and are valid and effective; (i) the Cable Contractor’s Permits which are required to operate and maintain the Interconnector or the Irish Grid Connection Works have not been rendered invalid or ineffective by reason of an act, omission, neglect or default of any Sub-Contractor Related Person; (j) the Sub-Contractor has obtained and delivered the Warranty Bond to the Cable Contractor under and in accordance with Sub-Clause 4.2.7 [Warranty Bond]-, and (k) all other activities specified in the Sub-Contract as being required to be completed by the Sub-Contractor for the purposes of the issuance of the Taking-Over Certificate have been completed.

The facts

[14]On GMC’s case, it is necessary to consider the earlier exchanges between the parties to understand the context to the letter of 8 November 2024 set out at paragraph 5 above.

[15]It is only necessary to consider exchanges from the previous day when by email sent at 8:39pm on 7 November 2024, Michelmores LLP attached a letter to Watson Farley & Williams LLP making a counter-offer on behalf of GMC as part of the ongoing negotiations. The email stated:

“You will note that the sum offered to be paid into escrow is now the full amount but the maximum aggregate liability under the Performance Bond and on that basis, your deletions to paragraph 4 have been reinstated. We expect to be in funds in this sum tomorrow. GMC’s claims, referred to in paragraph 6 are its claims for extension of time only. We await hearing from you as soon as possible.”

GMC’s claims, referred to in paragraph 6 are its claims for extension of time only. We await hearing from you as soon as possible.”

[16]That email was headed “Without prejudice save as to costs and subject to contract”. The letter attached was in the following terms:

“Dear Watson Farley & Williams LLP 07 November 2024 Your client: Sumitomo Electric Industries Limited (Sumitomo) Our client: GMC Utilities Group Limited Without prejudice save as to costs and subject to contract We refer to your email dated 7 November 2024. GMC makes the following counter-offer. 1 Michelmores LLP will, upon receipt of the sum of €3,936,366 which is expected to be received into its client account tomorrow, 8 November 2024, undertake to Sumitomo, on behalf of its client GMC Utilities Group Limited (GMC), to pay the sum of €3,936,366 (the Escrow Sum) into an agreed escrow account (the Escrow Account) on the terms set out herein. Michelmores LLP will be immediately released from its undertaking (once given) in the event that the Issuer (as defined in the Performance Bond dated 24 October 2022 (the Performance Bond)) makes a payment to Sumitomo pursuant to Sumitomo's Demand dated 28 October 2024 or otherwise. 2 Michelmores LLP will place the Escrow Sum into the Escrow Account as soon as possible, and in any event within 24 hours of the establishment of the Escrow Account. 3 Upon Michelmores LLP providing the undertaking referred to in paragraph 1 above, Sumitomo will immediately write to the Issuer to confirm that the parties are looking to reach a compromise and that payment is not to be made. GMC is to be copied in on that correspondence. 4 Upon confirmation that the Escrow Sum has been paid into the Escrow Account, Sumitomo will write to the Issuer confirming that: 4.1 the Demand is unconditionally and irrevocably withdrawn; and 4.2 the Issuer is unconditionally relieved of all and any obligation under the Performance Bond and the Bond is unconditionally released. GMC is to be copied in on that correspondence. 5 Sumitomo shall make no Demand or further Demand on the Performance Bond pending its release in accordance with paragraph 4.2 above. 6 The Escrow Sum is only to be released to either GMC or Sumitomo pursuant to an agreement between the parties, a decision by a duly appointed adjudicator, or an order of a court or competent arbitral tribunal on the issue of GMC's claims for extensions of time pursuant to Sub-Clause 8.4 of the Sub-Contract dated 8 August 2022 and Sumitomo's claims for any Delay Damages pursuant to Sub-Clause 8.6 of the Sub-Contract (the Claims). If there has been no agreement between the parties, decision by a duly appointed adjudicator, or commencement of court or arbitral proceedings on the Claims by Friday 7 March 2025, the Escrow Sum will be paid to Sumitomo. 7 Interest on the Escrow Sum shall accrue to the benefit of the party to whom the Escrow Sum is to be paid, in proportion to the amount to be paid. 8 In the event that it is ordered or agreed pursuant to paragraph 6 above that none or a proportion of the Escrow Sum shall be paid to Sumitomo, the Escrow Sum or the balance of the Escrow Sum will revert to GMC. We look forward to hearing from you by return to confirm Sumitomo's agreement to the above termsand look forward to receiving a copy of Sumitomo's letter to the Issuer in accordance with paragraph 3 above. All of our client’s rights remain reserved. Yours faithfully Michelmores LLP” 07 November 2024 Our client: GMC Utilities Group Limited Without prejudice save as to costs and subject to contract Michelmores LLP will be immediately released from its undertaking (once given) in the event that the Issuer (as defined in the Performance Bond dated 24 October 2022 (the Performance Bond)) makes a payment to Sumitomo pursuant to Sumitomo's Demand dated 28 October 2024 or otherwise. 4.1 the Demand is unconditionally and irrevocably withdrawn; and 4.2 the Issuer is unconditionally relieved of all and any obligation under the Performance Bond and the Bond is unconditionally released. GMC is to be copied in on that correspondence. Yours faithfully Michelmores LLP”

Yours faithfully

[17]The following day on 8 November 2024, by email sent at 12:37 and marked “Without prejudice save as to costs”, Watson Farley & Williams LLP responded:

“Dear Sirs We refer to your email dated 07.11.2024 received at 20:39hrs and GMC’s counter-offer dated 7 November 2024, reattached for your convenience. Sumitomo accepts the terms of the GMC’s counter-offer dated 7 November 2024. Can Michelmores LLP please confirm the timing of the solicitor’s undertaking as set out in paragraph 1 of GMC’s attached counter-off. We await hearing from you as soon as possible.”

We refer to your email dated 07.11.2024 received at 20:39hrs and GMC’s counter-offer dated 7 November 2024, reattached for your convenience. Sumitomo accepts the terms of the GMC’s counter-offer dated 7 November 2024. Can Michelmores LLP please confirm the timing of the solicitor’s undertaking as set out in paragraph 1 of GMC’s attached counter-off. We await hearing from you as soon as possible.”

[18]Michelmores LLP replied later that day at 1:54PM in the following terms, again, headed “Without prejudice save as to costs”:

“Thank you for your email. We have been provided with confirmation that our clients’ bank is processing the transfer of funds to our account and I expect shortly to receive confirmation of receipt, whereupon I will be able to provide the solicitors’ undertaking. On preparing that, it occurred to me that the time period in paragraph 2 should be one (1) business day, rather than 24 hours. If the escrow is established after close of business banking, we may not be able to effect the placing the funds within 24 hours. Is your client happy to accept that change? I will shortly copy you into an email to the escrow agent so that there is no delay in establishment of the escrow account. I look forward to hearing from you.”

I look forward to hearing from you.”

[19]Watson Farley & Williams LLP responded in turn later that day at 15:16. At this stage, the response was not headed “Without prejudice save as to costs”, neither was it headed “Subject to Contract”. It stated: “We refer to your email of earlier today timed at 13:54hrs. Sumitomo accepts the time period in paragraph 2 to be changed to “one (1) business day” instead of “24hrs”.

[20]The email exchanges set out above are those referred to in the first paragraph of the letter of 8 November 2024 set out at paragraph 5 above.

[21]What divides the parties is whether the letter of 8 November 2024 comprises a binding agreement between the parties as submitted by Mr Selby KC and Mr Thompson on behalf of SEI, or whether there is no binding agreement because the letter of 8 November 2024 is properly construed as part of an exchange which is subject to contract. In making that submission, Mr Wygas, on behalf of GMC, notes that the Escrow Account, as the contract ultimately agreed, was not agreed until 19 December 2024.

[22]When seeking to interpret the letter of 8 November 2024 the parties accept that the negotiations leading to the letter of 8 November 2024 are not admissible as an aid to interpretation of the terms alleged to have been agreed (see for example Chartbrook v Persimmon Homes Ltd

[2009] 1 AC 1101

). In support of his submission that there was no agreement on 8 November 2024 and that the letter was subject to contract Mr Wygas went through such documentation to demonstrate the length of time it took to conclude the Escrow Agreement and that during the negotiations there were disagreements on certain terms. I was not assisted by that exercise. It is clear from the documents to which I have already referred that the Escrow Agreement took some time to conclude. For present purposes, it is sufficient to note that in exchanges on 6 November 2024 headed “Without prejudice save as to costs and subject to contract”, Michelmores LLP wrote to Watson Farley & Williams seeking SEI’s agreement to an Escrow Agreement being arranged with Law Debenture. By response sent the same day, Watson Farley & Williams accepted the proposal. A draft Escrow Agreement under Law Debenture was provided by Michelmores LLP “subject to contract” on 8 November 2024.

The Escrow Agreement

[23]As noted at paragraph 6 above, the terms of the Escrow Agreement were agreed on 19 December 2024 with The Law Debenture Trust Corporation plc as the Escrow Agent. So far as material to this judgment, the Escrow Agreement contained the following terms:

“Background (A) The Transaction Parties are parties to one or more Supplemental Agreements (each as defined below). (B) Further to the Supplemental Agreements, the Transaction Parties shall appoint the Escrow Agent on the terms of the Agreement to establish the Escrow Agent (as defined below). (C) GMC will pay the Escrow Sums (as defined below) into the Escrow Account. (D) The Transaction Parties have requested that the Escrow Agent hold and apply the escrow monies as bare trustee on the terms of the Agreement. 1 Definitions 1.1 In the Escrow Agreements the following words and expressions shall have the following meanings: Contract Year means a period of twelve (12) consecutive months. The first Contract Year shall commence on the Commencement Date and each subsequent Contract Year shall commence on the anniversary of the Commencement Date. Escrow Sums means any amounts deposited or transferred by either or both of the Transaction Parties to the Escrow Bank pursuant to the Supplemental Agreements or otherwise; Parties means the parties to the Agreement and the term “Party” shall be interpreted accordingly; Supplemental Agreement means any other agreements between one or both of the Transaction Parties or any other party which relates to the underlying reason for entering into the Agreement; Transaction Parties means GMC and SEI and the term “Transection Party” shall be interpreted accordingly. … 1.3 The Parties acknowledge and agree that the Standard Conditions and the Fee Letter shall be incorporated into the Escrow Agreement and any references to “Agreement” and the Escrow Agreement, the Standard Conditions of the Fee Letter shall mean the Escrow Agreement, the Standard Conditions and the Fee Letter. 2 Appointment of Escrow Agent 2.1 The Transaction Parties jointly appoint the Escrow Agent to establish the Escrow Account, to act as Escrow Agent and to hold and apply the Escrow Monies on bare trust and in accordance with the terms of the Agreement. 3 Administration of the Escrow Account by the Escrow Agent 3.1 The Escrow Agent shall: 3.1.1 hold the Escrow Monies in the Escrow Account as bare trustee and on the terms set out in the Agreement; and 3.1.2 transfer the Escrow Monies only in accordance with clause 4. 3.2 The Parties agree that the Escrow Agent shall act in accordance with any instructions received pursuant to clause 4. … 4. Transfer of the Escrow Monies 4.1 The Parties agree that the Escrow Agent shall transfer some or all or the Escrow Monies only on the written instruction of: 4.1.1 both Transaction Parties, or 4.1.2 either or both GMC or SEI, accompanied by an order of a duly appointed adjudicator, court or competent arbitral tribunal containing a declaration as to the Transaction Parties’ respective entitlements to the Escrow Monies in the Escrow Account. 4.2 Such instruction shall: 4.2.1 in the case of a written instruction in accordance with clause 4.1.1 above, take the form of, and be made by the Transaction Parties in accordance with, a Transfer Notice; or 4.2.2 in the case of a written instruction in accordance with clause 4.1.2 above, take the form of, and be made by the Transaction Parties or GMC or SEI, in accordance with a Transfer Notice modified as necessary to provide for the signature by one of the Transaction Parties only and the enclosure of an order of a duly appointed adjudicator, court or competent arbitral tribunal containing a declaration as to the Transaction Parties’ respective entitlement to the Escrow Monies and the Escrow Account, it being understood that the Escrow Agent shall be under no obligation to verify the validity of any such order of a duly appointed adjudicator, court or competent arbitral tribunal. … 7. Termination 7.1 Subject to clause 7.2 and clause 7.3, the Agreement shall terminate on the earlier of: 7.1.1 two (2) years from and including the Commencement Dates; and 7.1.2 the date on which all Escrow Monies standing to the credit of the Escrow Account have been transferred by the escrow Agent pursuant to the delivery of one or more Transfer Notices or otherwise in accordance with the Agreement. 7.2 The Parties agree, in the event that any Escrow Monies stand to the credit of the Escrow Account on the expiration of the periods stated in clause 7.1.1, that: 7.2.1 they shall extend the Agreement for such term and such additional fee as shall be agreed by the Parties at the relevant time; or 7.2.2 if no such agreement is reached pursuant to clause 7.2.1, the term of the Agreement shall automatically continue in full force and effect on a rolling basis for further Contract Years (unless terminated earlier in accordance with these terms) and for such additional fee as set out in the Fee Letter. … 10. Governing Law and Jurisdiction 10.1 The Escrow Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with the laws of England and Wales. The Parties shall submit to the exclusive jurisdiction of the Courts of England and Wales. Pursuant to the Standard Conditions 1. Definitions 1.1 Agreement: the agreement contained by the Standard Conditions, the Escrow Agreement, the Fee Letter and any other documents referenced therein which govern the performance of the escrow services by the Escrow Agent to the Transaction Parties. Commencement Date has the meaning given to such term in condition 2.2. 2. Agreement 2.1 By signing the Escrow Agreement, the Transaction Parties agree to be bound by the Standard Conditions. 2.2 The Agreement shall be accepted by each Party on the date on which the Escrow Agreement is countersigned by all Parties, such date being the “Commencement Date”. 2.3 The Agreement shall constitute the whole agreement between the Transaction parties and the Escrow Agent to the exclusion of any other terms and conditions. Each Transaction Party acknowledges that it has not relied on any warranty, undertaking, statement, assurance, promise or representation made or given by or on behalf of the Escrow Agent which is not set out in the Agreement. 2.4 In the event of any conflict between the Standard Conditions and the Escrow Agreement, the Escrow Agreement shall take precedence unless a condition includes the following wording (or any similar wording) “notwithstanding any other provision of the Agreement”, in which case the Standard Conditions shall precedence. 3. Administration of the Escrow Account by the Escrow Agent 3.1 The Escrow Agent shall be entitled to accept and rely upon, without further investigation or enquiry, any instruction which appears on its face to be signed by or on behalf of the relevant Transaction Party and shall not be required to ascertain whether such instruction has been properly executed or validly authorised or whether such Instrument or the information contained in any such Instrument is valid, correct or accurate. 3.2 The escrow Agent shall not be responsible for ascertaining whether any amount it is instructed to pay or transfer pursuant to an instruction has been correctly calculated or is properly payable. 3.3 If at any time the Escrow Agent is uncertain as to its duties, obligations or responsibilities under the Agreement or receives Instructions, claims or demands which in its opinion conflict with each other, or with any provision of the Agreement: 3.3.1 the Escrow Agent may, but shall not be required to, take legal action to resolve any such uncertainty or conflict and in doing so may consult with legal advisers of its own choice; and 3.3.2 the Escrow Agent shall be entitled, without liability to any Transaction Party, or any other party or person for any Loss that may result, to refrain from taking any action until it receives (i) an instruction from the Transaction Parties in terms satisfactory to the Escrow Agent; or (ii) an order of an English court or other competent tribunal binding on the Escrow Agent following which the Escrow Agent shall act in accordance with such instruction or order. … 5. Responsibilities of the Escrow Agent 5.1 The responsibilities of the Escrow Agent under the Agreement are administrative only. 5.2 The Escrow Agent shall have only those duties, obligations and responsibilities expressly set out in the Agreement and shall have no implied duties, obligations or responsibilities. The Parties acknowledge and agree that the Escrow Agent is not bound by any Supplemental Agreement or any other agreement, arrangement or understanding between the Transaction Parties, nor shall the Escrow Agent be treated as having actual, constructive or implied knowledge of any of the terms of any Supplement Agreement or any such other agreement, arrangement or understanding. … 14. Entire Agreement 14.1 All warranties, terms, undertakings, representations and obligations implied by statute, common law, trade usage, course of dealing or otherwise are excluded to the fullest extent permitted by law. 14.2 Neither Party shall rely on, nor shall have any remedy in respect of, any promise, assurance, agreement, statement, warranty, undertaking or representation made (whether innocently or negligently) by any other Party or any person or party, except as expressly set out in the Agreement and in respect of which its sole remedy shall be for breach of contract. Any such promise, assurance, agreement, statement, warranty, undertaking or representation, including any advertising or description contained in any catalogue or brochure, is hereby excluded and withdrawn. 14.3 Nothing in condition 14 shall exclude the liability of any Party for fraud or fraudulent misrepresentation. … 19. General … 19.5 It is expressly agreed between the Parties that the arrangements set out herein are designed solely to provide a mechanism that a deposit in escrow of, and the release from escrow of, the Escrow Monies in the manner contemplated by the Agreement. It is not the intention of the parties to create any security interest hereunder other than any trustee’s lien. 20. Governing Law and Jurisdiction 20.1 The Standard Conditions and any non-contractual obligations arising out of or in connection with them shall be governed by and construed in accordance with the laws of England. The Parties shall submit to the exclusive jurisdiction of the Courts of England.”

Contract Year means a period of twelve (12) consecutive months. The first Contract Year shall commence on the Commencement Date and each subsequent Contract Year shall commence on the anniversary of the Commencement Date. Escrow Sums means any amounts deposited or transferred by either or both of the Transaction Parties to the Escrow Bank pursuant to the Supplemental Agreements or otherwise; Parties means the parties to the Agreement and the term “Party” shall be interpreted accordingly; Supplemental Agreement means any other agreements between one or both of the Transaction Parties or any other party which relates to the underlying reason for entering into the Agreement; Transaction Parties means GMC and SEI and the term “Transection Party” shall be interpreted accordingly. 3.1.1 hold the Escrow Monies in the Escrow Account as bare trustee and on the terms set out in the Agreement; and 3.1.2 transfer the Escrow Monies only in accordance with clause 4. 4.1.1 both Transaction Parties, or 4.1.2 either or both GMC or SEI, accompanied by an order of a duly appointed adjudicator, court or competent arbitral tribunal containing a declaration as to the Transaction Parties’ respective entitlements to the Escrow Monies in the Escrow Account. 4.2.1 in the case of a written instruction in accordance with clause 4.1.1 above, take the form of, and be made by the Transaction Parties in accordance with, a Transfer Notice; or 4.2.2 in the case of a written instruction in accordance with clause 4.1.2 above, take the form of, and be made by the Transaction Parties or GMC or SEI, in accordance with a Transfer Notice modified as necessary to provide for the signature by one of the Transaction Parties only and the enclosure of an order of a duly appointed adjudicator, court or competent arbitral tribunal containing a declaration as to the Transaction Parties’ respective entitlement to the Escrow Monies and the Escrow Account, it being understood that the Escrow Agent shall be under no obligation to verify the validity of any such order of a duly appointed adjudicator, court or competent arbitral tribunal. … 7.1.1 two (2) years from and including the Commencement Dates; and 7.1.2 the date on which all Escrow Monies standing to the credit of the Escrow Account have been transferred by the escrow Agent pursuant to the delivery of one or more Transfer Notices or otherwise in accordance with the Agreement. 7.2.1 they shall extend the Agreement for such term and such additional fee as shall be agreed by the Parties at the relevant time; or 7.2.2 if no such agreement is reached pursuant to clause 7.2.1, the term of the Agreement shall automatically continue in full force and effect on a rolling basis for further Contract Years (unless terminated earlier in accordance with these terms) and for such additional fee as set out in the Fee Letter. Pursuant to the Standard Conditions Commencement Date has the meaning given to such term in condition 2.2. 3.3.1 the Escrow Agent may, but shall not be required to, take legal action to resolve any such uncertainty or conflict and in doing so may consult with legal advisers of its own choice; and 3.3.2 the Escrow Agent shall be entitled, without liability to any Transaction Party, or any other party or person for any Loss that may result, to refrain from taking any action until it receives (i) an instruction from the Transaction Parties in terms satisfactory to the Escrow Agent; or (ii) an order of an English court or other competent tribunal binding on the Escrow Agent following which the Escrow Agent shall act in accordance with such instruction or order.

Pursuant to the Standard Conditions

[24]On 20 December 2024, the day following agreement of the Escrow Agreement, SEI wrote to the Issuer cc GMC, sent by e-mail marked “URGENT”, stating:

“We refer to the Demand made on 28 October 2024 by Sumitomo Electric Industries Ltd under the Performance Bond reference 2022/IE/001790/1 and our letter dated 8 November 2024. We write to you to confirm that: 1. the Demand is unconditionally and irrevocably withdrawn; and 2. the Issuer is unconditionally relieved of all and any obligation under the Performance Bond and Bond is unconditionally released.”

We write to you to confirm that:

[25]This wording is consistent with that required by paragraph 4 of the letter of 8 November 2024. The nature of the letter of 8 November 2024

[26]As set out above, GMC submits that the letter of 8 November 2024 did not comprise an agreement between the parties but was merely a step in negotiations being undertaken “subject to contract”. Reliance is placed on the correspondence referred to in the first paragraph of the letter which, as set out above, commenced expressly “subject to contract”. As such, GMC submits that there is no agreement to pay the Escrow Sum to SEI on 7 March 2025 in the circumstances set out at numbered paragraph 6 of the letter of 8 November 2024.

[27]GMC also submits that numbered paragraph 1 of the letter of 8 November 2024 is an agreement to agree and unenforceable. Paragraph 1 comprises an undertaking by Michelmores LLP to SEI, on behalf of GMC, to pay the Escrow Sum into an agreed escrow account. As already noted, GMC relies on the time it took to conclude the Escrow Agreement.

[28]In contrast, SEI submits that numbered paragraphs 1 to 6 contain the core terms of an agreement reached between the parties, for consideration, under which GMC agreed to pay monies into escrow in return for SEI’s agreement not to seek payment from the Issuer of the monies called under the performance bond.

Law

[29]The meaning and effect of negotiations subject to contract was considered by the Supreme Court in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG(UK Production)

[2010] UKSC 14

. In delivering the judgment of the court, Lord Clarke stated: “The principles 45 The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement. … 47 We agree with Mr Catchpole's submission that, in a case where a contract is being negotiated subject to contract and work begins before the formal contract is executed, it cannot be said that there will always or even usually be a contract on the terms that were agreed subject to contract. That would be too simplistic and dogmatic an approach. The court should not impose binding contracts on the parties which they have not reached. All will depend upon the circumstances. This can be seen from a contrast between the approach of Steyn LJ in the Percy Trentham case, which was relied upon by the judge, and that of Robert Goff J in British Steel Corpn v Cleveland Bridge and Engineering Co Ltd

[1984] 1 All ER 504

, to which the judge was not referred but which was relied upon in and by the Court of Appeal. 48 These principles apply to all contracts, including both sales contracts and construction contracts, and are clearly stated in Pagnan SPA v Feed Products Ltd

[1987] 2 Lloyd's Rep 601

, both by Bingham J at first instance and by the Court of Appeal. In Pagnan it was held that, although certain terms of economic significance to the parties were not agreed, neither party intended agreement of those terms to be a precondition to a concluded agreement. The parties regarded them as relatively minor details which could be sorted out without difficulty once a bargain was struck. The parties agreed to bind themselves to agreed terms, leaving certain subsidiary and legally inessential terms to be decided later. 49 In his judgment in the Court of Appeal in Pagnan Lloyd LJ (with whom O'Connor and Stocker LJJ agreed) summarised the relevant principles in this way at page 619: "(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole... (2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary 'subject to contract' case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed... (4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled... (5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty. (6) It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge [at page 611] 'the masters of their contractual fate'. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'. The same principles apply where, as here, one is considering whether a contract was concluded in correspondence as well as by oral communications and conduct. 50 Before the judge much attention was paid to the Percy Trentham case, where, as Steyn LJ put it at page 26, the case for Trentham (the main contractor) was that the sub-contracts came into existence, not simply from an exchange of contracts, but partly by reason of written exchanges, partly by oral discussions and partly by performance of the transactions. In the passage from the judgment of Steyn LJ at page 27 quoted by the judge at para 66 he identified these four particular matters which he regarded as of importance.(1) English law generally adopts an objective theory of contract formation, ignoring the subjective expectations and the unexpressed mental reservations of the parties. Instead the governing criterion is the reasonable expectations of honest sensible businessmen.

(2) Contracts may come into existence, not as a result of offer and acceptance, but during and as a result of performance.

(3) The fact that the transaction is executed rather than executory can be very relevant. The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations and difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalised in negotiations as inessential. This may be so in both fully executed and partly executed transactions.

(4) If a contract only comes into existence during and as a result of performance it will frequently be possible to hold that the contract impliedly and retrospectively covers pre-contractual performance. 51 By contrast, in the Court of Appeal much attention was paid to the decision of Robert Goff J in the British Steel case, which had not been cited to the judge. At para 51 Waller LJ said that the factors which influenced Robert Goff J to conclude in that case that there was no binding contract apply with equal force to the factual matrix here. He thought (para 59) that, if the judge had had Robert Goff J's judgment cited to him (and/or if the no contract point had been fully developed before him) the judge would not have reached the conclusion he did. 52 The particular passage in Robert Goff J's judgment (starting at page 510G) on which Waller LJ relied reads as follows: "The real difficulty is to be found in the factual matrix of the transaction, and in particular the fact that the work was being done pending a formal sub-contract the terms of which were still in a state of negotiation. It is, of course, a notorious fact that, when a contract is made for the supply of goods on a scale and in circumstances such as the present, it will in all probability be subject to standard terms, usually the standard terms of the supplier. Such standard terms will frequently legislate, not only for the liability of the seller for defects, but also for the damages (if any) for which the seller will be liable in the event not only of defects in the goods but also of late delivery. It is a commonplace that a seller of goods may exclude liability for consequential loss, and may agree liquidated damages for delay. In the present case, an unresolved dispute broke out between the parties on the question whether CBE's or BSC's standard terms were to apply, the former providing no limit to the seller's liability for delay and the latter excluding such liability altogether. Accordingly, when, in a case such as the present, the parties are still in a state of negotiation, it is impossible to predicate what liability (if any) will be assumed by the seller for, eg defective goods or late delivery, if a formal contract should be entered into. In these circumstances, if the buyer asks the seller to commence work 'pending' the parties entering into a formal contract, it is difficult to infer from the [seller] acting on that request that he is assuming any responsibility for his performance, except such responsibility as will rest on him under the terms of the contract which both parties confidently anticipate they will shortly enter into. It would be an extraordinary result if, by acting on such a request in such circumstances, the [seller] were to assume an unlimited liability for his contractual performance, when he would never assume such liability under any contract which he entered into." (Waller LJ rightly put 'seller' in parentheses since, although the report reads 'buyer', Robert Goff J must have meant 'seller'.) 53 In that passage Robert Goff J recognised that contracts for the supply of goods on a significant scale will in all probability be subject to standard terms, which will frequently legislate, not only for the liability of the seller for defects, but also for the damages (if any) for which the seller will be liable in the event not only of defects in the goods but also of late delivery. Thus a seller may exclude liability for consequential loss, and may agree liquidated damages for delay. In the British Steel case itself there was an unresolved dispute as to whose standard terms were to apply. One set of terms provided no limit to the seller's liability for delay and the other excluded such liability altogether. We can understand why, in such a case, if the buyer asks the seller to commence work 'pending' the parties entering into a formal contract, it is difficult to infer from the seller acting on that request that he is assuming any responsibility for his performance, "except such responsibility as will rest on him under the terms of the contract which both parties confidently anticipate they will shortly enter into". By the last words, Robert Goff J was not suggesting that there was, in the case before him, any contract governing the performance rendered, merely that the parties had anticipated (wrongly in the event) that there would be. 54 There is said to be a conflict between the approach of Steyn LJ in the Percy Trentham case and that of Robert Goff J in the British Steel case. We do not agree. Each case depends upon its own facts. We do not understand Steyn LJ to be saying that it follows from the fact that the work was performed that the parties must have entered into a contract. On the other hand, it is plainly a very relevant factor pointing in that direction. Whether the court will hold that a binding contract was made depends upon all the circumstances of the case, of which that is but one. The decision in the British Steel case was simply one on the other side of the line. Robert Goff J was struck by the likelihood that parties would agree detailed provisions for matters such as liability for defects and concluded on the facts that no binding agreement had been reached. By contrast, in Pagnan Bingham J and the Court of Appeal reached a different conclusion, albeit in a case of sale not construction. 55 We note in passing that the Percy Trentham case was not a 'subject to contract' or 'subject to written contract' type of case. Nor was Pagnan, whereas part of the reasoning in the British Steel case in the passage quoted above was that the negotiations were throughout conducted on the basis that, when reached, the agreement would be incorporated in a formal contract. So too was the reasoning of the Court of Appeal in Galliard Homes Ltd v J Jarvis & Sons Ltd (1999) 71 Con LR 219. In our judgment, in such a case, the question is whether the parties have nevertheless agreed to enter into contractual relations on particular terms notwithstanding their earlier understanding or agreement. Thus, in the Galliard Homes case Lindsay J, giving the only substantive judgment in the Court of Appeal, which also comprised Evans and Schiemann LJJ, at page 236 quoted with approval the statement in Megarry & Wade, The Law of Real Property, 5th ed (1984) at pages 568-9 that it is possible for an agreement 'subject to contract' or 'subject to written contract' to become legally binding if the parties later agree to waive that condition, for they are in effect making a firm contract by reference to the terms of the earlier agreement. Put another way, they are waiving the 'subject to [written] contract' term or understanding. 56 Whether in such a case the parties agreed to enter into a binding contract, waiving reliance on the “subject to [written] contract” term or understanding will again depend upon all the circumstances of the case, although the cases show that the court will not lightly so hold. We turn to consider the facts. … "(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole... (2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary 'subject to contract' case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed... (4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled...

(5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.

(6) It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge [at page 611] 'the masters of their contractual fate'. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'. The same principles apply where, as here, one is considering whether a contract was concluded in correspondence as well as by oral communications and conduct. "The real difficulty is to be found in the factual matrix of the transaction, and in particular the fact that the work was being done pending a formal sub-contract the terms of which were still in a state of negotiation. It is, of course, a notorious fact that, when a contract is made for the supply of goods on a scale and in circumstances such as the present, it will in all probability be subject to standard terms, usually the standard terms of the supplier. Such standard terms will frequently legislate, not only for the liability of the seller for defects, but also for the damages (if any) for which the seller will be liable in the event not only of defects in the goods but also of late delivery. It is a commonplace that a seller of goods may exclude liability for consequential loss, and may agree liquidated damages for delay. In the present case, an unresolved dispute broke out between the parties on the question whether CBE's or BSC's standard terms were to apply, the former providing no limit to the seller's liability for delay and the latter excluding such liability altogether. Accordingly, when, in a case such as the present, the parties are still in a state of negotiation, it is impossible to predicate what liability (if any) will be assumed by the seller for, eg defective goods or late delivery, if a formal contract should be entered into. In these circumstances, if the buyer asks the seller to commence work 'pending' the parties entering into a formal contract, it is difficult to infer from the [seller] acting on that request that he is assuming any responsibility for his performance, except such responsibility as will rest on him under the terms of the contract which both parties confidently anticipate they will shortly enter into. It would be an extraordinary result if, by acting on such a request in such circumstances, the [seller] were to assume an unlimited liability for his contractual performance, when he would never assume such liability under any contract which he entered into." (Waller LJ rightly put 'seller' in parentheses since, although the report reads 'buyer', Robert Goff J must have meant 'seller'.)

[30]Mr Wygas relies on Generator Developments Limited v LIDL UK GmbH

[2018] EWHC Civ 396

. In that case Lewison LJ. (with whom Longmore LJ. and Rose J. agreed) considered whether, on the facts of the case, there was an agreement or understanding that if Lidl acquired property, the subject matter of the proceedings, Generator would obtain some interest in it. In giving reasons why Generator’s claim could not succeed, it was stated:

“79. Second, the proposed “joint venture” (if such it was) was expressly made “subject to contract”

. That phrase appeared (three times) in all three versions of the heads of terms that passed back and forth between the parties well before contracts were exchanged for the land purchase. The meaning of that phrase is well-known. What it means is that (a) neither party intends to be bound either in law or in equity unless and until a formal contract is made; and (b) that each party reserves the right to withdraw until such time as a binding contract is made. It follows, therefore, that in negotiating on that basis both Generator and Lidl took the commercial risk that one or other of them might back out of the proposed transaction. As Lord Walker stressed in Cobbe, equity will not intervene in a case where the parties expressly agree that a putative agreement is binding in honour only. Likewise, in the Hong Kong case the Privy Council recognised that the use of the “subject to contract” formula means that the parties are not committed either in law or in equity. Like Mr Cobbe, Generator never expected to acquire any interest in the land otherwise than by way of a legally enforceable contract. To put the point another way, where negotiations in a commercial context are expressly made “subject to contract” there is no understanding or arrangement capable of bringing the first of Chadwick LJ’s requirements into play. The mere fact that parties have agreed to engage in good faith negotiations for the making of a joint venture agreement is insufficient to support a constructive trust: Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd

[2005] EWCA Civ 1355

at [15] and [23]. In short, a “subject to contract” agreement is no agreement at all. For the same reason, the consequence of an express non-agreement is that fiduciary duties will not arise. Mr Gaunt argued that there was a difference between an understanding in principle that there would be “a” joint venture, which was not “subject to contract”, and the detailed terms of such a venture which were. He also argued that although the “subject to contract” reservation applied to the terms of the proposed joint venture agreement, it did not apply to the acquisition of the land. I do not consider that that is a sound distinction. It would subvert the well-understood meaning and effect of negotiations “subject to contract” to differentiate the acquisition of the land, the principle of a joint venture and the terms of the putative joint venture agreement in that way. Moreover, it appears that Mr Barnes purported to draw that very distinction in paragraph 67 of his witness statement; but, as the judge recorded at [45], when asked about it in cross-examination he accepted that he struggled “to get to the finer points of what’s meant there”. That goes to show that the proposed distinction is an artificial one, which would not have been in the minds of the parties at the time. Moreover, it was always intended, right from the inception of discussions, that the parties’ respective rights and obligations would be regulated by written contracts.”

[31]Mr Wygas also relies on the later decision of the Court of Appeal in Joanne Properties Limited v(1) Moneything Capital Limited,

(2) Moneything (Security Trustee Limited

[2020] EWCA Civ 1541

. As set out in the judgment of Lewison LJ., with whom Rose and Stuart Smith LJJ. agreed, the issue in the appeal was whether the parties had entered into a binding contract of compromise. Before noting what the Supreme Court said at paragraphs 47 and 56 of RTS,Lewison LJ. reviewed earlier authorities:

“17. Once negotiations have begun “subject to contract”, in the ordinary way that condition is carried all the way through the negotiations: Sherbrooke v Dipple (1981) 41 P & CR 173. As Lord Denning MR explained: “But there is this overwhelming point: Everything in the opening letter was “subject to contract.”

All the subsequent negotiations were subject to that overriding initial condition. ” 18. In the course of the judgments both Lord Denning MR and Templeman LJ approved the proposition formulated by Brightman J in Tevanan v Norman Brett (Builders) Ltd (1972) 223 EG 1945 that:

“parties could get rid of the qualification of ‘subject to contract’ only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied. ” 19. Templeman LJ also approved a further passage of Brightman J’s judgment in which he said: “… when parties started their negotiations under the umbrella of the “subject to contract” formula, or some similar expression of intention, it was really hopeless for one side or the other to say that a contract came into existence because the parties became of one mind notwithstanding that no formal contracts had been exchanged. Where formal contracts were exchanged, it was true that the parties were inevitably of one mind at the moment before the exchange was made. But they were only of one mind on the footing that all the terms and conditions of the sale and purchase had been settled between them, and even then the original intention still remained intact that there should be no formal contract in existence until the written contracts had been exchanged.” 20. Templeman LJ went on to say: “Accordingly, in my judgment, the judge, with great respect, fell into the error which was adumbrated by Brightman J, namely of thinking that because parties got near a contract or conveyance, because parties assumed that they would go happily on until matters had become binding, therefore the “subject to contract” qualification either ceased to have effect or was replaced by a new contract. That, in my judgment, is not the position. It is always the case that in “subject to contract” negotiations one side or both from time to time speak as though there was a contract or would be a contract, and that is because everybody looks on the bright side and thinks a sale is going to take place. The fact of the matter is that for very good reasons the “subject to contract” formula enables one to see at once whether there is or is not a contract—either a contract exchanged or conveyance executed and delivered—or whether parties are in the negotiation stage. Once one gets away from principle, then all is difficulty, and reliance on odd conversations and letters produces uncertainty in law.” ” “But there is this overwhelming point: Everything in the opening letter was “subject to contract.”

All the subsequent negotiations were subject to that overriding initial condition. ” “parties could get rid of the qualification of ‘subject to contract’ only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied. ” “… when parties started their negotiations under the umbrella of the “subject to contract” formula, or some similar expression of intention, it was really hopeless for one side or the other to say that a contract came into existence because the parties became of one mind notwithstanding that no formal contracts had been exchanged. Where formal contracts were exchanged, it was true that the parties were inevitably of one mind at the moment before the exchange was made. But they were only of one mind on the footing that all the terms and conditions of the sale and purchase had been settled between them, and even then the original intention still remained intact that there should be no formal contract in existence until the written contracts had been exchanged.” “Accordingly, in my judgment, the judge, with great respect, fell into the error which was adumbrated by Brightman J, namely of thinking that because parties got near a contract or conveyance, because parties assumed that they would go happily on until matters had become binding, therefore the “subject to contract” qualification either ceased to have effect or was replaced by a new contract. That, in my judgment, is not the position. It is always the case that in “subject to contract” negotiations one side or both from time to time speak as though there was a contract or would be a contract, and that is because everybody looks on the bright side and thinks a sale is going to take place. The fact of the matter is that for very good reasons the “subject to contract” formula enables one to see at once whether there is or is not a contract—either a contract exchanged or conveyance executed and delivered—or whether parties are in the negotiation stage. Once one gets away from principle, then all is difficulty, and reliance on odd conversations and letters produces uncertainty in law.” ”

[32]The principles set out in the authorities to which I have been referred were not seriously in issue. It is clear that negotiations started “subject to contract” can conclude without that condition both by express agreement or by implication that the condition was no more to be applied or by waiving the same. For the purposes of this judgment, I do not consider the extent of any difference in this context between the requirements for waiver and those leading to a necessary implication that parties were no longer proceeding “subject to contract”. In all cases what must be borne in mind, as emphasised in RTS, is that the court will not lightly hold that such a waiver exists or implication can be made.

Analysis

[33]Applying the principles set out above to the facts of this case I am unable to accept GMC’s submission that no agreement was reached between the parties until the conclusion of the Escrow Agreement on 19 December 2024. It is clear from the opening paragraph of the letter of 8 November 2024, confirming acceptance of GMC’s offer, that GMC considered a concluded agreement had been reached in the correspondence to which reference is made and was no longer proceeding “subject to contract”. Either expressly or by implication this removes any prior “subject to contract” condition. Consistent with such a conclusion, the letter contains no such heading. Indeed such a heading appears on none of the correspondence passing between the parties after SEI purports to accept the 7 November counter-offer in its e-mail of 12:37 on 8 November 2024. Further the letter of 8 November 2024 no longer contains the reservation of rights which was stated at the conclusion of the letter of 7 November 2024. This is also consistent with the parties having reached agreement as to how they would regulate their relationship with regard to the monies demanded under the performance bond.

[34]Having noted the headings to the correspondence referred to in the first paragraph of the letter of 8 November 2024 I make clear that this is in no way determinative on its own if they form part of a negotiation which commenced “subject to contract”. Subsequent exchanges are not required to bear that heading. Indeed it is unclear why the confirmation email of 8 November 2024 timed at 12:37 was marked “without prejudice save as to costs.” It may be a reflection that the terms of the timing of the undertaking were yet to be agreed and that SEI believed it would have some protection on costs in having made clear that the balance of the terms were accepted. It may be a reflection of the e-mail to which it responded being headed “Without prejudice save as to costs and subject to contract”. Whatever the reason, the position on the undertaking having been clarified later that day, SEI’s acceptance of the same contained no reservation, neither was it headed “subject to contract”.

[35]The background context to this agreement was an anticipated imminent payment by the Issuer. That urgency is reflected in numbered paragraph 3 of the letter of 8 November 2024 which, upon Michelmores LLP providing an undertaking to pay the Escrow Sum into an agreed escrow, requires SEI to immediately write to the Issuer to confirm that the parties are looking to reach a compromise and the payment is not to be made.

[36]Consistent with the existence of such a requirement, by e-mail marked “URGENT” and sent on 8 November 2024 to the Issuer, cc GMC, SEI referred to the demand and advised the Issuer that SEI and GMC:

“are looking to reach a compromise and the payment under the Performance Bond is not to be made until further instruction”

. That wording reflects the wording in numbered paragraph 3 of the letter of the 8 November 2024.It will be noted that the trigger for the letter to the Issuer is not the establishment of the Escrow Account but an undertaking to pay the Escrow Sum into an agreed escrow account. Similarly, as noted above, the letter to the Issuer on 20 December 2024 was consistent with the requirements of numbered paragraph 4.

[37]It is also noteworthy that in none of the exchanges after 8 November 2024 was it suggested that the conclusion of the Escrow Agreement was a pre-condition to a binding agreement on the terms of the letter of 8 November 2024. The correspondence concerning the Escrow Account was a separate chain of negotiations.

[38]Whilst not at the forefront of the submissions made by Mr Wygas, I am similarly unable to accept that paragraph 1 of the letter of 8 November 2024 is unenforceable, being an agreement to agree. Numbered paragraph 1 is an undertaking to pay a sum into an agreed Escrow Account on terms set out in the letter itself. I see no difficulty with this. There was no reason to believe the Escrow Account would not be agreed and, as set out above, agreement was reached on 19 December 2024.

[39]Mr Wygas draws attention to numbered paragraphs 2 and 4 of the letter of 8 November 2024 which he notes, correctly, require the existence of an Escrow Account. I do not see that the absence of an agreed Escrow Account as at 8 November 2024 assists GMC in demonstrating that there was no concluded contract in the form of the letter of that date. Indeed, numbered paragraph 2 recognises that the obligation is one yet to be performed as apparent from the word “within one business day of the establishment of the Escrow Account”.

[40]It follows that SEI’s alternative case that an agreement was concluded by part-performance in the letter being written to the Issuer pursuant to numbered paragraph 3 does not strictly arise. SEI gave good consideration for the agreement in agreeing to compromise, on terms, its right to call for payment by the Issuer of the Performance Bond. Had that not been the case, then the part performance would have been relevant as concluding the agreement.

[41]In considering the period subsequent to the letter of 8 November 2024, Mr Selby referred to a letter from Pinsent Masons, then acting for GMC, to Watson Farley & Williams LLP. Paragraph 2 of that letter, dated 10 February 2025, stated:

“We refer to the agreement between GMC and Sumitomo in respect of the payment of €3,936,366 to an escrow account on the terms set out in the Michelmores’ letter dated 7 November 2024 (copy enclosed) (“the Escrow Agreement”).”

[42]It was submitted that those acting for GMC considered that to be an agreement in the terms of the letter of 8 November 2024 (it being common ground before me that the reference to the letter of 7 November 2024 should be to 8 November 2024). Again, I am not assisted by the views expressed. The observation appears more of a “jury point” than one which is directly relevant as to the question of whether a concluded contract has been reached. I also note that two days later, on 12 February 2025, Pinsent Masons, having apparently received further instructions, stated:

“We have identified that the terms set out in Michelmores’ letter dated 7 November 2024 are superseded by the Executed Escrow Agreement and consequentially the Escrow Sum will not be automatically transferred to Sumitomo on 7 March 2025. It is therefore not necessary for the parties to agree an extension to the safe keeping of the Escrow Sum of the Escrow Agent.”

[43]This reflects the position submitted before me to which I now turn.

Was the agreement in the letter of 8 November 2024 superseded by the Escrow Agreement?

[44]Whilst Pinsent Masons’ letter of 12 February 2025 does not identify the basis by which the letter dated 7 [sic] November 2024 was superseded, GMC relies on condition 14.2 of the Standard Conditions of the Escrow Agreement. As set out above, this provides: Neither Party shall rely on, nor shall have any remedy in respect of any agreement by any other Party or any other person or party, except as expressly set out in the Agreementand in respect of which its sole remedy shall be for breach of contract. Any such promise, assurance, agreement, statement, warranty, undertaking or representation, including any advertising or description contained in any catalogue or brochure, is hereby excluded and withdrawn.

[45]I do not read condition 14.2 as extending to the agreement in the letter of 8 November 2024 in the manner submitted. As part of the Standard Conditions, condition 14.2 relates to the operation of the Escrow Account. This is consistent with condition 2.3 which provides that the Agreement, as defined, shall constitute the whole agreement between GMC and SEI as the Transaction Parties and the Escrow Agent.

[46]The Escrow Agreement expressly recognises the possibility of Supplemental Agreements, being any other agreements between one or both of the Transaction Parties which relate to the underlying reason for entering into the Agreement. This would include the agreement in the letter of 8 November 2024. However, condition 5.2 is an express acknowledgement and agreement by the Parties that the Escrow Agent is not bound by any Supplemental Agreement nor shall the Escrow Agent be treated as having actual constructive or implied knowledge of any of the terms of any Supplemental Agreement. This provision is wholly consistent with the preceding condition 5.1 that the responsibilities of the Escrow Agent under the Agreement are administrative only and are to be treated as separate and distinct from any obligations agreed in the letter of 8 November 2024.

[47]It should also be noted that clause 10 of the Escrow Agreement provides that the parties shall submit to the exclusive jurisdiction of the courts of England and Wales. This suggests that the provisions of clause 4.1.2 of the same agreement, referring to an order of a duly appointed adjudicator, court or competent arbitral tribunal, recognises the continuing effect of the letter of 8 November 2024 and further supports the construction of the Escrow Agreement as having a more limited scope than submitted by GMC.

[48]If, contrary to that interpretation, there is a conflict between condition 14.2 of the Standard Conditions and the Escrow Agreement then, pursuant to condition 2.4 of the Standard Conditions, the Escrow Agreement takes precedence. In that regard, Recital (B) to the Escrow Agreement expressly provides that the appointment of the Escrow Agent is further to the Supplemental Agreements. This is consistent with the Escrow Agreement providing the terms of the security to be provided to further what has been agreed in the Supplemental Agreement of 8 November 2024.

[49]Condition 19.5 of the Standard Conditions set out above reflects this interpretation providing an express agreement between the Parties that the arrangements set out in the Standard Conditions are designed solely to provide a mechanism for the deposit in escrow of, and the release from escrow of, the Escrow Monies in the manner contemplated by the Agreement.

How is the 8 November Agreement to be read with the Escrow Agreement?

[50]In large part this has already been addressed, however, a specific issue arises as to the effect of clause 4.1 of the Escrow Agreement. As set out above, this provides for circumstances in which the Escrow Agent shall transfer some or all of the Escrow Monies. It is in terms different to those set out at numbered paragraph 6 of the letter of 8 November 2024 and the issue of interpretation which arises is whether the parties should be taken to have agreed that the provisions of paragraph 6 are superseded by the terms subsequently agreed on 19 December 2024.

[51]I can deal with this shortly. Whilst numbered paragraph 6 and clause 4.1 are in different terms, they are not incompatible. Clause 4.1 of the Escrow Agreement anticipates monies being paid out either, under clause4.1.1 by agreement between GMC and SEI or, in the absence of agreement, under clause

4.1.2 by an order of a duly appointed adjudicator, court or competent arbitral tribunal containing a declaration as to the Transaction Parties’ respective entitlement to the Escrow Monies in the Escrow Account.

[52]Numbered paragraph 6 provides for transfer on agreement between the parties. It also provides for release pursuant to a decision by a duly appointed adjudicator, an order of a court or competent arbitral tribunal on the issue of GMC’s claims for extensions of time, and SEI’s claim for delay damages.

[53]On the basis, as I find, that the letter of 8 November 2024 is a concluded agreement between the parties and falls within the definition of a Supplemental Agreement for the purposes of the Escrow Agreement, the reference to the Transaction Parties’ respective entitlement as to the Escrow Monies at clause 4.1.2 can and should be read as referring to numbered paragraph 6 of the letter of 8 November 2024. By paragraph 6, that respective entitlement is the sum that is consequential on the resolution of the issue of GMC’s claims to extensions of time and SEI’s claims for delay damages.

[54]Similarly, whilst clause 4.1 of the Escrow Agreement makes no reference to 7 March 2025 whether in the terms of paragraph 6 of the letter of 8 November 2024 or at all, that is unnecessary. In the event that there has been no agreement between the parties or decision by a duly appointed adjudicator or commencement of court or arbitral proceedings on the Claims by 7 March 2025 then this state of affairs should be something which is capable of agreement such that the Transaction Parties can instruct the Escrow Agent accordingly to pay the Escrow Sum to Sumitomo under clause 4.1.1. Should such agreement, reflected in a written instruction by both Parties, prove impossible, the dispute as to the state of affairs on 7 March 2025 would be determined by order of a duly appointed adjudicator, court or competent arbitral tribunal. Both these two events are anticipated by clauses4.1.1 and

4.1.2 respectively. That resolution is to what the Part 8 proceedings before me are directed.

[55]It also follows that, contrary to the submission made by Mr Wygas, I do not read numbered paragraph 6 as addressing release of the Escrow Sum by Michelmores LLP. Such a construction is unsupportable having regard to numbered paragraphs 1, 2 and 4 which anticipate and provide for the Escrow Sum being paid by Michelmores into the Escrow Account.

[56]It also follows that I reject a construction of clause 4.1.2 of the Escrow Agreement as requiring determination of the Parties’ respective claims in their totality. The entitlement relates to the Claims as defined in paragraph 6 of the letter of 8 November 2024.

[57]Finally I turn to the provisions of clause 7 of the Escrow Agreement which, as set out above, address termination. The effect of clause 7.2 is that, absent agreement between the Parties, the Escrow Agreement shall automatically continue in full force on a rolling basis on the expiration of two years from the Commencement Date of 19 December 2024. The potential for the Escrow Account to continue in perpetuity is not of particular assistance on the issue of interpretation. Whilst it is right to observe that the letter of 8 November 2024 anticipates the Escrow Sum being paid out on 7 March 2025, that is only in certain specified circumstances. Absent those circumstances, the Escrow Sum remains in the Escrow Account, and so provision needs to be made for that account to continue. That is the purpose of clause 7 of the Escrow Agreement.

The meaning and effect of paragraph 6 of the 8 November Agreement

[58]I have already rejected GMC’s submission that, if the letter of 8 November 2024 is a binding agreement between the Parties, paragraph 6 governs release of the Escrow Sum by Michelmores LLP. I therefore turn to consider whether paragraph 6 has been complied with and if so, what are the consequences.

[59]GMC relies on the Part 7 proceedings issued on 5 March 2025 as precluding the payment of the Escrow Sum to SEI. As set out above, those proceedings sought declaratory relief as to the entitlement of SEI to levy liquidated damages. Given the definition of Claims in numbered paragraph 6 comprises GMC’s claims for extensions of time and SEI’s claims for delay damages, it is clear that GMC has issued court proceedings on the Claims by Friday, 7 March 2025.

[60]At paragraphs 77.1 to 77.4 of its skeleton argument, SEI submits that GMC had no genuine intention of pursuing those proceedings and as such, there was no compliance with numbered paragraph 6 as properly construed, alternatively that the proceedings were an abuse. At the outset of his oral submissions, Mr Selby made clear that this part of SEI’s case was not pursued. Again, that was a sensible stance, the result of which there is no need to look in particular detail at the Part 7 proceedings. I would nevertheless observe that the Particulars of Claim served by GMC extend to 77 pages and 409 paragraphs, advancing claims for variations and extension of time. The claim for extension of time is to the Time for Completion such that there is no liability for liquidated damages (paragraphs 403 and 404 refer).

[61]SEI submits that GMC has not satisfied the requirements of numbered paragraph 6 on the basis that the reference to “commencement of court or arbitral proceedings on the Claims” meant such proceedings as were applicable to the Claims. On the basis that disputes under the sub-contract are subject to the arbitration agreement at clause 20.12, SEI submits that those were the proceedings which should have been issued.

[62]I am unable to accept that submission. The parties were at liberty to agree any criteria to prevent payment of the Escrow Sum to SEI. They need not even have required the issue of proceedings, arbitral or otherwise. It follows that whilst the commencement of court proceedings on the Claims may be liable to be stayed to arbitration, that is no answer to GMC satisfying one of the criteria agreed by the parties. In any event, a stay does not have the effect of making such proceedings void ab initio.The proceedings were validly commenced, they continued but would be stayed to arbitration on an appropriate application. It is not suggested that, absent any stay, the Court would not have jurisdiction to determine the Claims. The Court clearly has that jurisdiction.

[63]There is nothing in numbered paragraph 6 which requires arbitration proceedings to be commenced to the exclusion of court proceedings. I do not consider the reference to court proceedings was to allow for the future possibility of the parties agreeing to Court as the proper forum for the Claims, as submitted by SEI. Indeed, there would be no need for such agreement. If, when court proceedings are issued, SEI wished to have the matter resolved in Court, it could simply allow the proceedings to proceed without making an application under section 9 of the Arbitration Act 1996. Similarly consistent with the anticipation that numbered paragraph 6 may be satisfied other than simply by arbitration proceedings, clause 4.1.2 of the Escrow Agreement anticipates release of the Escrow Monies on receipt of an order from a duly appointed adjudicator, a court or competent arbitral tribunal.

[64]For these reasons I conclude that, in issuing its Part 7 proceedings, on 5 March 2025 GMC has complied with the provisions of numbered paragraph 6 of the letter of 8 November 2024 with the effect that the Escrow Sum does not become payable to SEI under the provisions of that paragraph.

Is SEI estopped from denying numbered paragraph 6 has been satisfied?

[65]Given my decision that paragraph 6 has been complied with by GMC, the question of estoppel does not strictly arise for determination. I address it for the sake of completeness.

[66]In his first witness statement, Steven Carey states that out of an abundance of caution, GMC commenced a Part 7 claim on 5 March 2025. That abundance of caution referred to issuing proceedings before 7 March 2025 notwithstanding GMC’s position that the deadline of 7 March 2025 was not incorporated into the Escrow Agreement.

[67]Mr Carey goes on in his evidence as follows:

“4.4 Further, in correspondence for WFW, in relation to this matter, it referred to court proceedings, which is at odds with the position that SEI is taking now. 4.4.1 WFW’s letter dated 19 February 2025 states: “Paragraph 6 of the Parties Agreement clearly identified that the Escrow Sum is only to be released to either GMC or Sumitomo pursuant to an agreement between the Parties, a decision by a duly appointed adjudicator, or an order of a court or competent arbitral tribunal on the issue of the Claims”

(emphasis added) 4.4.2 WFW’s letter dated 5 March 2025 states:

“Paragraph 6 of the Parties Agreement clearly identifies that the Escrow Sum is only to be released to either GMC or Sumitomo pursuant to an agreement between the Parties, a decision by a duly appointed adjudicator, or an order of a court or competent arbitral tribunal on the issue of the Claims if none of these events have occurred by Friday 7 March 2025.”

(emphasis added) 4.5 GMC replied [sic] on WFW representations that court proceedings were appropriate when it issued its Part 7 claim.” 4.4.1 WFW’s letter dated 19 February 2025 states:

“Paragraph 6 of the Parties Agreement clearly identified that the Escrow Sum is only to be released to either GMC or Sumitomo pursuant to an agreement between the Parties, a decision by a duly appointed adjudicator, or an order of a court or competent arbitral tribunal on the issue of the Claims”

(emphasis added) 4.4.2 WFW’s letter dated 5 March 2025 states:

“Paragraph 6 of the Parties Agreement clearly identifies that the Escrow Sum is only to be released to either GMC or Sumitomo pursuant to an agreement between the Parties, a decision by a duly appointed adjudicator, or an order of a court or competent arbitral tribunal on the issue of the Claims if none of these events have occurred by Friday 7 March 2025.”

(emphasis added)

[68]It is that evidence on which GMC seeks to establish an estoppel by representation.

[69]There are a number of difficulties with this estoppel claim. It is unclear whether the abundance of caution and reliance is that of GMC or Charles Russell Speechlys as the firm having conduct on behalf of GMC. Whilst the letters were written directly to GMC, on the understanding that Pinsent Masons was no longer acting on GMC’s behalf, it must be assumed that the Part 7 proceedings were issued on the advice of Charles Russell Speechlys. It is Mr Carey’s name which appears in the Statement of Truth on the Claim Form.

[70]Considering the first letter in time of 19 February 2025, paragraph 10 of that letter commences:

“It is plain that the parameters of any dispute will be set by the notice of adjudication or arbitration.”

[71]This is a clear indication that Watson Farley & Williams considered that any dispute would ultimately need to be resolved by arbitration rather than court proceedings. This immediately follows the paragraph relied on which, in my judgment, does no more than recite the terms of paragraph 6 of the letter of 8 November 2024, as it purports to do.

[72]Given that the letter of 5 March 2025 refers back to the letter of 19 February 2025, the position as to any representation remains unaltered.

The law

[73]The written submissions served by the parties did not address the issue of estoppel in any detail. Subsequent to the oral hearing, the parties agreed that the relevant test for estoppel by representation is that set out in Chitty on Contracts 36th Ed. between paragraphs 7-05 and 7-15. By reference to that agreed statement of law, I find the claim for estoppel fails for a number of reasons. Firstly, the representation alleged is not sufficiently clear and unqualified if, contrary to my reading of the letters relied on, the representation alleged is made at all. Paragraph 10 of the letter of 19 February 2025, taken at its lowest, robs paragraph 9 of any claim to be a clear and unqualified representation as alleged by GMC. Secondly, if the representation alleged has been made, I do not consider it was intended to be relied upon. That intention, assessed objectively, does not follow from a fair consideration of both letters and, in particular, paragraph 10 of the letter of 19 February 2025 to which letter the subsequent letter of 5 March 2025 also refers.

[74]I make clear that I am rejecting the claim for estoppel without making any finding as to reliance by Mr Carey or GMC. As indicated at the outset of argument, I had difficulty in seeing how such a finding could be made in these Part 8 proceedings and having considered his position, Mr Selby made clear that he would wish to cross-examine Mr Carey as to his evidence on reliance should the issue arise for determination.

[75]For these reasons, I would have rejected GMC’s case on estoppel by representation.

Adjudication proceedings

[76]I mention these proceedings to make clear the extent to which they are relevant to the matters before me.

[77]On 25 June 2025, SEI issued adjudication proceedings. The dispute referred related to SEI’s entitlement to delay damages from GMC. As such, these proceedings clearly post-dated the date of 7 March 2025 referred to at paragraph 6 of the letter of 8 November 2024.

[78]Robert Evans, as Adjudicator, provided his Decision on 17 October 2025, corrected on 22 October 2025. As set out between paragraphs 71 and 74 of the Decision, SEI had chosen not to refer what was described as “Pre-PC Delay” to adjudication. That is the period between the time for completion stated in the sub-contract of 15 June 2024 and the actual physical completion achieved and certified by SEI on 4 July 2024, 52 days after the planned date of 13 May 2024. It is this period of 52 days which is used in the calculation of delay for the purposes of delay damages.

[79]As set out at paragraph 418(i) of his Decision, Mr Evans decided that SEI had no entitlement to delay damages as claimed. Further, the Taking-Over Certificate was opened up and revised with the Taking-Over Date adjusted to 31 July 2024.

[80]The precise meaning and effect of this Decision was in issue before me because, on GMC’s case, the rejection of SEI’s delay case reduced the maximum sum that could have been payable to SEI under the operation of paragraph 6 of the letter of 8 November 2024.

[81]I understand that a further adjudication is progressing between the parties with a decision expected sometime in April 2026. I do not have the details of that adjudication, but understand from counsel that one of the issues is the meaning and extent of Mr Evans’ Decision of October 2025. Neither Party asks this Court on the present applications to determine disputed issues of extensions of time and liquidated damages.

[82]As a result of the strikeout of paragraph 6.2 of the statement of Steven Carey, GMC does not seek a determination of the sum due and payment out from the Escrow Account. SEI sought the Escrow Sum on the basis that, by 7 March 2025, GMC had not satisfied the conditions in paragraph 6 of the letter of 8 November 2024 with the result that the Escrow Sum became payable to SEI. I have found against SEI on that point.

[83]In those circumstances, I do not address whether SEI’s decision not to put the totality of its Delay Claim before the Adjudicator affects the sum that might otherwise be payable to SEI under the provisions of the agreement of 8 November 2024.

SEI’s application to stay the Part 7 proceedings

[84]I turn, finally, to the stay application.

[85]Section 9 of the Arbitration Act 1996 provides:

“(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter. (2) ... (3) ... (4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.”

[86]SEI seeks to stay the Part 7 proceedings to arbitration. It is not in issue that the sub-contract between the parties contains an arbitration clause, at clause 20.12. Two questions arise for determination. Firstly, whether the Part 7 proceedings fall within the definition of a Dispute and if so, whether on a proper construction of the agreements between the parties, the arbitration clause has been overtaken by the Escrow Agreement and in particular the exclusive jurisdiction provision at clause 10.1.

The law

[87]In Fiona Trust & Holding Corporation v Privalov

[2007] UKHL 40

, Lord Hoffmann set out the proper interpretation of arbitration agreements, in particular, between paragraphs 11 and 13:

“11. With that background, I turn to the question of construction. Your Lordships were referred to a number of cases in which various forms of words in arbitration clauses have been considered. Some of them draw a distinction between disputes “arising under” and “arising out of” the agreement. In Heyman v Darwins Ltd [1942 ] AC 356, 399 Lord Porter said that the former had a narrower meaning than the latter but in Union of India v E B Aaby’s Rederi A/S [1975] AC 797 Viscount Dihorne, at p. 814, and Lord Salmon, at p. 817, said that they could not see the difference between them. Nevertheless, in Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd [1988] 2 Lloyd’s Rep 63, 67, Evans J said that there was a broad distinction between clauses which referred “only those disputes which may arise regarding the rights and obligations which are created by the contract itself” and those which “show an intention to refer some wider class or classes of disputes.”

The former may be said to arise “under” the contract while the latter would arise “in relation to” or “in connection with” the contract. In Fillite (Runcorn) Ltd v Aqua-Lift (1989) 26 Con LR 66, 76 Slade LJ said that the phrase “under a contract” was not wide enough to include disputes which did not concern obligations created by or incorporated in the contract. Nourse LJ gave a judgment to the same effect. The court does not seem to have been referred to Mackender v Feldia AG

[1967] 2 QB 590

, in which a court which included Lord Denning MR and Diplock LJ decided that a clause in an insurance policy submitting disputes “arising thereunder” to a foreign jurisdiction was wide enough to cover the question of whether the contract could be avoided for non-disclosure. 12. I do not propose to analyse these and other such cases any further because in my opinion the distinctions which they make reflect no credit upon English commercial law. It may be a great disappointment to the judges who explained so carefully the effects of the various linguistic nuances if they could learn that the draftsman of so widely used a standard form as Shelltime 4 obviously regarded the expressions “arising under this charter” in clause 41(b) and “arisen out of this charter” in clause 41(c)(1)(a)(i) as mutually interchangeable. So I applaud the opinion expressed by Longmore LJ in the Court of Appeal (at paragraph 17) that the time has come to draw a line under the authorities to date and make a fresh start. I think that a fresh start is justified by the developments which have occurred in this branch of the law in recent years and in particular by the adoption of the principle of separability by Parliament in section 7 of the 1996 Act. That section was obviously intended to enable the courts to give effect to the reasonable commercial expectations of the parties about the questions which they intended to be decided by arbitration. But section 7 will not achieve its purpose if the courts adopt an approach to construction which is likely in many cases to defeat those expectations. The approach to construction therefore needs to be re-examined. 13. In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction. As Longmore LJ remarked, at para 17:

“if any businessman did want to exclude disputes about the validity of a contract, it would be comparatively easy to say so.” ”

[88]This approach was repeated in Sebastian Holdings Inc v Deutsche Bank AG

[2010] EWCA Civ 998

where the Court of Appeal considered the proper construction of jurisdiction clauses in a series of agreements between a bank and its customer, most of which provided for the jurisdiction of the English courts with one providing for the jurisdiction of the courts of New York. In his judgment (with which Pitchford and Mummery LJJ. agreed), Thomas LJ. set out the applicable principles as follows:

“39. It is clear that in construing a jurisdiction clause, a broad and purposive construction must be followed: Donohue v Armco [2001] UKHL 64; [2002] CLC 440 ; Fiona Trust & Holding Corp v Privalov [2007] EWCA Civ 20; [2007] 1 CLC 144 affirmed sub nom Premium Nafta Products v Fili Shipping [2007] UKHL 40; [2007] 2 CLC 553 where Lord Hoffmann observed at paragraph 7; ‘If, as appears to be generally accepted, there is no rational basis upon which businessmen would be likely to wish to have questions of the validity or enforceability of the contract decided by one tribunal and questions about its performance decided by another, one would need to find very clear language before deciding that they must have had such an intention.’ 40. The Supreme Court emphasised in Re Sigma Finance Corp [2009] UKSC 2 the need, when looking at a complex series of agreements, to construe an agreement which was part of a series of agreements by taking into account the overall scheme of the agreements and reading sentences and phrases in the context of that overall scheme. 41. It is generally to be assumed on these principles that just as parties to a single agreement do not intend as rational businessmen that disputes under the same agreement be determined by different tribunals, parties to an arrangement between them set out in multiple related agreements do not generally intend a dispute to be litigated in two different tribunals. 42. However, where there are multiple related agreements, the task of the court in determining whether a dispute falls within the jurisdiction clauses of one or more related agreements, depends upon the intention of the parties as revealed by the agreements against these general principles: see Collins LJ in Satyam Computer Services Ltd v Upaid Systems Ltd [2008] EWCA Civ 487; [2008] 2 CLC 864 at paragraph 93 and UBS at paragraph 83. Having considered in detail a number of authorities on this issue, Thomas LJ concluded at paragraph 49: ‘If, as appears to be generally accepted, there is no rational basis upon which businessmen would be likely to wish to have questions of the validity or enforceability of the contract decided by one tribunal and questions about its performance decided by another, one would need to find very clear language before deciding that they must have had such an intention.’ 49. The decisions in Credit Suisse and UBS are both examples of the process of construction that has to be undertaken, using the well recognised general principles and tools of contractual construction in the context of the principles relating to different jurisdiction clauses in related agreements. The overall task of the court is summarised in the 2010 supplement to Dicey, Morris and Collins at paragraph 12–094: ‘But the decision in Fiona Trust has limited application to the questions which arise where parties are bound by several contracts which contain jurisdiction agreements for different countries. There is no presumption that a jurisdiction (or arbitration) agreement in contract A, even if expressed in wide language, was intended to capture disputes under contract B; the question is entirely one of construction … The same approach to the construction of potentially-overlapping agreements on jurisdiction (but there will, in this respect, be no difference between the construction of agreements on jurisdiction, arbitration agreements and service of suit clauses) was taken in [ UBS ] … In the final analysis, the question simply requires the careful and commercially-minded construction of the various agreements providing for the resolution of disputes, the point of departure being that agreements which appear to have been deliberately and professionally drafted are to be given effect so far as it is possible and commercially rational to do so, even where this may result in a degree of fragmentation in the resolution of disputes. It may be necessary to enquire under which of a number of inter-related contractual agreements a dispute actually arises; this may be answered by seeking to locate its centre of gravity. The same approach, namely to focus on the commercially-rational construction, governs the interpretation of agreements on jurisdiction as exclusive or non-exclusive, and of agreements which specifically provide that the parties will not take objection to the bringing of proceedings if proceedings are brought in more courts than one.’ (omitting the citation of the authorities)”

[89]The authorities on this issue were again reviewed in Surrey County Council v Suez Recycling and recovery Surrey Limited

[2021] EWHC 2015 (TCC)

where Alexander Nissen QC, sitting as a Judge of the High Court, also referred to the Decision of Coulson J., as he then was, in Costain Ltd v Tarmac Holdings

[2017] EWHC 319

, noting that the “one-stop” jurisdiction, whilst a useful starting point, was not decisive.

[90]I do not propose to add to the foregoing analysis. I will adopt the suggested careful and commercially minded construction of the agreements noting that a one-stop jurisdiction is not decisive.

Analysis

[91]Applying that approach, it is clear that the majority of the declaratory relief sought by GMC falls within the scope of the arbitration clause. The only question is whether that arbitration clause is wide enough to cover the declaratory relief at paragraph 409.3 that GMC is entitled to EUR3,351,158.20 held in escrow, and SEI is not entitled to any of the funds held in escrow. I consider this is a dispute arising between the parties in connection with the sub-contract. In consequence, the totality of the Part 7 proceedings fall within the scope of the arbitration agreement at clause 20.12.1. Further, such a construction is consistent with the starting assumption that the parties are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal. I reject the submission that the exclusive jurisdiction clause at clause 10.1 in the Escrow Agreement supersedes the arbitration clause in the sub-contract. For the reasons set out above, it does not purport to do so. The Escrow Agreement is directed to the administration of the Escrow Sum. Further, as already observed, clauses 4.1.2 and 4.2.2 anticipate that some disputes between SEI and GMC may be resolved by arbitration.

[92]I similarly reject GMC’s characterisation of the Escrow Agreement as a settlement agreement of the nature described by Popplewell J. in Monde Petroleum S.A. v Westernzagros Ltd

[2015] EWHC 67 (Comm)

at paragraph 38. As submitted by Mr Selby, the Escrow Agreement is more in the nature of a security agreement. It settles nothing.

[93]It follows that I reject GMC’s submission that the effect of clauses 4.1.2 and 10.1 of the Escrow Agreement and condition 20.1 of the Standard Conditions is to provide for the exclusive jurisdiction of the courts of England and Wales in relation to such a dispute. Having expressly agreed arbitration in the sub-contract, it is improbable that the dispute resolution clauses in the Escrow Agreement, however expressed, were intended to capture disputes more naturally seen as arising under that sub-contract.

[94]GMC submits in support of its construction that if GMC was not able to bring its Part 7 claim then it would rob the reference to “court” in clause 4.1.2 of the Escrow Agreement of all meaning which simply cannot be right. I disagree. Clause 4.1.2 anticipates reference to adjudication, court or competent arbitral tribunal. As such, the same point could be made in relation to removing the ability to arbitrate, perhaps more so given that this is the parties’ originally agreed method of dispute resolution. Further, given, as I have decided, the letter of 8 November 2024 comprises an enforceable agreement between the parties, that letter similarly refers at numbered paragraph 6 to a decision of a duly appointed adjudicator or an order of a court or competent arbitral tribunal. At the date of that agreement, there was no concluded Escrow Agreement.

[95]It follows from my analysis that the Part 7 proceedings are within the scope of an enforceable arbitration clause in the sub-contract between the parties and the grant of a stay is mandatory.

Conclusion

[96]For the reasons set out above: i) Paragraph 6.2 of the witness statement of Steven Carey dated 24 November 2025 is struck out pursuant to CPR Rule 3.4(2)(a). ii) I decline to make the declarations sought by GMC at paragraphs25.1 to 25.3 inclusive of the Particulars of Part 8 Claim. The declaratory relief sought at paragraphs

25.2 and

25.3 proceeds on an assumption that GMC had failed by 7 March 2025 to commence court or arbitral proceedings. For the reasons set out above, GMC, in issuing Part 7 proceedings on 5 March 2025 satisfied the requirements of numbered paragraph 6 of the letter of 8 November 2024. As such, that declaratory relief falls away.

[97]It follows that I similarly reject the declaratory relief sought by SEI at paragraph 34 of the Part 8 Defence and Counterclaim that, because the Claimant had not, by 7 March 2025, either(a) reached agreement with the Defendant on the “Claims” (as defined in the agreement reached on 8 November 2024), or

(b) obtained a decision by a duly appointed adjudicator on the Claims, or

(c) commence arbitral proceedings on the Claims, the Defendant was entitled to payment of the Escrow Sum out of the Escrow Account.

[98]GMC, having satisfied the requirements of paragraph 6 of the letter of 8 November 2024 by issuing Part 7 proceedings on 5 March 2025, the Escrow Sum remains in the Escrow Account on the applications before me.

[99]Those Part 7 proceedings are stayed to arbitration in accordance with the provisions of the sub-contract between SEI and GMC.

[100]I believe this addresses all the issues which were argued before the Court at the oral hearing on 18 and 19 March 2026. The parties should seek to reach an agreed order for approval reflecting this judgment. In the event of disagreement, I anticipate the same could be resolved on paper. I would ask the proposed order be provided with the directed provision of suggested typing corrections and other obvious errors. At the same time, the parties should indicate the extent of any disagreements between them as to consequential orders, and I will give directions for their resolution.