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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Enterprise Managed Services Ltd v East Midland Contracting Ltd [2008] EWHC 727 (TCC) (27 March 2008) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2008/727.html Cite as: [2008] EWHC 727 (TCC) |
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QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
TECHNOLOGY AND CONSTRUCTION COURT
HIS HONOUR JUDGE STEPHEN DAVIES
1 BRIDGE STREET WEST MANCHESTER M3 3FX |
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Date of draft judgment: 7 February 2008 Date Judgment Handed Down: 27 March 2008 |
B e f o r e :
____________________
ENTERPRISE MANAGED SERVICES LIMITED | Claimant | |
and | ||
EAST MIDLAND CONTRACTING LIMITED | Defendant |
____________________
Mr Michael O'Reilly of Adie O'Reilly LLP, Solicitors, for the Defendant
____________________
Crown Copyright ©
(a) Under CPR part 11, a declaration that the court has no jurisdiction to decide this claim or, if it does, that it should not exercise its jurisdiction to do so.
(b) Under CPR part 3.4, an order striking out the claim as disclosing no cause of action or, under CPR part 24, an order for summary judgment against the claimant on the claim.
'15. … The parties shall not commence any action or proceeding other than adjudication arising out of or in connection with this Sub-Contract until such time as the Main Contract Works have been certified substantially or practically complete.'
(i) prevents the court from having jurisdiction, alternatively requires the court to decline to exercise jurisdiction;
(ii) operates as a substantive defence to the claim asserted in the proceedings.
'22.1. What does clause 15 mean by the Main Contract Works?
22.2. What does clause 15 require by way of certification?'
(a) The court was asked to reach a final decision on the jurisdiction point, which involved: (i) reaching a conclusion on the questions of construction, as to which (and subject to one point) no further evidence was required; (ii) reaching a conclusion on the factual questions on the evidence before me. In particular, neither party was inviting the court to order disclosure or cross-examination of witnesses to deal with this issue, very sensibly mindful of the costs and delays which would be associated with such an exercise.
(b) The court was asked to resolve the part 3.4 and part 24 applications in the usual manner appropriate to such interlocutory applications.
(c) The court was asked to determine the questions of construction as preliminary issues in the proceedings, not least in order to avoid the possibility that the losing party might subsequently seek to contend that the determination of the questions of construction for the purposes of the jurisdiction issue was not binding in the substantive proceedings.
7.1. Following the hearing last Friday 25 January 2008 I received:(i) A letter to the court from the defendant's solicitors dated 28 January 2008, enclosing a copy letter to the claimant's solicitors also dated 28 January 2008, and a copy proposed letter to National Grid Legal Department.(ii) A letter to the court from the claimant's solicitors dated 29 January 2008, enclosing the supplemental witness statement of Dean Cooper with attachments.(iii) A further letter to the court from the claimant's solicitors dated 31 January 2008 in response to the defendant's solicitors' letter to the court dated 28 January 2008.(iv) A further written submission from Mr O'Reilly entitled 'Applicant's comments arising from further disclosure of main contract'.7.2. As I understood it, the defendant's position was as follows:
(a) It said that it was awaiting completion of disclosure of certain main contract documents which were identified in paragraph 1 of Mr O'Reilly's further written submissions, namely: (i) appendix 2 of the deed of July 2004; (ii) a deed of January 2008.(b) It was asking the court for an indication that it could send its proposed letter to National Grid Legal Department, and that the court would await the response before giving judgment.(c) It sought to reserve its client's position in relation to its agreement at the hearing of 25 January 2008 to having the questions of construction of clause 15 of the sub-contract determined as preliminary issues by the court.7.3. In contrast, as I understood it, the claimant's position was that:
(1) It had addressed the question of disclosure of the main contract.(2) It did not consider it appropriate for the court to extend the time for giving judgment to await any response from National Grid Legal Department to the defendant's solicitors' proposed letter.7.4. Having considered these communications, I advised the parties in a letter dated 1 February 2008 that:
(i) I did not consider that the claimant was required under the direction I gave at the hearing on 24 January 2008 to disclose the further documents referred to in paragraph 1 of Mr O'Reilly's further written submissions on the ground that they do not form part of the main contract as originally entered into in 1999 (or as in force in 2002 when the sub-contract was entered into).(ii) Although it was not for the court to determine what correspondence the defendant's solicitors may choose to send to third parties, I was not prepared to await any reply from National Grid Legal Department to the defendant's solicitors' proposed letter before proceeding to judgment. In my judgment the defendant had every opportunity at the outset of the hearing to make an application for the hearing to be adjourned in order to obtain evidence in response to that filed by the claimant, and chose not to do so. I was not prepared to allow them to adduce further evidence from the employer at this stage.(iii) Insofar was relevant, I did not consider that the Defendant was entitled to resile from its agreement at the hearing of 24 January 2008 to having the questions of construction of clause 15 of the sub-contract determined as preliminary issues by the court.(iv) Accordingly, I was proceeding to prepare my judgment, taking into account the supplemental witness statement of Dean Cooper with attachments and the further written submission from Mr O'Reilly entitled 'Applicant's comments arising from further disclosure of main contract'.
"The supply of all Labour, Tools and Equipment, Vehicles, Fuel, Plant and Materials … as required to facilitate the installation/alteration of new/existing service/main laying works, including reinstatement, at various locations in the Lincoln area[2] on our First Connect Connections Engineering Period Contract (The Main Contract) under our Enterprise Utility Services Ltd Standard Form of Sub-Contract.".
It continues by identifying the documents which form part of the agreement, which are identified as follows:
1. The Sub Contract Terms and Conditions
2. The Schedule of Rates
3. Letter dated 09/04/02
4. General Requirements of Contract
5. Particular Requirements to All Schedules.
(a) Clause 1, under which the defendant was deemed to have notice of all provisions of the main contract (except for details of prices), which were available for inspection on reasonable notice;
(b) A number of references to the " Main Contract Works", which was not defined anywhere, for example clause 5 (requiring the defendant to undertake the subcontract works in accordance with the Main Contract Works programme), and clause 7 (requiring the defendant to maintain and protect the sub-contract works until "final completion of the Main Contract Works");
(c) Clause 13, providing for payment on a monthly basis for the value of Sub-Contract Work "certified to be complete for the purposes of the Main Contract";
(d) Clause 14, providing for payment of retention, on the sooner of two dates, the second of which was "the date falling three years after substantial completion of the Main Contract Works as certified for the purposes of the Main Contract".
(e) Clause 15, which contained a number of provisions relating to jurisdiction and dispute resolution under which, in addition to the provision now under consideration, the parties made provision: as to the law applicable to the sub-contract; for the English courts to have exclusive jurisdiction; for a dispute escalation procedure; and for the parties to refer any dispute to adjudication at any time.
(i) The General Requirements document was a 'non-binding guidance document' which was produced as part of the negotiations between the predecessors of the claimant and the predecessor of the employer, and did not form part of the main contract as originally entered into or as at the date of entry into the sub-contract.
(ii) It was not until the main contract was varied by deed of variation dated 14 June 2005 that the General Requirements document achieved any contractual status, and then only in that (clause 3.3 of the deed) the main contractor undertook to comply with the General Requirements. Even then, however, the General Requirements were to rank below the other provisions of the main contract in priority – clause 6.1.
(a) Clause 1.1.1, which provided that "no amendment or addition to this Contract shall be binding on the parties hereto unless in writing and signed on [their] behalf".
(b) Clause 1.1.5, which provided that the contract should not be waived except "where agreed by both parties in writing or as otherwise set out in this contract".
(c) Clause 1.3, which contained a number of inter-related relevant definitions, including the following:
clause 1.3.46: "Works means all or any of the Projects … to be performed by the Contractor under any Contract Order issued under this Contract" (emphasis added).
Clause 1.3.10: "Contract Order means the written signed instruction given by the Manager to the Contractor to perform the Works specified in that Contract Order".
Clause 1.3.21: "Manager means the person nominated by the Employer to act as its representative in relation to the management and performance of the Works of this Contract".
Clause 1.3.32: "Project is a specific task issued under a Contract Order".
Clause 1.3.33: "Project Completion Certificate is a certificate authorised by the Manager which shall identify that all the Works comprising a Project and all the Work Documents have been completed".
Clause 1.3.34: "Project Completion Date is the date when the Project Completion Certificate is authorised by the Manager".
Clause 1.3.47: "Work Documents means those documents that the Manager deems necessary for the Contractor to complete or provide an to show that the Works have been performed in accordance with this Contract".
Clause 1.3.43: "Track Sheet records: (i) the Value of Works Performed on Site; (ii) the Contract Management Costs; (iii) the Material and Design Costs; (iv) any other allowable cost".
Clause 1.3.5: "Contract Commencement Date means the date upon which this contract comes into operation as set out in the Contract Data".
Clause 1.3.6: "Contract Completion Date means the end of the Contract in accordance with clause 4 of the Contract Agreement". (However there was no separate definition of or reference to any requirement for the issue of a certificate of Contract Completion.)
(d) Clause 4.2.1, under which it was provided that "the Employer issues work to the Contractor by way of a Contract Order which shall constitute Works to be performed …" and which, by clause 4.2.3, "may consist of any number of Projects", so that "the Contract Order is completed on the issue of the last Project Completion Certificate of that Contract Order" (clause 4.2.4). Clause 4.4 refers to Projects, and by clause 4.4.2 it was provided that: "the Project will be completed when:
(i) all Works comprising the Projects are completed and
(ii) the Contractor produces to the Manager all the Work at Documents he intends to rely upon as the basis of any amounts due to him and
(iii) all the Work Documents as required by the Manager are completed and submitted to the Manager and
(iv) the Manager being satisfied authorises the Project Completion Certificate".
(d) Clause 7 dealt with payment. Under clause 7.1.3 the contractor was entitled to receive payment of his actual costs on a periodic basis, and payment of profit "where the Project Completion Certificate has been authorised by the Manager", and under clause 7.2.2(ii) it was provided that the payment mechanism designated in a contract order should operate once the " Project Completion Certificate is authorised".
(1) Mr O'Reilly observed that this extension to the term of the main contract was not something which was expressly envisaged or permitted by the terms of the main contract. Mr Darling pointed to clause 1.1.1 as showing that the parties to be main contract envisaged that there might be amendments or additions to the contract. Mr O'Reilly countered by submitting that the purpose of this clause was to restrict the circumstances in which any such amendment or addition might operate, rather than expressly to permit such acts.
(2) It should also be noted that by clause 7 of the deed further provision was made as to what information the track sheets should record, and also that payment should be made 28 days after receipt of the relevant track sheet.
(a) Clause 3.1 provided that the Deed itself was to constitute a Contract Order requiring the contractor to undertake the work set out in, and ordered by the employer pursuant to the schedules to the Deeds.
(b) I have already referred to the fact that by this deed the main contractor undertook an obligation to comply with the General Requirements. Although Mr O'Reilly submitted in his supplemental argument that this was insufficient to vary or override the terms of the main contract in relation to the matters contained in them, I disagree. In my judgment it is apparent that notwithstanding the priority clause and the non-waiver clause, the parties obviously intended the contract-specific General Requirements to identify how the main contract should be operated on a practical level, and the requirements of clause 1.1.1 in relation to amendments to the contract were complied with via the deed itself.
(i) The expression 'Main Contract Works' in clause 15 of the sub-contract means work under any project performed by the claimant under a contract order issued under the main contract in respect of that project (and including for the avoidance of doubt work performed under a contract order issued under the main contract after the original main contract completion date whilst the main contract was still being operated, whether pursuant to a formal extension or an informal continuation) in respect of which work was also ordered by the claimant from the defendant under the terms of the sub-contract.
(ii) The certificate of substantial or practical completion of the Main Contract Works in clause 15 of the sub-contract means a project completion certificate (as defined in clause 1.3.33 of the Main Contract) under the Main Contract.
Practical completion of the main contract works
"Given my knowledge of this contract and the nature of the works and following a review of [the defendant's] database, I can confirm that all Projects carried out in or around December 2005 and/or March 2006 (or any time before that) were completed, Project Completion Certificates were sent to [the employer] and payment was made by [the employer] evidencing [the employer's] authorisation of completion."
Certification
"26. The Main Contract does not prescribe a format for the Project Completion Certificate. Enterprise submitted various types of documents at different times to signify completion of Projects.
27. When appropriate, Enterprise submitted a Summary Sheet setting out details of the Project, a completion date and details of the documentation provided. The precise format of this Summary Sheet varied throughout the periods referred to above but a sample template is attached as Appendix 4.
28. The attached Summary Sheet sets out the other types of documents that work, depending on the nature of the job, submitted. A Track Sheet was always submitted along with a Job Card. Various other documents were sometimes necessary including Test Certificates and As-Laid Plans.
29. Of the documents sent to Fulcrum to signify completion of a Project, Enterprise only kept copies of the Track Sheets.
30. … By way of example, I attach a Track Sheet relating to 47a Kenilworth Drive, Oadby, Leicestershire dated 23 December 2005 which was submitted to Fulcrum following completion of that Project (Appendix 5).
31. Fulcrum's authorisation that the above Project was completed was signified by its payment in respect of that Project on 1 February 2006 (the 'WR Number' on the Remittance Sheet matches the 'QS No' on the Track Sheet. Details of payments received have been removed for reasons of commercial sensitivity) (Appendix 6).
…
34. [Set out in paragraph 35 above]
…
36. I attach a letter received from Philip Jenkins of Fulcrum on 11 January 2008 (Appendix 9) which supports my understanding regarding completion, as set out above. Most importantly, he confirms in the second paragraph that "Relevant Fulcrum officers check the completed documents and if satisfied authorise payment of the claimed charges … authorisation of the Enterprise Track-sheet signifies that Fulcrum has accepted the individual project is complete and certifies this as such for all practicable purposes". In this way, as stated above, Fulcrum payments made in relation to Projects completed in December 2005 and March 2006 evidences Fulcrum's authorisation of the Projects (and, therefore, the Contract Order) as being complete."
"… Individual project instructions are contained within a project pack, which would include job cards for individual elements of the project. Individual projects are considered to be completed and certified as such when all works are satisfactorily completed and all relevant project pack documents are correctly completed and returned to Fulcrum.
Returned project packs would also be accompanied by a project track-sheet that details the actual works and quantities, completed for each project. Relevant Fulcrum Officers check the completed documents and if satisfied authorise payment of the claimed charges within the Enterprise track-sheet. Although there isn't a specific completion certificate, authorisation of the Enterprise Track-sheet signifies that Fulcrum has accepted the individual project is complete and certifies this as such for all practicable purposes."
The respective arguments
(i) What the main contract envisages is not the issue of a formal certificate, but the authorisation by the employer's manager of the project completion certificate which means the authorisation of the individual track-sheet.
(ii) There is no requirement under the main contract for the individual track-sheet to be signed by the employer's manager or returned signed to the contractor in order for it to stand as a certificate. Authorisation is all that is required, and this does not have to be written, or issued to the contractor.
(iii) Thus in this case, the evidence of authorisation of the track-sheets is proved by the evidence of payment against the invoice referable to the particular track-sheet and thus project where, I note, there is a column purporting to identify the 'responsible manager'.
(iv) Even if this did not amount to certification as strictly required, under the main contract, nonetheless by virtue of the practice adopted by the employer (namely that of passing the track-sheets for payment and paying the sums due in relation to each project, without standing on the strict requirement for issue of a certificate) then as between the employer and the main contractor any strict requirement for the issue of a certificate has in effect been waived, so that for the purposes of the main contract there has been certification, and that then suffices for the purposes of clause 15 as well.
(i) What the claimant is required to establish by satisfactory evidence is that a certificate of practical completion of the main contract works has been issued by the duly nominated Manager.
(ii) Here, the claimant has failed to establish this requirement, in that it has failed to produce any relevant certificate(s), or to provide any satisfactory evidence that such were issued. The track-sheets are not, nor can they be regarded as, certificates.
(iii) Evidence of payment against submitted track-sheets is not sufficient for the purposes of clause 15 either in terms of evidencing the issue of a certificate or of evidencing the authorisation of a certificate. In particular he argues that: (a) evidence of the actual operation of the main contract in practice, if more relaxed that strictly required under the main contract, does not assist the claimant in demonstrating compliance with clause 15 of the sub-contract; (b) even if the procedure was relaxed by the subsequent amendments to the main contract, that cannot relax the requirement of certification for clause 15, which is not affected by any such amendments; (c) the argument based on waiver cannot succeed, because there is no evidence of waiver which complies with clause 1.1.5 of the main contract general conditions.
(iv) In any event, the evidence produced by the claimant is unsatisfactory, in that: (a) neither Mr Cooper nor Mr Jenkins confirm that they were involved in the administration of the main contract at the relevant times (i.e. up to circa end December 2005); (b) the letter from Mr Jenkins is particularly unsatisfactory in that it is unsigned, it does not state his source of knowledge, it offers a mix of fact and opinion evidence, and the letter to which it responds has not been exhibited.
Certification - conclusions
………………
(His Honour Judge Stephen Davies)
Note 1 In fact, as will appear subsequently, there were two main contracts rather than one main contract, but since both were in identical terms I shall refer to them collectively as the main contract unless necessary to differentiate between them. [Back] Note 2 It is common ground that the sub-contract was extended to cover a greater geographical area than Lincoln. [Back]