BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

England and Wales High Court (Queen's Bench Division) Decisions


You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Spree Engineering & Testing Ltd. v O'Rourke Civil & Structural Engineering Ltd [1999] EWHC QB 272 (18 May 1999)
URL: http://www.bailii.org/ew/cases/EWHC/QB/1999/272.html
Cite as: [1999] EWHC QB 272

[New search] [View without highlighting] [Printable RTF version] [Help]


Neutral Citation Number: [1999] EWHC QB 272
98 NJ1924

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand
London WC2A 2LL
18th May 1999

B e f o r e :

MR T STOW Q.C.
____________________

SPREE ENGINEERING & TESTING LIMITED PLAINTIFF
- v -
O'ROURKE CIVIL & STRUCTURAL ENGINEERING LIMITED DEFENDANT

____________________

Tape Transcript of Smith Bernal Wordwave Limited
190 Fleet Street London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writer's to the Court)

____________________

MR S POWLES Q.C. (instructed by Stonehams) appeared on behalf of the CLAIMANT

MR N DAVIS Q.C. (instructed by Nicholson Graham & Jones) appeared on behalf of the DEFENDANT

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    MR STOW Q.C:

  1. The plaintiff is the assignee from a company called Spree Non-Destructive Testing Limited (I shall call them "Spree") the latter having gone into receivership on 4th February 1994. The receivership was apparently due, at least in part, to the non-payment of debts, which the plaintiff is now seeking to recover from the defendant in these proceedings.
  2. Pursuant to the order of Deputy Master Roper on 11th December 1995, this is the trial of a preliminary issue, to decide whether the defendant, formerly known as R O Rawling & Son Limited, that I shall refer to as "ROR," is liable to pay for weld testing carried out by Spree during 1993. At that time ROR and another company, initially called M F Kent Services Limited, and later Kent CNM (UK) Limited, that I shall call "Kent," were involved in a joint venture relating to a major gas pipeline contract, entered into by them with Board Gas ADM, that I shall call "BG," dated 1st April 1993.
  3. BG were installing a gas pipeline under the Irish Sea to Scotland in order to connect to North Sea Gas fields. This connection concerned a site at Brighouse Bay in Scotland, where there was to be a compressor station and a section of the pipeline associated with it. As between Kent and ROR, the former carried out mechanical and electrical work, and the latter were responsible for civil construction work. Their relationship was governed by a joint venture agreement dated 20th April 1993. The contractual background was that BG wished to deal with a single entity, but was not prepared to enter into a contract with an off the shelf company formed expressly for the project by Kent and ROR. Accordingly, BG entered into the main contract with two companies, on the basis that they were jointly and severally liable in respect of all obligations.
  4. References in this judgment to the page numbers of documents are references to bundle B, unless prefixed by the letter A.
  5. The plaintiff's claim arises, essentially, from two written orders addressed to Spree, which on the face of those documents emanated from Kent. Both orders related to weld testing work, the first in connection with the pipeline, and the second with the compressor station. The first order of 24th June 1993 was handwritten, and starts at page 90/1. This was superseded by a typed confirmation order at page 92/1, concluding with the words:
  6. "This order is subject to the terms and conditions of the M F Kent sub-contract documents."

    The second order was dated 4th October 1993 and starts at page 126/1. On 3rd December Spree received from Kent an order purporting to amend the first order of 24th June 1993, to include additional work carried out by Spree up to 29th September 1993. This starts at page 128/1, and towards the end contains the words:

    "This order is subject to the terms and conditions of the Kent sub-contract documents."

    It appears to be common ground that the terms and conditions referred to in the original and amended order cannot be identified, if they ever existed.

  7. The two companies decided that the joint venture should be called Kent O'Rourke, I shall refer to them as "KOR," and with the authority of ROR there was produced a quantity of headed writing paper and fax paper for KOR, which was in fact used by Kent to communicate with Spree. I shall refer to some of these documents later, but they are constitute one of the main planks of the plaintiff's case which, in essence, is that ROR is liable to it on the orders placed by Kent, to the extent that their work remained unpaid. In fact, the project went badly wrong and the joint venture suffered a substantial loss. Spree's receivership on 4th February 1994 had been proceeded by Kent's receivership on 19th January 1994. A winding up order for Kent was made on 9th February 1994.
  8. On behalf of the plaintiff, Mr Stephen Powles QC puts his case in a number of different ways. First of all he submits that the joint venture was in fact a partnership in law for the purposes of s.11 of the Partnership Act (1890). Or alternatively, that ROR at least allowed themselves to be held out as Kent's partner for the purposes of s.14(1) of the Act. Next, he submits that whether or not the joint venture was a partnership in law, ROR was the principal to the contract with Spree, either as a matter of construction of the documents, or because Kent was acting as its agent. Alternatively, it held out Kent as its agent, so that the latter had ostensible authority to bind ROR. On behalf of ROR, Mr Nigel Davis QC disputes all the propositions for which the plaintiff contends. The joint venture was not a partnership in law, and there was no material to justify findings of agency or holding out.
  9. I will deal first with the issue of partnership. There can be no doubt that Kent and ROR were carrying on a business, and the plaintiff's case is that the contractual arrangements of this joint venture had the features of a partnership for the purposes of s.1(1) of the Partnership Act (1890) which provides that:
  10. "Partnership is the relation which subsists between persons carrying on a business in common with a view to profit."

  11. Attention is drawn to paragraph 6 of the main contract between the two companies and BG at page 6/11, which clearly provides, that the former should be jointly and severally liable on the contract to the latter. The two companies are called the contractor, and the same features are present in the performance bond at page 7/1.
  12. Mr Powles submits that this joint responsibility towards BG is not only a feature of the partnership itself, but is mirrored in the contractual relationship between the two companies. In clause 4.1 of the joint venture agreement at page 5/1, insofar as relevant it is stated:
  13. "If the tender shall be accepted by the employer, such acceptance shall be jointly binding on the joint venturers in accordance with the terms of this agreement, and they shall thereupon enter into the contract, and each joint venturer hereby covenants with the other to faithfully perform, and observe all the terms and conditions thereof, as to each other and as to the employer."

    Emphasis is placed on the words, "as to each other," and it is submitted that this involves an obligation on the part of each joint venturer, owed to each other, to comply with the terms of the main contract in respect of all the work covered thereby, including work actually carried out by the other joint venturer. In other words, the breach of the main contract for which Kent were responsible, would involve breach of contractual duty owed by ROR to Kent, in addition to a breach of contractual duty by Kent to ROR.

  14. It is accepted that clause 17 of the joint venture agreement at page 5/8, prohibited the joint venturers from incurring liabilities or obligations binding upon the other. But it is said that the facts of this case fell within the proviso, which stated:
  15. "Except insofar as they may have herein before been expressly authorised."

    By reason of clause 4.1, and the powers conferred on the joint executive committee and project managers under clauses 5 and 8, ROR have authorised Kent to act on their behalf in employing sub-contractors to carry out the works. It is pointed out that although clause 18 of the joint venture agreement provided that it was not a partnership, this could not affect the real status of the arrangement as was made clear in Lindley and Banks on Partnership, 17th Edition at paragraphs 504 and 505.

  16. Reliance is placed on the fact that the agreement envisaged a unified organisation or structure, which can be seen at pages 58/5 and 61/6. This was set up pursuant to clauses 5 and 8 of the joint venture agreement, which provided for a joint executive committee, whose decisions would be binding on both parties. The committee's powers over the practical execution and carrying out of the works were to be delegated to project managers, whose acts, it is said, would bind both companies. Under clause 5.2 the executive committee had the power to require payment by the joint venturers of monetary contributions in equal proportions and, with reference to clause 7, to provide working capital, and the proper execution of the works in a profitable furtherance of the joint venture. It is submitted that those features support a partnership status.
  17. Clause 7 provided that the two companies should have a joint bank account, into which sums received by either in connection with the joint venture should be paid. Although clause 7.4 provided that amounts due in respect of the Kent/ROR contract should be separately identified and paid to each of them, and that in practice each was paid separately in respect of certified amounts relating solely to the work each had carried out, this nevertheless involved each receiving "a share of the profits" for the purposes of s.2(3) of the Act.
  18. Clause 7.4 was concerned with the calculation of the share. It was not just a sharing of gross returns, but a sharing of the profit element from the management of the joint structure. It is submitted that further weight to this approach is derived from clause 6, which provided for equal sharing of residual funds and assets and equal sharing of residual liabilities and obligations. It is also said that the two joint venturers must have regarded themselves as partners, because in a number of documents each of them referred on occasions to the word "Partner" and "Partnership." Reference is made in particular to the documents at page 1/1, 38/1, 51/1, 58/1, 73, 80 and 81/1.
  19. As regards the question of joint and several liability, I accept the submission of Mr Davis, that because joint venturers have accepted joint and several responsibility to an employer, it does not follow that they must be partners in relation to sub-contractors or other parties. It is necessary to examine the realities of the relationship between them, to decide whether or not they are in fact a partnership in law. In this connection the joint venture agreement is obviously a vital document, and it is necessary to examine a number of its provision. At the outset I know, that although the execution of that agreement in fact post-dated the main contract, it is clear that the parties wished to collaborate for the sole purpose of carrying out the works in connection with the gas compressor station (See the recitals in clause 1.1 at page 5/2). It was not an agreement covering construction projects generally.
  20. Paragraph (c) of the recitals at page 5/2 refers to the wish of the joint venturers:
  21. "To regulate the separate obligations of the parties, as defined in the Kent contract and the ROR contract."

    In fact, I am satisfied on the evidence I have heard, that although there were joint meetings from time to time to review progress, both companies carried out their own part of the work independently of each other, and indeed, neither Mr Christopher Spree, nor anyone else representing Spree, ever dealt with or had contact with personnel from ROR. The separate nature of their activities is illustrated by complaints on behalf of BG, that despite their insistence on dealing with a single entity, communications were still emanating from both companies. This can be seen at pages 60/3, 64 and 65. On this last occasion of 18th May 1993, the engineer complained that the contract was being run as if it were two separate contracts, with two separate contractors operating from two different offices. As between the two joint venturers, therefore, the need to establish a separate identity for KOR with separate stationary, was largely artificial, and was borne of the need to satisfy BG's requirement to deal with a single entity.

  22. It is also worth noting that the joint venture agreement envisaged Kent and ROR acting as sub-contractors of KOR, as can be seen from schedule 2 at page 5/16 in relation to Kent, and schedule 3 at page 5/126 in relation to ROR. No sub-contracts were ever in fact entered into, and the two companies just got on with their separate work, but the provision of this contractual machinery does not fit easily with the concept of either company acting as the agent of KOR, or of the two companies being in partnership with each other.
  23. Further support for the separate treatment of their works comes from page 5/18, where there is a breakdown of the work each is to undertake, including a division of the preliminaries. As regards the payment process, which was contemplated by clause 7.4, it was in fact put into practice. Any receipts from BG went gross into the joint venture bank account, and then gross into the individual bank accounts of the two companies. For instance, one can see an analysis of payments to each company in respect of the September 1993 valuation relating to the work they individually carried out at page 22/7. Adjustments in respect of shared costs and work done for each other appear at pages 22/11 and 12. In effect, if one company did some work for the other it would be invoiced. To my mind, the purpose of the joint bank account was to satisfy BG's requirement to deal with and pay a single entity, and to provide a vehicle for the payment of the two companies in respect of monies they had individually earned. It was not used for other purposes, and did not involve the operation of a joint bank account in the normal course of business.
  24. In my view, the sharing of residual profits and obligations under clause 6 has to be read in the context of the machinery provided by clause 7.4. The profits, if any, which the two companies might make on the project would come out of the monies allocated to them from sums paid into the joint account by BG. I consider that the main purpose of clause 6 was to cater for shared expenses, such as secretarial costs, and the major item of the performance bond. As I understand it, no residual profit has actually been identified in practice, and if it arose at all, it was likely to be modest, fortuitous and unrelated to margins on work actually undertaken. I do not consider that clause 6 could fairly be described as providing for the sharing of net profit or loss in the sense that this would normally be understood.
  25. I am unable to accept the construction of clause 4.1, contended for by Mr Powles. I consider that the words in the last line, "as to each other," are simply intended to provide an obligation on each joint venturer owed to the other, to comply with the terms of the main contract in respect of the work that joint venturer undertakes. The purpose is to ensure that if both become liable to BG by reason of a default of one, the guilty party must indemnify the innocent joint venturer. That being the case, clause 17, in my view, militates against the existence of a partnership.
  26. To my mind, the financial arrangements I have outlined are better described as the sharing of gross returns for the purposes of sub-section 2.2 of the Act, rather than a sharing of the profits for the purposes of sub-section 2.3. It is necessary, however, to see if guidance on such issues exists in the form of case law, or the opinions of authors in this field. Although there are undoubtedly authorities on the circumstances which give rise to a partnership, there do not appear to be any cases where the courts have given guidance specifically as to the position in relation to joint ventures.
  27. Mr Davis, however, referred to me to Hewitt on joint ventures, and in particular to pages 55 to 58, and 79 to 81. He submits that the situation here fits with the description at page 56 of an unincorporated venture based on a simple contract between the parties, detailing their cooperation. Such an arrangement usually involves the sharing of costs and resources, and sometimes income, on terms which do not give rise to a legal partnership. A typical unincorporated venture is a bidding agreement, which was the essence of the joint venture agreement here. Mr Davis drew attention to a passage on page 81 which reads:
  28. "In the absence of strong tax considerations or professional requirements, it is comparatively rare to find a commercial joint venture business organised in the UK on a partnership basis."

  29. He also referred to passages on pages 29 and 30 of Linklaters and Payne's work on joint ventures, and submits that the case here is a classic illustration of a non-integrated joint venture which is not a partnership. In analysing the situation here, I derive considerable assistance from passages on page 30 of this last work. It reads as follows:
  30. "The participants in a non-integrated joint venture would typically assume the same joint and several liability to the employer for the performance of their obligations under the construction contract, as would parties to an integrated joint venture.
    In a non-integrated joint venture on the other hand, no profit is struck at the level of the joint venture. Instead, the work is divided up into discreet segments which the participants carry out severally, each bearing their own costs of performance, and dividing between them the flow of payments from the employer under the construction contract. Profit is thus taken, not at the level of the non-integrated joint venture, but severally by the participants, and it is possible for one participant to show a profit, and another a loss, on their respective parts of the work under a non-integrated joint venture.
    It will be seen that the status of the two types of venture is very different for the purposes of the Partnership Act. An integrated joint venture generally satisfies the test of "the relation which subsists between persons carrying on business in common with a view to profit."
    On the other hand, the non-integrated joint venture generally falls to be treated simply as an unincorporated association, since the participants generally share no more than the gross payments received from the employer under the construction of the contract -- see the Partnership Act sub-section 2.2"

  31. I accept Mr Davis's submission that this description of a non-integrated joint venture is close to the situation we have in this case. One must be cautious about accepting at face value the opinions of authors, unsupported directly by authorities of the courts, but I find the analysis compelling, and likely to represent the views of professionals used to dealing with joint ventures on a regular basis.
  32. Mr Powles draws attention, inter alia, to the words on page 56 of Hewitt, and I quote:
  33. "However, the inclusion of any sharing of net profit or loss will frequently give rise to a partnership in law in many jurisdictions."

    He submits that such sharing was involved here. However, I cannot accept that submission, and have already set out my findings as to the effect of clause 6, and as to the sharing of gross returns, rather than the sharing of profit. He also suggests that we are concerned with an integrated rather than a non-integrated joint venture, and points to the fact that according to Hewitt at page 58 a feature of an integrated joint venture was that the parties accept joint and several liability vis--vis the principal third party employer. However, I do not consider that in broadly categorising the two types of joint venture, the author intended to convey that this feature could not be present in a non-integrated joint venture. In any event, I accept the analysis on page 30 of Linklaters and Payne's work, which makes it clear that such a feature can be present in both. Furthermore, in my view, the powers conferred on the joint executive committee and project managers under clauses 5 and 8, including the right to require monetary contributions from the joint venturers in equal proportions, is consistent with the cooperation between the parties to an unincorpated venture, involving the sharing of costs and resources as explained on page 56 of Hewitt.

  34. I have reached the firm conclusion that the contractual arrangements between Kent and ROR amounted to a non-integrated joint venture, and did not consist of a partnership. Even if I had been in doubt about their status, I would have resolved this doubt in favour of ROR by reason of the clear terms of clause 18 of the joint venture agreement. As is pointed out in Lindley at paragraph 504, such a declaration may be of particular significance where the nature of the relationship does not appear clearly from the remainder of the agreement.
  35. I will turn next to the question of whether or not ROR were the principals to the contract which Spree, either as a matter of construction of the documents, or because Kent was in fact acting as its agent. This matter can be disposed of quite briefly. In view of my findings as to the effect and nature of the joint venture agreement, I am quite unable to hold that on a correct construction of this document, Kent was authorised to act as the agent of ROR or KOR when it entered into a contract with sub-contractors. Furthermore, having heard the witnesses called on behalf of ROR, I am satisfied that both Kent and ROR understood that they were individually responsible in respect of their own subcontractors and intended to proceed accordingly. Furthermore, I cannot draw the inference that because the two companies agreed to produce joint venture letter heading and fax paper in the name of KOR, that this or any other dealings between them amounted to an express or implied authority for Kent to enter into sub-contracts on behalf of ROR or KOR. In my view, Kent did not act as an agent for these purposes.
  36. I move now to the issue of holding out, which occupied a large part of the trial. Mr Powles contends that ROR held itself out as a partner, and he relies upon s.14 of the Act. Alternatively, he submits that ROR held out Kent as the agent of KOR, and Kent had ostensible authority to bind ROR at common law. S.14(1) provides:
  37. "Anyone who by words spoken or written or by conduct, represents himself, or knowingly suffers himself to be represented as a partner in a particular firm is liable as a partner to anyone who has, on the faith of any such representation, given credit to the firm whether the representation has or has not been made or communicated to the person so giving credit, by or with the knowledge of the apparent partner making the representation or suffering it to be made."

  38. Initially, Mr Davis submitted that this sub-section could not apply to the facts of this case because the words:
  39. "... as a partner in a particular firm ..."

    presupposed an existing partnership, of which the defendant was represented as a partner. It did not apply where the only question was whether two individuals or bodies were in partnership together. However, Mr Davis abandoned this point, and in my view, he was correct to do so.

  40. Similar principles apply to both kinds of holding out, and I will identify them as follows. (1) It is not necessary for the representation to be made directly to Spree by ROR. If ROR represented to Kent or a third party that it was a principal or partner of Kent, or allowed itself to be so represented, and the representation was repeated by Kent or a third party to Spree, it can bind ROR if Spree acted on it, even if ROR had not authorised its repetition - See Lindley at paragraphs 5/46 and Martin v. Grey [1863] 14 Common Bench New Series at page 824, in particular at pages 838 and 839. (2) Holding out is a form of estoppel and cannot be established unless (a) there is an unequivocal representation - See Hudgell Yeates & Company v. Watson [1978] QB 451 at page 470 A to C; (b) the representation must be by or on behalf of the principal. It is not enough that if there is holding out by the agent himself - See Reman and Lodger v. Buckhurst Properties [1964] 2 QB, 480 at page 505; and (c), the claimant has acted on the faith of the representation.
  41. It is necessary to bear these principles in mind when considering the documents, and what happened in this case. I will start by considering the first transaction action, namely the order to Spree of 24th June 1993. The background of this matter is that in April 1993 Spree had submitted a quotation for X-Radiography services in connection with an inter-connector pipeline in Eire. It was submitted to another subsidiary of the Kent Corporation, namely M F Kent & Company Limited, an Irish company which had contracted for pipeline work on the Irish mainland. This subsidiary is not to be confused with Kent. Mr Spree was also interested in the Scottish part of the contract, and after submitting the quotation, he raised the possibility of this extra work at a meeting in Dublin with Mr Peter Stephenson, the contracts manager of this other subsidiary. Mr Stephenson told him that he was not responsible for that part of the contract, as it was being dealt with by a joint venture between Kent and ROR. He suggested that Mr Spree should contact Mr Terence O'Reilly or Mr Roger Brook at the Derby office of Kent.
  42. Following discussions between Spree and Kent personnel, Spree submitted a quotation on 3rd June 1993 for the testing of the gas inter-connector pipeline at Brighouse Bay in Scotland. This is at page 74. On 18th June 1993 Spree wrote to Kent referring to their intention to sub-contract to a company called OIS, and mentioning a proposed meeting the following Tuesday. This is at page 83/1. That meeting took place on 22nd June and was attended by representatives of Kent and OIS. On 24th June Spree submitted a final quotation, at page 89/1, and received from Kent a handwritten confirmation order, at page 90/1. Attached to that faxed confirmation were the handwritten minutes of the meeting, which had taken place on 22nd June. These are at page 90/4. The minutes are wrongly dated 22nd September. The minutes contained references to Kent O'Rourke, and the Kent O'Rourke joint venture. At paragraph 4 it is recorded that:
  43. "OIS will carry out radiographic interpretation for Kent O'Rourke."

    On the same day Spree received a fax on Kent O'Rourke headed paper attaching BG's comments on their procedures. The handwritten confirmation order was followed by a typed up version at page 89/1, concluding with the words:

    "This order is subject to the terms and conditions of the MF Kent sub-contract documents."

  44. In cross-examination Mr Spree said that he could not specifically recall seeing the fax of 24th June at page 88/1. It might have gone to his quality control manager, Mr Thompson. He did, however, see the minutes attached to the handwritten confirmation order, and said that this was the first time he knew of the name Kent O'Rourke. In his statement, he said that the minutes confirmed in his mind that he was dealing with a joint venture in which ROR was a party. He was pleased to learn that ROR was in fact involved, as Spree had dealt with them in the past and they had conducted themselves perfectly satisfactorily. Although he was not aware of the precise legal status of the joint venture, he believed that, effectively, it was a single entity, for which its members would each be fully responsible. That included responsibility for paying his company. The relevant passages are at A, 34 and 35. In cross-examination he said he formed the view that the joint venture was Spree's client. As from June 1993 Kent was in fact just the agent of the joint venture, and was responsible for giving them instructions.
  45. Although the facts in relation to each transaction need to be considered separately, Mr Powles submits that there are two basic features which apply to the whole relationship between the parties. The first is that the KOR headed letter and fax paper came into existences with the full agreement of Kent and ROR, and was freely used without any restrictions imposed on its use by ROR. The second is that Mr Spree was left with the firm impression as a result of his dealings with Kent, that they were involved in a joint venture with ROR, in circumstances where they were both responsible to Spree on any contract. Although precise conversations could not now be identified, the impression could only have come from what employees of Kent had told him, and ROR were liable in law for such representations because they authorised the use of the joint venture stationery and fax paper, and indeed, used the latter themselves, as can be seen at pages 165/1 to 165/3. Their conduct was sufficient to attract responsibility for these representations, even if they did not expressly authorise them. Although Mr O'Reilly of Kent claimed that he had confirmed to Mr Spree by way of clarification that they were contracting with Kent and no one else; this is hotly disputed.
  46. In connection with these submissions I accept that ROR placed no restriction on the use of the KOR headed writing and fax paper, even though the principal reason for its existence was the need to satisfy BG that they were dealing with one entity. Had there been any such restriction, I would have expected Mr Hollingshead to have mentioned it in his letter of 25th November 1993 at page 141/A, when he expressed concern at the use by them of KOR headed writing paper.
  47. Furthermore, I consider that Mr O'Reilly's somewhat vague recollection is wrong, and that neither he nor anyone else at Kent told Mr Spree that he was only dealing with Kent. However, I do not consider that it occurred to Mr O'Reilly, Mr O'Donnell, or anyone else at Kent, that the use of KOR writing or fax paper could fix ROR with responsibility, when the orders themselves plainly came from Kent.
  48. Coming back to the June 1993 transaction, I am unable to find that any document which Mr Spree might have seen, constituted a clear or unequivocal representation that the joint venture was responsible, in the sense that both Kent and ROR would be liable on the contract. Both the handwritten confirmation of order and the subsequent typed up version were on Kent paper, and the latter refers to the terms and conditions of the Kent sub-contract documents. Although these terms and conditions are not identified, mention of them in itself is an indication of the identity of the party submitting the order. Any equivocation arising out of the KOR headed fax at 88/1, and the minutes I have referred to, must be resolved by the most important consideration, which to my mind, is the identity of the party submitting the order. This was plainly Kent, and that has to be seen in the context of Spree's initial quote, their letter of 18th June, and their final quote of 24th June, all being addressed to Kent. Furthermore, I do not consider that anything which ROR did or failed to do in relation to the KOR fax and letter heading or anything else, amounted to the kind of conduct which would enable a subsequent representation by Kent to fix them with responsibility. In other words, there was not in any event a representation by or on behalf of ROR.
  49. Lastly, I do not consider that Mr Spree acted on the faith of, or relied upon any representation he might have perceived. Firstly, as Mr Powles very properly conceded, there are no contemporaneous documents in relation to this or any subsequent transaction to suggest that Mr Spree was influenced in any way by the view that ROR were involved and would be jointly responsible to Spree with Kent. Secondly, he made it clear at one stage of his cross-examination, that the involvement of ROR, although giving him a degree of confidence, was not an important consideration. At that time he had no lack of confidence in Kent, and it was immaterial to him whether they were involved in a joint venture. What mattered to him was that the company was part of the Kent Corporation Group, with which he hoped to foster a business relationship. He regarded them as a blue chip and prestigious company. In my judgment, the existence of the joint venture and ROR's involvement with it was not a material factor in his decision to accept an order and proceed with the work. I consider that Mr Spree believed at the time that he was contracting with Kent, and was perfectly satisfied with that situation.
  50. I will now move to the September 1993 transaction. On 24th September 1993, Mr O'Donnell of Kent wrote to Spree on KOR headed paper, saying:
  51. "We are pleased to invite you to tender for the contract package."

    That is at page 122/1. Paragraphs 7 and 8 of that letter stated that pit access, lighting and temporary power would be supplied by KOR. Paragraph 12 stipulated that the lump sum price would be based on X-ray, but where this was not possible, the difference in cost between X-Ray and Gamma, would be credited to KOR. Paragraph 17, on the other hand, stated that in the event of an award of contract, Kent's UK Limited standard terms and conditions would apply. The letter concluded with a requirement to return the tender submission to KOR site offices, and Spree did in fact reply to KOR by letter of 30th September 1993, at page124/1.

  52. In the course of his evidence, Mr Spree said that if a contract materialised it would be on the same basis as before. He accepted that he did not object to the contract being on Kent's terms, and his expectation would be that the contract would be in the same form as that for 24th June 1993. It does not follow, however, that because I have found that the earlier contract was concluded and understood to be concluded between Spree and Kent alone, that the same must apply to the September transaction in the light of this evidence from Mr Spree. However, although it is possible that he was wrong about the June transaction, and that a holding out of the kind contended for only arose by the time of the second transaction, his evidence is some support for the contention that what applied in June also applied in September.
  53. Returning to the KOR letter of 24th September 1993, at page 122/1, this is in somewhat equivocal form, because although it refers to the Kent UK Limited standard terms and conditions, it contains references to what KOR was to supply, and a potential credit to KOR in paragraph 12 could compound the impression that the joint venture was going to be a party. If this letter stood alone, it might have been understood as a representation that both arms of the joint venture were going to be jointly responsible on the contract. However, the confirmation order and accompanying fax, starting at page 126/1 and dated 4th October 1993, were plainly on Kent paper using a Kent standard order form. The consignee in the letter was described as Kent, although there are the same references to KOR as there were in the letter of 24th September. I am unable to read either document, taken by themselves, or in the context of any other contemporaneous correspondence or dealings between the parties, as a clear or unequivocal representation of the kind for which the plaintiff contends. This conclusion is reinforced by my findings as to the absence of such a representation in relation to the June transaction. In the context of an ongoing relationship in connection with a single project, one would expect very explicit language if the second transaction were going to involve different parties to the first.
  54. Furthermore, for the same reasons as before, I am unable to find any representation to the effect that both they and Kent would be liable on the contract emanating from ROR, or that their conduct would make them responsible for it in law. I consider that the mere arrangement by the joint venturers for the production of KOR fax and writing paper, for the main purpose of giving it an identity in its relations with BG, would not be enough to constitute such conduct, despite the fact that when Mr Hollingshead wrote his letter on 25th November 1993, at page 141/A, he was worried that the use of such documents by Kent might attract liability to ROR. No KOR standard orders, invoices or other contractual documents were produced, and I have already found that the personnel of both Kent and ROR understood perfectly well that each would be individually responsible for their own sub-contracts.
  55. Finally, having heard Mr Spree give evidence, I do not consider that he acted upon the faith of any representation he might have been given. I do not accept that the participation of ROR in the joint venture, in whatever form he might have considered it to take, was a material factor in his decision to accept the September order and do the work. It is true that in re-examination Mr Spree said that he would not have taken the work in September if ROR had not been involved. However, in my view his attitude then is more accurately described by an answer he gave in cross-examination to the effect that at the time he would not have worried if ROR were not involved.
  56. I move now to the amendment of the June 1993 order to cover extra work. This started on 17th September 1993 with a fax from Mr Spree to Mr O'Donnell, stating that they would require an order of approximately 14,500 to cover work done in August to which the September work needed to be added. That is at page 117. There is a reply on KOR fax paper from Mr O'Donnell on 29th September asking for further information, and referring to the order value received from Kent. That is at page 118. Spree answered by fax of the same date, at page 119/1, referring to M F Kent order no. 76763/354, and attaching an invoice from Spree of 30th July 1993 addressed to Kent. On 22nd September, at page 121/1, Mr O'Donnell acknowledged receipt of the invoice on KOR headed paper, and referred to the order placed by Kent. However, he went on:
  57. "We have placed the order to you on the basis etc"

  58. In the course of his evidence, Mr Spree said he only noticed that the letter was on new notepaper. He was not surprised and it told him nothing he did not already understand. He was concentrating on what the letter actually said. The order itself is at page 128/1, and was only received by Spree on 3rd December 1993. This plainly came from Kent, and there were added the words:
  59. "This order is subject to the terms and conditions of the Kent sub-contract documents."

    Bearing in mind my finding that there was no representation in relation to the original order to the effect that Spree were contracting with a joint venture, it would be somewhat bizarre if there was, nevertheless, such a representation in relation to the amendment. In fact, I cannot find that any such representation is spelt out from the correspondence preceding the order, including not only that to which I have already referred, but also a KOR headed letter to Spree of 18th November, at page 137/1, mentioning:

    "This total sum agreed between us on 30th September 1993."

  60. For the same reasons as before, I am unable to find in any event, that any representation there may have been emanated from ROR, or that they were responsible in law for it. Furthermore, I do not consider that Mr Spree attached importance to KOR headed writing or fax paper or to references to KOR. In my judgment, reliance is not made out.
  61. In support of my findings on reliance, not only in relation to the amended order, but generally, I draw attention to the following. (1) Mr Spree accepted, and I find, that he never spoke to, or dealt with anyone at ROR. His dealings were confined entirely to Kent. (2) Mr Spree accepted, and I find, that neither Mr O'Reilly nor Mr O'Donnell nor anyone else ever told him that ROR would also be liable on an order. (3) All Spree invoices were sent to Kent. It is of some significance that following receipt of the KOR headed fax of 23rd November 1993, at page 139, suggesting that Spree might wish to cancel the VAT invoices and submit an application for payment, Mr Spree replied to KOR, at page 141/1, that the invoice itself of 24th November 1993, at page 141/2, was addressed to Kent. This suggests to my mind that Mr Spree distinguished between the joint venture, as a vehicle for communication, and the party who was liable on the contract. (4) Mr Spree's radiographs and procedures originally identified Kent as the client, and these were only changed to KOR on the insistence of BG. (5) In cross-examination it was clear that Mr Spree did not believe that every joint venture automatically gave rise to joint liability. He accepted that you have to look at each joint venture on its own facts, and that there were different types of joint venture. He said that this was the kind where they would cross-guarantee each other's liabilities, but he has not been able to explain to my satisfaction why he thought that was so. (6) On 13th January 1994, at page 145/1, and shortly before Mr Spree learnt of the collapse of Kent, he wrote a letter to them asking for an immediate further payment on account of 22,000. It concluded:
  62. "This letter is addressed to Kent C & M UK Limited, but it is assumed that it is also addressed to M F Kent Services, the company whose name appears on our orders."

  63. In his evidence Mr Spree accepted that his responsibility at the company was handling and concluding contracts. He told me, and I accept, that he tried to be meticulous in his contractual arrangements, and that it was important for him to know with whom he was contracting, and the terms of the contract. He said of the letter of 13th January that it was drafted by his quantity surveyor, but Mr Spree signed it, and I am satisfied that he played a part in it and knew why it was written. Given that by this stage Spree had had considerable difficulties extracting money, not only from the Irish company, but from Kent itself, I would have expected him to mention the responsibility of KOR or ROR at that stage if he had believed it to exist. In fact he never sought an assurance from ROR to the effect that they would also be a party to the orders. To my mind, this letter is entirely consistent with an understanding that Kent alone were liable on them.
  64. I consider that Mr Spree was an honest witness, who was scrupulous not to bolster his case by stretching his imagination to the point of recording conversations and events which did not occur. However, following the shock of the Kent collapse, and the realisation that payment would not be forthcoming from that source, he has convinced himself in retrospect that KOR and ROR have an importance, which he had not believed them to possess at the time.
  65. In the circumstances, I decide the preliminary issue in favour of the defendant.


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWHC/QB/1999/272.html