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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Jacobs UK Ltd v Skidmore Owings & Merrill LLP  EWHC 3293 (TCC) (15 November 2012)
Cite as:  BLR 18,  EWHC 3293 (TCC)
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| JACOBS U.K. LIMITED
|- and -
|SKIDMORE OWINGS & MERRILL LLP
(Incorporated as a US Limited Liability Partnership)
Ms. Rachel Ansell (instructed by DAC Beachcroft LLP) for the Claimant
Mr. Richard Harding QC (instructed by Kirkland & Ellis International LLP) for the Defendant
Hearing dates: 14th and 15th November 2012
Crown Copyright ©
The Hon. Mr. Justice Coulson:
2. THE JUNE 2009 AGREEMENT
"1. SOM shall pay to Jacobs the sum of £1,500,000. Payment of that sum shall be made in three instalments. The first instalment will be in the sum of £750,000 and made within 14 days of the date of the Tomlin Order staying Claim No. HT-08-225. The subsequent two instalments will be each of £375,000. The first of these will be made by 24th August, 2009 and the second by 26th October, 2009. In addition, the sums paid into court following judgment in the Summary Judgment Proceedings on 21st November 2008 will be paid out to SOM following payment of the first instalment.
2. Within a period of two years from the date of this letter SOM will award Jacobs or any other subsidiary or affiliate of Jacobs Engineering Group Inc one or more contracts for the provision of not less than 33500 hours of construction, design and engineering services. These services will be executed at the prevailing hourly rate charged by Jacobs as at the date of execution in respect of work of similar nature character and quality. If we are unable to agree on the hourly rate then a reasonable commercial rate will be decided by Dr Robert Gaitkells QC of Keating Chambers, 15 Essex Street, London WC2R 3AA (or his mutually agreed successor) who shall act as an expert in this respect not as an arbitrator. If and to the extent that the obligation to provide services is not fulfilled or is not the subject of contracted services in the course of execution within the two year period SOM shall pay Jacobs £15 per hour per every hour of shortfall up to a maximum of 33500 hours.
3. Within a period of two years of the date of this letter Jacobs or any other subsidiary or affiliate of Jacobs Engineering Group Inc will provide to SOM not more than 33500 hours of construction, design and architectural services. The services will be executed prevailing hourly rates charged by SOM as at the date of execution in respect of work of similar nature character and quality less £15 per hour. If we are unable to agree on an hourly rate then a reasonable commercial rate will be decided by Dr. Robert Gaitskell of Keating Chambers, 15 Essex Street, London, WC2R 3AA (or his mutually agreed successor) who shall act as an expert in this respect and not as an arbitrator. If an to the extent that the obligation to provide services is not fulfilled or is not the subject of contracted services in the course of execution within the two year period then the obligation of Jacobs to provide the services and the obligation of SOM to perform the services at discounted rates will be forgiven.
4. SOM and Jacobs will pay their own legal costs of the proceedings in the Technology and Construction Court in London under Claim No. HT-08-225. Jacobs will however retain the costs paid by SOM to Jacobs following the Summary Judgment Proceedings in November 2008…
9. This Agreement shall be governed by, and construed in accordance with, the laws of England and Wales and exclusive jurisdiction shall reside in the English courts."
3. SUBSEQUENT EVENTS
4. THE ISSUES
6.1 Issue 1
On a proper construction of the June 2009 agreement, were SOM obliged to offer contracts to Jacobs worth up to 33,500 hours, or was the obligation actually to enter into contracts up to that amount?
6.2 Issue 2
If the obligation was to enter into contracts up to that amount, not merely to offer such contracts, does SOM have any other defence to the claimant in these proceedings (given the admission that such contracts have not eventuated)?
6.3 Issue 3
If the obligation was simply to offer Jacobs contracts up to that amount, did the events relating to the conference centre in Riyadh, Saudi Arabia, fulfil SOM's contractual obligations?
5. ISSUE 1 – CONSTRUCTION OF THE JUNE 2009 AGREEMENT
5.1 The Commercial Background
a) Jacobs had a large claim for unpaid fees in respect of a major project in the Middle East;
b) The judgment pursuant to CPR Part 24 had given them only a small part of the sum claimed but it required SOM to pay a larger sum into court as a condition of being able to defend the claim;
c) There was a broad agreement between the parties that Jacobs were entitled to further fees but not in the sums claimed;
d) There was a broad agreement between the parties that, despite the litigation, they could profitably collaborate in the future for their mutual benefit;
e) Both parties are large global consultancies with offices worldwide.
5.2 The Regime Provided By Clauses 1, 2 and 3.
8.1 These clauses recognised that SOM owed money to Jacobs.
8.2 That money was to be paid in two ways. The first and principal sum of £1.5 million was to be paid in the manner envisaged by Clause 1, namely in three lump sums instalments.
8.3 The remaining sum (£502,000 being 33,500 hours x £15) was only to be paid as a lump sum if SOM failed to fulfil their obligation under Clause 2 to award contracts to Jacobs for the provision of not less than 33,500 hours of construction, design and engineering services. The clause made plain that this 'work option' represented the parties' preferred way of conferring this additional benefit on Jacobs.
8.4 Further confirmation that it was the award of contracts, rather than the payment of a further lump sum, that was the parties' preferred option can be seen in the agreed mechanism by which any dispute about rates was to be resolved by a named expert. Thus, a failure to agree the level of fees was not intended to prevent the award of contracts by SOM to Jacobs.
8.5 The anticipated collaboration worked both ways, hence the terms of Clause 3. But there are important differences between the two clauses. Clause 3 imposed no obligation on the part of Jacobs to pay SOM if the future work did not materialise, a recognition that it was SOM who owed money to Jacobs, and not the other way round. Further, Clause 3 conferred an additional benefit on Jacobs because of the £15 discount in respect of SOM's hourly rate.
5.3 The Parties Competing Submissions
5.4 Detailed Reasons
6. ISSUE 2 – IS THERE ANY OTHER DEFENCE ON THAT CONSTRUCTION OF THE CONTRACT?
7. ISSUE 3 – DID THE EVENTS IN RESPECT OF THE RIYADH CONFERENCE CENTRE FULFIL SOM's OBLIGATIONS UNDER CLAUSE 2?
"It has been some time since we have spoken. I would like to bring you up to date with regard to recent developments and the real prospect of collaborating with your firm. First, and you may know, I recently received a letter from John Stewart reminding SOM of their requirement to award Jacobs Design and Engineering contracts within a two year period. The letter states that SOM has not awarded work to Jacobs as of the date of the letter. This is not true. We have, in fact awarded contracts to GPR/Jacobs. I will provide you with an account of hours and fees so that we may accurately evaluate the extent to which we have addressed a portion of our contractual obligation to Jacobs.
In addition, I am in a position to directly award an MEP engineering contract to Jacobs for a significant new project in Saudi Arabia. The project is a conference centre in Riyadh, in the King Abdullah Financial District. Can you provide the name of a contract representative so that we may get a proposal from Jacobs for MEP Design Services?"
"Please review the attached RFP for the new conference centre and submit to my attention your proposals to provide MEP/fire alarm/fire protection services. The new conference centre will be fed from an existing remote central utility plant."
There was then a reference to phases. The email concluded:
"Construction services will be addressed separately once design has been completed. Please submit to your most competitive fee to my attention by Friday March 4th. "
"Can't help feeling suspicious as to why at the 11th hour we have to put a bid in by Friday."
"We have now received the RFP for the above project for our team. We have carefully evaluated it as a prospect with which Jacobs could assist you and have a number of concerns which we believe would make it very difficult for us to make a positive contribution to the project namely:
- Your team who are delivering it are based in New York where we have no MEP design resources. The nearest relevant resources would be in St. Louis or Fort Worth, which would make communications difficult.
- It is a complex project of a type of which we have no track record in MEP.
- Our relevant local teams have no previous experience of working on projects located in the Middle East.
- Its fast track nature would make familiarisation and rapid delivery a real challenge for the whole team by introducing a new MEP designer at this stage.
If your options are limited and considering the concerns noted above you still wish to proceed or engage Jacobs for this work, then we would be willing to assist you on a time charge basis plus expenses until such point as a lump sum offer could sensibly be made.
In these circumstances, and bearing in mind that this is the first offer of work which you have made to Jacobs since entering into out agreement 18 months ago, it seems likely that there will be better, more relevant and timely opportunities for us to work together in future. We would therefore suggest that Jacobs assisting on this project would not be in the best interest of the project, SOM or your client…"
We will continue to look for opportunities on which we can work together. We would appreciate your timely feedback on opportunities we identify. We would request that SOM be granted a one year extension on our agreement until June 2012. This would enable us to work together to identify projects that you believe to be appropriate for our firm and allow us to meet the outstanding amount of our obligation…"
7.3 What Was The Offer?
7.4 Implied Terms