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

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 >> Liberty Mercian Ltd v Cuddy Civil Engineering Ltd & Anor [2014] EWHC 3584 (TCC) (30 October 2014)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2014/3584.html
Cite as: [2014] EWHC 3584 (TCC), [2015] BUS LR D3, [2015] Bus LR D3

[New search] [View without highlighting] [Printable RTF version] [Buy ICLR report: [2015] Bus LR D3] [Help]


Neutral Citation Number: [2014] EWHC 3584 (TCC)
Case No: HT-12-55

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
30 October 2014

B e f o r e :

THE HON MR JUSTICE RAMSEY
____________________

Between:
LIBERTY MERCIAN LIMITED
Claimant
- and -

CUDDY CIVIL ENGINEERING LIMITED
CUDDY DEMOLITION AND DISMANTLING LIMITED
Defendants

____________________

SIMON LOFTHOUSE QC and MARC LIXENBERG (instructed by Morgan LaRoche) for the Claimant
SIMON HARGREAVES QC and CHRISTOPHER HARRISON (instructed by Hugh James) for the Defendants

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©


     
    Judgment No 3

    Mr Justice Ramsey:

    Introduction

  1. In these proceedings the Claimant ("Liberty Mercian") seeks specific performance of obligations relating to a performance bond and two collateral warranties under a contract for a development project ("the Contract").
  2. In the first judgment ([2013] EWHC 2688 (TCC)) I dealt with a number of issues relating to the Contract and, in particular, the question of when the Contract was formed and which of the Defendants, Cuddy Civil Engineering Limited ("CCEL") or Cuddy Demolition and Dismantling Limited ("CDDL") was the Contractor under the Contract. I held that the Contract was made with CCEL and that CCEL's obligation to supply the performance bond and warranties survived the termination of the Contract and that CCEL was in breach of contract in failing to supply them.
  3. In the second judgment ([2013] EWHC 4110 (TCC)) I dealt further with the claim for specific performance of a performance bond and two warranties. I held that, subject to certain matters raised by CCEL but not established on the evidence then put before the court, I would have been inclined to grant specific performance both in respect to the performance bond and the warranties. As I indicated, my concern was that I should not order specific performance in circumstances where, on proper investigation, the obligations to provide the performance bond or warranties might prove to be impossible. I therefore decided to proceed by stages by first ordering CCEL to use its best endeavours to obtain both the performance bond and the warranties so that the position on alleged impossibility could be properly considered at a further hearing. I therefore gave CCEL further time to deal with those matters.
  4. At a hearing on 19 December 2013 the parties agreed that the date by which CCEL should use its best endeavours to supply a performance bond and warranties should be extended to 16 February 2014.
  5. At the subsequent hearing I heard submissions on whether, on the basis of the evidence then produced, I should order specific performance of the performance bond and warranties and I also heard submissions on costs. Certain matters arose during the course of oral submissions and I gave permission for each party to exchange further submissions after the hearing.
  6. I now consider the three issues which remain:
  7. 1) Whether to grant specific performance of CCEL's obligation to produce a performance bond.
    2) Whether to grant specific performance of CCEL's obligation to provide warranties.
    3) The appropriate order for costs in these proceedings.

    Specific performance of the performance bond
  8. As set out in the second judgment, subject to the question of impossibility and the expiry date for any performance bond, for the reasons given in that judgment I would have granted specific performance.
  9. As stated in my order dated 19 November 2013, as amended by my order dated 20 December 2013 ("the Order") CCEL was to use its best endeavours by 16 February 2014 to "supply to the claimant a performance bond (executed by a bank or insurer strong enough to carry the bond) in the form enclosed herewith".
  10. In the event, as indicated in the second judgment at [23], it was open for Liberty Mercian to put forward evidence showing that a performance bond could be obtained by using reasonable endeavours. In the event there was a degree of co-operation between the parties in seeking to obtain the required performance bond. It is therefore convenient to summarise the steps which were taken, as set out in the third and fourth witness statements of Michael Cuddy served on behalf of CCEL and the witness statement of Ian Crabtree, the Company Secretary of Liberty Mercian, served on behalf of Liberty Mercian.
  11. After seeking advice from a financial consultant, Mr Cuddy approached Oval Insurance Broking Limited ("Oval"), a firm of leading UK commercial insurance brokers. He sought their assistance in obtaining a performance bond in the terms attached to the Order. He set out the relevant circumstances both as to these proceedings and the termination of the Contract. Mr Cuddy made the following request: "whilst CCEL has no assets, can you please respond to this enquiry on the presumption that sufficient security can be provided."
  12. Mr Paul Rowland of Oval consulted eight underwriters, ACE, Aviva, CBL, Enterprise, Euler Hermes, HCCI, QBE and Travelers. After completing his enquiries with that specialist panel of underwriters, he provided his surety market review document. In the covering email he said this:
  13. "The content details the reason why the specialist panel of underwriters whom we approached and engaged on behalf of CCEL have not offered their appetite, capacity and support for this risk proposition in this instance."
  14. In the report he set out the responses from the underwriters, attaching the emails from each of them responding to the enquiry. He summarised his conclusions in the following terms:
  15. "Despite our very best efforts, it has proven impossible to secure market appetite, capacity and support for this risk proposition due to the following reasons:
    1. The on-site work has progressed significantly to the point of near practical completion; as such, the issuance of a bond at this juncture would retrospectively attach all the liability onto a Surety underwriter.
    2. The continuing, and as yet unresolved, legal dispute with regards to the engagement of the correct principle to the contracting entities.
    3. Under the contentious relationship there is a clear "monies owed position" between both parties yet to be resolved
    4. The proposed contract form is NEC3. As such the surety underwriters would need to introduce some bespoke clauses to make it more acceptable and compliant."
  16. Mr Cuddy then instructed HMT LLP, a corporate finance firm, to make further enquiries on behalf of CCEL. HMT consulted eight lending institutions: RBS, Santander, HSBC, Metrobank, Barclays, Lloyds, Clydesdale and Handelsbank and a specialist debt advisory business, Litmus.
  17. In his response to Mr Cuddy, Mr Andrew Thomson of HMT attached a schedule and said:
  18. "…each institution either declined the opportunity outright or required the bond to be 100% cash covered. Given the circumstances of the situation (i.e. a strong likelihood that the bond would be called and the financial circumstances of your business), the results of this exercise are by no means surprising and, in our opinion, there would be no point in widening it further."
  19. As set out in that attached schedule, all of the financial institutions except two were stated to have shown no interest. In respect of Santander it was stated that the trade finance director had said that, for the bank to consider any form of performance bond, they would need it backed by tangible security of equal amount to what is issued. In relation to Metrobank it was noted that their interest was "unlikely". They had stated that the basis on which they would consider issuing a bond would be on a fully cash covered basis. They said they would need to obtain credit approval and they could foresee some resistance in view of the history.
  20. On 13 December 2013 Mr Rowland of Oval informed Mr Cuddy that, despite initially declining, one of their preferred and highly respected surety markets, HCCI, had come back and issued a non-binding indication of terms for the requested £420,000 bond against a £12,600 premium. In addition there was an onerous security of 100% cash deposit, being £420,000 equal to the value of the proposed bond to be issued. He said that the bond expiry clause would be "on issue of the certificate of practical completion, which shall be conclusive for the purposes of this guarantee".
  21. On 16 December 2013 HCCI confirmed the terms of the bond but on the morning of 17 December 2013 Mr Rowland wrote to Mr Cuddy to say that HCCI had advised that, after taking another look at this case and discussing the matter further internally, they have determined that in this specific instance this was a "bond placement best left alone".
  22. Meanwhile on 10 December 2013 Liberty Mercian's solicitors had been in contact with CCEL's solicitors to say that a meeting had been arranged with Henderson Surety Services ("Henderson") and a representative of their underwriters, Evolution. On 17 December 2013 a meeting took place between Henderson, Evolution, Liberty Mercian and CCEL.
  23. Mr Cuddy says that after discussing the project, the background, the contract and the fact that it had been terminated the representative of Evolution said he could not provide a performance bond on a terminated contract and it was his view that in those circumstances a bond was not available. At the end of the meeting Mr Crabtree of Liberty Mercian said he would report the bondsman's position to Liberty Mercian. Mr Brian Tourle, the representative of Henderson confirmed the position in the following terms:
  24. "I confirm that it will not be possible to issue a performance bond guaranteeing performance of a contract which no longer exists and therefore is not capable of being performed.
    I can further confirm that I have been in touch with underwriters across the Surety market in this regard and this is a consistent response."
  25. In his witness statement Mr Crabtree says that Mr Cuddy failed to record that the representatives of Henderson and Evolution made it clear that there were other financial instruments which could provide the security sought by CCEL and they gave examples of a letter of credit, deposit into a solicitors account or a deposit guarantee bond.
  26. In an email of 12 December 2013, Mr Rowland set out the following comments in relation to Evolution, although it appears that he has reversed the position of Evolution and Enterprise in the following extract from that email:
  27. "The surety underwriter market mentioned, Evolution, is based in Essex and has very close ties and often shares capacity and risk with Enterprise of Gibraltar; you will recall from the content of our Market Review report that we securely squared away this option by engaging Enterprise to test their appetite and capacity...as seen from our report, Enterprise declined.
    As discussed, we would be able to engage with Evolution. However, in doing so, and because they are an "unrated" carrier similar to Enterprise, Oval would have to ask CCEL for a letter of disclaimer revoking any liability as to the financial competency of the carrier and/or validity of the covers placed for which we would receive a commission.
    Our standard broking and compliant platform is to engage exclusively through a panel of pre-qualified and continually assessed "A" rated underwriters on behalf of our clients.
    As discussed, I would certainly not feel comfortable placing a business of the calibre and standing of CCEL in this position. Accordingly, I feel that this would be an inappropriate process for us to pursue on their behalf."
  28. On 30 December 2013 Liberty Mercian's solicitors wrote to CCEL's solicitors indicating that Liberty Mercian would be prepared to accept equivalent performance to the provision of the bond, such as payment to a stakeholder account of the bond sum, such sum to be held on terms materially the same as those of the bond. No response was received to that suggestion.
  29. On 6 January 2014 Mr Crabtree contacted Henderson to see if it was possible to agree a form of bond which Evolution would be prepared to underwrite and issue to CCEL and the terms that would be associated with that bond. On 7 February 2014 Henderson responded in the following terms:
  30. "There are conditions relating to the provision of the bond which the Cuddy Group will need to meet:
    1. £420,000 cash collateral deposited by Cuddy
    2. Cuddy entering into a deed of deposit in respect of the security in the form prescribed by Evolution
    3. Long stop date of 31/12/16 within the bond.
    4. Premium of 2% per annum for the period of the bond, so amount payable to Evolution prior to the issue of the bond is £23,800 assuming a commencement date of 1/3/14.
    The long stop date ensures that the bond period does not continue indefinitely. I imagine that Evolution would extend the period subject to the payment of additional premium."

  31. It was evident that there had been some discussion between Liberty Mercian, Henderson and Evolution about the terms of the documentation and at the hearing Liberty Mercian agreed to disclose that documentation to CCEL.
  32. Mr Cuddy also refers to further contact he made both with Santander and Metrobank in January 2014 which led to them saying they were unable to assist CCEL. Mr Cuddy also consulted his own bank, Barclays, who likewise said they would not be in a position to provide a bond.
  33. On the basis of these facts, Mr Simon Lofthouse QC, who appeared with Mr Marc Lixenberg, submitted that Mr Cuddy was not correct when he said in his fourth witness statement that "CCEL has used its best endeavours to obtain a bond which on any basis has proved to be impossible". Mr Lofthouse said that, as evidenced by Mr Crabtree's statement, Liberty had procured an offer in respect of a bond in similar terms to the bond attached to the Order.
  34. On that basis Mr Lofthouse's primary submission was that specific performance should be ordered in terms that CCEL should supply to Liberty Mercian a performance bond, executed by a bank or insurer strong enough to carry the bond, in the form annexed to the Order. Alternatively he submitted that, as made clear in correspondence, Liberty Mercian would accept equivalent performance by way of a payment into court of the sum of £420.000, to be paid out upon judgment being entered against CCEL in respect of breaches of the Contract, on terms equivalent to the terms of the performance bond.
  35. His further alternative submission was that, although Liberty Mercian would have preferred to have been able to negotiate better terms with Evolution, the court should order specific performance in the terms of the form of bond attached to Henderson's letter of 7 February 2014.
  36. Mr Lofthouse submitted that specific performance, being an equitable remedy, was flexible enough to do justice in the present situation where damages were not an adequate remedy against CCEL. He submitted that the court was empowered to do justice by requiring CCEL to perform its obligation in substance, alternatively through equivalent performance. He referred to the following passages in Fry on Specific Performance of Contract (6th Edition, 1921) at [1001 to 1010]:
  37. (1) "It must not, however, be understood that the incapacity of the defendant to perform a contract literally and exactly in all its parts will enable him to refuse to perform it in substance." (para. 1001)
    (2) "So, in Carey v Stafford, in the Exchequer in 1725, where a man executed a deed affecting to convey lands therein described of the yearly value of 22l. to his servant, and no such lands existed, the Court compelled him to convey lands of equal value." (para. 1003)
    (3) "And so if a copyholder were to contract to grant a lease for a longer term than custom allowed, he would, it seems, be compelled to effectuate his contract in substance, by from time to time executing leases for such terms as he could, till he had made up the term contracted for." (para. 1004)
    (4) "Errington's case, though not on a specific performance, is another illustration of this principle. He had contracted for 9,000l to build a bridge over the Tyne, and to maintain it for seven years, and had entered into a bond in that sum conditioned for performance of the contract: the bridge was built, but thrown down by a flood; and it was found that no bridge on that site could stand. Thereupon he filed his bill for relief from the bond; and upon his building a bridge upon a neighbouring site where it could stand, and submitting to an issue of quantum damnificatus by the change of site, he was relieved from the penalty of the bond." (para. 1005)
    (5) "Where a contract is in its original form obnoxious to difficulties on the score of illegality, but can nevertheless be lawfully performed in substance, the Court will so model it as to effectuate this purpose. Thus it having been made by statute illegal to contract for a tenant to pay the tithe rent-charge, a contract for a lease, stipulating that the tenant should pay a certain sum for rent and also the rent-charge, may be carried into effect by the Court by means of a lease reserving as rent the two sums in the contract treated respectively as rent and rent-charge." (para. 1006)
    (6) "The Court will probably be anxious to execute a contract cy pres, where by subsequent legislation a contract originally valid may have become invalid in part…." (para. 1008)
    (7) "It seems that in some cases in which the contact would be incapable of being specifically enforced in its very terms for other reasons than illegality, it may he executed by the Court cy pres, if such a plan be feasible. In one case there was a contract entered into by the defendants within two years to procure the heir-at-law of A. B. to convey certain estates to the plaintiff or within the same period to petition the House of Lords for, and to use their utmost endeavours to procure, an Act of Parliament for substituting a trustee in place of the heir, in case such heir could not be found, or there was no heir; on a bill filed for the performance of the contract, the Court decreed the defendants to allow their names to be used in an Application to Parliament for the Act. A contract by a person to use his utmost endeavours seems to be one which the Court could not specifically execute." (para. 1009)
    (8) "In some railway cases, the Court has shown a great inclination to regard what it considers as the substance of the contract." (para. 1010)

  38. Mr Lofthouse also referred to paragraph 311 of Halsbury's Laws, Specific Performance (Volume 95 (2013) 5th Edition), "Inability to order performance of the whole contract" where it stated: "where the contract is to execute a document, specific performance may be ordered even though the court might not be able to order specific performance of some of the obligations created by that document."
  39. At paragraph 392, in the section with the title "Performance by the Defendant made impossible" and dealing with "Frustration and impossibility" it is stated: "If, however, the impossibility does not relate to the substance of the contract, the court may order the defendants to perform the contract so far as he can and pay compensation for the part unperformed." The citation was to the case of Errington v Aynsly (1788) 2 Bro CC 340 where, as set out in paragraph 29(4) above, there was a contract to build a bridge, but it proved impossible to lay the foundations, and it was ordered that the bridge be built on the nearest possible site and that compensation be paid.
  40. In relation to the ability of the court to order equivalent performance by way of payment into court, Mr Lofthouse served further submissions after the hearing dealing with that aspect. He submitted that under s.19 of the Senior Courts Act 1981 the High Court had the right to order funds to be paid into court as part of its inherent jurisdiction. He submitted that if the court decided that it could order substituted performance, then there could be no basis for contending that the court could not order sums to be paid into court as it could order a party to pay sums into an escrow account. He referred to Halsbury's Laws on Specific Performance at paragraph 430 where decisions were cited which showed that payment into court could be ordered in a wide variety of circumstances. He also referred to the Court Fund Rules 2011 which at rule 6(1)(b) showed that funds would be accepted if there was "a sealed copy of the court order authorising the deposit." On that basis Mr Lofthouse submitted that the court could and should order substituted performance by payment into court.
  41. In reply to the submissions served by Mr Hargreaves, Mr Lofthouse submitted that the fact that there is express reference to payment into court in certain rules or statutes did not mean that those were the exclusive occasions when a payment into court could be ordered. In this case he submitted that the payment into court could be ordered as part of the order for specific performance and would be paid out on equivalent terms to those of the bond required by Clause Z.4.1.2 of the Contract.
  42. In respect of the form of bond annexed to Henderson's letter of 7 February 2014 Mr Lofthouse submitted that the court could do justice by ordering CCEL to perform its obligation by entering into a bond in that form which would be performance in substance or equivalent performance to the obligation undertaken by CCEL under the Contract. He submitted that this was appropriate, based on the approach of the courts, as summarised in Fry and Halsbury's Laws. He submitted that the criticisms of the form of bond made on behalf of CCEL were not properly founded
  43. On behalf of CCEL, Mr Simon Hargreaves QC, who appeared with Mr Christopher Harrison, submitted that, in accordance with the Order, CCEL had used its best endeavours to obtain a performance bond, executed by a bank or insurer strong enough to carry the bond, in the form attached to the Order and had shown that, on that basis, it was not possible to obtain a bond in that form. He said that CCEL's approaches to Oval, HMT, Santander, Metrobank and Barclays had all, in the end, failed to obtain an offer to provide a performance bond in the form required by the Contract.
  44. He said that the Order, as agreed by the parties, had followed the obligation in the Contract which was to provide a performance bond "in the form annexed" reflecting the obligation in Clause Z.4.1.2 of the Contract, whilst the obligation in respect of the warranties was to provide them "substantially in the form annexed" as set out in clause Z.17.1 of the Contract. He submitted that this was not a case where, in dealing with specific performance of the obligations in the Contract, the court could seek to depart from the wording of the bond annexed to the Contract.
  45. In relation to the authorities cited by Mr Lofthouse, Mr Hargreaves submitted that they were dealing with a different situation and not one where third parties were involved, as was the case here. In any event, he submitted that there was no authority to show that substituted performance of the obligation to provide the performance bond would apply in the circumstances of this case.
  46. In relation to the alternative relief proposed by Mr Lofthouse in terms of a payment into court, Mr Hargreaves submitted in written submission in response to those from Mr Lofthouse, that the court had no jurisdiction to make an order for payment into court in these circumstances and, in any event, should not exercise any jurisdiction to do so.
  47. He referred to the provisions of the CPR which gave the court an express power to order a payment into court and submitted that none of the circumstances applied in this case. He also referred to CPR Part 37 which contains miscellaneous provisions as to payment into court including payment into court under statutes. He submitted that the general position is that the CPR provides for payment into court as an interim remedy and that the two examples of payment into court as a final remedy are based on statutes but there is no statute which provides the power to order payment into court in this case.
  48. He also submitted that, as explained in the notes in the White Book 2014 to s.19 of the Senior Courts Act 1981 at 9A-68: "The overriding features of the inherent jurisdiction of the court are that it is a part of the procedural law, both civil and criminal, and not part of substantive law."
  49. Mr Hargreaves referred to the decision of the Court of Appeal in Moore v Assignment Courier Ltd [1977] 1 WLR 638 where the Court of Appeal refused to order a tenant in possession to pay a periodic sum into court between the date of a purported forfeiture and determination of the action. Sir John Pennycuick referred, at 642, to Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146 where Lord Denning MR said at 156 "These courts are masters of their own procedure and can do what is right even though it is not contained in the rules."
  50. Sir John Pennycuick then added:
  51. "I think that in its context that sentence is plainly addressed to matters of procedure and is not intended to say that the court can, in matters of substantive right, do whatever the court thinks fair, apart from the principles applicable under either the general law or the RSC . The present claim, to my mind, clearly raises an issue of substantive right, namely: in circumstances such as these, can the tenant be ordered to make interim payments to the landlord?
    Apart from any provision in any rule of the Supreme Court, it seems to me that the answer must be that which was given by the judge, namely: the court has no jurisdiction to make such an order. The court has before it a claim by the landlords based on forfeiture, claiming mesne profits. I do not see any ground on which the court, having only that claim before it, could make an order for interim payments based, not on the landlords' claim in the action, but on what would be the position if the landlords' action failed. It may at first sight seem attractive and fair that the court should make such an order, but I do not know of any ground on which the court could be said to possess that jurisdiction."
  52. Mr Hargreaves submitted that this showed that the court did not have a jurisdiction to order a payment into court as final substantive relief where there was no inherent or statutory jurisdiction.
  53. In relation to the passage in Halsbury's Laws on payment into court, relied on by Mr Lofthouse, Mr Hargreaves submitted that this passage was dealing with interim remedies which as illustrated by Pearlberg v May [1951] Ch 699 is where the court is ordering payment into court pending the outcome of the action.
  54. In any event, even if the court does have jurisdiction, Mr Hargreaves submitted that the court should not exercise that jurisdiction. He submitted that, where the impossibility of performance gave rise to a defence to specific performance, the court should not seek to grant relief to overcome that defence. Further, he submitted that the court should not be asked to act as a bondsman and have to administer funds on the terms of the bond.
  55. In relation to the form of bond attached to the letter of 7 February 2014, Mr Hargreaves submitted that this was not specific performance of the obligation under the Contract but, by reference to a number of terms, he submitted that it was a totally different form of bond.
  56. He also submitted that Evolution, an insurance company based in Gibraltar, was unrated and that the court ought not to order specific performance which would require CCEL to enter into arrangements with such a company, particularly where it was required to deposit £420,000 to obtain the bond. He said that the clear advice of Mr Rowland pointed against CCEL being involved with that company.
  57. I now turn to consider those submissions. In this case it is evident that both CCEL and Liberty Mercian have attempted to obtain a performance bond in the terms annexed to the Contract but have been unable to do so. In my judgment, by approaching underwriters, financial institutions and individual banks, CCEL has complied with the obligation in the order dated 19 November 2013 to use its best endeavours to secure that performance bond. I consider that, on the basis of the evidence summarised above, it is, in practical terms, impossible for the court to order specific performance of the obligation to provide a performance bond in the terms annexed to the Contract in the circumstances of this case, which are well summarised by Mr Rowland in his report.
  58. Mr Lofthouse submitted, in effect, that even if the obligation is impossible to perform on its original terms, in approaching the remedy of specific performance, the court can seek performance of the obligation in substance or by equivalent means, by ordering performance in an alternative way.
  59. The authorities referred to in Fry and Halsbury are all of some antiquity. In the case of Fry the last edition was written in 1921. Despite the researches of counsel on both sides, they have been unable to find a modern authority which follows that principle. The cases cited in Fry all consist of a case where a party has undertaken to perform an obligation but where, for some reason, it has been unable to do so.
  60. The obligation to provide a performance bond from a bank or insurer is not now possible of performance for the reasons I have set out above. However, there is no reason to suppose that it would not have been possible for CCEL to provide a performance bond had it responded to the request to produce one during the course of the project. The main difficulty in obtaining it now arises because of the subsequent termination and the underlying disputes between the parties.
  61. Despite their antiquity, the cases show that where an obligation is agreed between the parties and it proves impossible to perform it when the time comes then, if it is a matter for which specific performance would be ordered, the court will seek to order specific performance so as to provide the party with equivalent rights by substituting the original performance with other performance. The reason why the original performance has proved impossible is often because a party does not have the ability to perform because it does not have the relevant property or other rights. However, so far as the cases go, it does not seem that it is necessary to show that performance has become impossible because of an act or omission on the part of the party obliged to perform. Indeed whether performance has proved impossible because of an act or omission of a party or some third party act should not, if the obligation is still enforceable, be a ground in principle for distinguishing between the relief which a party is granted. However, even if it was a point of distinction, on the facts of this case the reason why the performance bond cannot now be provided is that events have occurred after the time when CCEL was obliged to provide it.
  62. As a result, I consider that if there can be a form of performance which will provide Liberty Mercian with equivalent rights to those under a performance bond, then there may, in principle, be an order for specific performance by way of substituted performance.
  63. I shall deal first with the issue whether the court could and should order that £420,000 should be paid into court as substituted performance for the provision of a performance bond.
  64. There is a claim for specific performance where the remedy of damages against CCEL would not be an adequate remedy and where, as I have found, the court can, in principle, order substituted performance of the obligation to provide the bond.
  65. The mechanism of a payment into court is, as Mr Lofthouse submitted, a mechanism regulated by the Court Fund Rules under which money can be accepted and paid out under an order of the court. The question is whether the court can make an order for money to be paid in and paid out on the terms of the bond. The order would be by way of a final remedy of specific performance. It would therefore not be creating a new substantive right as was the concern in Moore v Assignment Courier. It would be using a procedure available to the court to give effect to the court's power to grant substituted performance. In those circumstances, I consider that Mr Lofthouse is correct to identify the general jurisdiction as being given under s.19 of the Senior Courts Act 1981. The power to order a payment into court is essentially procedural. It does not impose rights or liabilities on the parties by way of substantive law. It is, however, a procedural process which is available to give effect to rights and liabilities arising from substantive law.
  66. I therefore consider that, in principle, I could order substituted performance by ordering CCEL to lodge sums in court to give effect to performance of its obligation to provide a performance bond.
  67. Mr Hargreaves submitted that I should not do so because it would overcome a defence to specific performance based on impossibility of performance. That "defence" applies only where the court cannot grant specific performance of the original obligation and also cannot grant specific performance by way of substituted performance. If payment into court is an appropriate way of giving effect to specific performance of that original obligation by way of substituted performance then I do not consider that there is any "defence" to the court giving relief.
  68. Mr Hargreaves also submitted that the court should not be asked to act as bondsman and administer the fund in accordance with the terms of the bond. The reality is that the fund would stand as security for any claim by Liberty Mercian against CCEL, in the same away as the liability of the guarantor to pay that sum under the bond. If there is no claim brought by Liberty Mercian against CCEL or if any claim by Liberty Mercian fails then the sums would be repaid to CCEL in the same way as the bondsman would be discharged in that case. If however there are proceedings by Liberty Mercian against CCEL then the funds would be available to Liberty Mercian in the same way as the bondsman would be liable to pay any judgment. The court would make an order after liability had been determined dealing with the position in relation to the sums paid into court as if it were dealing with the liability of the guarantor under the bond and the same terms and conditions would apply.
  69. I therefore do not consider that there is any reason in principle or in practice why the court should not order a payment into court of the sum of £420,000 to stand as equivalent to the performance bond and on the same terms and conditions. There would obviously be general liberty to apply to CCEL to obtain payment out. I also consider that the sum should be paid out to CCEL if proceedings have not been commenced within six months, with liberty to Liberty Mercian to apply to extend that period.
  70. However, before I grant that form of substituted performance by way of relief, I consider that I need to deal with the position in relation to the proposed bond attached to Henderson's letter. If that is an appropriate bond then it may provide a better form of substituted performance than a payment into court.
  71. Mr Hargreaves raised two aspects which, he submitted, meant that the bond should not be ordered. First, he referred to a number of terms in the proposed bond or on which it was offered, which differed from the terms in the bond attached to the Contract and which he said made it inappropriate to grant specific performance in the form of the proposed bond. Secondly, he submitted that CCEL should not be ordered to provide a bond provided by Evolution.
  72. I will deal first with Mr Hargreaves' objections to the terms of the bond. He submitted that Recital 3 of the proposed bond, which stated that the contractor had arranged for £420,000 to be placed on deposit, showed that it was a different form of bond to that normally required.
  73. On this point Mr Lofthouse submitted that there was nothing in Recital 3 which could be objectionable as the arrangement was merely that a sum was to be deposited as security instead of there being a counter indemnity to cover the amount of the bond.
  74. I do not consider that the fact that a sum has to be deposited in order to provide the bond, rather than there being a counter indemnity, would be a ground for not ordering specific performance of a bond.
  75. Mr Hargreaves also referred to the terms of the letter which made it clear that Evolution would be entitled to charge losses, costs, charges, expenses and claims to the bank account which contained the sum deposited and to do so on the basis of the signature by a director of Evolution. He said that this was objectionable.
  76. Mr Lofthouse submitted that the fact that Evolution may be able to take funds out of the bank account would again be no different to the position where there was a liability to pay such sums under a counter indemnity required for the provision of a bond.
  77. Again I so not see any fundamental objection to granting specific performance of a bond which is subject to those terms which could otherwise be obtained under a counter indemnity.
  78. Mr Hargreaves then referred to the provisions of Clause 1 of the proposed bond which added a proviso limiting the liability of the guarantor so that it was not required to make payment under the bond "until such time as the Works have been completed and the actual and incurred (i.e. excluding prospective or contingent law) "Damages" have been properly established and ascertained". Mr Hargreaves submitted that those provisions were not in the Contract or in the Order and it was Evolution, rather than Liberty Mercian, who required those terms.
  79. Mr Lofthouse submitted that this provision would limit Liberty Mercian's ability to obtain payment under the bond and, if anything, would protect CCEL. I accept that submission. This term is more favourable to CCEL than the terms of the bond annexed to the Contract and, on that basis, I do not see that there could be any objection to granting specific performance in those terms.
  80. Mr Hargreaves referred to Clause 3 of the bond annexed to the Contract which had been deleted in the bond offered by Evolution. That clause provided that "The Guarantor should not be discharged or released by any alteration of any of the terms conditions and provisions of the Contract or in the extent or nature of the Works and no allowance of time by the Employer under or in respect of the Contract shall in any way release or affect the liability of the Guarantor". He submitted that the deletion of that term raised concerns over Evolution's ability to walk away from their obligations under the bond.
  81. Again Mr Lofthouse submitted, correctly in my judgment, that this is a matter which would be of more concern to Liberty Mercian because if Evolution's liability under the bond were to be discharged or released in circumstances where it would not have been discharged or released under the form of bond in the Contract then CCEL would be in a better position. I do not consider that there could be an objection to granting specific performance of the bond on the basis that Clause 3 of the bond annexed to the Contract had been deleted so that the bond was more favourable to CCEL as Evolution's obligation to pay out would be more limited than under the terms of the bond attached to the Contract.
  82. Mr Hargreaves also submitted that Clause 6 of the bond annexed to the Contract, concerning assignment, had been changed to the provision in Clause 5 of the proposed bond. He said that this altered the obligation. Mr Lofthouse submitted that, again, this was, if anything, to the benefit of CCEL.
  83. The proposed clause imposes an obligation on the employer to obtain the prior written consent of both the guarantor and the contractor before the bond can be assigned. I consider that Mr Lofthouse is correct in saying that this, again, is a matter which benefits CCEL. The provision in the proposed bond also removes the prohibition on assignment by the guarantor or the contractor but this does not make the bond more burdensome for the contractor. In those circumstances I do not consider that the change in the wording of the bond in relation to assignment would be a matter which would affect the question of whether the court would grant specific performance.
  84. In summary, therefore, on the basis that the court can grant specific performance of an equivalent obligation I do not see that there could be any objection to the terms of the proposed bond or the terms on which the proposed bond is offered which would preclude the court, in principle, from granting specific performance of a bond on those terms.
  85. Mr Hargreaves then relied on a second aspect which concerned the financial position of Evolution. He submitted that Evolution was a company, according to the documents, with a registered office in Gibraltar and authorised and regulated by the Commissioner of Insurance of Gibraltar. It is also permitted to issue policies of insurance or financial guarantee in the United Kingdom by the Financial Conduct Authority. However Mr Rowland points out that, because Evolution is not an English registered company it is unrated. He says that the policy of his standard broking business is to engage exclusively with "A" rated underwriters. He says he does not feel comfortable with CCEL being asked to use an unrated carrier and that Oval would have to ask CCEL for a letter of disclaimer revoking liability as to the financial competency of the carrier and the validity of the cover placed.
  86. Mr Lofthouse submitted that Evolution is only unrated because it is a company outside the United Kingdom and that such concern would be a matter for Liberty Mercian rather than CCEL.
  87. I consider that the concerns raised by Mr Hargreaves do affect the position. Under the terms proposed CCEL would have to deposit £420,000 with Evolution, a company registered in Gibraltar. Evolution would then place the sum in a separate bank account with a bank of its choice. There is no provision that this would be within the UK and it is evident from the terms on which the bond is provided that Evolution could deduct any losses, costs, charges, expenses and claims merely by giving a notice in writing signed by a director of Evolution, which would be conclusive evidence that such amounts had been properly withdrawn and utilised, notwithstanding any objection by CCEL and/or the depositor, such as CDDL.
  88. I have no financial information about Evolution and I consider that the reservations expressed by Mr Rowland are reasonable objections made by a person with experience in the market of placing performance bonds. The general concern in the case is that there would be the deposit of a large amount of money to which Evolution would have free access. If the court were to grant specific performance in the terms of the proposed bond then the court would necessarily be forcing CCEL, or the depositor (such as CDDL), to enter into an arrangement which, on the basis of the evidence before me, a financially prudent party would not do. As the sum which is deposited would be returned if the conditions of the bond were not met, CCEL and the depositor (such as CDDL) have a clear interest in making sure that the money deposited is properly protected and dealt with.
  89. Equally the Order reflected the terms of Clause X13.1 of the Contract. Under that provision CCEL had to give the employer a "performance bond, provided by a bank or insurer which the Project Manager has accepted" and "A reason for not accepting the bank or insurer was that its commercial position was not strong enough to carry the bond". Whilst that is evidently aimed at protecting the employer if the contractor were to propose a bond from an unacceptable bondsman, it indicates that the parties contemplated that the bond would be from a bank or insurer in a strong financial position. I do not consider that it is appropriate for the court to impose a transaction by way of specific performance which, on the current evidence, would not be one which a prudent party would enter into.
  90. In those circumstances, even on the basis that the court could order substantial or equivalent performance of the contractual obligation to provide a performance bond, I would not have made CCEL the subject of an order for specific performance to enter into the performance bond attached to Henderson's letter on the terms offered.
  91. As a result, for the reasons set out above, whilst it is not possible for CCEL to obtain a performance bond in the form attached to the Contract, I consider that there should be substituted performance in this case by way of a payment into court as being an equivalent to the provision of the bond.
  92. Collateral warranties
  93. There are two warranties, both from Quantum (GB) Limited ("Quantum"), one to Liberty Mercian and the other to Waterman Transport and Development Limited ("Waterman") which, as I have held, it was CCEL's obligation to supply under the Contract. I also found that this obligation survived the termination of the contract and CCEL was in breach in failing to supply the two remaining warranties.
  94. In the second judgment, as CCEL had raised an issue as to its ability to obtain warranties from Quantum, I decided to proceed in stages by first ordering CCEL to use its best endeavours to obtain the warranties.
  95. Mr Hargreaves submitted that, on the basis of the steps which CCEL has taken, CCEL has used its best endeavours and not been able to obtain the warranties and that the court should not now grant specific performance.
  96. Mr Lofthouse submitted that this is a case where specific performance should be granted because Quantum has no defence to providing the warranties and accordingly CCEL should enforce the obligation.
  97. The sub-contract was entered into between CDDL and Quantum but, as I set out in the second judgment at [37], I do not consider that that affects the position as, on the basis of the documents produced, CDDL has been prepared to pursue Quantum for the warranty and therefore no question arises of CCEL having to enforce the obligation against CDDL so as to obtain the warranties.
  98. It is first convenient to summarise the steps which have been taken towards obtaining the warranties from Quantum. The evidence is contained in the third and fourth witness statements of Darren Evans and the first and second witness statements of Ioan Llyr Prydderch, a Partner at Hugh James Solicitors, on behalf of CCEL and the first witness statement of Ian Crabtree on behalf of Liberty Mercian.
  99. On 26 November 2013 Hugh James sent a letter to Grant Thornton, the Liquidator of Quantum, after having sent the draft letter to Liberty Mercian's solicitors. Having chased for a response on 2 December 2013, Hugh James received a phone call on 3 December from Douglas-Jones and Mercer ("DJM"), Solicitors who had been instructed by Grant Thornton to respond to Hugh James' letter. Hugh James then sent a further letter on 10 December 2013 and received a response the same day.
  100. In that response of 10 December 2013 DJM said that their client had already stated its position in respect of the warranties and continued:
  101. "Having considered the matter again in the limited lime provided, our client understands that it is unlikely to be able to satisfy/comply with a number of clauses contained within the warranty, including but not limited to clause 1, 3 and 4. As a result any completion of the same has the potential for the Deed to be of no benefit and/or Quantum being in breach of the same. Without prejudice to the foregoing it is also understood that at the present time it is difficult to verify the accuracy of a variety of the clauses contained within the warranty and therefore to commit to the same by signing the Deed.
    In the circumstances our client is not in a position to complete the same and therefore cannot provide the confirmation or signatures you seek."
  102. Hugh James responded to that letter on 13 December 2013 in a letter which had been agreed between the parties' solicitors. On 17 December 2013 DJM responded saying that Hugh James' client was being somewhat precipitous and the Liquidator had not had time properly to consider the situation. Given the extension of time for CCEL to comply with the order of 19 November 2013, Hugh James wrote on 23 December 2013 requiring a full response by 17 January 2014.
  103. On 17 January 2014 DJM replied still refusing to provide the warranties and raising a number of points. First, they required proof that the form of warranty was presented to Quantum at the time of the formation of the contract. Secondly, they indicated that sums were due totalling nearly £18,000 including some £13,000 on the relevant project and raising the question of why those sums had been withheld.
  104. Thirdly, in relation to insurance they noted a reference in my judgment to Quantum apparently having insurance and said that this was not correct:
  105. "Quantum does not benefit from professional indemnity insurance as we have already explained a variety of other matters said to be required under the warranty document supplied are incapable of being confirmed."
  106. Fourthly, they raised the existence of the arbitration clause in the sub-contract.
  107. Hugh James replied to that letter noting that DJM had been supplied with a copy of the signed sub-contract and that warranties had already been supplied by Quantum to Sainsbury's and said that there could be no dispute about the form of warranty. They referred to clauses 30(4), 33 and 16(1) concerning the contractor's ability to withhold payment for the failure to provide the bond and set off sums on other contracts. They said that Quantum did not have a defence to performance in the event of non-payment. In relation to the dispute resolution clause, which contained the need for a meeting in advance of arbitration, Hugh James indicated they were prepared to meet if dates and times were provided.
  108. On 5 February 2014 Hugh James wrote to DJM again making some observations passed to them by Liberty Mercian's solicitors and requesting a response.
  109. On 10 February 2014 DJM wrote in the following terms:
  110. "We are no longer instructed in this matter. In light of your client's previous comments to our client regarding this matter we have costs in the sum of £2,950 ex VAT and enquire as to which of your client's companies is to be invoiced. The final meeting of the creditors has taken place and the appropriate documentation arising therefrom filed."
  111. From the documents it is apparent from the London Gazette of 4 December 2013 a meeting of the creditors under section 106 of the Insolvency Act 1986 was arranged for 5 February 2014 and the Liquidator has now vacated office. Quantum is therefore now in the position where it has been dissolved and an application would have to be made under the Companies Act 2006 for Quantum to be restored to the register.
  112. Mr Hargreaves submitted that, on the basis set out above, where Quantum is now an insolvent company and Hugh James have tried but been unable to obtain the warranties despite using best endeavours, the court should not grant specific performance of the obligations. He submitted that it would be impossible to obtain the warranties from Quantum alternatively to obtain the warranties would require, to cite from Wroth v Tyler [1974] Ch 30 at 50: "difficult or uncertain litigation", the outcome of which "depends on disputed facts, difficult questions of law, or the exercise of discretionary jurisdiction."
  113. He also referred to the following passage from Wroth v Tyler as follows at 51:
  114. "… In such a case, the vendor cannot know where the litigation will end. If he succeeds at first instance, the defendant may carry him to appeal: if he fails at first instance, the purchaser may say that there ought to be an appeal. No doubt the line between simple and difficult cases will sometimes be hard to draw: and it may be that specific performance will be readily decreed only where it is plain that the requisite consent is obtainable without difficulty."
  115. In those circumstances Mr Hargreaves submitted that CCEL should not be required to take the matter any further in relation to the warranties from Quantum.
  116. Mr Lofthouse said that, although Liberty Mercian does not take issue with Hugh James' efforts after December 2013 to obtain the warranties, based upon the principles articulated in the second judgment, CCEL can readily and should, through CDDL, be required to proceed against Quantum in order to obtain the warranties in question. In particular, he submitted that the correspondence with DJM and the responses from Hugh James made it clear that Quantum had no valid defences to the claim from CDDL in respect of the warranties.
  117. The enforcement of an obligation to obtain a warranty from a party which is evidently insolvent and dissolved would not, in general be a matter for which the court would order specific performance on the basis that it would serve no useful purpose: see, for instance, De Brassac v Martyn (1863) 2 New Rep 512 and Tunno v Lewis (1831) 1 LJ Ch 177, cited in Atkins Court Forms as one of the grounds on which specific performance may be refused.
  118. In the present case there is evidence before the court that up until 21 January 2012 Quantum had professional indemnity insurance organised through a Lloyd's broker with a limit of indemnity of £5,000,000. From the more recent correspondence it seems that there may be no insurance cover that would respond to a claim on a warranty issued by Quantum but the position is far from clear. If there is no insurance cover then evidently Liberty Mercian and Waterman would not derive any benefit from having a warranty. Indeed it is unlikely that a party would seek to enforce an order for specific performance in such circumstances.
  119. On the present evidence therefore I do not consider that this is a case where specific performance should not be granted on the basis that the remedy would be useless.
  120. From the exchange of letters between Hugh James and DJM it is apparent that if proceedings were commenced in court, the matters in the letters from DJM would have been relied on by way of defence and there might be an application to stay the proceedings to arbitration. I do not consider that the matters currently raised would depend on disputed facts or difficult questions of law. Whilst it is very unlikely that the proceedings would be defended by Quantum, points may be taken by insurers. However I do not see these as being difficult or uncertain proceedings.
  121. In a case such as this, where Quantum is insolvent and dissolved but there is evidence that any warranty would be backed by insurance cover, I consider that it is appropriate to grant specific performance against CCEL in respect of the obligation to provide warranties from Quantum.
  122. Costs
  123. In order to consider the appropriate order for costs there are a number of issues which have to be dealt with. First, costs were reserved on 3 April 2012 and each party seeks an order for costs relating to that hearing. Secondly, there is a question of the costs of the main hearing and how those costs should be allocated as between the parties. Thirdly, there is a question of how the costs subsequent to the first judgment which were concerned with issues of specific performance should be allocated.
  124. In coming to my conclusion on costs I have been provided with draft bills of cost. Liberty Mercian have put in a bill in the sum of £302,947.50 and CCEL and CDDL have put in a combined bill of costs in the sum of £401,457.81 including VAT which becomes £334,578.01 without VAT, which is comparable with the costs of Liberty Mercian.
  125. I consider that it is convenient to consider the costs in 3 stages. First up to and including the hearing of 3 April 2012. Secondly from 3 April 2012 up to 3 September 2013 when judgment was handed down. Thirdly, from 3 September 2013 to date.
  126. Costs of 3 April 2012
  127. Mr Lofthouse submitted that, on the basis that Liberty Mercian had been successful, it ought to have the costs of the hearing on 3 April 2012.
  128. Mr Hargreaves submitted that the costs of 3 April 2012 were incurred because Liberty Mercian brought Part 8 instead of Part 7 proceedings and so the Defendants, CCEL and CDDL, should have their costs in any event.
  129. These proceedings were commenced solely against CCEL by a Part 8 claim issued on 9 February 2012, supported by the witness statement of Stephen Mundy. In accordance with usual practice in the Technology and Construction Court, directions were given on 9 February 2012 leading to a hearing, after the exchange of further evidence, on 3 April 2012.
  130. Proceedings were served and CCEL instructed solicitors JHW Law Limited. On 27 February 2012 CCEL instructed their current solicitors and on 29 February 2012 CCEL issued an application, seeking an order for revised directions, contending that the original service of proceedings was defective, the timetable should be revised and the claim transferred to Cardiff District Registry. That application was supported by a witness statement from Ioan Prydderch. It sought an extension to the date for the service of evidence with a hearing after 9 April 2012 in Cardiff District Registry. On 1 March 2012 Akenhead J made an order retaining the hearing in London on 3 April 2012 and giving amended directions.
  131. On 16 March 2012 Liberty Mercian wrote to CDDL saying that it considered that the Contract was, in fact between Liberty Mercian and CDDL and on 19 March 2012 Liberty Mercian's solicitors, Morgan LaRoche wrote to Hugh James seeking their consent to the joinder of CDDL in the Part 8 proceedings to raise the issue that CDDL was the proper party to the Contract and to seek appropriate declarations. Hugh James replied on 22 March 2012 saying that Part 8 proceedings were not appropriate and that they did not agree to the joinder of CDDL.
  132. At the hearing on 3 April 2012 I ordered the joinder of CDDL and that matters should proceed under Part 7 and giving directions for pleadings, disclosure, witness statements and a two-day trial. I reserved costs.
  133. The reality of the position is that Liberty Mercian commenced Part 8 proceedings against CCEL seeking the bond, warranties and a parent company guarantee when, as it realised in March 2012, the proceedings needed to be under Part 7 to resolve an issue about the proper party to the Contract and this necessarily meant the joinder of CDDL. In those circumstances, the costs of the hearing of 3 April 2012 would have been largely unnecessary if Liberty Mercian had commenced proceedings under Part 7 with all relevant issues being dealt with at the time. I consider that the appropriate order should be that CCEL should have its costs against Liberty Mercian of the hearing on 3 April 2012.
  134. I consider that, on this basis, the costs of the direction orders of 10 February and 1 March 2012 which were reserved should be costs in the case. I consider that in relation to the costs of the Part 8 proceedings up to 3 April 2012 Liberty Mercian ought to have 50% of its costs up to that date as they were successful in the end against CCEL but costs were also incurred in relation to the change to Part 7 proceedings at the hearing on 3 April 2012 which I have held that CCEL are entitled to recover.
  135. Costs up to judgment on 3 September 2013
  136. Mr Lofthouse submitted that there were two overall issues to be determined at the trial and those were whether the obligations under the Contract to provide the documents survived termination and whether CCEL or CDDL owed those obligations to Liberty Mercian. He submitted that Liberty Mercian won on the first but failed on the second issue. He therefore submitted that Liberty Mercian should have a proportion of its costs to reflect its success on the first issue and proposed that the appropriate proportion was 50%.
  137. Mr Hargreaves submitted that the Defendants, CCEL and CDDL, should have their costs in any event. He said that Liberty Mercian brought the proceedings after April 2012 to establish that CDDL was the proper party who had the obligations to provide the documents and on that main issue Liberty Mercian failed. He said that if the case was analysed as having 10 issues, excluding the claim for specific performance, the Defendants had won on eight issues and the Liberty Mercian had won on two. He also provided an analysis of time which showed that there was a roughly 80:20 division of time at the hearing between issues on which the Defendants succeeded and issues on which Liberty Mercian succeeded.
  138. After April 2012 the major issue between the parties in the Part 7 proceedings and the one which took the greatest amount of time and evidence was whether CCEL or CDDL was the Contractor under the Contract. Liberty Mercian lost on that issue. It did however succeed in establishing a right to the performance bond and warranties but not the parent company guarantee, but from CCEL not CDDL.
  139. In those circumstances I consider that in relation to the Part 7 proceedings from April 2012 to September 2013 the Defendants are properly considered to have been the successful party but that under CPR 44.2(4)(b) partial success is a matter to be taken into account in deciding on the order to make. I do not consider that this is an appropriate case to make an "issues" based costs order but rather the overall success and failure should be reflected in a costs order which gives the overall successful party a proportion of its costs, reduced to take account of its lack of success.
  140. The proportion of costs has to reflect the fact that Defendants are not entitled to the costs of the issues on which they lost and that the Claimants would be entitled to their costs of those issues. The proportion must be a matter of impression and I consider that a proportion of 65% properly reflects the justice of the situation. I therefore order that Liberty Mercian should pay the Defendants 65% of their costs from April 2012 until judgment in September 2013.
  141. Costs from 3 September 2013
  142. In December 2013 I dealt in the second judgment with the principle of whether specific performance should be granted. I held that Liberty Mercian was entitled, in principle, to specific performance but I provided CCEL with the opportunity to provide further evidence of impossibility. I have decided now that there should be specific performance of the performance bond by way of a payment into court and of the warranties.
  143. In those circumstances, I consider that Liberty Mercian has been overall the successful party since September 2013 and that CCEL should pay Liberty Mercian its costs since 3 September 2013.
  144. On account payment
  145. The parties have provided a great deal of detail in relation to their costs and have made detailed submissions on the way in which costs should be analysed so as to lead to a payment on account of costs, based on the assumptions made by them.
  146. It is evident that costs will have to be assessed on the standard basis if not agreed. Given my conclusions on costs liability, the Defendants have put in a schedule of costs of some £38,000 including VAT for the period up to 3 April 2012 and say that their further costs of the main action to 3 September 2013 are £212,000 (including VAT). Liberty Mercian says that its costs up to 3 April 2012 were some £15,600 (excluding VAT) and since 3 September 2013 are some £27,000 (including VAT) for the 19 November 2013 hearing and some £27,000 (including VAT) for the 19 February 2014 hearing. The costs between these dates of about £27,000 (including VAT) have an element of appeal costs within them. CCEL also says that Liberty Mercian's costs after September 2013 have elements which are irrecoverable. There are therefore a number of disputes as to how costs should be apportioned and what the appropriate figures are but for present purposes I intend to calculate a payment on account using these figures but taking account of the matters raised.
  147. Taking all those matters into account I consider that an appropriate amount for a payment on account of costs is that Liberty Mercian should pay the Defendants £50,000.
  148. Conclusion
  149. For the reasons set out above, I conclude that:
  150. 1) CCEL should pay the sum of £420,000 into court as substituted performance for the provision of a performance bond.
    2) There should be an order for specific performance in relation to the warranties to be provided by Quantum.
    3) Liberty Mercian should pay CCEL's costs of the hearing on 3 April 2012 and 65% of the Defendants' costs of the proceedings up to 3 September 2013.
    4) CCEL should pay Liberty Mercian 50% of its costs up to 3 April 2012 and its costs since 3 September 2013.
    5) Liberty Mercian should make a payment on account of costs to CCEL of £50,000.


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2014/3584.html