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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 >> Co-Operative Group (Cws) Ltd. (Formerly Co-Operative Wholesale Society Ltd.) v International Computers Ltd. [2003] EWHC 1 (TCC) (13 January 2003)
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Cite as: [2003] EWHC 1 (TCC)

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Neutral Citation Number: [2003] EWHC 1 (TCC)
Case No: HT-01-355

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

St. Dunstan's House,
133-137, Fetter Lane,
London, EC4A 1HD
13 January 2003

B e f o r e :

HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.
____________________

CO-OPERATIVE GROUP (CWS) LIMITED
(formerly CO-OPERATIVE WHOLESALE SOCIETY LIMITED)
Claimant
- and -

INTERNATIONAL COMPUTERS LIMITED
Defendant

____________________

Richard Mawrey Q.C. and Terence Bergin (instructed by DLA for the Claimant)
Henry Carr Q.C. and Jacqueline Reid (instructed by Baker & McKenzie for the Defendant)

____________________

HTML VERSION OF JUDGMENT: APPROVED BY THE COURT FOR
____________________

Crown Copyright ©

    HANDING DOWN


     

    H.H. Judge Richard Seymour Q. C. :

    Introduction

  1. The essential background to this action is the transfer, with effect from 2 April 2000, of the engagements of Co-operative Retail Services Ltd. ("CRS") to Co-operative Wholesale Society Ltd. ("CWS") pursuant to the provisions of Industrial and Provident Societies Act 1965 s.51. The Claimant changed its name subsequent to the transfer of engagements to its present name, but for the purposes of this judgment it is convenient to refer to it as "CWS" no matter what name it actually had at the time of which I am writing.
  2. Prior to the transfer of engagements CRS carried on a retail grocery and supermarket business through some 460 or so stores located in regions called Central and Eastern, Northern, South East, South West and Wales and Borders. The precise number of stores operated by CRS immediately prior to the transfer of engagements is a matter of some controversy in the evidence in this action, but ultimately of no significance. The range was between 436, a figure as to which Mr. Neil Braithwaite, the General Manager, Retail Finance, of CWS spoke, and 464, a number put forward by Mr. Keith Brydon, the General Manager, Retail IT of CWS. Other evidence generally concentrated in the region of 460. CRS did not operate in Scotland or Northern Ireland.
  3. CWS seems originally to have been, as its name suggests, a supplier of goods by wholesale, rather than by retail. However, over the years it appears to have spread its net into other areas, including providing a funerals service, to which aspect of its business I shall have to make further reference later in this judgment. By the 1990s CWS also carried on a similar retail grocery business to that of CRS. Immediately prior to the transfer of the engagements of CRS to CWS that retail business was carried on through some 650 or so stores. Again the evidence on behalf of CWS conflicted as to exactly how many stores CWS operated immediately prior to the transfer of engagements, but again the question of the precise number is of no significance. CWS operated in regions called Central and Eastern, North Eastern (including Cumbria), Northern Ireland, Northern, Scotland and South East. CWS did not operate in Wales or the South West of England.
  4. Although the names Central and Eastern, Northern and South East were each used by CRS and CWS to describe regions in which they respectively operated stores, in fact only in the Greater Nottingham area and in the South East of England did CRS and CWS operate stores in close proximity to one another. It seems that there were in total some 25 CRS stores which were close to CWS stores.
  5. It is notorious that in recent times a feature of the retail market in foodstuffs in the United Kingdom has been the presence of large supermarket groups, some of which have chosen to seek to attract custom by providing large out of town superstores. It seems that at one time CWS sought to compete with such groups by operating superstores of its own. However, in about 1997, according to the evidence of Mr. John Bowes, the Chief General Manager, Marketing of CWS, CWS carried out a strategic review of its food retail business and concluded that it should cease to compete with the operators of superstores on their own terms. Instead, CWS should concentrate on smaller supermarkets in market towns which would dominate the local trading area and on convenience stores. Against that background consideration was given within CWS to the acquisition of further stores to give effect to the new policy and achieve comprehensive national coverage.
  6. Both CRS and CWS were formed as co-operative societies and were appropriately registered under Industrial and Provident Societies Act 1965 ("the 1965 Act"). It appears that the possibility of a merger of the two through the mechanism of a transfer of the engagements of one to the other in accordance with the provisions of the 1965 Act had, by 2000, been under consideration on and off for some 25 years. Following an abortive attempt on the part of CWS to acquire a group of stores called "One Stop", as Mr. Bowes put it at paragraph 15 of his witness statement:-
  7. "….Neil Braithwaite, General Manager, Finance, and I discussed the position. We were aware that CRS was having difficulties and it occurred to us that a CRS/CWS merger offered CWS the opportunity to acquire a large number of medium and small size stores. It was that end of the market which the strategic review had determined was of most benefit to CWS, on the basis that it would allow us to concentrate on our strengths, which were seen as being the smaller convenience stores, as opposed to the larger supermarket side of the market."
    Contact was made with CRS and, in due course, the transfer of engagements to which I have referred was agreed and implemented.

  8. A feature of the Co-operative movement at retail level from early in its history in the nineteenth century was the distribution to members of a share of profits by means of what was called a "dividend". In the marketing conditions of the late twentieth century the distribution of dividend in what had been the classic manner seems to have ceased to be a characteristic of trading in retail co-operative societies. The evidence of Mr. Bowes and Mr. Braithwaite was that it had disappeared in the late 1960s.
  9. In his first witness statement, in evidence which I accept, Mr. Bowes explained that, having decided to concentrate food retailing in the small supermarket and convenience store sector, CWS was faced with the need to try to differentiate itself from other stores in that sector. In paragraph 5.5 of his first witness statement Mr. Bowes said that from about 1995 CWS had run various trials of loyalty schemes. It was decided, following the strategic review, according to Mr. Bowes, to introduce, "as a key differentiator between CWS stores and our opposition in the market place", a loyalty card scheme, which in broad general terms entitled holders of loyalty cards to build up an entitlement having a cash value on purchases of certain types of items – Co-op brand products and fresh produce – and to use such entitlement in payment for goods or to redeem it for Sterling currency. Because of the nostalgic appeal of the classic dividend scheme this loyalty card scheme was called "the Dividend". I shall refer to it by that name in this judgment. In its original form the rate at which entitlement could be accumulated under the Dividend was 5% of the retail price per item on Co-op brand products and fresh produce. Purchases of other products were not eligible for entitlement. In various of the documents put before me during the trial the original Dividend scheme, to which I shall refer as "the Original Dividend", was described as a 5% + 0% scheme. Subsequently the Original Dividend was revised so that the rate at which entitlement could be accumulated on purchases of Co-op brand products and fresh produce was reduced to 3%, but other brands of products became eligible for entitlement on purchases at a rate of 1% of the retail price per item. Some purchases of goods remained ineligible for entitlement, so the revised scheme, to which I shall refer as "the Revised Dividend", was referred to as a 3% + 1% + 0% scheme.
  10. CRS did not, up to 1999, have a loyalty card scheme which operated in all its stores, although it too no longer distributed dividends to members in the classic fashion. CRS had experimented with loyalty card schemes on a trial basis. At paragraph 16 of his first witness statement Mr. Bowes told me about a scheme called "Points Plus" operated as a pilot scheme at five CRS stores, namely those in Pontllanfraith, Pyle, Porth, Keynsham and Leytonstone.
  11. The efficient conduct of modern retailing depends upon the use of computer systems for a number of functions. At the till, or "point of sale" in the jargon of the trade, the ability to pay quickly and easily by means of a credit or debit card being "swiped" depends upon the till in question having an "electronic point of sale" or "EPOS" facility, which requires computer support. A loyalty card scheme requires the same sort of support, so that the relevant purchases of a particular card holder can be attributed correctly to his or her entitlement account. With appropriate software other options are available in relation to what are called "back office" functions, such as cash management, ordering and stock control.
  12. In the period immediately prior to the transfer of the engagements of CRS to CWS CWS used computer software to provide an EPOS facility at the tills in its stores and to perform various back office functions. The platform, as it is called, was a product of the Defendant, International Computers Ltd. ("ICL"), called "ISS300". I shall refer to that product in this judgment by that name. In addition, operating off that platform, and in particular providing the means, or "functionality", to enable the Dividend to operate, was a software application of a company called The PCMS Group Plc ("PCMS") which was known as "Vision". Again, in this judgment I shall refer to "Vision" by that name.
  13. ICL is one of the leading computer companies based in the United Kingdom, if not the leading company. It seems that the name of the company was changed recently to Fujitsu Services Ltd., no doubt to reflect the fact that the company is now owned by the Fujitsu Corporation of Japan. However, in this judgment I shall refer to it as "ICL".
  14. At paragraphs 6 and 7 of his first witness statement Mr. Brydon, in a passage which I accept, said this about the position of CRS in relation to computer facilities in 1999:-
  15. "6. Phil Davies (of CRS) and I were peers in terms of IT responsibility and Phil effectively had the same job in CRS as I had at CWS. In early 1999 I was aware that Phil was addressing the issue of Millennium compliance of the CRS estate. The entire CRS estate faced the potential problem of its EPOS system not working after the Millennium. CRS also had a problem in that it did not have a uniform IT system throughout the stores, using a number of different systems which makes it difficult to service and introduce new developments. I was aware that in 1999 Phil had negotiated with ICL for an EPOS harmonisation programme which would provide CRS with a uniform platform which was also Millennium compliant.
    7. Although this meant that CRS had progressed towards EPOS harmonisation, this was only a first step. To advance further would involve CRS addressing its back office functionality which was relatively unsophisticated compared with the CWS estate…."
  16. The negotiations between CRS and ICL in fact resulted in the making of a written agreement ("the CRS Agreement") to which I must now turn.
  17. The CRS Agreement

  18. The CRS Agreement was dated 7 June 1999. The first page identified the parties and their respective addresses. It bore signatures on behalf of both. The remaining text of the first page was as follows:-
  19. "The Agreement covers all types of business transactions which ICL may enter into with CRS including the supply of Equipment, licensing of Programs and provision of Services in connection with the overall CRS IT Convergence strategy.
    It details the terms and conditions under which ICL agrees to perform these transactions, the various methods of ordering CRS may wish to use, and provides for the procurement under either leasing or purchase terms.
    This Agreement details the pricing arrangements which ICL has agreed for certain Equipment, Programs and Services CRS wishes to order.
    This Agreement also incorporates a binding contract between the parties for the STORE SYSTEM HARMONISATION & STOCK MANAGEMENT PROGRAMME
    as detailed in Schedule Four hereto.
    By signing below ICL and CRS each indicate their respective company's acceptance of this Agreement and agree that future Orders accepted by ICL under this Agreement will be subject to its terms and conditions."
  20. The main body of the CRS Agreement included these provisions:-
  21. "2.1 The parties agree that the supply of Products to CRS will be by means of CRS placing Orders from time to time in accordance with this Agreement. Orders will only be valid when they have been accepted by ICL in accordance with Clause 4.1. All Orders will incorporate ICL Contract Conditions, September 1998 Edition (reference UKGC0998, UKSE0998, UKPL0998, UKES0998, UKPS0998). In addition, leasing arrangements will typically be subject to the Flexible Finance Contract Conditions, January 1999 edition (reference HRFF0199). Any special terms set out in Schedule Three hereto shall apply with precedence…
    3.1 CRS agrees that all Orders will be placed in the format agreed in Schedule Two to this Agreement and in accordance with any other details set out therein…
    4.2 ICL agrees to supply the Products detailed in Schedule One at the prices detailed therein and according to the terms of that Schedule and of this Agreement.
    5.1 This Agreement will come into immediate force and effect on the date hereof and subject to Clause 5.2 below shall remain in force for a minimum of 3 years. Thereafter, either party may terminate this Agreement by providing to the other party not less than three months prior written notice of such termination…
    5.2 Either party may by written notice terminate this Agreement at any time if the other party is put into liquidation (other than solely for amalgamation or reconstruction while solvent) or if a receiver administrator or administrative receiver is appointed over any part of the other party's business or if any of the other party's property is seized for non-payment of any debt or is unable to pay its debts as they fall due. A merger between CRS and another member or members of the Co-operative movement in the United Kingdom will not provide cause for the termination of this Agreement under this clause…"
  22. Schedule One to the CRS Agreement was concerned with pricing. Section 1.2 provided, so far as is presently material:-
  23. "In return for a 3-year commitment ICL will adopt a services pricing strategy of occupancy cost plus 30%. The table below gives the rates at the date of this Agreement for each role envisaged within the 3-year programme….
    In the event that this Agreement is terminated prior to completion of all work described in Schedule Four, then the Standard Daily Rates shown below will instead apply to all work carried out under this Agreement."
    A table was then set out which indicated, for each of the "Core Team Roles", amongst other things a "Standard Daily Rate" and a "Special Rate for ICL/CRS 3 Year Agreement". The latter were substantially lower than the former.

  24. Schedule Four to the CRS Agreement set out details of a "Store System Harmonisation & Stock Management Programme". That programme was divided into four phases. In the first phase the EPOS systems in all CRS stores were to be replaced with what was called "the ISS400 Lite EpoS system" ("ISS400"). That was done successfully before the transfer by CRS of its engagements to CWS and nothing turns on it in this action. The other phases related to what was called in the schedule "SSM", which is an abbreviation of "Store Stock Management". SSM was an existing software application of ICL, but it was contemplated in the CRS Agreement that CRS would conduct a trial using SSM as it then existed, and, if that trial persuaded CRS of the benefits of SSM, the characteristics of SSM should then be developed as part of a new software application which was being evolved by ICL and which was called "GlobalSTORE". I shall refer to "GlobalSTORE" in this judgment by that name. The brief description of phases 2, 3 and 4 given in the schedule was:-
  25. "Phase 2 – SSM Trial – Will provide the necessary Hardware, Software & Services required to deliver a 2-store trial of SSM. Conducted over a period from May 1999 to June 2000 this activity will provide a detailed definition of the operational and system requirements for the subsequent Pilot and Rollout phases. It will also establish the measurable business benefits expected from full implementation. SSM is as described in Section 4.1.1 below.
    Phase 3 – SSM Pilot – During the period of the SSM Trial ICL will develop a GlobalSTORE Back Office application, to meet the needs of the Co-op and wider Convenience store market, which will include the required SSM functionality. This product linked to the ISS400 Front End will be available to Pilot in 5 to 10 stores by the end of June 2000. The Pilot phase will be used to demonstrate the achievement of the identified business benefits.
    Phase 4 – Rollout – Subject to the successful pilot of the GlobalSTORE Back Office the system will be rolled out to all stores in the CRS estate. Rollout will be completed within 18 months of commencement."
    The expression "pilot", in the jargon of information technology, means the trial of software in a working environment in a sample location or locations. The expression "rollout", which features quite a lot in this action, simply means installation of software in a working environment with a view to operational use.

  26. The GlobalSTORE software application features large in the circumstances which have given rise to this action.
  27. Section 4.1.1 of Schedule Four to the CRS Agreement contained an "SSM Overview". That included:-
  28. "SSM is aimed at improving the perpetual inventory and replenishment process. SSM consists of a consultancy methodology and also certain core applications.
    SSM looks at existing processes and business rules and, by reference to the best practice, SSM targets five main areas: availability, stockholding, wastage, store staff workload and management information.
    SSM considers the replenishment cycle, including
    SSM addresses in-store inventory activities and interfaces to other systems which includes EpoS interface, RF interface and interface to other parts of the supply chain and existing central systems. SSM is a store-based system and as such it excludes supply chain systems outside the store (such as warehouse and distribution systems, etc.)."
  29. The "ICL Contract Conditions, September 1998 Edition (reference UKGC0998, UKSE0998, UKPL0998, UKES0998, UKPS0998)" mentioned in clause 2.1 of the main body of the CRS Agreement were in fact a number of separate sets of conditions. UKGC0998 was a set of conditions entitled "General Conditions of Contract for the Supply of Equipment, Programs and Services". It included:-
  30. "9 ICL's Liabilities
    9.1 This clause 9 deals with the financial liability of ICL for any Claims for loss or damage made by the Customer and is the exclusive statement of the financial liability that ICL may have to the Customer for any Claims for the Acts or Omissions of ICL, including where any such Acts or Omissions constitute a fundamental breach of a contractual term or a breach of a fundamental term.
    9.2 No limit of liability will apply in respect of Claims for death or personal injury as a result of any act or omission of ICL which is negligent (as defined by the Unfair Contract Terms Act 1977 section 1) and no limit of liability will apply to any proven fraud on the part of ICL or of others for which it is at law responsible.
    9.3 ICL's liability is limited to £1,000,000 in respect of any Claim for physical loss of or damage to the Customer's property or other property for which it is at law responsible to the extent that such loss or damage is caused by or contributed to by any negligent act or omission of ICL (including any such act or omission in breach of a contractual duty of care).
    9.4 If the Customer lawfully terminates the Agreement for the Equipment, Programs or Services by reason of a breach of contract by ICL, it shall be entitled to the return of any sums paid as part of the Contract Price (except as otherwise specifically provided in the Agreement [which limited the sum repayable to £2,500,000]). For Equipment, Programs and Services which are subject to periodic charges the return of sums paid shall be limited to the sums paid over the previous twelve months' period.
    9.5 In addition to the rights expressed in Clause 9.4 and subject to Clause 9.6 below, ICL's total aggregate liability under the Agreement for any and all Acts or Omissions which cause or contribute to financial or economic loss or damage to the Customer is limited to 15% of the Contract Price of the Equipment, Programs or Services giving rise to the liability regardless of the time such Claim or Claims may be made by the Customer, of how such Claim or Claims may arise and of what cause of action is used. In calculating the Contract Price for Equipment, Programs and Services which are subject to periodic charges it shall be limited to be the sums paid over the twelve months' period immediately prior to the time the Act or Omission occurred. In calculating the sums that may be claimed as 15% of the Contract Price, no account shall be taken of any sums returned or to be returned to the Customer under Clause 9.4 above. Any such financial or economic loss includes any Claim other than a Claim for compensation for loss of or damage to physical property covered by Clause 9.3 above and in particular includes any Claim made by the Customer in respect of the following types of loss without prejudice to the generality of the applicability of this Clause 9.5, loss of profits, failure to make anticipated savings, additional expenses incurred, increased costs of working and loss of opportunity (including the loss of opportunity for earning additional profits or making savings).
    9.6 In no circumstances will ICL be liable to the Customer for any Claim or part of a Claim which seeks compensation in respect of the cost of management time i.e. where a Claim is made by the Customer (by whatever means of calculation) in respect of the time spent by its employees as a result of any act or omission of ICL where that Claim is based on time spent and not based on any other specific proven loss or damage (including any loss of opportunity)…
    13.7 The Customer is hereby put on notice that the Agreement does not impose on ICL any obligation to verify the suitability of the Equipment, Programs or Services for the Customer's particular purposes, whether those purposes have been expressed to ICL or not and whether or not ICL could reasonably have been aware of any such purposes. It is therefore the Customer's responsibility to ensure that the Products are suitable for its purposes. The Customer is hereby further put on notice that no employee of or agent acting on behalf of ICL (other than a director) is authorised to make any representation with regard to the suitability of the Equipment, Programs or Services for any purpose of the Customer. ICL is not acting in any fiduciary sense and it is agreed that the parties are acting at arm's length."
    By a special term of the CRS Agreement the liability of ICL under Clause 9.5 of the General Conditions quoted above was limited to the sum of £375,000 in any event.

  31. The conditions which bore the reference UKPS0998 were entitled "ICL Contract Conditions Professional Service". Clause 11.1 of those conditions contained a warranty in the following terms:-
  32. "ICL warrants that the Service will be performed with due diligence and professional standards of care and that the Service will conform in all material respects to the Product Description, provided that ICL will not be liable for breach of any such warranty unless the breach is reported to ICL within three months after completion of the Service and, having been given reasonable opportunity by the Customer to rectify any such breach, ICL fails to do so promptly and without additional charge to the Customer. This warranty excludes all other conditions or warranties, express or implied, statutory or otherwise (including but not limited to fitness for any particular purpose)."
    Clause 17.1 of those conditions was an entire agreement clause.

  33. The conditions which bore the reference UKSE0998 were entitled "ICL Contract Conditions Equipment Service". Clause 6.1 of those conditions dealt with the payment of charges as follows:-
  34. "The Customer will pay charges for the Service in accordance with the appropriate ICL standard scales in force from time to time. Charges are payable quarterly in advance from the Commencement Date as described in Clause 3.1 above. With the first payment is also due the proportionate charge for the part period (if any) from and including the Commencement Date."
    Clause 9.1 of those conditions was an entire agreement clause.

    The provision of the Dividend in CRS stores

  35. As I have already recorded, Phase 1 of the work contemplated by the CRS Agreement was completed satisfactorily. Before the question of carrying out the work required under the succeeding phases seriously arose CRS and CWS became involved in the discussions which led ultimately to the transfer of the engagements of CRS to CWS. An aspect of the possible merger of CRS with CWS was the anticipated need to harmonise the computer systems used in the stores operated by CRS immediately prior to the transfer of engagements (to which stores I shall refer in this judgment as "the former CRS stores") and those used in the stores operated at that time by CWS (to which stores I shall refer in this judgment as "the existing CWS stores"). In particular, it was anticipated that it would be necessary, or at any rate desirable, to introduce the Dividend into the former CRS stores after the transfer of engagements had taken place. Other features of what was on offer in the existing CWS stores which it was desired should also be available in the former CRS stores included the ability to make payments at tills in-store into Individual Savings Accounts ("ISAs") and High Interest Savings Accounts ("HISAs"), which I think were in fact operated for customers by Co-operative Bank. ICL and PCMS was each invited to make proposals to CWS as to how, from the point of view of provision of appropriate computer software, the computer systems of CRS and CWS could be harmonised, and the Dividend, and other desired facilities, introduced into the former CRS stores. One possibility was to replace the recently installed ISS400 in the former CRS stores with ISS300 and Vision, which were used successfully by CWS in the existing CWS stores. Another possibility was to replace Vision in the existing CWS stores with GlobalSTORE which, under the CRS Agreement, ICL had undertaken to develop for use by CRS so as to provide the functionality of SSM, at the same time as that software was installed in the former CRS stores. A third possibility was to leave the existing CWS stores as they were, but to instal GlobalSTORE, developed to provide in conjunction with ISS400 all the functionality provided to the existing CWS stores by the combination of ISS300 and Vision, in the former CRS stores. In the event it was the latter course which CWS decided to adopt. In this judgment I shall call the project to develop GlobalSTORE for installation in the former CRS stores with the capacity to offer the Dividend and the other desired facilities "the GlobalSTORE project".
  36. In short, the attempt to develop GlobalSTORE so as to provide the functionality required in the former CRS stores, and in particular the ability to offer the Dividend, had not, by the end of January 2001, achieved success. At that point CWS decided to adopt the alternative solution of replacing ISS400 in the former CRS stores with ISS300 plus Vision. That was done successfully.
  37. The claims made in this action

  38. In this action CWS claimed damages for alleged repudiatory breach of an alleged contract by which, so it seemed to be contended, ICL agreed to develop GlobalSTORE by 29 January 2001 into a condition in which it could provide the functionality required by CWS in the former CRS stores, including in particular the ability to make available the Dividend. The case of CWS was that it accepted that alleged repudiatory breach as terminating the contract for which it contended. There were also allegations that ICL made misrepresentations in order to induce CWS to enter into the contract contended for. The damages claimed amounted to a little less than £11,000,000.
  39. It was accepted on behalf of CWS that the transfer of the engagements of CRS to CWS would otherwise have meant that the obligations of CRS under the CRS Agreement passed to CWS, but it was contended that it was a term of the contract which was asserted on behalf of CWS that the CRS Agreement was thereby discharged.
  40. ICL resisted the claim of CWS. The position adopted in the Re-Amended Defence and Counterclaim was that the contract alleged on behalf of CWS in the Particulars of Claim was denied. Rather, so it was said, the work done to seek to develop GlobalSTORE for CWS was undertaken pursuant to the CRS Agreement after the obligations of CRS under that agreement had passed to CWS. On this basis ICL sought to rely upon clauses 9 and 13.7 of the conditions having the reference UKGC0998, clauses 11.1 and 17.1 of the conditions having the reference UKPS0998 and clauses 6.1 and 9.1 of the conditions having the reference UKSE0998. Alternatively, it was contended that there was no contract under which the work was done, the position being that it was anticipated that a contract would be agreed as a result of negotiations in which CWS and ICL engaged over an extended period, but that that never happened. It was asserted on behalf of ICL that, whichever of the foregoing was the correct analysis, the CRS Agreement did not run its full course, with the result that the provisions in Schedule One for revision upwards of the charges made for the services actually provided to CRS came into effect. ICL thus counterclaimed a sum of £1,018,034 under this head. Further or alternatively, so it was contended, the termination by CWS of the continued involvement of ICL in the development of software for the former CRS stores itself amounted to a repudiation of the CRS Agreement in respect of which ICL was entitled to damages by way of compensation for loss of profits calculated at some £1,473,000.
  41. The case of CWS as to a contract

  42. The summary set out in the preceding paragraphs of the claims made in this action is brief, but sufficient to indicate that an essential plank of the case of CWS, whether based on breach of contract or on the assertion that it was induced to enter into a contract by misrepresentations, was the existence of the contract for which it contended.
  43. The case pleaded on behalf of CWS in the Particulars of Claim as to the contract for which CWS contended and the representations immediately preceding it was as follows:-
  44. "20. In the course of the negotiations, ICL represented that:
    20.1 ICL was capable of adapting the version of GlobalSTORE it was developing from Eurofood to incorporate the additional functionality required by CWS/CRS, including operation of the Dividend;
    20.2 GlobalSTORE was sufficiently advanced in its development to permit a pilot project to be run in a former CRS store in August 2000 and the system as a whole to be rolled out across CWS's network of former CRS stores by September 2000 so as to operate in harmony with and with equivalent functionality to the existing systems in the historic CWS stores;
    20.3 GlobalSTORE would be capable of providing a stable and robust Microsoft environment.
    21. In the course of the negotiations, it was agreed between CWS/CRS and ICL that, if CRS' engagements were transferred to CWS and CWS entered into an agreement with ICL for the provision of a system for the former CRS stores, the CRS agreement would be cancelled without penalty. This was evidenced by a letter from ICL to CWS dated 22 December 1999 (a copy of which is attached to these particulars of claim at schedule 2).
    22. In or about March and April 2000, CWS entered into an agreement with ICL for the provision of an integrated EPOS, back-office and stock management system operating in all CRS stores which had been or were about to be transferred to CWS. ("the CWS agreement").
    23. The CWS agreement was entered into by conduct and/or by implication by CWS and ICL in that:
    23.1 the essential components of the agreement had been worked out by the parties in negotiations between December 1999 and April 2000;
    23.2 by 10 March 2000 CWS had made a definitive decision to acquire the ICL system based on GlobalSTORE and install it in all former CRS stores as evidenced by a letter dated 10 March 2000 from CWS to PCMS Group Limited (a copy of which is attached to these particulars of claim as schedule 3);
    23.3 after 10 March 2000 (and, in particular, after 2 April 2000 when the CRS stores were transferred to CWS) both CWS and ICL treated the CWS Agreement as being in force:
    23.3.1 ICL supplied materials, carried out work and performed services, all of which were exclusively referable to the CWS agreement and not the CRS agreement;
    23.3.2 ICL rendered invoices in respect of those materials, work and services and CWS paid those invoices, such invoices and payments being referable to the CWS agreement and different from and inconsistent with those referable to the CRS agreement;
    23.4 no further performance of the CRS agreement took place after the transfer of CRS' engagements to CWS and no further invoices were rendered by ICL in respect thereof.
    24. Both CWS and ICL intended throughout that the CWS agreement should be reduced to writing but the parties never agreed the precise terms of the document and no written agreement was ever executed. Nonetheless, both parties treated the CWS agreement as being on foot from the date that the CRS stores were transferred to CWS.
    25. The following were the essential terms of the CWS agreement:
    25.1 ICL would develop, supply and install the hardware and software necessary to create an EPOS, back-office and stock management system operating in all former CRS stores;
    25.2 The system would be based on an ISS/400 Lite platform;
    25.3 The back-office and stock management functions would be performed by GlobalSTORE;
    25.4 The system would contain (as a minimum) all functionality equivalent to that currently in operation in historic CWS stores using Vision on an ISS/300 platform;
    25.5 The system would be capable of operating the Dividend in all former CRS stores;
    25.6 The system would be ready for a pilot scheme in August 2000 and would be rolled out to all former CRS stores in September 2000;
    25.7 As from the date of the transfer of CRS' engagements to CWS, the CRS agreement would be treated as no longer operative and no further materials or work would be supplied or billed under it (but without prejudice to any rights which had accrued to either party before that date).
    26. The following were necessarily implied terms of the CWS agreement:
    26.1 ICL would exercise all proper and professional care and skill in the manufacture, supply and installation of all hardware and software supplied to CWS;
    26.2 All hardware and software supplied by ICL would be reasonably fit for the purpose for which CWS required it and of satisfactory quality;
    26.3 Insofar as a time limit for the performance of any part of the contract was not the subject of express agreement, such performance would be delivered within a reasonable time."
  45. The letter dated 22 December 1999 written by Mr. John Pickett, Client Director at ICL, to Mr. Brydon, a copy of which was attached as Schedule 2 to the Particulars of Claim, included:-
  46. "Should the merger between CWS and CRS go ahead we confirmed that the GlobalSTORE trading agreement that is in place between ICL and CRS would be cancelled without penalty provided a new contract could be negotiated to reflect the new project. This is based on the assumption that any new project would generate similar revenue and cash flow profiles to the original agreement."
  47. A Request for Further Information was made under CPR Part 18 on behalf of ICL in respect of various of the allegations contained in the Particulars of Claim. A response to the Request was given in a document served on behalf of CWS entitled "Further Information and Clarification of the Claimant's Particulars of Claim" ("the Further Information").In relation to the alleged agreement set out in paragraph 21 of the Particulars of Claim that the CRS Agreement be discharged the relevant requests and responses set out in the Further Information were:-
  48. "REQUEST
    16. Please state whether each of CWS and CRS and ICL were parties to the alleged agreement. If not, please state who were the parties to the alleged agreement.
    17. State which party or parties made an offer in relation to the alleged agreement, and provide particulars as to the nature of the alleged offer, and without prejudice to the generality of the foregoing state when, where and how the alleged offer was made.
    18. State which party or parties accepted the alleged offer, and without prejudice to the generality of the foregoing state when, where and how the alleged offer was accepted.
    19. Please identify the consideration for the alleged agreement.
    20. State when the alleged agreement was executed.
    RESPONSES
    16. Yes.
    17 & 18 CWS relies upon the contents of ICL's own letter confirming that the agreement was reached in the course of discussions between the parties. That letter is admitted and relied upon by ICL in paragraph 30 of the Defence. In the circumstances, which party technically made the offer and which party accepted it is immaterial.
    19. The consideration for the agreement is clearly and sufficiently stated and is apparent on the face of the letter of 22/12/1999.
    20. Yes. As set out in the Particulars of Claim, it is CWS's case that, following the merger of the societies, the CRS agreement was treated as having been terminated and replaced by the CWS agreement."
  49. There were a number of requests for further information made on behalf of ICL in relation to the alleged contract upon which CWS based its pleaded claims. Those allegations in the Particulars of Claim in respect of which further information was sought which are presently material, the requests for information made, and the responses given in the Further Information were these:-
  50. "Under paragraph 22
    Of: "In or about March or April 2000, CWS entered into an agreement with ICL…"
    REQUEST
    21. State which party or parties made an offer in relation to the alleged agreement, and provide particulars as to the nature of the alleged offer, and without prejudice to the generality of the foregoing state when, where and how the alleged offer was made.
    22. State which party or parties accepted the alleged offer, and without prejudice to the generality of the foregoing state when, where and how the alleged offer was accepted.
    23. Please identify the consideration for the alleged agreement.
    24. State with as much precision as possible when the alleged agreement is alleged to have been executed.
    RESPONSES
    21 & 22 CWS' case is clearly and sufficiently stated in paragraphs 22 to 26 of the Particulars of Claim.
    23. The consideration for the agreement is self-explanatory: ICL was to carry out the work agreed for CWS and CWS was to pay for it.
    24. This request is not understood. If by the word "executed", the request seeks to know whether CWS alleges that the agreement was reduced to writing and signed by the parties, as is made clear in paragraph 24, that is not CWS's case. If by "executed" the request means "performed", as is pleaded at length in the Particulars of Claim, it is CWS's case that ICL embarked on performance of the agreement but (in the manner and circumstances detailed in the Particulars of Claim) failed to perform it in accordance with its terms or (in any real sense) at all.
    Under paragraph 23
    Of: "The CWS agreement was entered into by conduct and/or by implication by CWS and ICL…."
    REQUEST
    25. Please provide particulars of all facts and matters that CWS will rely upon at trial to support the allegations that the alleged agreement was entered into (1) by conduct and/or (2) by implication.
    RESPONSE
    25. This request is not understood. The matters relied on in support of the general allegation in the opening sentence of paragraph 23 are set out in paragraphs 23.1 to 23.4.
    Under paragraph 23.1
    Of: "the essential components of the agreement had been worked out in negotiations between December 1999 and April 2000;"
    REQUEST
    26. Please confirm what is meant in the context of the pleading by "worked out".
    27. Please set out in full each of the essential components that CWS alleges had been "worked out", providing, in each case particulars as to when the same occurred and the persons who were present or represented the parties.
    RESPONSES
    26. The expression means discussed and negotiated to a point where the matters referred to were agreed in principle.
    27. The essential components were the terms set out in paragraph 25 of the Particulars of Claim. In addition to the negotiations which (as set out above) took place between October and November 1999, the parties continued negotiating the refining of the project up to the point of the merger of the societies. These components are fully documented in documents common to the parties including (by way of example only):
    (a) documents produced and circulated by ICL relating to what ICL itself referred to as "the CWS/CRS Integration Project";
    (b) regular minuted meetings between the CWS team and the ICL team from 24/1/2000 onwards;
    (c) the drafts of the proposed written agreement passing between CWS and ICL in which the details of the work to be carried out and its costing remain constant…..
    Under paragraph 24
    Of: "…both parties treated the CWS agreement as being on foot from the date that the CRS stores were transferred to CWS."
    REQUEST
    34. Please provide full particulars of each and every act or omission by ICL that CWS intends to rely upon to support the allegation that ICL treated the alleged CWS agreement as being "on foot".
    RESPONSE
    34. It is CWS' case that the work carried out or purportedly carried out by ICL after the inception of the CWS agreement was the work provided for by that agreement and not that provided for by the CRS agreement. In outline, ICL was working to supply an EPOS, back-office and stock management system with equivalent functionality to that already existing in historic CWS stores built around the provision of the Dividend. All contemporaneous documentation is based on this premise and the relevant FRS were designed to specify this functionality. The invoicing referred to above was only one of the many facets of the documentation to make this clear.
    Under paragraph 25
    Of: "The following were the essential terms of the CWS agreement…."
    REQUEST
    35. Please provide full particulars of all terms of the alleged CWS agreement.
    36. Please explain what is meant, in the context of this case by "essential".
    37. Is it alleged that the "essential terms" were expressly agreed by the parties and if so, in relation to each such term please state who on behalf of the parties agreed the said term and the circumstances in which the same was agreed, In each case state whether the term was evidenced in writing and if so provide a copy of the relevant document(s). If not expressly agreed, please provide full particulars as to the basis for the allegation that the term formed part of the alleged CWS agreement.
    RESPONSES
    35. CWS's case as to the terms of the CWS agreement is as follows. Both parties were familiar with the CRS agreement and the modes of working provided for by that agreement. These provided (amongst other things) for the production of detailed FRS, project plans with delivery timetables, change control and a testing and acceptance regime. The negotiations between CWS and ICL proceeded on the basis that those terms would be carried forward to the CWS agreement and this was reflected by the draft written agreements passing between the parties. What had to be agreed in negotiation was:
    (a) precisely what ICL was to deliver under the CWS agreement;
    (b) dates of delivery;
    (c) costing and modes of payment.
    The terms agreed as to (a) and (b) are those set out in the sub-paragraphs of paragraph 25. As to the terms relating to (c), the parties agreed that ICL should be paid daily rates for the services of ICL personnel (varying according to grade) and fixed sums for named items of hardware and software. These went through a number of changes but reached their final form in the draft agreement Version 7 dated 14/6/2000. ICL was to invoice CWS (as happened) on the basis of actual work carried out and goods supplied rather than, as under the CRS agreement, on the basis of monthly payments.
    These principal terms of the CWS agreement were agreed and the parties worked to that agreement throughout. Where the parties did not reach sufficiently final agreement to enable the written agreement to be completed and signed was in the areas of whether and to what extent ICL's standard conditions should be incorporated into the agreement and whether and to what extent ICL should be liable to pay agreed liquidated damages for delays in delivery. The CWS agreement was, however, fully workable without terms being agreed in those areas and was so operated by the parties.
    36. The word "essential" connotes the principal obligations of the CWS agreement upon which CWS relies for the purposes of this action.
    37. This request is not understood. It is CWS' pleaded case that the CWS agreement was formed in the manner stated in paragraph 23.4 of the Particulars of Claim.
    Under paragraph 25.7
    Of: "As from the date of the transfer ….the CRS agreement would be treated as no longer operative …(but without prejudice to any rights which had accrued to either party before that date)."
    REQUEST
    38. Is it alleged that the CRS agreement was terminated? If so, please explain the mechanism by which the alleged agreement was terminated.
    39. Is it alleged that any rights accruing to CRS or CWS prior to the Transfer, subsist or are relied upon by CWS in this Action? If so, please provide full particulars thereof.
    RESPONSE
    38. Yes. This is expressly pleaded in paragraph 23.4 of the Particulars of Claim. There was no formal termination of the CRS agreement. Both parties simply treated it as having been superseded by the CWS agreement: they ceased to work to the former and commenced working to the latter.
    39. It is CWS's case (as clearly pleaded) that the CWS agreement superseded and replaced the CRS agreement. Neither party treated the other as having been in breach of the CRS agreement as at the date the CRS agreement was abandoned.
    If, however, contrary to CWS's primary contention, the court were to decide that the operative contract was the CRS agreement (as varied or novated to incorporate the terms said by CWS to constitute the CWS agreement) then it will be CWS's case that the breaches of the CWS agreement on which it relies were breaches of the CRS agreement as varied or novated."
  51. The reference in the Further Information given in respect of requests 17 and 18 to paragraph 30 of the Defence was to this plea:-
  52. "Pending the provision of further information in respect of the alleged agreement pleaded in paragraph 21, ICL is unable to plead fully in respect thereof. Without prejudice to the foregoing, it is admitted that by a letter dated 22 December 1999 from John Pickett of ICL to Keith Brydon, General Manager, IT, of CWS Retail Limited, which was copied to Phil Davies, IT Director of CRS, Mr. Pickett confirmed ICL' s proposal as follows:
    "Should the merger between CWS and CRS go ahead we confirmed that the GlobalSTORE trading agreement that is in place between ICL and CRS would be cancelled without penalty provided that a new contract could be negotiated to reflect the new project. This is based on the assumption that any new project would generate similar revenue and cash flow profiles to the original agreement."
    Save as aforesaid paragraph 21 is denied."
  53. The case pleaded in the Re-Amended Defence and Counterclaim in response to the allegations as to a contract contained in paragraphs 22 to 26 inclusive of the Particulars of Claim was summarised in paragraph 32 thus:-
  54. "Save as admitted or not admitted below paragraphs 22, 23, 24, 25, 26 and 28 are denied. Despite negotiations, which started in or around late March or early April 2000 and were aimed at agreeing the terms upon which ICL would provide goods and services to CWS in relation to the new project in place of the Contract [that is to say, the CRS Agreement], ICL and CWS never agreed upon the terms of such agreement. Such negotiations continued until at least mid-October 2000. Accordingly, no separate agreement was concluded with CWS. It is denied that any such agreement was concluded by implication or conduct. It is denied that it was necessary in the circumstances for the alleged agreement to be implied. In any event the alleged terms pleaded in respect of the alleged agreement were not agreed and are insufficiently precise to be capable of being enforced. CWS never communicated to ICL CWS' alleged belief that the alleged "CWS agreement" had come into existence or set out what CWS understood to be the terms of that agreement."
  55. The way in which the contract contended for on behalf of CWS was pleaded in the Particulars of Claim, as amplified in the Further Information, is very curious. The contract in question was said to have been made in or about March or April 2000 by conduct or implication. That suggests that it was not said that it was formed by the acceptance on the part of one side of an offer made on the part of the other. I shall turn in the next section of this judgment to consider the law of England in relation to contract formation, so far as is relevant to this case. Suffice for the present to say, that, while a contract can theoretically come into existence either by conduct or by implication, these are not the means by which commercial contracts are usually made.
  56. The fundamental notion underlying a contract in English law is agreement. While an objective approach to the issues whether particular parties have reached an agreement and, if so, upon what terms, is adopted, it is not usually suggested that agreement itself is unnecessary. It is therefore surprising to find the plea in paragraph 24 of the Particulars of Claim that, "Both CWS and ICL intended throughout that the CWS agreement should be reduced to writing but the parties never agreed the precise terms of the document…". The conclusion which, conventionally, one would expect to follow from a plea in those terms is that set out at paragraph 32 of the Re-Amended Defence and Counterclaim, namely that, for want of agreement, no contract was made.
  57. What, on analysis, the basis for the contract contended for on behalf of CWS seemed to be said to be was that, during the course of negotiations between CWS and ICL for a contract, various matters said to be "essential" for the conclusion of a binding contract were "agreed in principle", and that, notwithstanding that other matters discussed in the negotiations, in particular as to whether ICL's standard conditions were to be incorporated and whether ICL was to be liable to pay liquidated damages for delay in completing the work the subject of the contract under negotiation, were not agreed, somehow a contract came into existence.
  58. At the start of the trial, on the morning of the first day, I expressed to Mr. Richard Mawrey Q.C., who appeared with Mr. Terence Bergin on behalf of CWS, some difficulty in understanding how the case as to the formation of the contract sued on was put. Mr. Mawrey accepted that the present was not a case in which it was possible to identify an offer and an acceptance of such offer in a way which a law student would recognise. He assured me, nonetheless, that:-
  59. "quite clearly there was a contract; the parties treated there as being a contract afoot."
    In his closing submissions Mr. Mawrey modified his original position in relation to offer and acceptance in the following passage:-

    "16. If it were necessary to identify an offer, then Mr. Pickett's letter of 22nd December 1999 is such an offer. It sets out the work that ICL will undertake in "Phase 4a" and a timescale within which it will be performed.
    17. Acceptance is more tricky to pin down but there clearly is a date by which acceptance has taken place and it is 3rd March 2000 when the first project plan is produced and agreed. Thereafter until March 2001 both parties behave as if a new contractual relationship has come into existence and, as the presentation of 27th June 2000 shows, actually spoke of "the new contract"."
    I shall come to consider that analysis later in this judgment. Remaining for the present with how the case was opened, during the course of the opening I suggested to Mr. Mawrey that there were authorities which might be relevant to the issue whether, in law, a contract could be concluded in the circumstances which he was then asserting on behalf of CWS. I also pointed out that a possible conclusion was that no relevant contract at all was made. Mr. Mawrey explained:-

    "I accept of course that strict legal analysis may sometimes assist on pinpointing when a contract was made and what its terms were. But if one finds two parties working together in circumstances where quite clearly they both treat a contract as being on foot, then the function of the parties is to show to the court what the contract was and what its terms were. It serves no useful purpose to say, "Well, both of these parties were wholly mistaken. They never had a contract at all. They were all doing it for nothing." That would not be a pragmatic or sensible solution to a problem if… The court may come to the conclusion that they were not working to a contract and they simply hoped that one would be signed, but once the court is convinced that they are working to a contract, then the question has to be asked, what was the contract and how did it arise. It may well be no more than a court says, "It is clear that by point X in time there was a contract because both parties believed there was, both parties were working towards it"."
    I asked Mr. Mawrey whether he was intending to refer me to authority during his opening which supported the approach which he was urging me to adopt. He indicated that, at that time, he was not. I was left with the impression that he felt that I was just being difficult and that if I tried harder I would surely see the contract for which CWS contended. I have to say that I did not find that approach at all helpful. By the conclusion of the trial Mr. Mawrey had come to the view that some reference to authority might be of assistance. I consider relevant authority in the next section of this judgment.

    Contract formation – the law

  60. The approach which Mr. Mawrey contended I should adopt to the resolution of the issue whether the contract upon which CWS sought to rely had in fact been concluded is significantly at variance from the English law of contract as conventionally understood. The particular problems thrown up by the approach which he advanced are, first, whether it is appropriate in the circumstances of the present case to address the question whether a binding contract was concluded on some basis other than by seeking to identify an offer made by one party which the other had accepted unequivocally and in its entirety, and second, what is the relevance of contractual intention in a case in which the parties are still in negotiation.
  61. It is convenient to begin this review of the law by considering the significance of offer and acceptance, to which Mr. Mawrey attributed little importance.
  62. In the context of an agreement said to have been made in correspondence Lord Diplock said in Gibson v. Manchester City Council [1979] 1 WLR 294 at page 297, in a passage to which Mr. Mawrey drew my attention:-
  63. "My Lords, there may be certain types of contract, though I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance; but a contract alleged to have been made by an exchange of correspondence between the parties in which the successive communications other than the first are in reply to one another is not one of these."
  64. The approach of considering whether a contract has been concluded by asking and answering the question has one party made to the other an offer which the other has accepted unequivocally was described trenchantly by Lawton LJ in Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corporation (England) Ltd. [1979] 1 WLR 401 at page 405 in this way:-
  65. "The modern commercial practice of making quotations and placing orders with conditions attached, usually in small print, is indeed likely, as in this case, to produce a battle of forms. The problem is how should that battle be conducted? The view taken by the judge was that the battle should extend over a wide area and the court should do its best to look into the minds of the parties and make certain assumptions. In my judgment, the battle has to be conducted in accordance with set rules. It is a battle more on classical 18th century lines when convention decided who had the right to open fire first rather than in accordance with the modern concept of attrition.
    The rules relating to a battle of this kind have been known for the past 130-odd years. They were set out by the then Master of the Rolls, Lord Langdale, in Hyde v. Wrench, and Lord Denning MR has already referred to them; and, if anyone should have thought they were obsolescent, Megaw J in Trollope & Colls Ltd. v. Atomic Power Constructions Ltd. called attention to the fact that those rules are still in force. "
  66. The submission of Mr. Mawrey that a binding contract was made between CWS and ICL in relation to the GlobalSTORE project depends fundamentally upon the proposition that an agreement in circumstances such as those of the present case can be made other than by the demonstrated acceptance by one party of an identified offer made by the other. It may be that Mr. Mawrey had in mind the words of Lord Denning MR in Port Sudan Cotton Co. v. Govindaswamy Chettiar & Sons [1977] 2 Lloyd's Rep. 5 at page 10, although Mr. Mawrey did not specifically refer to those words. What Lord Denning said was:-
  67. "In considering this question, I do not much like the analysis in the text-books of inquiring whether there was an offer and acceptance, or a counter-offer and so forth. I prefer to examine the whole of the documents in the case and decide from them whether the parties did reach an agreement upon all the material terms in such circumstances that the proper inference is that they agreed to be bound by those terms from that time onwards. "
    That expression of opinion is, I think, if taken on its face, suggestive of the proposition that it is not necessary, in order to find a contract, to ask the traditional question, was there an offer which was unequivocally accepted, and answer that question in the affirmative. Rather, it is, or may be, enough to justify the finding of an agreement, that by trawling through correspondence or other exchanges between the parties one can find that at different times particular matters had been agreed which in sum could be said to amount to an agreement.

  68. There is also a passage in the judgment of Steyn LJ in G. Percy Trentham Ltd. v. Archital Luxfer Ltd. [1993] 1 Lloyd's Rep 25 at page 27 which contained a suggestion that, at least in the case of an executed, that is to say, performed, project, it may not be appropriate to seek to resolve the question whether a binding contract was made by reference simply to whether an identifiable offer was the subject of a demonstrable acceptance. What Steyn LJ said, in the passage upon which Mr. Mawrey relied, was this:-
  69. "Secondly, it is true that the coincidence of offer and acceptance will in the vast majority of cases represent the mechanism of contract formation. It is so in the case of a contract alleged to have been made by an exchange of correspondence. But it is not necessarily so in the case of a contract alleged to have come into existence during and as a result of performance. See Brogden v. Metropolitan Railway (1877) 2 AC 666; New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. [1974] 1 Lloyd's Rep. 534 at p.539 col.1 [1975] AC 154 at p. 167 D-E; Gibson v. Manchester City Council [1979] 1 WLR 294. The third matter is the impact of the fact that the transaction is executed rather than executory. It is a consideration of the first importance on a number of levels. See British Bank for Foreign Trade Ltd. v. Novinex [1949] 1 KB 628 at p. 630. The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations. It will often make it difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalised in negotiations as inessential. In this case fully executed transactions are under consideration. Clearly, similar considerations may sometimes be relevant in partly executed transactions. Fourthly, if a contract only comes into existence during and as a result of performance of the transaction it will frequently be possible to hold that the contract impliedly and retrospectively covers pre-contractual performance. See Trollope & Colls Ltd. v. Atomic Power Constructions Ltd. [1963] 1 WLR 333. "
  70. Mr. Mawrey accepted that the present was not a case of a fully executed transaction. What was said to have given rise to the claims in the action was the fact that ICL had not done that which it was contended it had agreed to do. Mr. Mawrey's submission on analysis was that I should extract from the exchanges in correspondence and in discussion between CWS and ICL any element ever apparently agreed and aggregate such elements so as to make an overall agreement at the end. Mr. Henry Carr Q.C., who appeared with Miss Jacqueline Reid on behalf of ICL, submitted that on a consideration of the correspondence and other exchanges between the parties as a whole it was plain that there never was an agreement because of the matters as to which the parties wished to reach agreement but did not. The parties did not, submitted Mr. Carr, intend to enter into any binding contract unless or until they had reached complete agreement on all issues about which they had been in negotiation. That submission leads to a consideration of the second of the two problems to which I have referred.
  71. If satisfied that parties did indeed intend to enter into a binding agreement and sought to do so, it is no part of the function of the court to seek to frustrate that intention. At the same time it is no part of the function of the court to impose upon the parties a contract which they did not, objectively, make for themselves. Lord Wright said in Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 LT 503 , at page 514:-
  72. "But it is clear that the parties both intended to make a contract and thought they had done so. Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but, on the contrary, the court should seek to apply the old maxim of English law, verba ita sunt intelligenda ut res magis valeat quam pereat. That maxim, however, does not mean that the court is to make a contract for the parties, or to go outside the words they have used, except in so far as there are appropriate implications of law, as for instance, the implication of what is just and reasonable to be ascertained by the court as a matter of machinery where the contractual intention is clear but the contract is silent on some detail."
  73. It is clear from what he said in the later case of G. Scammell and Nephew Ltd. v. Ouston [1941] AC 251, that Lord Wright in the passage quoted in the preceding paragraph was not seeking to do more than emphasise that it is not the function of the court to seek to frustrate on technical grounds the achievement by commercial parties of their objective aim of concluding a contract, if that indeed was objectively what they had done. If the parties were still in negotiation about the terms of an intended contract and not intending to be bound until those negotiations were concluded, they had not entered into any contract. In G. Scammell and Nephew Ltd. v. Ouston Lord Wright said this, at pages 268-269:-
  74. "There are in my opinion two grounds on which the court ought to hold that there never was a contract. The first is that the language used was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention. The object of the court is to do justice between the parties and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract. Such a position is not often found. But I think that it is found in this case. My reason for so thinking is not only based on the actual vagueness and unintelligibility of the words used, but is confirmed by the startling diversity of explanations, tendered by those who think there was a bargain, of what the bargain was. I do not think it would be right to hold the appellants to any particular version. It was all left too vague. There are many cases in the books of what are called illusory contracts, that is, where the parties may have thought they were making a contract but failed to arrive at a definite bargain. It is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each party are reasonably certain. In my opinion that requirement was not satisfied in this case.
    But I think the other reason, which is that the parties never in intention nor even in appearance reached an agreement, is a still sounder reason against enforcing the claim. In truth, in my opinion, their agreement was inchoate and never got beyond negotiations. They did, indeed, accept the position that there should be some form of hire-purchase agreement, but they never went on to complete their agreement by settling between them what the terms of the hire-purchase agreement were to be. The furthest point they reached was an understanding or agreement to agree upon hire-purchase terms."
    The critical question, therefore, is did the parties intend, objectively, to conclude a legally binding agreement.

  75. In the context of the question of the relevance of agreement of matters in principle during the course of unconcluded negotiations it is instructive to consider the decision in Rossiter v. Miller (1878) 3 App Cas 1124. In the course of his speech in that case Lord Blackburn said at page 1151:-
  76. "I quite agree with the Lords Justices that (wholly independent of the Statute of Frauds) it is a necessary part of the Plaintiff's case to shew that the two parties had come to a final and complete agreement, for, if not, there was no contract. So long as they are only in negotiation either party may retract; and though the parties may have agreed on all the cardinal points of the intended contract, if some particulars essential to the agreement still remain to be settled afterwards, there is no contract. The parties, in such a case are still only in negotiation. But the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, shew that they continue merely in negotiation. It is a matter to be taken into account in construing the evidence and determining whether the parties have really come to a final agreement or not. But as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed. "
    It is plainly inconsistent with the sort of mechanism of contract formation in the present case for which Mr. Mawrey contended that either party should be able to withdraw from that which he has agreed until agreement on all issues upon which the parties wish to reach agreement has been achieved. If Mr. Mawrey were right, once a party has agreed anything in principle, he is bound, no matter what has not been agreed.

  77. A convenient statement of the principles to be applied to the question of whether there was a concluded contract in the present case is to be found in the judgment of Lloyd LJ in Pagnan SpA v. Feed Products Ltd. [1987] 2 Lloyd's Rep. 601 at page 619, in a passage upon which Mr. Carr placed considerable reliance:-
  78. "As to the law, the principles to be derived from the authorities, some of which I have already mentioned, can be summarised as follows:
    (1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole (see Hussey v. Horne-Payne).
    (2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary "subject to contract" case.
    (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed; see Love and Stewart v. Instone, where the parties failed to agree the intended strike clause, and Hussey v. Horne-Payne, where Lord Selborne said at p.323:
    "…The observation has often been made, that a contract established by letters may sometimes bind parties who, when they wrote those letters, did not imagine that they were finally settling terms of the agreement by which they were to be bound; and it appears to me that no such contract ought to be held established, even by letters which would otherwise be sufficient for the purpose, if it is clear, upon the facts, that there were other conditions of the intended contract, beyond and besides those expressed in the letters, which were still in a state of negotiation only, and without the settlement of which the parties had no idea of concluding any agreement [ My [Lloyd LJ's] emphasis]
    (4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled (see Love and Stewart v. Instone per Lord Loreburn at p. 476).
    (5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.
    (6) It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word "essential" in that context is ambiguous. If by "essential" one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by "essential" one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by an "essential" one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge "the masters of their contractual fate". Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens everyday when parties enter into so-called "heads of agreement"."
  79. In my judgment the fallacy in the approach for which Mr. Mawrey contended is graphically explained in paragraph (6) of the summary of relevant principles set out in the passage from the judgment of Lloyd LJ quoted in the preceding paragraph. It seems to me that that for which Mr. Mawrey was contending is exactly that which Lloyd LJ pointed out was not legitimate, namely that it was for the court to decide which terms it regarded as important and which terms it regarded as less important or as matters of detail, and on that basis to decide whether the parties had agreed all that which the court considered necessary for there to be a workable agreement. That, in my view, is a total misapprehension as to the correct principle. The correct principle, as Lloyd LJ put it, is that, "It is for the parties to decide whether they wish to be bound, and, if so, by what terms, whether important or unimportant." Applying that principle, it is plain, in my judgment, that the analysis set out in the Particulars of Claim and amplified in the Further Information is wholly unsustainable. I find it difficult to understand how it could ever seriously have been put forward.
  80. On the first day of the trial I mentioned to Mr. Mawrey as possibly being relevant to the issues which I have to decide the cases of Gibson v. Manchester City Council, Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corporation (England) Ltd. and Pagnan SpA v. Feed Products Ltd.. Mr. Mawrey did not seem to find that of assistance. Nor did he think it appropriate at that time to seek to help me in relation to the possible significance of these decisions. A couple of days later, after I had had an opportunity of reading the witness statements served on behalf of CWS, I suggested that Mr. Mawrey might like to consider further, sooner rather than later, the passage from the judgment of Lloyd LJ in Pagnan SpA v. Feed Products Ltd. which I have quoted, and in particular paragraph (6), in the context of a number of paragraphs of the witness statements of Mr. Brydon, Mr. Adrian Marks, Mr. Peter Dennis and Mr. Garry Goodby which I identified to him. I cannot say whether he did so, but the trial did not thereafter take a course which indicated that he had. By the end of the trial Mr. Mawrey had still not sought to grapple with the statement of principles set out in the judgment of Lloyd LJ to which I have referred.
  81. It was in my mind at the close of Mr. Mawrey's opening to consider whether it was appropriate to exercise my management powers to seek to deal in a summary way with the issue of the contract for which Mr. Mawrey contended. Mr. Mawrey reminded me that the action was listed for trial of all issues and that it had not seemed to anyone, including the judge who had had responsibility for managing the case up to that point, that a trial of any issue preliminary to any other was appropriate. Mr. Carr did not suggest that any course should be taken other than that all issues should be tried. I was conscious that ICL had an interest in vindicating, if it could, its commercial reputation in relation to serious allegations of almost a professional negligence character which had been made against it by CWS. In the end I decided to let the trial run its course. However, it is clearly necessary to consider what should be the costs consequences of claims being advanced on behalf of CWS against ICL which were, from a legal point of view, doomed from the start, and those claims being persisted in notwithstanding a transparent indication from me on more than one occasion at the beginning of the trial what the difficulties were.
  82. The case of ICL as to a contract

  83. I have already set out the terms of paragraph 32 of the Re-Amended Defence and Counterclaim which, in summary, indicate the nature of the response on behalf of ICL to the allegation that a contract in the terms for which CWS contended had been made between the parties. Mr. Carr, in a brief, but helpful, opening on behalf of ICL, made plain that one of the alternatives for which ICL contended was that there was no relevant contract between ICL and CWS in relation to the GlobalSTORE project. He reminded me of the analysis of Lord Goff of Chieveley, then Robert Goff J, in British Steel Corporation v. Cleveland Bridge and Engineering Co. Ltd. [1984] 1 All ER 504, in particular from page 511 onwards, of the implications of there being no relevant contract between parties who had had mutual dealings, namely that there could be no question of any breach of any obligation of a contractual character by one side or the other because neither side owed the other any obligations of a contractual character at all. However, as Mr. Carr made clear, it was actually ICL's primary case that the work done in relation to the GlobalSTORE project was carried out under the CRS Agreement, the obligation of CRS to perform which had transferred to CWS upon the transfer of the engagements of CRS to CWS. That case was pleaded at paragraph 31 of the Re-Amended Defence and Counterclaim as follows:-
  84. "From the date of the Transfer and as evidenced by the payment by CWS of invoices in relation to work carried out prior to the Transfer and by CWS' approval and acceptance of FRS in relation to the Contract, which acceptance varied the Deliverables to be provided under the Contract [that is to say, the CRS Agreement], CWS accepted the benefit and burden of the Contract and stood in the place of CRS in respect thereof."
  85. The way in which the case was put in paragraph 31 of the Re-Amended Defence and Counterclaim rather ran together two issues which are logically separate. The first is whether, after the transfer of engagements, CWS became under the obligations arising under the CRS Agreement which it fell to CRS to perform prior to the transfer. As to that there has been no dispute before me. It was accepted on both sides that the effect of s.51 of the 1965 Act was that that result was achieved. The second issue is whether, the burden of performing the obligations previously falling to be performed by CRS having passed to CWS, the CRS Agreement should be treated as governing the work undertaken by ICL in relation to the GlobalSTORE project for CWS. That, as was implicitly acknowledged in paragraph 31 of the Re-Amended Defence and Counterclaim, depends upon whether the CRS Agreement was varied after the transfer of engagements so as to apply to the work carried out for CWS in relation to the GlobalSTORE project in place of the Phases 2, 3 and 4 for which the CRS Agreement provided initially. As a matter of law an existing agreement can only effectively be varied by the making of a further legally binding agreement by which the parties to the original agreement, or, in this case, the parties for the time being bound to perform the obligations for which the original agreement provided, agree to the variation. In other words, exactly the same issues in respect of the mechanism by which the agreement can in law be made and as to contractual intention arise in relation to an agreement to vary the CRS Agreement as arise in relation to the contract for which CWS contended. Applying the principles discussed in the preceding section of this judgment ICL's primary case that the CRS Agreement was varied so as to apply to the work done for CWS in relation to the GlobalSTORE project seems unpromising given that it is common ground that the parties engaged in extensive negotiations for a new agreement, which negotiations did not come to fruition as a result of failure to agree on issues regarded by CWS as fundamental, namely that ICL should agree to pay liquidated damages in the event that it failed to deliver what it should deliver by some date which also needed to be agreed, and as to whether the standard conditions of ICL should be incorporated into the agreement. Whether a variation of the CRS Agreement was agreed is ultimately a question of mixed fact and law, but it is ironic that the answer to the question whether such a variation was agreed seems, in advance of considering the evidence of fact, likely to be negative for the reasons summarised in paragraph 32 of the Re-Amended Defence and Counterclaim.
  86. The misrepresentation case

  87. In his opening Mr. Mawrey placed little emphasis upon the case pleaded in the Particulars of Claim in relation to alleged misrepresentations. His focus was almost entirely upon the contract for which CWS contended, and more particularly upon the allegations as to gross and flagrant breaches of that contract. By the end of the trial the issue of misrepresentation had acquired a much higher profile. A lengthy passage in the written closing submissions of Mr. Mawrey and Mr. Bergin dealt with it.
  88. "212. Although misrepresentation, if proved in this case, would provide tCG with a good cause of action both on the premise that there was an enforceable contract between the parties and on the premise that there was not, in practical terms it will make a significant difference only in the event that there was no contract. If there was a contract and ICL was in breach of it, no damages are likely to be recoverable for misrepresentation that would not equally be recoverable as damages for breach of contract. In that context, therefore, a finding of misrepresentation would add nothing concrete.
    213. Similarly, although it is pleaded that tCG was induced to agree to the change from ISS400 to ISS300 by misrepresentations, this only bites if the court were to hold that there was, at the time, no enforceable contract between the parties.
    214. The misrepresentations relied on as inducing the contract can be summarised as follows:
    (a) ICL represented that it was capable of producing for the existing CRS stores an EPOS and back office system based on ISS400 and GlobalSTORE which would give the proposed new Group a harmonised IT capacity based on the functionality currently in place in CWS stores, including Dividend, ISAs, HISAs and electronic cash management;
    (b) ICL represented that it was capable of delivering the new system to an agreed timetable;
    (c) ICL represented that it was capable of delivering the new system within five months of FRS being signed off;
    (d) ICL represented that it was capable to [sic] delivering the new system to timescales that would fit in with CWS's expressed intentions to re-launch the new Group as soon as practicable after merger;
    (e) ICL represented that it could deliver an ISS400/GlobalSTORE system more quickly and more cheaply than its rival, the ISS300/Vision system.
    215. Those representations appear quite clearly from the presentations, especially the presentation of December 1999 and from Mr. Pickett's letter of 22nd December 1999.
    216. If these representations were incorrect, then whether the onus is on tCG to show that they were made negligently or on ICL to show that they were made without negligence, the result is going to be the same, They were made negligently.
    217. Events have undeniably shown these representations to be incorrect. ICL was not able to deliver a system based on ISS400 and GlobalSTORE within any measurable timescale and probably not able to do so at all. Whether the system was based on ISS400 or on ISS300 (allegedly introduced to speed the Project up), it was not delivered to any agreed timetable and was never going to be ready for rollout within five months of being signed off. Going down the GlobalSTORE route was a disaster for tCG; it was neither quicker nor cheaper than it would have been to decide on ISS300/Vision at the outset.
    218. Were the misrepresentations negligent? As the evidence has turned out, this seems to be incontrovertible. The fact is that ICL carried out absolutely no internal feasibility exercise on the project. ICL had no idea whether adapting ISS400 to produce Dividend would be easy or difficult and had no idea whether they would be able to source the appropriately skilled staff from the USA to meet any agreed timescale.
    219. More significantly, the moment CWS stated that the new system was to replicate the Dividend functionality of CWS's existing system, ICL knew that
    (a) it had to discover exactly what that functionality was;
    (b) Dividend was going to have to communicate with CWS's existing central systems including the SSC;
    (c) although it had supplied the system as a main contractor, ICL's own knowledge of the existing CWS system was partial; in particular it did not know the file formats for communication between the Vision back office system and the central systems including the SSC;
    (d) given that reverse engineering was not a practical proposition, ICL would have to discover the relevant file formats and other information from PCMS;
    (e) it had made no enquiries either of CWS or of PCMS itself as to whether, when and on what terms PCMS would be prepared to provide this information.
    220. Furthermore ICL seems to have contemplated at that stage that it would be producing GlobalSTORE by some form of RAD process which would render any agreement of fixed timescales pointless.
    221. In short, ICL knew that it had made none of the appropriate enquiries needed to be able to give the assurances it was giving and it knew that it could not deliver to the desired timescales or any fixed timescales.
    222. ICL wanted desperately to persuade CWS to pay for it to develop GlobalSTORE and not to do the obvious thing namely to buy ISS300/Vision, a fully developed product which could be installed quickly and at an ascertainable cost. It revealed none of its difficulties (especially the difficulty with PCMS) to CWS because it knew that if it did so, CWS would almost certainly choose Vision.
    223. As for the misrepresentations leading to the change from ISS400 to ISS300, they are relevant as to extending the period of loss. If, in May 2000, ICL had failed to persuade tCG to continue with the Project and tCG had abandoned GlobalSTORE to Vision, then the losses flowing from the December 1999 misrepresentations would have been crystallised. What tCG would have lost was the difference between going down the Vision route following the cancellation of the GlobalSTORE project in June 2000 and going down the Vision route ab initio – a loss of probably no more than 3 or 4 months (say March to June 2000).
    224. By persuading tCG to persist with GlobalSTORE, ICL delayed tCG from moving to Vision for a further 9 months (May/June 2000 to February/March 2001).
    225. The essence of the May/June misrepresentations was that ICL represented that, if tCG would agree to a change from ISS400 to ISS300, ICL had the ability to meet the August pilot and September rollout dates. This was clearly wrong, as events showed, but was ICL negligent in giving those assurances?
    226. As with the earlier misrepresentations, ICL had failed completely to carry out any feasibility exercise before committing itself to delivery [sic] ISS300/GlobalSTORE in time for a pilot date. It had not assessed what work would be necessary, in particular to replace the back office functionality which was going to be removed with the removal of ISS400. If it was contemplating three drops of unvalidated (or only partially validated) software, ICL must have known that any commitment to a definite timetable was going to be impossible.
    227. As Mr. Pickett's evidence made clear, communication between the sales team and the technical team was sketchy. The technical team realised that meeting the time limits was not practicable but the sales team, realising that without the assurances, tCG might terminate the contract and buy Vision, chose either not to ask the right questions or not to listen to the answers.
    228. The reality is that, at the time ICL's sales team was attempting to persuade tCG that, if it consented to the change to ISS300, the agreed dates could be met, any rational assessment of ICL's capability to achieve this must have indicated that it was not feasible.
    229. tCG was undoubtedly misled into thinking that the change to ISS300, which, after all, had been used successfully in the existing CWS system, would put the project back on course.
    230. The case on misrepresentation is straightforward and coherent both as to liability and as to damages. It is not contested that, if ICL had failed to persuade tCG to choose ISS400/GlobalSTORE in December 1999 or if ICL had failed to persuade tCG to continue with the project with a changed specification in June 2000, at either point tCG would have chosen the ISS300/Vision solution."
  89. The passage which I have quoted in the preceding paragraph from the closing submissions of Mr. Mawrey and Mr. Bergin traversed much controversial ground, notwithstanding the assertions as to what was not in dispute or could not be contested. What was significant, it seemed to me, was that at this stage in the closing submissions what appeared to be said – see paragraph 214 – was that the first set of alleged misrepresentations relied upon induced CWS to enter into a contract, in fact the contract for which CWS contended, while the second set of alleged misrepresentations – see paragraph 225 – induced CWS to agree to a variation of that contract. None of this was of any practical relevance, as was accepted at paragraph 212 of the submissions, if the contract for which CWS contended was found proved. Equally, bearing in mind that at this stage in the submissions what was being said was that the representations alleged induced CWS to enter into the alleged contract in the first place, and thereafter to agree to a variation of the contract, none of this was of any relevance if it were not found that the contract contended for had been concluded.
  90. The real significance of the alleged misrepresentations, so far as the submissions of Mr. Mawrey and Mr. Bergin were concerned, emerged in a section of the submissions entitled "What is the position if there was no contract?". That section contained the following:-
  91. "235. Although there is mention of quantum meruit in ICL's pleadings, neither party has ever contended for the proposition that there was no contract governing the Project. The course of the action has been predicated on there being a dispute between the parties as to whether there was a new contract – the CWS agreement – or a varied version of the CRS agreement.
    236. It is still tCG's case that these are the only two viable analyses of the situation but, as the court has raised the matter, the parties must address the consequences of their both being mistaken as to the existence of a contract.
    237. One thing can be said with certainty: if there was no contract, both limbs of ICL's counterclaim fail in limine because they are purely contractual claims.
    238. What, however, of tCG's claims?
    239. Firstly, if there was no contract, as indicated above, tCG's claims based on misrepresentation still hold good. They can succeed on the premise that no contract was entered into because the misrepresentations induced tCG to follow a course of action which it would not have followed if the misrepresentations had not been made at all or if (which comes to the same thing) ICL had correctly represented the position by telling tCG it could not deliver what tCG wanted.
    240. Secondly, tCG would have a restitutionary claim, although, of course, tCG's pleaded case, being based on different premises, does not contain one.
    241. The way in which a restitutionary claim would be based would be to calculate the sums paid by tCG to ICL referable to the development of GlobalSTORE. Those sums would be recoverable as sums paid on a consideration which has wholly failed. Insofar as tCG has paid for hardware, then, if the hardware is utilisable for other purposes, it is irrecoverable on that basis: if it is not, then the cost is similarly recoverable.
    242. ICL cannot set up a claim upon a quantum meruit or, more strictly, quantum valebat because it has not sought to show that any of the work relating to GlobalSTORE provided any benefit to tCG. On the premise that there was no contract, ICL's work on GlobalSTORE must be treated as being speculative work undertaken in the hope that it would lead to a product that would be sold to tCG. Any payment by tCG must be taken as relating to the proposed contract and recoverable if the contract does not take place.
    243. If, therefore, the court did come to the conclusion that there was no contract between the parties, the court would be invited first to consider tCG's misrepresentation claim. If that succeeds, tCG recover's [sic] damages and ICL's counterclaim fails. If the misrepresentation claim does not succeed, then ICL's counterclaim still fails but the court should order an account or enquiry into the sums paid by tCG to ICL for GlobalSTORE and for hardware not used by tCG in consequence of the change to ISS300/Vision."
  92. The section of the closing submissions of Mr. Mawrey and Mr. Bergin which I have set out in the preceding paragraph was, in my judgment, a rather desperate attempt to salvage something from the anticipated wreckage of CWS's case as to a contract. It itself contained a number of illogicalities and misconceptions.
  93. The first misconception was in relation to the basis of the counterclaim of ICL in respect of revision of the charges levied under the CRS Agreement. Paragraph 237 of the submissions proceeded on the basis that if there was no contract between the parties concerning the GlobalSTORE project somehow that caused the CRS Agreement, under which the relevant claim of ICL was made, somehow to disappear. That is just nonsense. It was common ground that the CRS Agreement had been made and that CWS had succeeded to the rights and liabilities of CRS under it. One of those liabilities was that to pay revised sums for services provided by ICL under the CRS Agreement in the event that the CRS Agreement did not run its full course.
  94. The second great puzzle arising under the section of the closing submissions of Mr. Mawrey and Mr. Bergin entitled "What is the position if there was no contract?" was how logically it could be said that alleged misrepresentations which it had earlier been explained had led, on CWS's case, to CWS being induced to enter into the contract for which it contended, and thereafter to agree to a variation of that contract, gave rise to a cause of action if there was no contract. The alleged consequences could not have followed from the representations relied upon. There was an effort to blur this logical difficulty by the assertion in paragraph 239 that, "the misrepresentations induced tCG to follow a course of action which it would not have followed if the misrepresentations had not been made". That formulation prompts the question, "Well, what course of action." The answer cannot be to enter into a contract which a fortiori was not made. The answer must be to do something else, perhaps entertain the thought of the GlobalSTORE project or something along those lines. However, no such consequence was pleaded, and no evidence was directed to it, I imagine precisely because this point was a late thought on the part of Mr. Mawrey and Mr. Bergin.
  95. The summary of the misrepresentations alleged at paragraph 214 of the closing submissions of Mr. Mawrey and Mr. Bergin was different from the misrepresentations pleaded at paragraph 20 of the Particulars of Claim, which I have already set out. Those pleaded misrepresentations were not in terms said to have influenced CWS to do anything. There was simply an allegation at paragraph 29 of the Particulars of Claim that they "were false and misleading". Requests were made for further information in relation to that allegation. In the Further Information the responses to those requests were:-
  96. "44. CWS's case is self explanatory. As to paragraph 20.1 ICL represented that it was capable of adapting GlobalSTORE so as to incorporate the additional functionality required by CWS (including the Dividend). As set out in paragraph 27, it was not so capable and admitted as such. Similarly, as to the representation set out in paragraph 20.2, GlobalSTORE was not at the time of the representation (nor ever became) sufficiently advanced in its development to permit a pilot project to be run in August 2000 and the system to be rolled out across the network of former CRS stores in September 2000. So much was admitted as set out in paragraph 27.
    45. It is not alleged that the misrepresentations were fraudulent. That said, if CWS establishes that the representations were made and were material, it is for ICL to show either that they were true or, if not, that it had reasonable grounds to believe that they were true. CWS will rely on the Misrepresentation Act 1967 s.2.
    Without prejudice to CWS's primary case as set out above, CWS reserve the right to argue that, had ICL however, properly and carefully investigated the current state of its GlobalSTORE system and evaluated the prospects of its being adapted to provide the required functionality, it would have realised that the system could not be adapted to provide that functionality on a platform of ISS/400 Lite within any timescale which would be acceptable to any customer, however indulgent, and, in all probability could never be so adapted. To that extent therefore, and if and insofar as it may be necessary to do so, CWS will contend that ICL was negligent in making the misrepresentations."
  97. By contrast with the lack of any plea as to reliance upon the representations pleaded at paragraph 20 of the Particulars of Claim, the alleged representations said to have been made in May and June 2000 before the change from ISS400 to ISS300, pleaded at paragraph 31 of the Particulars of Claim, were said, at paragraph 33, to have been relied upon by CWS in agreeing to that change. There was, however, no plea that those representations were false.
  98. The only plea in relation to alleged consequences of any misrepresentation alleged was in paragraph 42 of the Particulars of Claim:-
  99. "By reason of ICL's misrepresentations, breaches of contract and repudiation of contract, CWS is entitled to recover back all monies paid to ICL under the CWS agreement and to damages. A schedule of CWS's claims under these heads is attached to these particulars of claim at schedule 8 [in fact 7]"
    Schedule 7 to the Particulars of Claim did not identify any element of claim which was expressly denoted as dependent upon any allegation of misrepresentation. Rather there were set out a number of elements which seemed to be common to all ways in which the case was put. That was confirmed by an "Alternative case" set out in the Further Information in response to a request under paragraph 42 of the Particulars of Claim numbered 73 in these terms:-

    "Please set out (in Scott schedule or other convenient form) in relation to each alleged item in schedule 7, whether it is alleged that the damage results from a misrepresentation or a breach of contract or (if it is different) a repudiation, and in each case identify the relevant contract and term or representation or act of repudiation relied upon."
    The "Alternative case" was:-

    "CWS's alternative case, based on misrepresentation, is that if the misrepresentations had not been made CWS would not have contracted with ICL to deliver a system based on ISS/400 Lite and GlobalSTORE (or even ISS/300 and GlobalSTORE). It would have opted to equip the former CRS stores with the existing system ISS/300 and Vision currently installed in historic CWS stores and containing the functionality of the Dividend. There is no reason why that system could not have been acquired and installed before (or, at worst, shortly after) the merger of the societies in April 2000.
    On that premise, all the losses and expenditure incurred by CWS and claimed in Schedule 7, with the exception of the cost of acquiring the licences for ISS/300 would have been avoided."
  100. At paragraph 29 of their closing submissions Mr. Carr and Miss Reid submitted that:-
  101. "It also follows that if there is no new agreement, CWS' claims under the Misrepresentation Act 1967 must also fail. Such claims require misrepresentations to have induced a contract. CWS have neither pleaded nor relied upon any common law claim for negligent misrepresentation."
  102. Mr. Mawrey in his oral closing submissions disputed that there was no pleaded claim based upon negligent misstatement. He relied upon the response to request 45 in the Further Information. In my judgment that reliance was misplaced. On a fair reading, what the responses to requests 44 and 45 were concerned with, and all they were concerned with, was the position under Misrepresentation Act 1967. The relevance of negligence under that statute is, potentially, to the availability of the statutory defence under s.2(1). I therefore accept the submission of Mr. Carr and Miss Reid that there was no pleaded case of negligent misstatement. Mr. Mawrey did not seek to address the issue of whether there was a pleaded case other than by asserting that there was. He made no application to add a plea of negligent misstatement.
  103. In the circumstances it seems to me that it is unnecessary to consider further the allegations of misrepresentation contained in the Particulars of Claim. The only specifically identified consequence of any alleged misrepresentation for which CWS contended was entry into, or agreement to variation of, the contract for which it contended. I do not see how any claim could succeed in the absence of the making of the contract contended for, even if it was open to CWS to advance a case independent of Misrepresentation Act 1967 that ICL had made some negligent misstatement to it.
  104. No application was made by Mr. Mawrey for permission to amend the Particulars of Claim to include a claim in restitution such as contemplated at paragraphs 240 and 241 of his written closing submissions. Those paragraphs seem to envisage that no such application was necessary. I do not share that view. In the absence of any pleaded claim I do not propose to consider the possibility of a restitutionary claim further, beyond remarking that it by no means follows from the fact that there was no concluded contract between CWS and ICL for the undertaking of the GlobalSTORE project that there was no consideration for the making of any payments which CWS actually made to ICL in connection with that project. ICL would, in principle, have a claim in restitution for payment for work done at the request of CWS. Payments made voluntarily by CWS to discharge that liability would be amply supported by consideration.
  105. The material facts as to negotiations between CWS and ICL

  106. The conclusion which I have indicated, that the contract for which CWS contended could not be established, was based, initially, simply upon a consideration of how the case for CWS as to a contract was pleaded. However, that conclusion is reinforced by a consideration of the evidence as to the facts of the negotiations between the parties. Those facts also demonstrate that the primary case of ICL, that the CRS Agreement was varied so as to encompass the undertaking of the GlobalSTORE project for CWS, was not made out. My overall conclusion is that no contract of any sort was made between CWS and ICL in relation to the carrying out of the GlobalSTORE project. Quite simply, the negotiations between the parties in respect of a contract to govern the carrying out of the GlobalSTORE project never fructified as a concluded agreement.
  107. It is not necessary for the purposes of this judgment to rehearse extensively the steps in negotiations between CWS and ICL in relation to a possible contract for the undertaking by ICL of work for CWS in respect of the GlobalSTORE project. It is common ground that there were extensive negotiations over an extended period and that in the course of those negotiations a number of versions of a proposed written contract were produced. It is also common ground that no written agreement ever was signed. A major reason why negotiations never progressed beyond the stage of consideration of commercial terms to seeking legal advice on drafting on the CWS side was the refusal of ICL to agree to the payment of liquidated damages. Mr. Mawrey, in opening CWS's case, sought to deal with that question in this way:-
  108. "Our case on that is that if the parties do not reach agreement on penalties, then there are no penalties, but it is not fatal to there being an agreement with regard to the essentials of the contract."
    For the reasons which I have sought to explain, that solution just is not satisfactory. The real question is whether the parties had any intention of entering into any contract at all, whether a fresh agreement or by way of variation of the CRS Agreement, without the issue of liquidated damages being resolved, and so my consideration of the evidence will focus on what the positions of the parties was on that question. Mr. Mawrey's suggested solution really amounts to no more than saying that in order to bring into existence a contract upon which it can sue CWS retrospectively did not seek to insist upon that which at the time was of fundamental importance.

  109. While the question of liquidated damages was probably the most important single issue raised during the course of negotiations between CWS and ICL over which agreement was not reached, it was not the only one. Associated with it logically was the question of agreement of dates for the provision of something failure to produce which on the part of ICL would trigger the obligation to pay liquidated damages. ICL's case was that no fixed dates ever were agreed, only target dates identified by CWS. Mr. Mawrey, on behalf of CWS characterised what ICL contended were only target dates as contractually binding, notwithstanding that they changed over time in the light of progress. Mr. Mawrey submitted that the correct analysis of the alteration in dates over time was that the parties had agreed variations to their contract.
  110. ICL also asserted through Mr. Carr that there was never any agreement as to the exact scope of the GlobalSTORE project or what CWS would pay ICL for carrying it out. On those issues the position of Mr. Mawrey on behalf of CWS was more equivocal, no doubt because of the potential link with ICL's counterclaim for loss of profit in relation to the cancellation of the GlobalSTORE project. Essentially the position of CWS was that the scope of the GlobalSTORE was sufficiently clearly known for there to be a binding agreement in relation to it, but not sufficiently defined for ICL to be ab