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Cite as: [2011] EWHC 930 (TCC)

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Neutral Citation Number: [2011] EWHC 930 (TCC)
Case No: HT-09-169


Royal Courts of Justice
Strand, London, WC2A 2LL

B e f o r e :


1. Donne Place Investments Limited
2. Ives Street Investments Limited
- and -

1. Louise McDonnell
2. McDonnell Associates Limited


Mr Matthew Cook (instructed by Fox Williams LLP) for the Claimant
Mr Marc Beaumont (instructed under the Bar Public Access Scheme) for the Defendants
Hearing dates: 30th November, 1st, 2nd, 6th-10th, 20th December 2010; 20th, 21st, 31st January 2011 & 1st February 2011.



Crown Copyright ©

    Mr Recorder Soole QC :

  1. This action concerns the development of two sets of adjoining properties in Chelsea, namely 13/14 Donne Place ('Donne Place') and 17/19 Ives Street ('Ives Street'). At the material times the properties were owned respectively by the First Claimant ('DPIL') and the Second Claimant ('ISIL'). Those two companies were each owned by interests of the Ciampolini family who were represented for all material purposes in the course of the development by Mr Stefano Ciampolini ('SC') and his partner Sanja Vukelic ('SV'). The First Defendant ('LM') was at all material times an Architectural Designer and the principal and sole Director of the Second Defendant ('MCD').
  2. The action and counterclaim between these companies primarily concerns (i) a 'design and build' contract in respect of Donne Place, between DPIL and MCD dated 5.7.06[1] ('the Donne Place 2006 agreement') and (ii) a professional retainer for architectural design and project management services in respect of Ives Street, between ISIL and MCD concluded 22.2.06 ('the Ives Street agreement'). These two contracts were terminated by DPIL and ISIL, respectively, in December 2008, in each case before the developments had been completed.
  3. Disputes have arisen between these contracting parties under the following essential heads:

    (1) the final account between DPIL and MCD ('Account : Donne Place');

    (2) the final account between ISIL and MCD ('Account : Ives Street');

    (3) DPIL's claim that MCD is liable for losses resulting from alleged negligent delay in the performance of its obligations under the Donne Place 2006 agreement ('Delay : Donne Place');

    (4) ISIL's claim that MCD is liable for losses resulting from alleged negligent delay in the performance of the services required under the Ives Street agreement ('Delay : Ives Street').
  4. In addition, the following claims are made against LM personally:

    (1) if and to the extent that monies are due to DPIL and/or ISIL under the accounts, that LM is personally liable for those sums on the basis of dishonest assistance ('dishonest assistance');

    (2) that in the course of the Ives Street project, LM was guilty of fraudulent misrepresentations in the tort of deceit, resulting in loss to ISIL ('deceit').
  5. Over the course of the 13 days of this trial I heard evidence from SC, SV and LM and heard or read evidence from 6 other witnesses of fact; heard evidence from expert witnesses in respect of the account (Mr Rooney for DPIL/ISIL; Mr Mainz for MCD) and the delay claims (Mr Masterson for DPIL/ISIL; Mr Redler for MCD) and read valuation evidence from two experts. I have received opening and closing written submissions in excess of 240 pages, together with oral submissions.

    Background to the disputes
  6. Donne Place and Ives Street back on to each other, separated by gardens. In the 1990s the freehold property 13 Donne Place was purchased by Glenbrook Management Ltd, a company owned by Mr Ciampolini's parents; and SC/SV began to live there. In October 2001 SC purchased the adjoining freehold property at 14 Donne Place. He and SV then lived in both properties. Ives Street was owned by ISIL, a company registered in Guernsey and also controlled by Mr Ciampolini's parents. Ives Street consisted of 5 self-contained flats and a garage, let out to tenants.
  7. In about 2002 the Ciampolini family conceived the idea of redeveloping the two properties forming Donne Place into one single family home. This was to be achieved through a company established for the purpose (DPIL), and owned by a Ciampolini family trust of which SC and other family members were beneficiaries. To this end, as I accept, in 2003 SC and Glenbrook each made a gift of their respective freehold properties to DPIL. A copy of SC's Deed of Gift was eventually supplied at the end of the trial. Early in the trial I refused an application to amend MCD's Defence and Counterclaim to the effect that DPIL (and indeed ISIL) was simply a façade for SC's personal interest; but allowed a good deal of leeway in cross-examination; in particular as to the fact and circumstances of the alleged Deed of Gift and later tenancy agreement of Donne Place between DPIL and SC/SV.
  8. Having heard SC's evidence, I am quite satisfied that there was no 'façade' and that DPIL/ISIL are to be treated as entities distinct from SC and from each other. In particular I see no significance in the fact that SC's e-mails concerning the projects routinely used the first person singular, rather than 'we' or 'the company'. That was his, quite understandable, form of speech. Furthermore SC's gift of his valuable property to DPIL was understandable in the context of an arrangement involving the redevelopment of a combined Donne Place property by a family trust of which he (together with other family members) was a beneficiary.
  9. For the purpose of the development it was necessary to have architectural design and project management services. For that purpose SC contacted the RIBA and received a recommendation in respect of MCD. MCD's principal, LM, was not herself an architect but the company did at this time employ architects.
  10. By an agreement dated 11th June 2002 ('the 2002 agreement'), MCD agreed to provide design consultancy and project management services in respect of Donne Place for a fee of 7.5% of Total Contract Value, then stated to be £800,000 exclusive of VAT plus disbursements. MCD contends that this agreement continued in force, wholly or at least in part, after the 2006 Donne Place agreement. This is disputed.
  11. The Donne Place project of course required planning permission. After many setbacks this was eventually granted on 20th October 2005. The permission allowed demolition of the two adjoining properties and construction of a single property, including the provision of a basement. This required 3 Party Wall Awards to be obtained, namely Demolition, Excavation and Construction.
  12. In the meantime the Ciampolini family had decided also to redevelop and modernise Ives Street, by knocking down the two adjoining 2-storey properties and replacing them with a 3-storey block of flats. This did not include a basement, nor therefore require an Excavation Party Wall Award, but had the particular problem that the properties were directly above a London Underground ('LU') tunnel. Accordingly all concerned knew from the outset that agreement with LU was essential to the project.
  13. Although the two developments were governed by distinct contractual arrangements, the intention was that, so far as possible, the two would be run in parallel.
  14. On 1st November 2005 MCD sent out proposed heads of terms for design consultancy and project management services in relation to Ives Street, signed by LM on behalf of MCD as 'Architectural Designer'. The terms were accepted by the signature of Diana Mortimer on behalf of 'Ives Street Management Ltd' on 22nd February 2006. Although in dispute before the trial commenced, it is now common ground that this was a mistake. There is no such company and the true contracting party was ISIL.
  15. By this agreement ('the Ives Street Agreement') MCD were to provide ISIL with 'design consultancy and project management' services in respect of this development. Under the heading 'Planned Key Dates' the Client Brief was stated to be 'Work stages A – G to be completed before June 2006. Commencement of works on site after June 2006.' The payment terms provided hourly rates for Design Stages A-D and 15% of Total Contract Value for Work Stages E-L.
  16. The Ives Street agreement identified other appointments to be made under separate agreements by the client. These included Richard Birchall as Party Wall Surveyor and Elliott Wood & Partners ('Elliot Wood') as structural engineers. The VAT Consultant was Landmark PT Ltd, whose principal was Mr Julian Potts. These matched the original appointments in respect of Donne Place.
  17. The Ives Street Agreement was terminable by either party on 14 days' notice (clause 8.5).
  18. Following a meeting with SC on 11th January 2006 Mr Roger Cotterill (through his company Designer Building Services Ltd) was appointed consultant quantity surveyor in respect of both developments. This was confirmed in his subsequent letter of 16th January 2006.
  19. At that time Mr Cotterill considered that the contract period for Donne Place should be approximately 12 months and for Ives Street 9 months; whereas SC believed the periods should be 15 and 9 months respectively: see Mr Cotterill's letter of 16th January 2006. SC wanted both projects to complete at the same time and Mr Cotterill identified a draft programme as follows: Donne Place commence June 2006; complete June or September 2007; Ives Street commence September 2006; complete June 2007. The same letter records that SC was agreeable to the contract for the works (apparently in respect of both properties) being let to MCD. However, since MCD were not building contractors, it was always understood that the entirety of the construction work would be carried out by sub-contractors.
  20. Mr Cotterill's letter of 16.1.06 also noted the critical importance, for Ives Street, of reaching agreement with LU. The first contact was made with LU in January 2006.
  21. In the event MCD was appointed the main contractor for the works at Donne Place. In respect of Ives Street there was no such appointment; the contractual relationship with MCD was throughout governed by the Ives Street agreement concluded on 22nd February 2006.
  22. The appointment of MCD as contractor for Donne Place took place on 5.7.06. On that date two successive agreements were entered. First MCD, as 'Contractor', entered a 'design and build' contract with SC/SV (in their personal capacity) as 'Employer'. The second agreement of that day was a 'Novation Agreement' between those parties and DPIL whereby, in essence, DPIL was substituted for SC/SV as Employer.
  23. This arrangement of successive agreements was entered in consequence of the advice of the VAT consultant Mr Potts and following drafting assistance from Mr Cotterill. There may also have been some assistance from a firm of solicitors in Guildford.
  24. The reason for the concern about VAT was that MCD had already carried out substantial architectural and design services for SC/SV under the 2002 Agreement, at fees attracting VAT. If those historic payments could somehow be incorporated within or linked to the intended design and build contract with MCD, the advice from Mr Potts was that it should be possible to reclaim the VAT that had been paid. In the result VAT paid for services rendered under the 2002 Agreement and other professional appointments was in due course recovered, but limited by the HMRC to the period of 3 years preceding the Donne Place 2006 Agreement.
  25. The first agreement of 5th July 2006 was between SC/SV (as Employer) and MCD (as Contractor) and provided a 'design and build contract' in the following material terms.
  26. The recital provided that :
  27. "(1) The Employer wishes to have demolished an existing Structure and have designed and constructed a new house at 13/14 Donne Place, London, SW3 2NG in accordance with the list of Drawings…attached or any subsequent amended or additional Drawings or details…

    (2) A Budget Cost of the Employers Proposals has been compiled and improved by the Employer (Document Marked "A" attached)…

    (3) The Contractor has agreed to demolish the existing Structure and design and construct the new house previously referred to including any additional work required by the Employer."

  28. The 'Articles' included :
  29. (1) That the Contractor will carry out and complete the works shown on the Contract Drawings or on any subsequent amended or additional Drawings or details or in accordance with instructions issued by the Employer in relation to additional work.
    (2) The Employer will pay to the Contractor the cost of carrying out the works plus a Contract Fee plus additional payments in accordance with Clause 4 (A) of the Contract Conditions.
  30. The Articles identified the Quantity Surveyor as Mr Cotterill's company, incorporating his letter of 16th January 2006, and Eldridge Moss Ltd as Planning Supervisor.
  31. As to the time for completion, clause 2 of the Conditions provided :
  32. 'The Contractor will complete the Construction of the House within fifteen months of the Date of Possession. If the Contractor fails to complete the works within 15 months of the Date of Possession the Contractor will incur no penalty.'
  33. The 'Contract Fee' was 15% of the Budget Cost of £1,142,505, i.e. £171,376, subject to potential adjustments in the light of the actual Final Cost of the works (Clause 5(3) : 'the Clause 5 calculation').
  34. Clause 4(a) provided for a system of advance monthly payments, on the basis of estimated expenditure, from Employer to Contractor; and monthly reconciliations on the basis of actual expenditure incurred.
  35. In addition the Employer was to '…provide to the Contractor funds on a monthly basis to pay Consultants Fees and the Contractor will not be entitled to be paid any additional fee or uplift on these funds.' (Clause 5(4)). The cost of the Consultants' Fees 'already paid and to be paid at the date of this Contract' were estimated at £240,000 and included 'Architectural Works'. (Clauses 5(4a), 11 and attached document 'D').
  36. By clause 10, the Agreement was terminable by either party 'for any reason' on 4 weeks' notice in writing. In that event the clause provided for a calculation of the costs/proportionate Contract Fee to be made to MCD ('the Clause 10 calculation').
  37. The 'Novation Agreement' of the same day (5.7.06) was between MCD, SC/SV and DPIL. In essence it provided for DPIL to replace SC/SV as the 'Employer' under the preceding agreement of that day.
  38. By this date a good deal of work relevant to the Donne Place development had already taken place, pursuant to the 2002 Agreement and the other professional appointments. In particular Party Wall notices had been served on adjoining properties and a Demolition Party Wall award had been made, albeit requiring a supplemental Award before demolition could start. On 3rd July 2006 a letter of intent had been issued in respect of an intended sub-contract with demolition contractors.
  39. On 17th July 2006 planning permission was obtained in relation to Ives Street. On 20th July 2006 MCD took possession of Donne Place and demolition works commenced shortly thereafter – in fact before the supplemental Award had been obtained. Demolition was completed by the end of August 2006.
  40. In August 2006 Elliot Wood were asked to provide temporary works designs in respect of the basement for Donne Place but were unwilling to do so. In that month David Akera was appointed to take over as structural engineer on Ives Street from Elliot Wood. In September 2006 Mr Akera was appointed to provide the temporary works designs for Donne Place.
  41. In November 2006 Party Wall notices were served on the properties adjoining Ives Street. On 23rd November 2006 Mr Akera produced a preliminary structural design for Ives Street. In order to meet the concerns about the LU tunnel this was based on a lightweight timber structure, but this required the specialist design input of potential sub-contractors KLH. It is now common ground that finalisation of KLH's design could not be achieved until the internal layout had been agreed with ISIL.
  42. In December 2006/January 2007 Excavation Party Awards were obtained for Donne Place. Piling works were completed in February 2007. In May 2007 Construction Party Wall Awards were obtained for that development.
  43. In August 2007 Demolition Party Wall Awards were obtained for Ives Street. KLH's design was finalised on 29th October 2007.
  44. As is now common ground, David Akera had the lead role in obtaining the necessary agreement from LU. In early January 2008 he sent certain structural calculations to LU. On 27th February and 24th April 2008 LU's agent Metronet confirmed the information which they required for approval. These included method statements and risk assessments ('MS/RA') in respect of demolition, scaffolding and construction. By October 2008 Metronet had approved the construction documents but were still awaiting 'site-specific' – as opposed to 'generic' - MS/RA in relation to demolition and scaffolding.
  45. At the heart of the delay in the provision of site-specific MS/RA for Ives Street was what was described at trial as the 'catch-22', viz. that site-specific information could not be provided without the appointment of sub-contractors; but that ISIL (through SC and his parents) did not want to incur the commitment and cost of appointing sub-contractors until the necessary consents had been obtained. SC contends that they would have appointed the relevant sub-contractors if they had appreciated that LU agreement could not have been achieved without it; and points to his agreement to pay KLH £4000 for certain necessary design work in the summer of 2008 and his conduct after receipt of specific advice from MCD at the end of October 2008.
  46. On 9th October 2008 Mr Akera advised that the demolition and scaffolding documents as required by Metronet would have to be prepared by sub-contractors. On 27th October MCD advised ISIL/SC that it was necessary to appoint sub-contractors for this purpose. MCD contends that this advice had previously been given.
  47. In the meantime and in particular during the latter half of 2008 SC was expressing increasing concern about what he saw as the inadequacy of the accounts and proper financial reporting from MCD/LM. In May 2008 he had appointed Mr Stephen McNamara (SEM Accountancy Services) to deal with various accounting issues including the repayment by HMRC of VAT and the preparation of spreadsheets to account for all costs incurred on Donne Place. This process culminated in a spreadsheet statement provided via Mr McNamara on 19.11.08 which included an item of expenditure under the heading 'MCD on cost agreed 15% (contract fee) £565,706', against the Budget Cost/Contract Fee of £171,237.
  48. Following unsuccessful attempts to obtain a satisfactory explanation in respect of this figure in particular, DPIL and ISIL terminated the respective agreements by letter from their solicitors dated 16.12.08. By that letter DPIL alleged repudiatory breach on the part of MCD. With one exception the cited examples of alleged breach all related to the financial arrangements. In respect of ISIL it was also alleged that there was a repudiatory failure 'to progress your obligations under the Ives Street Agreement' and that MCD had '… demonstrated by your actions that you do not intend to honour your contractual obligations pursuant to the Ives Street Agreement', referring to an e-mail from LM dated 10th December 2008 in which she had stated that she was unable to 'manage the workload requirements on both projects' and therefore wished to determine the Ives Street Agreement.
  49. As noted above, each party was in any event entitled to terminate the 2006 Donne Place agreement on 4 weeks' notice; and to terminate the Ives Street agreement on 14 days notice (clause 8.5).
  50. On the previous day (15.12.08) DPIL/ISIL had issued the Claim Form in this action, claiming damages for breach of contract, accounts and other associated relief.
  51. By this stage (16.12.08), in respect of Ives Street the necessary LU agreement had not been obtained; the Demolition Award (August 2007) had lapsed and the Construction Award had yet to be obtained. In place of MCD, architects Johanna Molineus Architects Ltd ('JMA') were appointed in January 2009. Mr Akera continued as lead negotiator with LU; and consent was eventually obtained. I understand that the Ives Street development was completed in the summer of 2010.
  52. As to Donne Place, the works were completed and SC and his family began occupation in the spring of 2009.
  53. Despite extensive efforts by the parties and their expert accountants in this action, the parties are very substantially apart on the project accounts – in the order of about £500,000. This division reflects differences of both principle and detail in the calculations.

    The witnesses
  54. The principal witnesses of fact were SC, SV and LM. SC gave his evidence in a clear and straightforward fashion. As might be expected from the fact of his successful career in finance and business he demonstrated a strong and clear-headed intelligence in the conduct of these projects in which he had naturally taken a close interest. He was evidently willing and able to take strong decisions when he considered it necessary to do so, for example in a number of replacements of members of the professional team.
  55. From LM's evidence it was clear that her real strength and flair lies in architectural design. She was evidently much less comfortable in her understanding of contractual matters or e.g. the process of obtaining LU consent. At times her evidence was not easy to follow. However, as with SC, I was throughout satisfied that she was giving honest evidence.
  56. The circumstances of this dispute have provoked strong feelings between the parties. SV's anger with LM was evident; as was LM's distress at the allegations of dishonesty made against her. These hostile feelings were, in my view, magnified by the fact that, through working together on these projects, SC/SV and LM had developed a personal friendship, involving an informal working relationship and considerable social contact.
  57. DPIL/ISIL had administrative assistance from a Guernsey trust company, acting by Ms Diana Mortimer. I found her evidence to be strikingly partisan. In particular, by reference to certain documents her witness statement described LM as showing a 'reckless disregard for her client's interest' and as having 'doctored' a document. When taken to the relevant documents it was apparent that their contents provided no basis for that pejorative language.
  58. Account : Donne Place

  59. Before turning to the detail of the disputed items, I must decide certain questions of principle.

    Pre-novation contributions/expenditure
  60. The first question is whether the account should take account of contributions and expenditure arising from the 2002 Agreement before 5.7.06, i.e. so-called 'pre-novation'[2] contributions/ expenditure. MCD submits that these should be included within the account, in particular on the basis that the parties saw this all as one project for the development of Donne Place; and that it would be artificial and inappropriate to draw a dividing line at 5.7.06. DPIL essentially submits that this action and claim for account are based on the 2006 Agreement between DPIL and MCD; and there are no grounds for the account to include payments made/expenditure incurred under the 2002 Agreement between SC/SV and MCD.
  61. I agree with DPIL. First, the 2002 Agreement was between MCD and SC/SV in their personal capacity. Although witnesses on behalf of DPIL/ISIL, SC/SV are not parties to this action.
  62. Secondly, neither party suggests that the 2002 Agreement was novated to DPIL. On the contrary, MCD's case is that the 2002 Agreement continued with independent force after 5.7.06, i.e. in parallel with the 2006 Agreement; and DPIL's case is that the 2002 Agreement terminated with effect from 5.7.06.
  63. Thirdly, I see no good basis for MCD's pleaded contention that either/both of the 5.7.06 Agreements were subject to an implied term that DPIL was liable to pay MCD any outstanding sums due under the 2002 Agreement. In fact MCD acknowledges that there were no such outstanding sums as at 5.7.06.
  64. There cannot have been such a term in the first Agreement of 5.7.06, since DPIL was not a party to it. As to the Novation Agreement, I see no basis for implication of an obligation on DPIL which had not been imposed on SC/SV under the first Agreement of 5.7.06. Furthermore I accept DPIL's submission that any such implied term would be inconsistent with the express warranty in the Novation Agreement ((4)) which provides that :
    'Both the Employer and the Contractor warrant that at the date of this Agreement all sums due to the Contractor by virtue of the provisions of the Contract have been paid by the Employer to the Contractor'. 'The Contract' is the preceding agreement of 5.7.06.
  65. True it is that all parties wanted to have an arrangement which would result in the recovery of VAT on sums already paid under the 2002 Agreement and other professional appointments. For this purpose Mr Potts' advice was that there needed to be a sufficient link between the building works and the design works. That object was achieved, to the extent that VAT was recovered for the 3 preceding years, via the contractual provisions which made reference to consultants' fees which had already been paid as at 5.7.06. However those provisions did not have the effect of imposing obligations on DPIL in respect of the 2002 Agreement.
  66. As to the submission that it would be artificial – in the context of 'one project' – to draw an accounting line at 5.7.06, my conclusion is that the account must reflect the contractual arrangements which the parties to this action have entered.

    Continuation of the 2002 Agreement post-5.7.06?
  67. The next issue is whether the Donne Place account should include a claim by MCD in respect of services allegedly performed – after 5.7.06 – pursuant to the 2002 Agreement.
  68. Until the very end of the trial, I had understood MCD's claim for architects' fees to be limited to 'pre-novation' fees, i.e. not post 5.7.06. Thus Appendix 12 of the Joint Experts' report refers to 'pre-novation' Architects' fees of £112,426.36 : see also Appendix 8.
  69. However at the very end of closing submissions it was submitted on behalf of MCD that there was a liability for post-5.7.06 architects services in the allegedly invoiced sums of £30,000 (£15,000 19.7.06; £15,000 22.6.07). In subsequent correspondence MCD has drawn my attention to what it regards as potentially relevant documents, including those identified by Mr Cotterill in his witness statement. DPIL objects to these post-trial submissions in respect of a case which was not clearly advanced in the course of the trial and might otherwise have led to further cross-examination and/or additional evidence being called.
  70. In my judgment, even if the 2002 Agreement did continue after 5.7.06, any claim for fees falls outside the 2006 Agreement. The only arguable basis for recovery would be under Condition 5(4) which required DPIL to provide funds to pay 'Consultants Fees'. The estimated cost of such fees 'already paid and to be paid' included those for 'Architectural Work' (Condition 5(4a) and attached 'Document Marked 'D'). Before 5.7.06 fees for architectural work had been paid both to MCD and a firm called Lathams.
  71. However as a matter of construction I consider that, in the context of future payments under Condition 5(4), the expression 'Consultants Fees' is intended to be confined to payments to be made by MCD to third party consultants, i.e. not by MCD to itself. If the 2002 Agreement continued, MCD was independently entitled to be paid thereunder (by SC/SV) in any event. I accept that the reference to 'Consultants Fees' in Condition 5(4a) and attachment 'D' must include historic fees paid to MCD (as well as Lathams), but this was for the distinct purpose of establishing the 'link' which would achieve recovery of VAT previously paid.
  72. Although not admissible on this issue of construction, I note that Mr Cotterill's letters to SC dated 17.5.07 and 30.5.07 – referred to in MCD's post-trial further submission – appear to make the same distinction between payments of MCD's 'architectural fees' and payments by MCD to third party Consultants.
  73. In any event, and as possibly anticipated in her second witness statement (para. 60), in cross-examination LM moved back from the position that the 2002 agreement continued in full after 5.7.06. She said that in the course of a conference call between herself, Mr Cotterill, SC and his solicitors she insisted that MCD would not enter the 2006 Agreements unless it could retain the architectural design services under the 2002 Agreement and that this was agreed; and notwithstanding that the 2006 Agreement was for 'design and build services'. She said that the project management services under that Agreement were essentially swept into the July 2006 contract but that for this reduced amount of work MCD would still be entitled to the fee calculated at 7.5% of Total Contract Value. She pointed to the inclusion of 'Architectural Work' within the 2006 Agreement estimate of Consultants' Fees 'already paid and to be paid' . SC had not been cross-examined to the effect that the 2002 Agreement had been revised in this way or at all.
  74. Mr Cotterill's unchallenged witness statement – which was read - did not refer to any such discussion or revision, but contained references to correspondence with LM (10.6.07) to the effect that MCD had a continuing entitlement to architectural fees at 7.5%; and to SC (17.5.07; 30.6.07) which included reference to MCD's architectural fees. In the absence of cross-examination or full argument, it is not clear to me whether these latter references are to fees pre- or post-5.7.06. However MCD also points to spreadsheets prepared by Mr Edwards (QS in succession to Mr Cotterill) which include references to the two £15,000 invoices referred to above.
  75. DPIL's evidence and submission is that the intention and effect of these agreements was entirely to supplant the 2002 Donne Place Agreement. This was a 'design and build contract' and there was therefore no reason to continue the previous retainer for architectural design and project management services; nor therefore to justify a combined fee of 22.5% (i.e. 15% under July 2006 agreement; 7.5% under the 2002 agreement).
  76. It is unfortunate that the question of post-5.7.06 invoices totalling £30,000 was not clearly raised until the very end of the trial, nor therefore adequately explored in cross-examination or argument.
  77. In the light of the answers given by LM in cross-examination, I am quite satisfied that the 2002 Agreement did not continue unchanged after 5.7.06. Furthermore if there had been agreement to amend the 2002 Agreement in the way suggested, I would have expected this to be recorded contemporaneously in some way by the parties and/or to feature expressly and clearly in Mr Cotterill's evidence. I also think it inherently unlikely that DPIL would have agreed to revised terms which imposed lesser obligations for the same reward; and at the same time as entering the 2006 Agreement for design and build.
  78. However in the light of the evidence brought to my attention by MCD at and since the end of the trial, I do not think it right - or necessary - to reach a final conclusion as to whether or not there was some revision of the 2002 Agreement between MCD and SC/SV; or services performed and invoiced thereunder.
  79. For the purposes of this action between MCD and DPIL I think it sufficient to record my conclusion that (i) the 2002 Agreement identified in MCD's pleaded case did not continue unchanged after 5.7.06 (ii) in any event any fees due under the 2002 Agreement or any revision thereof do not fall within the ambit of the account which I am taking.

  80. By amendment to the Defence which I permitted at trial, MCD contended that DPIL/ISIL were estopped from disputing the correctness of the accounts as provided from time to time by MCD in respect of expenditure on the projects. MCD pleaded that in the context of a system of accounts (including supply of monthly spreadsheets and the offer of supporting documents; and the opportunity for DPIL/ISIL to dispute items and raise queries) the approval and/or absence of challenge to itemised expenditure gave rise to a representation on behalf of DPIL/ISIL that the items were correct; and that "if and insofar as [MCD] acted to its detriment on the faith of such representations by failing to keep every single invoice for every item of expenditure" DPIL/ISIL were estopped from disputing that item.
  81. I am quite satisfied that the conduct of the accounts gave rise to no such representation, express or implied. Indeed the subsequent removal of items between the parties (e.g. mistakenly duplicated items) is inconsistent with any such general representation. Furthermore there is no evidential basis to show the alleged (conditional : "if and insofar as") detrimental reliance. Recognising the difficulties with establishing detrimental reliance, Mr Beaumont in the course of argument developed an alternative case of estoppel by convention, namely that the accounting arrangements gave rise to a common assumption of fact or law that, in the absence of query by SC, the accounts would be treated as correct. I am satisfied that there was no such assumption communicated across the line and that, again, the subsequent correction of errors is inconsistent with such a case.

  82. Background to the accounts
  83. Before turning to the individual points of dispute it is necessary to set out the background to the accounting arrangements between the parties. As recorded above, in respect of Donne Place the 2006 agreement provided express terms for the payment of the works as they were carried out, including advance payments. The essential fee arrangement was 'cost plus' namely (1) the cost of carrying out the works plus (2) a contract fee calculated as 15% of the Budget Cost identified as £1,142,505. The contract fee of 15% was £171,376; making a total of £1,313,881.
  84. In reality the contractual arrangement was not followed. However the parties did agree to open and operate a designated bank account in MCD's name at Coutts ('the Donne Place Account') into which funds would be paid by DPIL and payments made out by the signatories to that account, who included LM as sole signatory for a period.
  85. DPIL alleges that it was agreed that the funds in this account were only to be used to meet debts properly incurred in respect of the Donne Place project. However it is clear from the evidence that the funds were at times used, at SC's request and with his consent, for other purposes. For example from time to time funds were transferred from the account to a separate account which was opened for the Ives Street project; also it was used for certain personal expenditure of SC/SV. DPIL alleges that the account was used improperly by MCD/LM for their own purposes.
  86. The Ives Street Agreement contained no express accounting provisions. However the parties again agreed to open a specific 'Ives Street account' in MCD's name at Coutts which was intended to deal with contributions/expenditure in respect of that project. Again, and with SC's request/consent, that account was not used exclusively for expenditure relating to Ives Street.
  87. It is now common ground that LM owed a fiduciary duty in respect of the operation of these accounts. However it is critical to note she was not the only person concerned in the operation of the accounting arrangements. On the contrary, as elaborated in LM's witness statements and essentially unchallenged, the arrangements for the authorisation and explanation of expenditure on these projects also involved the work of a succession of quantity surveyors and bookkeepers; and from mid-2007 the provision of monthly financial spreadsheets to DPIL/ISIL (including a space for 'queries'); and the offered availability of supporting documents, e.g. invoices, bank statements, cheque stubs etc.
  88. I have no doubt that at least by the autumn of 2008 the accounts were in an unsatisfactory state; and I fully accept and understand SC's real concern and frustration at the lack of adequate explanation, in particular as to the £565,706 item. In assessing the dispute on the individual accounts, I also give full weight to DPIL/ISIL's point as to the very substantial disparity between the sums originally claimed in MCD's Counterclaim and the sums now claimed in the light of the work by the parties in their respective 'Final Accounts' and by the accountancy experts. However I am also struck by MCD's success in obtaining subsequent corroboration of expenditure (e.g. by replacement invoices from suppliers).
  89. In this latter respect, the question of documentary support for claimed expenditure has been further complicated by a dispute as to whether the full extent of invoices etc. supplied by Mr McNamara to Diana Mortimer in December 2008 had subsequently been returned. It is impossible now to determine whether documents did go astray in the course of this process, but if they did this was clearly accidental. In any event there is no doubt that MCD had to undertake a lot of work to obtain replacement invoices etc.

    Background to expert accountants' work
  90. The work of the accountancy experts must be seen in the light of the preceding attempts to achieve agreement on the final accounts.
  91. In the light of the starkly conflicting claim and counterclaim in respect of the account, and pursuant to Court Order made on 24.6.09, the parties appointed representatives (Ms Mortimer for DPIL/ISIL; Mr Pontin for MCD) to "…go through the accounting documents and seek to resolve/narrow the issues between the parties…". By further Order dated 29.10.09 Mortimer/Pontin were required to meet "…to formalise those items of the account which are agreed and to set out the agreement in a formal document." The result of that exercise was a Joint Memorandum (24.11.09) which contained agreement on some items. Ms Mortimer restricted her comments to payments during the life of the Ives Street Agreement (i.e. 22.2.06-18.12.08) and the Donne Place 2006 Agreement (i.e. 5.7.06-18.12.08). Thereafter Mr Pontin prepared a 'Final Account' (4.12.09) and Ms Mortimer prepared a 'Response to Final Account' (21.12.09). That Response on its face included items under a column headed 'Total Agreed'. 'Final Accounts' were subsequently prepared by MCD for Donne Place (11.6.10) and Ives Street (17.6.10). These are said to reflect the work done by Mr Pontin and Ms Mortimer and again included the column 'Total Agreed'. MCD prepared a revised Final Account, including new items, on 18.10.10. As I understand DPIL/ISIL's case and Ms Mortimer's evidence, her true and formal agreement was limited to the items so identified in the Joint Memorandum (24.11.09).
  92. In the meantime by further Court Order (31.3.10) permission was given for an expert Chartered Accountant for each party (Mr Rooney; Mr Mainz) "…to consider the reconciliation of the accounts, insofar as the parties have not been able to agree them, and to report on how much of the claim/counterclaim is from an accountant's perspective properly in dispute."
  93. This somewhat confusing array of Accounts and Orders has, in my view, contributed towards a significant difference of approach between the experts. In broad terms, Mr Rooney saw his task as the verification of all claims, i.e. by the provision of documents, i.e. invoice, receipts etc. Conversely Mr Mainz sought to form a judgment on the basis of all the available evidence and inferences therefrom, including evidence and explanations provided to him by LM in respect of the individual item. Furthermore as part of that approach he has limited the scope of his review to those items which are not in the 'Total Agreed' column in the Final Accounts. Conversely Mr Rooney was instructed that those items were not formally agreed and has therefore carried out a full review of the items included as project contributions and expenses in the Final Account, but focussed on the task of 'verification' by documentary support.
  94. In cross-examination of each expert there were suggestions of inappropriate partisanship. I was quite satisfied that this was not the case and that both experts were straightforward and conscientious in their evidence and concerned to assist the Court. In generally preferring the approach and conclusions of Mr Mainz, I do not in any way criticise Mr Rooney. I simply think that Mr Mainz's approach better reflects the evidential assessment which I have to undertake.
  95. In respect of Donne Place Mr Rooney concludes that the 'post-novation' contributions made by DPIL were £1,968,258.22. As I understand the present position, Mr Mainz agrees that total, but subject to a deduction of £50,000 in respect of a pre-novation payment which he does not agree was an advance payment for works under the 2006 Agreement, i.e. £1,918,258.22.
  96. As to the post-novation expenditure on the project, there is a stark difference, in part reflecting further non-accountancy issues which I have to resolve. In his second supplementary report Mr Rooney assesses allowable expenditure at £1,639,692.56, leaving a net sum owed to DPIL of £338,738.62. By contrast Mr Mainz' last figure is £1,979,124.32. This leaves a balance owing to MCD of £60,866.
  97. I turn to the details of the dispute between the experts on expenditure in respect of Donne Place. The burden of proof is of course on MCD. I will take the headings set out in Table 2 of the experts' amended Joint Report.

    Issue 3 : CIS tax
  98. The dispute between the parties is as to whether MCD deducted tax under the CIS scheme from the wages of certain workmen employed on the project and paid this over to HMRC. It is of course common ground that if the tax was not deducted and paid over it should not be included in the account.
  99. If applicable the CIS scheme requires the person paying a self-employed sub-contractor to deduct tax at 20% from the gross wage/salary, pay the net sum to the contractor and the deducted tax to HMRC. The scheme requires that detailed records are maintained by the contractor and regular returns have to be prepared, namely monthly returns are to be submitted to HMRC detailing each subcontractor by name and indicating the amount of CIS tax has been deducted; and a year-end return is to be submitted annually showing the tax deducted from each individual subcontractor. Annual certificates are to be prepared and provided to each subcontractor showing the total CIS tax deducted during each tax year.
  100. There is no doubt that the scheme was in operation for some sub-contractors on the project. That is clear from correspondence with the HMRC, and in particular letters dated 30.1.09 and 15.5.09 concerning a general review of MCD's PAYE/CIS records which concluded satisfactorily. The question is whether, in the absence of returns/records demonstrating that a number of sub-contractors were within the Scheme, these alleged expenditures have been established. I accept LM's evidence that the mechanics of the deductions and returns were carried out by the successive bookkeepers. The investigation has in particular focussed on payments relating to a site supervisor Mr David McDonald.
  101. In addition to the absence of direct records/returns, Mr Cook points to e-mails concerning the employment of Mr McDonald (LM-McDonald 24.5.07; McDonald-LM/LM-McDonald 6.6.07) as supporting the contention that he was paid gross. In my view those e-mails (and also a preceding e-mail LM-McDonald dated 23.5.07 (H5/3390)) are more consistent with LM's evidence in cross-examination that Mr McDonald was paid net, albeit the original method of calculating the deduction was erroneous and the story is further complicated by certain overpayments to/repayment by Mr McDonald.
  102. In the light of all the evidence, I am satisfied that Mr McDonald and the other relevant 'employees' were paid on a net basis. If so, the outcome of the HMRC review provides sufficient support for the conclusion that the appropriate CIS tax was paid over by MCD to HMRC. In my judgment this item of expenditure is sufficiently established. This includes the cleaner.
  103. Issue 4 : Disputed expenditure – cost of goods not delivered directly to Donne Place
  104. The only item in dispute was the cost (£1557.12) in respect of certain scaffolding which was used also at another site. The parties now agree that 90% of this sum should be allowed, i.e. £1401.41.
  105. Issue 5 : Invalid invoices which have not been and may never be paid
  106. These items concern internal fit-out items invoiced in the total of £12,388.95 by various suppliers. In the light of evidence of payment of £3,579 by DPIL to Quentrall, the total is now £8809.95, divided as : Quentrall £2279; Kreon £6201.75; iGuzzini £329.20.
  107. Since MCD entered these contracts at the request of its employer DPIL, any liability thereunder must ultimately fall into account. The difficulty for present purposes is that, by reason of DPIL's dissatisfaction with the quality of work/goods these sums have not been paid and to date no proceedings have been commenced.
  108. My conclusion is that, absent recent demands or threat of proceedings, there is no reason to include the sums as expenditure within the account. However MCD is entitled to an indemnity in respect of that liability. DPIL have prepared a form of indemnity which I understand not be acceptable to MCD. In those circumstances I consider that the Court should order by declaration that there is an entitlement to indemnity in the event that the claim is pursued by any of these suppliers.
  109. Issue 6 : No or insufficient supporting information for items in the final account
  110. This concerns items in the final account totalling £10,938. Mr Rooney disputes £6792.51 of these items on the basis of inadequate information and documentation. For the reasons summarised by Mr Mainz in the joint report I allow these items, save to the extent that any involve 'pre-novation' expenditure.
  111. Issue 7 : couriers transport and bank charges
  112. I am satisfied that these sums were expended on Donne Place. Save in respect of couriers they are supported by invoices. I am not surprised at the absence of invoices in respect of couriers. I allow the head in full.
  113. Issue 8 : Costs included in the Final Account for which no invoice can be found

  114. As to Donne Place, when the Final Account was prepared, no invoices were available to support items in the total of £41,630.35. Since then, £41,388.45 of this total has been supported by locating the invoice or by obtaining confirmation from the supplier. I regard the success in obtaining this information as significant supporting evidence for the integrity of the claim for expenditure.
  115. As discussed above, the essential difference of approach between the experts is that Mr Mainz has taken the parties' positions on the Final Account as his starting point and then reviewed only those items for which an invoice was missing in that Account. If and to the extent that an invoice/supplier confirmation has subsequently been obtained he has then allowed that item. He disallows £2513.72 in respect of Donne Place and £1264.88 in respect of Ives Street. Conversely Mr Rooney has reviewed the documentation in respect of all claimed expenditure and allowed only the expenditure for which there is adequate documentation to demonstrate that the claimed expenditure was incurred on the project. On this basis he disallows a total £14,048.46.
  116. Mr Cook submits that it is inappropriate to take the Final Account as a starting point, given the very substantial scale of the defects which have subsequently been demonstrated in that Account, e.g. by reference to duplicated items, credit notes, and expenditure on other projects being carried out by MCD.
  117. In my judgment against this valid point of 'defects' in the Final Account must be set MCD's subsequent distinct success in reconstituting missing invoices or otherwise obtaining confirmation from suppliers. My judgment is that Mr Mainz' approach and conclusion are to be preferred.
  118. Issue 9 : No invoice or evidence of payments included in the Final Account
  119. Leaving aside the TBG item, this disputed category totalled £10,091.12. The individual items range from insurance to planning suspensions closure, IT support/graphics, taxis/tubes and to expenditure on Roland Gardens a private property owned by SC. For the reasons given by Mr Mainz I am satisfied that these expenditures were incurred within the ambit of the Donne Place account and should be allowed.
  120. As to TBG, this relates to glazing works which have not been paid in full because of alleged defects and problems with late delivery. DPIL wrote to TBG in March 2009 to say that further payment would not be made. No subsequent demands have been made. Against the risk of such a demand being made and pursued, my conclusion is that the Court should declare that MCD is entitled to indemnity.
  121. Issue 10 : Costs included in the Final Account for which no specific evidence of payment has been provided
  122. This category totals £59,168.39. Under this head there is no dispute that there have been invoices for work done.
  123. As to CN Plumbing, on the basis of evidence identified by Mr Rooney in his supplementary reports, my conclusion is that the total liability/expenditure incurred on this project was £36,834.50 (less 5% retention = £34,992) and that this net sum has been satisfied by MCD (£23,409.75) and DPIL (£11,583.03).
  124. As to the remaining items under this head, LM's essential explanation is that these payments were made by cheque and a few of the old cheque-books are no longer available; also that many of the payments were made by issuing one cheque covering several invoices; and it is no longer possible to reconciling invoices to individual cheques. Furthermore some suppliers were paid by the BACS payment system. MCD could pay numerous suppliers on one payment run of BACS. In the MCD bank statements, the total payment run appears as one item even though it actually represents many payments. Therefore it is not possible to reconcile individual payments to the bank statements. The payments include sums due to utility companies for services provided to the site. There is no evidence that these services were ever disconnected.
  125. In the absence of documentation, and against e.g. the possibility that a supplier might have issued a credit note against these items, Mr Rooney disallows this category.
  126. I again prefer Mr Mainz' approach and assessment and am satisfied that, notwithstanding the absence of documented payment, these payments were made and represent allowable expenditure incurred in respect of Donne Place.
  127. Issue 11 : Disputed expenditure – classified as "Private, Incidentals and Other Associated Costs in the Final Account"
  128. This category originally totalled £15,513 .85 and included private expenditure allegedly incurred on SC/SV's behalf and at their request. Mr Rooney originally disputed them all on the basis that they were not relevant to the Donne Place project. The items range from expenditure on Roland Gardens; furniture for a Swiss ski chalet; sending luggage to Croatia; and import duty on wine for friends of SC. The claimed expenditure also included a 'trip to Italy' by LM and her MCD colleague. As to the latter Mr Rooney stated in the Joint Report that he had been advised by SC that at no point was it agreed that a charge could be levied by MCD for time spent on trips to Italy sourcing materials for the project. In evidence it emerged that this was a mistaken understanding of the position; and that SC was only referring to a particular trip (to Venice). The total claimed in respect of such trips to Italy was £13,446.56. In the course of the trial DPIL conceded all of the items, save the Venice trip (£2523.78), albeit the concession was expressed to be made on a purely pragmatic basis to save further costly debate. In my view, this concession was inevitable given the evidence of a relatively loose arrangement in practice for the use of these accounts.
  129. As to the particular trip to Italy, I am satisfied that this was an expenditure which both related to Donne Place and was in a reasonable total.
  130. Issue 12 : Disputed expenditure – Amounts paid post termination of the contract
  131. These concern post-termination expenditure in the agreed sum of £202,636.27.
  132. As I understand the position there is no dispute that these items have been paid by DPIL, i.e. so that MCD has no outstanding potential liability to the relevant suppliers or contractors.

  133. Issue 13 : Disputed expenditure – amounts paid pre-novation of the contract
  134. This concerns 'pre-novation' expenditure in the agreed sum of £168,179.02.
  135. For the reasons given above my view is that pre-novation expenditure does not fall within the ambit of this account under the 2006 Agreement.
  136. However, I am satisfied that a sum of £50,000 paid by DPIL before 5.7.06 was by way of an advance payment for works to be carried out under the 2006 Agreement and therefore falls to be included as a contribution under the account.
  137. Mr Cotterill's notes of a meeting with LM and SC on 6.5.06 records that DPIL was to pay MCD £50,000 '…as a deposit…in respect of the forthcoming works which will be accounted for in the Accounts to be presented on the 14th July 2006'. This was followed by the MCD invoice addressed to DPIL (i.e. not to SC/SV personally) dated 14.5.06 which identifies 'Design & Build Construction', requires payment of £50,000 and states under 'VAT Analysis' that this was a '0% Rated Project'. In Mr Pontin's Final Account, the notes for this item state 'On account. No VAT'.
  138. Issue 14 : expenses mistakenly included twice in the Final Account
  139. The experts agree as to disallowing £8952.24 in respect of items mistakenly duplicated in the Final Account. Mr Rooney disallows a further £12,500.45 in respect of a steel staircase (and associated balustrading and balconies) supplied by '1st Choice Fabricators Ltd'; and £1500 relating to private requests.
  140. As to the steel staircase and associated items, I am satisfied that a total £26,299.55 (£20,800 + 5499.55) has been paid to the supplier in respect of this work. Invoices total £18,980, but there is a quotation for £18,980 (stairs) plus a specified cost per metre for balustrading/balconies cost. The suggestion that MCD's further claim of £18,000 (lines 375-6) reflects double-counting of one invoice is undermined by the payment of £5499.55. My conclusion is that that sum probably reflects balustrading/balcony costs. However in the absence of better evidence I am not satisfied that the balance claimed by MCD (i.e. £18,000 – 5499.55 = 12500.45) is established as a liability which has been incurred.
  141. As to the private requests, I accept that line 40 (£1500) is not duplication of line 1 but a split of costs between Donne Place and Ives Street.
  142. Issue 15 : Jetset
  143. This concerns a potential liability to a supplier called 'Jetset'. It is agreed between the experts that a total of £92,692 .64 has in fact been paid from the DP account to Jetset. The Final Account includes an alleged total liability of £117,335.67 to Jetset. The available invoices total only £81,746 .34.
  144. On the basis of an Account Summary prepared by Mr Warwick on 19.1.09 the Jetset 'Contract Sum' is identified as £99,860.14; whereas the 'Work Value to date' was £83,338.64; in each case plus VAT as applicable. On this basis Mr Cook submits that the actual payments made (£92,692.64) have satisfied the work value to date and no further sum is due.
  145. On the available evidence I am satisfied that MCD's actual expenditure is limited to £92,692.64. However against the uncertainty of whether any further sum might be due I have concluded that an indemnity is again appropriate.
  146. Issue 17 : New information not accepted
  147. This concerns £11,758 .61 of expenditure which was added to the revised Final Account presented by MCD on 18 October 2010. It concerns subsequently submitted invoices for expenditure incurred in the course of the project. Mr Mainz considers the invoices to be valid; and has seen no evidence to show that these invoices were reviewed by Mr Ponting and Ms Mortimer and disallowed.
  148. Mr Rooney now agrees that £4682.50 of these items should be allowed. Mr Mainz agrees that duplicates of other expenditure (£2772.27) and a further sum (£726.84) in respect of Mr Cotterill should be disallowed.
  149. As to an invoice from solicitors David Cooper & Co for professional services 're 13 & 14 Donne Place' (£2100 + VAT), the evidence shows that this was re-issued to/paid by DPIL and that MCD has no potential liability.
  150. As to invoices from Selco, these originally had the wrong project code. This has been corrected and they should now be allowed. Although there is no invoice, I also allow the 'Site mobile telephone' claimed expenditure of £18.76.
  151. I therefore allow a total £5844.50 under this Item 17.
  152. Issue 18 : VAT on pre-novation
  153. This concerns VAT on 'pre-novation' expenditure; and accordingly falls away from the account for the reasons previously given
  154. Issue 28 : Fees due to MCD as Contractor on the Donne Place project
  155. The essential outstanding issue concerns the correct interpretation of the Clause 10(2) provision for calculation of the Contract Fee due to the Contractor upon early termination.
  156. Clause 10 provides :

  157. 'Determination
    The Employer shall be entitled to determine this Contract for any reason by giving the Contractor four weeks notice in writing.

    The Employer shall in those circumstances pay to the Contractor on the Date of Determination or as soon as can be ascertained.

    (1) The cost of the works to the Determination Date.

    (2) A proportion of the Contract Fee, being the percentage of the fee that bears relation to the cost of the works to date in relation to the Budget Cost.

    (3) Any other cost that the Contractor becomes liable for as a result of the determination.

    (4) The Contractor shall be entitled to determine this Contract for any reason by giving the Employer four weeks notice in writing and the Contractor shall be entitled to payment in accordance with Clauses 1-3 above.'
  158. On the basis that the 'Determination Date' was 16.1.09 (i.e. 4 weeks after DPIL's termination letter) and that the actual cost of the works at that date was £1,594,700, this represents 139.58% of the original 'Budget Cost' of £1,142,505. Mr Beaumont submits that clause 10(2) requires that this percentage be applied to the 'Contract Fee', so that MCD is entitled to a 'proportion' thereof in the sum of £239,205. In other words, MCD is entitled to a Contract Fee of 15% on whatever is the actual cost of the works at the Determination Date.
  159. This produces a substantially greater entitlement than would arise if there had been no early termination and MCD's final Contract Fee had been calculated in accordance with clause 5(3). On the same figures that calculation would have produced only £188,985.
  160. Mr Cook disputes this interpretation on the essential basis that it produces anomalous results that, as a matter of businesslike construction, cannot have been intended by the parties. His first step is to compare the provisions of clause 5.
  161. Clause 5 provides:
  162. '… (1) The Contract Fee to be paid by the Employer to the Contractor is a lump sum calculated as 15% of the Budget Cost described in the Articles.

    (2) The 'Cost' which the Contractor will be paid is the cost of carrying out the works whether or not that figure is greater than or less than the Budget Cost.

    (3) If the Final Cost is less than the Budget Cost them the Contractor will be paid 10% of the difference between the Budget Cost and the Final Cost as a bonus and this will be paid when the Final Cost is known.

    If the Final Cost is greater than the Budget Cost them the Contractor will be paid no additional Contract Fee on the first £100,000 of additional cost above the Budget Cost but will be paid 5% of the additional cost over and above the Budget Cost plus £100,000 and this will be paid when the Final Cost is known.'
  163. If the Final Cost had again been £1,594,700, clause 5(3) would have entitled MCD to receive an additional Contract Fee of only 5% of the additional cost in excess of £100,000 over the Budget Cost. This calculation produces a Contract Fee in the substantially lower total of £188,985.
  164. Mr Cook submits that this produces an absurd result which cannot have been intended. Furthermore, if that construction is correct, MCD would have been entitled to determine the Agreement on four weeks' notice (see clause10(4)) and thereby achieve a higher Contract Fee than if the Agreement had continued to completion of the works. Whilst of course acknowledging the different language used in clause 10(2), Mr Cook contends that the only sensible and businesslike construction must be that it is be interpreted in line with the provisions of clause 5(3).
  165. Mr Beaumont responds with a calculation which shows that the apparent anomaly in favour of the Contractor in the present case is matched by a potential converse anomaly in favour of the Employer. If the actual cost of the works were less than the Budget Cost the Employer could terminate under clause 10 and achieve a substantial advantage. Thus on actual costs of (say) £900,000, the Contractor's entitlement under clause 10 would be substantially lower (£135,004) than under clause 5 (£195,526). Mr Beaumont thus described clause 10 as providing 'a perfect balance of anomalies and a perfect symmetry of oddities'.
  166. I prefer Mr Cook's submissions. As a matter of construction I consider that the parties cannot be taken to have intended a construction which results in the sort of anomalies which have been identified; that clause 10 is to be construed in line with clause 5; and the Contract Fee calculated accordingly.
  167. In these circumstances I need only deal shortly with Mr Cook's brief alternative submission that clause 10 has no application since DPIL terminated at common law, not pursuant to this provision. DPIL submits that the 2006 Agreement was terminated by DPIL's acceptance – through its solicitors' letter of 16.12.08 – of MCD's repudiatory breach of contract, in particular concerning its alleged misconduct of the accounting arrangements.
  168. The account was in a most unsatisfactory state and DPIL's concern was understandably intensified by the absence of a satisfactory explanation from MCD. However in my judgment this did not amount to a repudiation or renunciation of the Agreement. In this respect, as considered further below, I am quite satisfied that there was no dishonesty on the part of MCD or LM. I conclude that the effect of the letter of 16.12.08 was to constitute termination of the Agreement within the meaning of clause 10.
  169. Issue 29 : Fees due to MCD as Architect on the Donne Place project
  170. For the reasons previously stated my conclusion is that MCD's entitlement to remuneration in this action is provided by the terms of the 2006 Agreements.

    Account : Ives Street
  171. Here there is not the complication of expenditure before and after 5.7.06. The experts agree that the contributions made by ISIL were £182,062.18. Subject to my decision on further non-accountancy issues, Mr Mainz calculates allowable expenditure as £204,336.41, leaving a balance of £22,274.23 owed to MCD. With the same proviso, Mr Rooney's calculations produce expenditure of £77,053.46, leaving a balance of £105,008.72 owed to ISIL.
  172. Issue 20 : Lack of details for couriers, transport and bank charges
  173. This raises essentially the same issues as under Donne Place Issue 7. For substantially the same reasons I prefer the conclusion of Mr Mainz and allow these sums.
  174. Issue 21 : Missing invoices
  175. Of the original missing invoices for £10,542.34, £7221.34 have been recovered by either tracing payment or recovering the invoice.
  176. As in Donne Place Issue 8 I again prefer the approach and conclusion of Mr Mainz. I therefore accept his disallowance of £1259.11.
  177. Issue 22 : No invoice or payment evidence

  178. As generally in Issue 10, I prefer the approach and conclusion of Mr Mainz.
  179. Issue 23 : No payment evidence provided

  180. As in Issue 6, I prefer the approach and conclusion of Mr Mainz.
  181. Issue 26 : Private expenditure
  182. On the basis of the concession made at trial in respect of private expenditure, I conclude that the disallowance is limited to the sum of £1500 accepted by Mr Mainz.
  183. Issue 27 : Duplicated expenses
  184. I accept that the sums in respect of travel to Italy (£8988.75) are not duplicated expenses. Accordingly the only disallowance is in the undisputed sum of £97.35.
  185. Issue 30 : Ives Street Architects Percentage Fees
  186. MCD claims £90,696.42 on the basis that by the date of termination in December 2008 MCD had completed RIBA Work Stages E-G and one-half of Stage H; and are therefore entitled to payment in accordance with the agreed scale.
  187. The relevant provisions of the agreement are as follows:

  188. '5.7 Where for any reason the Architectural Designer provides only part of the Services specified in Schedule 2 the Architectural Designer shall be entitled to fees calculated as follows:
    .1 for completed Services as described for those services in Schedule 3;
    .2 for completed Work Stages as apportioned for those Work Stages in schedule 3;
    .3 for Services or Work Stages not completed a fee proportionate to that described or apportioned in schedule 3 based on the Architectural Designer's estimate of the percentage of completion.
  189. The fee is 15% of Total Contract Value. The 'proportion of fee by Work Stage' is then divided as :
  190. Stage E 30% Final Proposals
    Stage F 30% Production Information
    Stage G 5% Tender Documentation Stage
    Stage H 5% Tender Action
    Stage J 10% Mobilisation
    Stage K 15% Construction to Practical Completion
    Stage L 5% After Practical Completion
  191. The agreement elaborates Stages E-H as follows:
  192. "E Final Proposals
    Preparation of final proposals for the Project sufficient for co-ordination of all components and elements of the project.
    F production information
    F1 Preparation of production information in sufficient detail to enable a tender or tenders to be obtained. Application for statutory approvals.
    F2 Preparation of further production information required under the building contract.
    G Tender documentation
    Preparation and collation of tender documentation in sufficient detail to enable a tender or tenders to be obtained for the construction of the Project.
    H Tender action
    Identification and evaluation of potential contractors and/or Specialists for the Construction of the Project. Obtaining and appraising tenders and submission of recommendations to the Client.'

  193. On the basis of an estimated contract value of £762,355, MCD claims a fee for these stages of £77,188.44 + VAT.
  194. There is no expert evidence to assist me on this issue. MCD points to the provisions of clause 5.7.3 which provides 'for Services or Work Stages not completed a fee proportionate to that described or apportioned in schedule 3 based on the Architectural Designer's estimate of the percentage of completion.
  195. Although at one stage describing this as a provision of 'self-certification' Mr Beaumont rightly conceded that this provision must be subject to reasonableness. In any event by its terms it applies only to a Stage which is said not to have been completed, i.e. Stage H.
  196. ISIL points to a number of documents emanating from MCD which, it says, quite undermine the contention that stage E (Final Proposals) – or any later Stage – had been completed. In particular it points to e-mails from MCD a month or so before termination of its involvement :

    11.11.08 (Michael Koutra to SC) : '…In order to responsibly specify fixed positions that will be final on the construction/tender issue drawings – we need to advance the detailing. We are ready to start the detailing however prior to commencing these works, Louise has asked me to request from you confirmation on our role on the Ives Street project.'

    In answer to a chasing e-mail from SC ('Could I please know what is going on with Ives Street?'), LM responded :

    26.11.08 (LM-SC) : '…MCD have carried out over a years worth of design changes on the plan form and were awaiting permission from Metronet prior to carrying out any further possible abortive drawing work as we cannot claim fees for this work as we are under contract for 15% cost plus once the construction commences if indeed [ISIL] still wishes to build as you had stated on a number of occasions that you may not build given the budget restraints. Knowing that you might not develop the site MCD have not produced detailed information at our risk. This has not held up the tender process or indeed any project item.'
  197. Further ISIL points to the evidence from the replacement architect (Johanna Molineus : JMA) that she had received no documents relating to production information or any detail drawings as to how the building of Ives Street would be assembled; and so had to carry out this work.
  198. From the terms of the 26.11.08 e-mail and her evidence in court LM at this time appears to have believed that she had entered a design and build contract for Ives Street (as with Donne Place, at '15% cost plus') or at least would be doing so. In consequence she appears to have believed that she could not charge for 'possible abortive drawing work' and had 'not produced detailed information at our risk'. It is common ground that the intention was that, as with Donne Place, there would in due course be a building contract between ISIL and MCD. However that stage was in fact never reached.
  199. In answer to cross-examination on these e-mails LM in particular pointed to a MCD drawing of floor build-ups (no. 1042/BD/312, marked 'Preliminary Issue') dated 26.9.07. This was supplied by attachment to an e-mail to Mr Akera dated 28.9.07 which stated 'Please find attached Preliminary ives street drawings'. As I understood her evidence, she relied on this drawing as evidence that the stage of Final Proposal had been reached, sufficient to go to a subcontractor or specialist who would then add their input. The particular drawing allowed for the specialist incorporation of underfloor heating and acoustic and thermal insulation and thus was consistent with the earlier part of Mr Koutra's e-mail of 11.11.08 which stated 'We do need to provide a specification for the design of the floor build-ups that incorporates underfloor heating, acoustic and thermal insulation as well as the floor structure and finish.' Although the drawing was described as 'preliminary' in that e-mail, there was sufficient to go to tender and it did. As to Mr Koutra's statement 'we are ready to start the detailing' and her own statement 'MCD have not produced detailed information', MCD had in fact produced such information. She pointed to a further drawing (1042/GA/210; 24.4.08). She told me that the reason for her saying 'MCD have not produced detailed information' was that she was trying to extricate MCD from Ives Street. As to the meaning of the words 'at our risk', she said 'That we were going, carrying on working for nothing as we did not know whether we would get [LU]. We had been paid very well up to stage D. I think at this point I thought we were under the design and build contract, 15%, not this contract, I thought we were the designer and builder'.
  200. I found this confusing and unsatisfactory evidence. The fact that LM wrongly thought that she was working under a design and build contract so that "we cannot claim fees" is not of course decisive. The question is whether MCD is in fact entitled to the Stage payments for services in fact performed having regard to the terms of the retainer which was in force. However, in the light of all the evidence and without independent expert assistance, I am not satisfied that MCD had completed work stages E – G or one- half of stage H. In reaching that conclusion I take account of Mr Beaumont's point that work may not be carried out in strict sequential Stages. However on the available evidence I am not persuaded by MCD's case in respect of any Stage. Furthermore LM's statement that 'MCD have not produced detailed information' is consistent with the evidence of the services subsequently provided by architects JMA.
  201. My conclusion is that the claim must fail. In the circumstances I make no finding as to the 'Total Contract Value' which would have been applicable.
  202. Issue 31 : MCD Fees included in Final Account but still subject to agreement
  203. This issue was not adequately explored in the trial and requires further submissions if not agreed.

    Delay : Donne Place
  204. The essential pleaded duty is that there was an implied term of the 2006 Agreement that MCD would 'use reasonable diligence, care and skill in providing the contracted for services' and that 'as the main building contractor and project manager, it was [MCD's] responsibility to use all reasonable diligence, skill and care to ensure that the 3 party wall awards were obtained as quickly as possible, so as not to hold up commencement of the works'.
  205. DPIL's essential pleaded case in the Particulars of Claim was that there was no good reason for it to take 9 months to obtain these Awards; and that the fact of that period of delay was evidence of negligence. DPIL pleads res ipsa loquitur. It alleged that the 3 Awards should have been obtained so as to allow commencement of construction works by end-August 2006. Alternatively, if it was not possible to obtain the Excavation/Construction awards before March 2007, MCD should not have permitted demolition works to go ahead until it could reasonably be expected that those Awards would be obtained.
  206. Although saying res ipsa loquitur, the pleaded case accepted that the task of obtaining the Party Wall awards was not in the sole control of MCD. Thus : '… [DPIL] accepts that a Party Wall Surveyor had been appointed in relation to the project and that much of the work in relation to the Party Awards would be carried out by this Surveyor. [DPIL] also accepts that information might have been required from other professionals involved in the project in order to obtain the Party Wall Awards. However, as project manager, it was [MCD's] responsibility to give such directions to the Party Wall Surveyor and such other professionals as were appropriate and/or oversee their performance of their duties and/or to ensure that the Party Wall Surveyor had all information necessary to obtain Party Awards so as to ensure that the 3 party wall awards were obtained as quickly as possible and did not hold up work or cause it to be carried out in a piecemeal and inefficient fashion.'
  207. By part 18 information, DPIL elaborated and extended its case to the effect that MCD had failed to provide (1) timely instructions to the Party Wall Surveyor (2) timely and suitable architectural drawings and (3) timely appointment of sub-contractors, in each case for the purpose of obtaining the Awards. Many of the dates of breach relied on predated 5.7.06, but these were abandoned in closing submissions.
  208. In my judgment these claims fail in law and fact.
  209. As noted above, clause 2 of the Conditions provided :
  210. 'The Contractor will complete the Construction of the House within fifteen months of the Date of Possession. If the Contractor fails to complete the works within 15 months of the Date of Possession the Contractor will incur no penalty.'
  211. In the light of the second sentence of that Condition DPIL concedes that it could not recover damages for delayed completion arising from the simple fact of failure to complete the works on time, i.e. within the specified 15 month period. However Mr Cook submits that this provision is no bar to recovery of such damages if they result from breach of the implied term of reasonable skill and care and/or due diligence in the performance of the works for the construction of the House.
  212. In my judgment if damages for delayed completion are barred by the express terms of Condition (2), they cannot be recovered via any other contractual term.
  213. I accept of course that this design and build Contract was subject to the usual implied terms that the works and services should be carried out with reasonable skill and care and/or in a good and workmanlike manner.
  214. It is more controversial as to whether there is an implied term of diligence and expedition in a construction contract, where the essential obligation is to complete the works. In any event any term of diligence/expedition must relate to the object to be achieved : see e.g. GLC v.Cleveland Bridge and Engineering Co. Ltd (1984) 34 BLR 57 per Parker LJ at 77. Thus for the purpose of this claim, the implied term, when spelt out in full, would have to be that MCD would execute the works with such diligence/expedition as were reasonably required in order to achieve completion within the 15-month period : cf. GLC v. Cleveland Bridge per Staughton J. at 67.
  215. In any event - and however any such implied term is expressed – any claim for breach causing delay in the completion of the works beyond the 15-month date and consequential loss would in my view conflict with the express provisions of Condition (2). In short, my conclusion is that Condition (2) constitutes an exhaustive agreement to the effect that damages are not payable by the Contractor in the event of failure to complete the works on time : see Temloc Ltd v. Errill Properties Ltd (1987) 33 BLR 30 at 38-40; Biffa Waste Services Ltd. v. Maschinenfabrik Ernst Hese GmbH [2008] BLR 155.
  216. Accordingly I conclude that DPIL can have no claim for damages resulting from the delay in completion namely the 7 months alleged loss of rental income and alleged wasted expenditure.
  217. Furthermore I can see no basis for the application of res ipsa loquitur in the context of this claim. HelloIn particular (i) delay in completion of a building contract can readily occur without negligence on the part of the contractor (ii) the relevant activities (in particular, obtaining Party Wall Awards and the appointment of sub-contractors) were not in the sole control of MCD.
  218. In any event, I have no doubt that the claim fails on the facts. As I have indicated the pleaded claim was in respect of alleged negligent delay in obtaining the 3 party wall awards. Pursuant to Court Order, expert evidence was obtained from chartered surveyors and 'party wall experts' Mr Trevor Masterson (for DPIL) and Mr Alistair Redler (for MCD).
  219. In their Joint Statement these experts agreed that the operation of the Party Wall Act was not the material factor in causing delay to the project programme for Donne Place; that the decision taken to produce the Awards in 3 phases (i.e. Demolition, Excavation and Construction) was in the circumstances the best way of dealing with Party Wall Act matters - on both these projects; and that delay in appointing subcontractors was the principal reason for delay to commencement of the Excavation works at Donne Place.
  220. In the Joint Statement Mr Masterson gave his opinion that MCD was responsible for the appointment of subcontractors. Mr Redler considered that the ultimate responsibility for authorising the appointment of a subcontractor remained with DPIL.
  221. Mr Redler is correct. Although MCD was the Contractor, it is not in dispute that decisions on the appointment of subcontractors were at all times to be made by DPIL, acting through SC.
  222. Mr Masterson was an unsatisfactory expert witness. In the course of cross-examination it became apparent that he had not considered the project documents in any sufficient detail and could not adequately support or justify his conclusions. In consequence Mr Cook was inevitably driven in his closing submissions to disavow any reliance on Mr Masterson's evidence.
  223. By contrast Mr Redler had carried out a detailed study of the documents and had in consequence prepared a helpful and detailed report. In the course of cross-examination Mr Cook was able to demonstrate errors in Mr Redler's report, but in my view he did not undermine Mr Redler's conclusion that MCD was not at fault.
  224. In his closing submissions Mr Cook approached the matter on the basis that the evidence of both experts was 'ultimately of little assistance in relation to these issues'.
  225. Rather he submitted that MCD's failings – on both projects - were established as a matter of common sense. He pointed to authority that the issue of breach of duty might be established in this way : see the case law and discussion in Jackson & Powell on Professional Liability (6th ed.) para.9-146.
  226. I do not doubt that there may be construction cases where professional negligence can be established without recourse to expert evidence; and indeed that there may be cases where negligence is established in the teeth of expert evidence adduced in support of the professional, e.g. where the opinion cannot withstand logical analysis.
  227. However in my judgment this is not such a case. In particular I do not think that 'common sense' can be deployed as a means of escape from the consequences of expert evidence which either provides no useful support for DPIL's case (Mr Masterson) or supports MCD (Mr Redler).
  228. Mr Cook submitted that achievement of the Excavation Award depended on information from the piling sub-contractor; from Mr Akera in respect of temporary works design; and from the groundworks sub-contractor; that these sub-contractors were 'only' appointed on 14.8.06, 19.9.06 and October 2006 respectively; and that this demonstrated a clear failure of MCD to use due diligence.
  229. In the absence of any supporting expert evidence I am quite unpersuaded that common sense dictates a conclusion that MCD were negligent in this or any respect.
  230. Mr Cook also sought to advance an argument that, even though it was DPIL's responsibility to appoint subcontractors, MCD was negligent in failing to warn DPIL of the consequences of delay in appointment.
  231. No such obligation or failure was pleaded in the re-re-amended particulars of claim or in the part 18 information. This is a matter of real substance not technicality, potentially affecting the lay and expert evidence that might be called and the course of cross-examination. The objection to this attempt at a new case was emphatically taken by Mr Beaumont in his opening submissions and on other occasions during the trial. I made it clear that the case would be determined by reference to the pleaded issues.
  232. In closing submissions Mr Cook contended that such a claim was pleaded in the Amended Reply. In answer to MCD's Defence that the 3-stage process of obtaining the party wall awards was largely in consequence of continuing design changes by the Employer, DPIL contended that these were minor and could not have prevented the Awards being obtained. The Reply continued (para 13 B(d)) : 'Furthermore, it was at no time suggested by [MCD] to [SC] or [DPIL/ISIL] that the Party Wall Awards were being held up by such minor changes to the design. If it had been, then a decision could have been made on a final design on that point.' The point was repeated in respect of Ives Street: para.22A(c).
  233. Even if, which is at least questionable, it were possible to spell out a 'duty to warn' from express or implied terms of the 2006 Agreement, these oblique references in the Reply are in my view quite insufficient to amount to an alternative allegation of duty, breach and consequential loss. Nor, again, is there any useful expert evidence to support such a case.
  234. As to damages for loss of rental income I am not satisfied that this was a 'kind' or 'type' of loss which was reasonably foreseeable or for which MCD assumed responsibility under the Contract. On the evidence, it was always understood that Donne Place was to be a home for SC/SV. Unlike Ives Street, there was never any suggestion that the development was for commercial purposes of letting out. I would have refused the claim for loss of rental income in any event.
  235. My conclusion is that the delay claim in respect of Donne Place fails.
  236. Delay : Ives Street
  237. In this case the essential pleaded case was that MCD were in breach of their duty to use reasonable skill, care and diligence to ensure that the essential agreement with LU and the two Party Wall Awards were obtained as soon as possible; and that in consequence the completion of the project was delayed, with resulting loss of rental income from the intended flats. ISIL claims damages for loss of rental income in the sum of £215,760 less credit for interest saved; plus the cost of obtaining a second Demolition Award, the first having lapsed.
  238. The pleaded claim again relies on the principle of res ipsa loquitur, which for the reasons given above can have no application in this case.
  239. In Part 18 information ISIL elaborated its case in respect of the LU agreement on the basis that MCD, as project manager, was negligent in failing in particular to negotiate an agreement with LU; to appoint the sub-contractors necessary for the purpose of providing the information required by LU; or otherwise to co-ordinate the work and information which was required from Mr Akera and others.
  240. In their Joint Statement the experts agreed that the critical path of the Ives Street project ran through agreement with LU; that the operation of the Party Wall Act was not the material factor in causing delay to the project programme for the Ives Street project; and in any event that the decision taken to obtain Awards in phases was also the best way of dealing with Party Wall Act matters of that project. Accordingly the focus in the trial was on the steps taken to obtain agreement from LU.
  241. In this case the contractual setting is of course different. In contrast to Donne Place MCD was providing the professional services of 'design consultancy and project management'. The Agreement was subject to express and implied terms of professional skill and care.
  242. A 'limitation of warranty' clause (2.4) provided:
  243. 'The Architectural Designer does not warrant:
    1 that the services will be completed in accordance with the Timetable or the budget cost for construction works;
  244. The 'Timetable' was defined by the agreement as 'The period of time which the client wishes to allow for the completion of the Services.' I understood it to be common ground that no such Timetable was agreed.
  245. Mr Cook essentially fastened his case on the obligation of reasonable skill and care in the performance of the required project management services, incorporating a requirement of diligence, and contended that breach of that term had resulted in unreasonable delay and consequential loss. Mr Beaumont submitted that any such claim must fail as a matter of law, having particular regard to the provisions of clause 2.4.1.
  246. In my judgment, this retainer contained no provision which could defeat such a claim as a matter of law. In contrast to the Donne Place agreement, the Ives Street agreement contained no equivalent of the exhaustive 'no penalty' provision in Condition 2 of the 2006 Agreement. In particular the 'limitation of warranty' provision (clause 2.4.1) simply provided that there would be no automatic breach of contract if the services were not completed by the dates provided in (any) agreed 'Timetable'.
  247. However my conclusion is that the claim emphatically fails on the facts.
  248. In his closing submissions Mr Cook again disavowed any reliance on the evidence of Mr Masterson. In the course of cross-examination Mr Masterson had to acknowledge that he simply had not analysed the documents recording the long and complex history of this development in any adequate detail. He acknowledged that the process of obtaining the agreement of LU involved the cooperation of a number of parties. In particular he acknowledged the pivotal role of the structural engineer Mr Akera in that process; and the delays which resulted from client design changes. However his opinion was that the whole process had taken much too long and that overall responsibility rested with MCD as project manager.
  249. In essence, Mr Masterson's evidence amounted to little more than saying res ipsa loquitur. It was not impressive or helpful expert evidence and Mr Cook's decision not to rely on it was again inevitable.
  250. Conversely, Mr Redler had considered the project documents in detail. He accepted in cross-examination that the 3-year period of obtaining LU approval was 'exceptionally long'. However his opinion was that MCD were not at fault, as project managers, for any part of that delay. Mr Redler was cross-examined closely and carefully on the detailed events of the Ives Street project between June 2006 and December 2008. Although he had to accept correction on various points in his expert report, his overall opinion was not shaken, nor in my judgment was it undermined.
  251. As with Donne Place Mr Cook submits that, set against the evidence, professional negligence is established as a matter of common sense.
  252. In support of his argument Mr Cook sought to divide the overall period of delay into six periods, between August 2006 and 27th October 2008. On analysis the criticisms of MCD in these individual periods fell into two essential categories, viz. alleged failures (1) to push the LU process forward, through chasing and co-ordinating Mr Akera in his lead role ('failure to co-ordinate') ; (2) to warn ISIL/SC of the need to (i) finalise the design and (ii) appoint sub-contractors in order to have the information which was required for obtaining LU consent ('failure to warn'). SC's evidence is to the effect that, if so advised, he would have taken the necessary steps to finalise the design (i.e. presumably by swift conclusion of the internal layout and the avoidance or minimising of client design changes) and appointing sub-contractors as necessary.
  253. As to the alleged failures in the first category, ISIL makes no particular criticism of Mr Akera in his lead role in securing the consent of LU, nor was Mr Akera cross-examined on that basis. Indeed the successor architect on the project (Ms Molineus) agreed in cross-examination that she regarded Mr Akera as perfectly competent and had received no criticism about him from SC. However it is submitted that MCD failed in its overall project management and co-ordinating role to keep this critical process moving at an effective and reasonable speed.
  254. I do not accept that any part of the chronology leads to a 'common sense' conclusion that MCD failed in this respect and prefer the expert opinion of Mr Redler. I should add that the claim is not advanced by LM's unforced statement in cross-examination that (at least by 2008) she was 'out of her depth' on this project. I do not think that such general admission supports a common sense conclusion that MCD was negligent in any of the ways alleged.
  255. As to 'failure to warn', this unpleaded case has been raised in opening submissions and developed during the trial in consequence of :

    (i) the fact that MCD was neither the appointed contractor for Ives Street, nor otherwise in a position to 'appoint sub-contractors' as the Part 18 Information alleged that it should have done;

    (ii) Mr Redler's evidence, agreed by Mr Masterson in cross-examination, that KLH's specialist design (i.e. of the lightweight timber structure) could not be finalised until the internal layout had been finally determined by the client.
  256. However any such case of 'failure to warn' must be pleaded. For the reasons set out in respect of the Donne Place delay claim, there is no such pleaded claim.
  257. My conclusion is that the claim of professional negligence in respect of Ives Street must be dismissed. I turn to the personal claims made against LM.

  258. Deceit
  259. ISIL alleges that LM is guilty of deceit in respect of the LU consent process.
  260. The essential elements of the tort of deceit are not in dispute. There must be a clear misrepresentation of present fact or law, express or implied. The representation must be false. The maker must know the representation to be false and either not believe in its truth or be reckless as to whether it is true. The representation must be made with the intent that it shall be acted upon by the claimant. The claimant must have been influenced by the misrepresentation.
  261. At the outset of the trial the primary pleaded allegation in the Re-Amended Particulars of Claim was that LM repeatedly and falsely informed ISIL (through SC/SV) that work on the site was not going ahead as a result of delay on the part of LU in agreeing to the work.
  262. It was alleged that the true reason why the work was not going ahead was because MCD had, to LM's knowledge, failed to exercise skill and care; and that had they done so agreement with LU would have been obtained and work on site would have begun at Ives Street in January 2007. At the beginning of the trial the allegation included that LM 'was or should have been aware' of that true reason. Following comment in opening submissions, the underlined words were deleted as part of the general amendment. Constructive knowledge short of recklessness cannot be enough.
  263. This was a strong allegation to make in a pleading where the allegation of negligence depended on the inapplicable principle res ipsa loquitur. If, as I have found, there is no tenable basis for the application of that evidential rule, i.e. that the thing did not speak for itself, it is difficult to understand how it can be said that LM must have known that the delay (and in particular delay with LU) was attributable to negligence on the part of MCD. The general allegation became quite unsustainable in circumstances where Mr Redler did not consider MCD to have been negligent and DPIL had to jettison reliance on Mr Masteron's evidence.
  264. However, in part 18 information served on 24.9.10, ISIL sought to expand this allegation with 16 allegations of fraudulent misrepresentation in e-mails sent by LM between 12.12.06 and 4.11.08. These focused on the LU question but made further allegations as to the state of LM's knowledge on the particular matters discussed in the e-mails. At trial I concluded that these went further than the pleaded case but allowed an amendment to incorporate them within Re-re-amended Particulars of Claim.
  265. In deciding whether these very serious allegations are established I have of course applied the civil standard of proof: In re B [2009] 1 AC 11; explaining In re H [1996] AC 563. In considering the allegations, I do so both collectively and individually and take account of all the evidence in the case generally.
  266. Mr Cook places particular reliance on the contents of an e-mail sent by LM to SC on 3rd July 2008. Since it is put forward as the 'most clear-cut example of a representation being made which was known to [LM] to be false' (closing submissions para.232) I will consider it first. The background to these communications was LU's need for information, in particular the supply of method statements and risk assessments ('MS/RA') for the works to be carried out.
  267. On 2.7.08 SC sent LM an e-mail which stated 'Any news on Ives Street? The company needs to renew the insurance policy. See below and attached.' On 3.7.08 LM replied:

  268. 'We have sent all information to Metronet which was requested they are reviewing the final information and should be ready to give approval within the next 7 days.
    They have requested and had been provided with Method Statements and Risk Assessments for: Construction, demolition, scaffolding and crane hire…'
  269. It is not disputed that Metronet had not in fact received MS/RA in respect of scaffolding. Indeed Metronet's Melina Kakouratou ('Melina') had e-mailed LM 3 days before (30.6.08):
  270. 'I have reviewed the MS for demolition. I have no further comments. I await the RA. Please send all MS/RA on two hard copies signed. I await a MS/RA for the scaffold and the relevant calculations and dwgs… I would request to send the required RA for the demolition and the MS/RA for scaffold as soon as possible in order to review it before my leave and I will deal with the rest of the MS depending upon my return.'
  271. Later on the same day (30.6.08) LM e-mailed Mr Akera, Jim Moss (of Eldridge Moss) and others in respect of further information required. To Jim Moss she asked:
  272. 'Demolition: Jim I believe you assisted with this. Can you confirm we have both MS & RA for this element…
    Scaffolding: – Jim I believe you assisted with this. Can you confirm we have both MS & RA for this element. I understand that I need to obtain contractor price if they are not willing to accept the generic. Thanks for this update."

    The reference to 'the generic' was to MS/RA which were not site-specific. If the relevant intended subcontractor had not been appointed, or was not willing to provide the information prior to appointment, it would not be possible to provide more than generic MS/RA.
  273. On the following day (1.7.08) Jim Moss responded to LM by e-mail which included the following:
  274. 'Did you get my note on the scaffolding calcs they are asking for?
    I can confirm that I sent the MS and RA for the demolition. You will need a RA for the scaffolding which I will do now and send over but you won't get a method statement or calcs for that until you get your subbie on-board.'
  275. Against this background of e-mails ISIL contends that LM's 3rd July e-mail to SC was false, to her knowledge, in that Metronet had not been sent all information which it had requested, nor could it be sent without appointment of a subcontractor for those works; nor accordingly was there any reason for Ms McDonnell to believe that Metronet would be ready to give approval within the next 7 days. In short, they contend that she lied to her client, or at least was reckless as to the truth of what she said.
  276. In support of that contention ISIL also points to subsequent e-mails which demonstrate LM's knowledge (at those later dates) that the scaffolding information required by Metronet had not yet been supplied: in particular a letter to her from Metronet dated 4.9.08 '… Scaffolding… I await a Method Statement as per previous request. (30.06.2008)' and an e-mail from Metronet to Mr Akera (3.10.08), forwarded to LM on the same date, which included 'The documents related to demolition and scaffolding works are still pending. Please advise of the anticipated time of submission and also the start of the site works.'
  277. In cross-examination LM accepted that she did not have the required MS for scaffolding by 3rd July and there can have been no question of approval being given in the next 7 days. However she insisted that she had not intended to mislead her client in these or any respects.
  278. When first cross-examined on this point, i.e. that this was an outright lie, LM's response was that she had persuaded Mr Moss to send her a MS on the scaffolding. There being no such document in the trial bundles, she said it would be in her own disclosure i.e. somewhere in her 45 files at the side of the Court. Having been given some time to look through those papers, she found a document prepared by Mr Moss and dated 24.6.08 which was a generic MS for scaffolding.
  279. In respect of the date which it bore (24th June), she volunteered that she had asked Mr Moss to backdate the document. Her explanation was that this was "to make sure that we had everything in place. It was not to deceive anyone, except LU, that we actually had one. Q : So you wanted it backdated to deceive [LU] A: That we had already got it in place." The following day she admitted to difficulty in explaining her reasoning for this request. Furthermore when taken to her e-mail of 23rd August to Jim Moss ('Metronet are still awaiting RA on the scaffolding'), she said that Mr Moss had responded by then sending it to her. He told her that he had previously sent it on 27th July, but he had not. She said that she was referring to other e-mails and a courier log that she had looked at overnight in her own disclosure. It was not suggested that she had asked for the document to be backdated in order to deceive her client.
  280. All this evidence added to my concern, which had developed through the trial, that the trial bundles did not contain all the relevant documents and that her disclosure bundles at the side of the Court contained potentially relevant documents. On two previous occasions in cross-examination LM had referred to potentially relevant documents and on both occasions had found them in these; and notwithstanding that the second document (i.e. backdated to 24.6.08) raised as many questions as it answered. Both parties shared in the responsibility for ensuring that the trial bundles contained all relevant documents.
  281. In weighing up the evidence on the general and specific question of her integrity in these matters, I must of course take account of her evidence that she arranged the backdating of the document in order to mislead the LU – albeit it is difficult to understand how this would have been material to LU, especially when this document did not reflect the input of an appointed sub-contractor. I also take particular account of LM's admission, considered further below, of 'white lies' told by her to others in the professional team in order to instil urgency and keep the project moving forward.
  282. As is evident, LM's explanation for the e-mail of 3rd July was difficult to follow and not particularly coherent. However I reject the submission that LM was guilty of deceit in what she wrote. Having seen her giving evidence in Court and dealing with properly vigorous cross-examination over much of 3 days, I simply do not accept that she was acting fraudulently towards her client.
  283. In this respect I can in particular see no reason or advantage for LM in trying to deceive her client. Thus if LU consent was dependent on the provision of site-specific information, I can see no advantage for her or MCD in concealing the need for sub-contractors to be appointed or in otherwise being deceitful about progress. Furthermore, if LM had truly believed that there was no prospect of LU approval being obtained in 7 days, she would know that the falsity of her statement would very soon be apparent and further questions might be asked. In fact, there was no such response.
  284. In my view the true position is that LM was at all times eager to progress the matter as quickly as possible and that any errors in her e-mails to her client were the combined result of unfamiliarity with the LU consent process and its requirements, reliance on others in the team who had the necessary expertise for that purpose (in particular Messrs Akera and Moss), and a continuing belief that ISIL (through SC) was unwilling to appoint sub-contractors until the necessary consent had been achieved.
  285. As to the other allegations of deceit, I will deal in turn with the subparagraphs of paragraph 43A of the Particulars of Claim.

    12 December 2006
  286. 'On 12 December 2006 in an e-mail copied to [SC, LM] stated that they would be in a position to demolish Ives Street in February 2007… There was no basis on which [LM] could honestly have believed this to be true, since no material contact had been made with [LU] at this stage and no work could go ahead without the agreement of [LU]'.
  287. This e-mail was primarily addressed to Pat Squibs of the potential demolition contractors. It was also copied to David Akera, Mr Cotterill and SC. The relevant parts stated 'I just thought I would touch base in regards to the demolition works at the above address. We are currently negotiating the party wall award and will be in a position to demolish Ives Street in Feb. I wonder if you could meet to discuss the scope of works and also produce a price for us.'
  288. In her evidence LM accepted that there was in fact no prospect of starting demolition in February 2007, although that had been the original target. She explained her e-mail to Pat Squibs on the basis that the statement was a 'white lie' in order to get a quotation. As she put it in cross-examination :'If you tell them that you need it in six or seven months time, they will not give you a price. They will not just jump and give you a price.'
  289. A few days later (21.12.06), in answer to a query from Diana Mortimer, LM replied that 'The current building at Ives Street will be knocked down completely within the next 3 months and we are then building new."
  290. In evidence LM stated that she was always working to what she saw as a three-month phase, namely 8 weeks for the application to LU (which she saw in much the same category as a planning application) followed by a month for the demolition sub-contractor to carry out its work; and that this explained her e-mail to Diana Mortimer.
  291. Mr Cook submits that this explanation does not fit with her acceptance that by this time she knew that a February 2007 start was unrealistic. For, if so, she was not in a position to tell Diane Mortimer that the demolition would be completed within the next 3 months. Furthermore he challenges her evidence that, contrary to SC's earlier e-mail of 3.11.06, SC also knew that a February start was unrealistic.
  292. I think it clear that LM had a hazy understanding of the work involved in respect of obtaining LU consent and was primarily reliant on Mr Akera's performance of his lead role in that essential task. I accept her evidence that she did have this '3-month' period in her mind and that this explained her e-mail to Diane Mortimer. I also accept her evidence that the statement in the e-mail of 12.12.06 was a 'white lie' directed to Pat Squibs for the purpose of obtaining an early quotation for the demolition subcontract. Her intention, I accept, was to speed up the whole process as much as possible. Although copied to SC and others I am quite satisfied that there was no fraudulent intent towards them. In this context I note the absence of any riposte from Mr Akera to challenge that statement in the e-mail.
  293. 17 January 2007
  294. 'On 17th January 2007 in an e-mail copied to [SC, LM] stated that the structure was 'designed in essence'… There was no basis on which [LM] could honestly have believed this to be true, since [MCD] were not close to having a final design at this stage."
  295. In support of this allegation ISIL relies on the subsequent e-mails of 29.1.07 (from Mr Akera) to the effect that the design for the timber structure required the specialist input from KLH, who had to date only produced budget estimates based on hand sketches; and on later-mails of 17.5.07 and 11.11.08 concerning the work needed to complete the structure and design.
  296. In my view the allegation fails, first, to take proper account of the context of the relevant e-mail. This was addressed (not copied) to SC/SV and was primarily concerned with the potential design implications of the understood wish for SC's parents to retain the top floor flat for themselves. This leads to the final sentence that "It would be great to meet up on your return to go over these issues as we have….now we have the structure designed in essence by David Akera."
  297. LM's response was that, whilst acknowledging the necessary role of KLH, Mr Akera had developed a structural scheme in essence to pass on to KLH. Whatever was the precise position at that stage I am quite satisfied that this was LM's honest opinion.
  298. 26th June 2007

    'On 26 June 2007 in an e-mail copied to [SC, LM] stated that they were due to demolish mid September 2007… There was no basis on which [LM] could honestly have believed this to be true, since no material contact had been made with [LU] at this stage and no work could go ahead without the agreement of [LU]."
  299. This e-mail was addressed to Mr Birchall and copied to SC. It stated : 'Can you please update us with the status of the Party Wall Award for Ives Street. As you know the Client would like the whole award in place prior to demolition and we are due to demolish mid September.'
  300. In her witness statement LM explained this as another 'white lie' to stimulate a sense of urgency in Mr Birchall. In cross-examination she said that she had the '3-month' period in mind. Notwithstanding this further confusion I am quite satisfied that there was no intent to deceive her client.
  301. 25th July 2007

    'On 25 July 2007 in an e-mail copied to [SC, LM] stated that they were ready to start demolition on Ives Street once the Party Wall Award was issued… There was no basis on which [LM] could honestly have believed this to be true, since no material contact had been made with [LU] at this stage and no work could go ahead without the agreement with [LU]. Furthermore, no quotes from demolition contractors have yet been obtained and no demolition sub-contractor appointed.'
  302. This e-mail was addressed to Mr Birchall, copied to SC and stated 'we are now ready to start demolition Ives Street and kindly ask that you issue the party wall award.'
  303. I accept LM's evidence that, in consequence of SC's frustration with Mr Birchall – a busy man running a one-man practice – she again told a 'white lie' to get his work to the top of the queue; and I accept her denial that she was trying to mislead SC. As she put it 'I was trying to push the project on, knowing that Stefano would not allow us to hire any subcontractors before we were ready with [LU].' I accept that this was her honest belief.
  304. 1st August 2007

    'On 1 August 2007 an e-mail copied to [SC, LM] stated that they were ready to commence with a building project at Ives Street once the party wall awards were issued. There was no basis [for the reasons alleged in respect of the 25.7.07 e-mail].
  305. The relevant e-mail is again addressed to Mr Birchall, copied to SC and states 'We now ready to commence with the building project at Ives Street and wondered if you could get the party wall awards signed and sent to Guernsey together with any invoices that may need to be paid.'
  306. I again accept LM's evidence that her reason for this statement to Mr Birchall was a 'white lie' for the purpose of progressing the works. She did not intend to deceive her client.
  307. 15 August 2007
  308. 'On 15 August 2007 in an e-mail copied to [SC, LM] stated that 'we need the Party Wall Award in place at the soonest possible time'…There was no basis on which [LM] could honestly have believed that the Party Wall Award was the key outstanding issue, since no material contact had been made with [LU] at this stage and no work could go ahead without the agreement of [LU]. Furthermore no quotes from demolition contractors had yet been obtained and no demolition sub-contractor appointed."
  309. This was addressed to various people at Oval Insurance and copied to Mr Birchall and SC. As formulated in cross-examination, it was said that this amounted to an implicit representation that they were on target for the September deadline for the commencement of demolition.
  310. I do not agree that the language of the e-mail can be said to give rise to a representation that the Demolition Award was the 'key outstanding issue' or that they were on target for September demolition. The statement that the Award was needed in place at the soonest possible time was true, and indeed reflects ISIL's own case. I can see no basis for the suggestion this involved misrepresentation, let alone one which was fraudulent.
  311. 5 September 2007

    'On 5 September 2007 in an e-mail to [SC and SV],[LM] stated that 'we are awaiting a price from the insurers on the Clause 21.2.1 insurance… This has been asked for by Richard Birchall to go with the Party Wall award.
    Based on this LM stated: 'once we have this in place we can programme in demolition'.… The falsity is said to be as with the 15.8.07 e-mail.
  312. In my view it is again necessary to quote the e-mail more fully. This shows that LM was awaiting finalisation of the internal layout by SC/SV. Thus the e-mail starts: "We are awaiting decisions on ground floor layout for Ives Street so that we can finalise the design with …KLH who will be manufacturing form our drawings…Could you let me know as soon as possible regarding the decisions on the layout please."
  313. As I understood the development of the allegation in cross-examination, the e-mail was said to amount to the representation that 'things were close to getting ready to start going', i.e. when the reality was that nothing could start without LU approval.
  314. I do not think that the e-mail amounts to the representation alleged. All parties knew that LU agreement was necessary and had not yet been obtained. As LM put it in evidence 'everybody knew it was the elephant in the room. We needed a design to go to [LU]. David [Akera] did not want to do it until he had a finalised design. We asked Stephano and Sanja for the finalised design.'
  315. In any event I am quite satisfied there was no intention to deceive.
  316. 13 February 2008

  317. 'On 13 February 2008, [LM] stated that: 'the negligence [insurance] is all good to go as soon as [LU] confirm that they are satisfied… This is the last piece of information required for Richard Birchall – the awards have been drafted and this letter will be enclosed and sent to the respective Surveyors…' There was no basis on which LM could honestly have believed that agreement from [LU] was all that was required for the Party Wall Awards to be sent out…'
    This was contained in an e-mail from LM to SC and others on that date.
  318. In cross-examination LM initially justified her statement that this was 'the last piece of information', on the basis that only the Demolition Award was going to be done at this point. However she later accepted that SC wanted both Demolition and Construction Awards in place, in order to avoid the problems which had arisen in Donne Place where the building was knocked down before excavation/construction were permitted. Thus corrected, she accepted that she did not have all the designs required for a Construction Award at that stage. Hence, in that context, the statement that the insurance was the last piece of information required was not true. However she denied that she was aware that was not true at the time of the e-mail or that she was trying to convince the client that things were ready to go when they were not.
  319. Whatever the confusions in LM's mind at the time, I am quite satisfied that that there was no intention to mislead or misrepresent anything to SC.
  320. 1 April 2008
  321. "On 1 April 2008, [SV] sent an e-mail to [LM] asking why the [MS] had not been provided to London Underground.[ LM] responded on 2 April 2008 stating that the 'method statements have been submitted ages ago by the structural engineers'… There was no basis on which LM could honestly have believed that this was the case. On 31 March 2008, Amy Moss of MCD had informed LM that the method statements from KLH (i.e. in relation to the superstructure) had not been provided to London Underground. Furthermore, as shown by the extensive subsequent correspondence about method statements (including Metronet's e-mail of 28 April 2008) parental, no method statements for scaffolding or demolition had been provided either.'
  322. On 31 March 2008 Amy Moss e-mailed LM and stated 'she [i.e. Metronet's Melina] hasn't mentioned that the method statements are missing from KLH so I suggest we keep quiet and assume their involvement can be predicted without these documents. We need to get LUL's go ahead now, so a couple of calls to Ian [Jarrett of LU] are our next step.
  323. Later the same day (31st March) LM forwarded this chain of e-mails to Mr Birchall, and copied to others including SV.
  324. SV's e-mail of 1st April to LM stated : 'hi, can you please tell me why are the method statements not provided, I have seen that from the recent correspondence, from what I understand, the visit to the tunnel is only informative and has no bearing on our methods. are our method statements ready? if not, what are we waiting for?'
  325. On 2nd April LM replied 'Method statements have been submitted ages ago by the structural engineers…'
  326. To this SV responded later that day: 'hi darling, I understand that but my question relates to an e-mail by Amy in the recent correspondence stating that "the method statements are missing" whatever that means. are we ready to go after this inspection or do we still have lots of leg work to do for the party wall awards?'
  327. LM forwarded this response to Amy Moss later that day, commenting 'help I'm lost… not sure how to respond to this.'
  328. The next available document is SV's e-mail to Amy Moss later that day (2nd April, 21.50), copied to LM and SC, which is headed 'Subject: Re: 1042 METHOD STATEMENTS' and begins ' dear Amy, thank you, that was very helpful and I understand now.'
  329. LM told me, and I accept, that her e-mail 'help I'm lost' was because she did not understand why SV was asking the question. She and SC knew that subcontractors were needed in order to proceed. She knew that there was therefore no bespoke MS from KLH, as confirmed by Amy Moss's e-mail of 31st of March which had been copied to her. LM said that the missing e-mail from Amy to SV says 'you know we need subcontractors on board'. She told me that this e-mail was in her disclosure but it has not subsequently been provided.
  330. In my judgement, and whatever the terms of the missing e-mail, this allegation of deceit is fatally undermined by the fact that LM had forwarded SV the e-mail from Amy Moss which made it clear that there was no bespoke method statement from KLH.
  331. In these circumstances I reject the allegation that there was a misrepresentation to this effect, or that the e-mail chain was sent with any deceitful intent.
  332. 3 April 2008
  333. 'On 3 April 2008,[ LM] stated in an e-mail to [SV] that 'this package of works (demolition) can happen as soon as: after the inspection of the tunnel: I can then pay for and put in place the insurance clause 21.2.1. This can then go to the Party Wall Surveyors who have the award ready – this will then be sent out… There was no basis on which the LM could honestly have believed that demolition could take place directly after the inspection of the tunnel since… she knew that method statements had not been provided to [LU], no demolition sub-contractor had been appointed and no final drawings were available for the superstructure party wall award.'
  334. As appears from the pleading, the allegation is, in effect, that the terms of the e-mail constituted an implied representation that demolition could take place directly after the inspection of the tunnel. In my view the impossibility of that construction is best demonstrated by the particulars of falsity. All parties knew that no works could begin without the approval of LU or the appointment of demolition sub-contractors; and knew that a Construction Award had not been obtained. In those circumstances I can see no reasonable basis to interpret the e-mail in that way.
  335. In these circumstances, and in any event, I accept LM's evidence that when using the phrase 'package of works' she was indeed referring to the physical package of drawings/specifications/technical information which the demolition subcontractor would need in order to give a quotation. Mr Cook says that 'package' is being used in the sense of the commencement of works; and that a package of documents does not 'happen'. He also submits that LM's construction makes no sense in the context of SV's preceding request (e-mail 2nd April) 'are we ready to go after this inspection or do we still have lots of leg work to do for the party wall awards?'. In fact LM's e-mail of 3rd April was in response to SV's later e-mail of 2nd April (sent to Amy Moss, copied to LM and SC) stating 'dear Amy, thank you, that was very helpful and I understand now'.
  336. In my judgment there is no basis to conclude that LM was guilty of any misrepresentation, let alone any fraudulent misrepresentation.
  337. 3rd July 2008
  338. I have dealt with this above.
  339. 25th July 2008
  340. 'On 25 July 2008, [LM] stated in an e-mail to [SC and SV] that: 'LUL/Metronet: Metronet have contacted us to ask for signed copies of all the paperwork that we sent before. This has been couriered to them. Party wall: Richard Birchall has copies of the insurance and we are just awaiting Metronet sign off and we will push the party wall awards to be signed… The implication of this statement… was that now signed documents had been provided, approval would follow. However, as set out above, key pieces of documentation were still missing, as LM knew.… In relation to the party wall awards… [LM] knew that in order to agree the superstructure party wall awards detailed drawings of superstructure were required and that no such drawings have been produced by [MCD]'.
  341. As to LU/Metronet, there is an alleged implied representation that Metronet now had all the information which they required and that 'approval would follow'. In my judgement the e-mail statement does not support that implied representation, in either respect. In any event, I accept LM's evidence that she was not trying to conceal anything from her clients.
  342. As to the Party Wall Awards, I do not think that the words (in particular "we will push the party wall awards to be signed") give rise to the representation alleged. In any event, I am again quite satisfied that there was no intent to deceive.
  343. 3rd October 2008
  344. 'On 3 October 2008,[LM] stated in an e-mail to [SC] that: 'we have at last made amazing progress on Ives Street thanks to David Akera's persistence. it looks like we may have a sign off next week given the last bit of information. I will contact Richard Brichall (sic). We can do handover on the project with David Akera at your convenience although we will be happy to get the Party Wall awards signed off for you prior to MCD's handover… There was no basis on which [LM] could honestly have believed that the last bit of information had been provided to [LU] or that sign off could be expected with a week or that Party Wall Awards would be available directly upon such approval be given will. the method statement, drawings and calculations for scaffolding still not been provided to [LU], nor had satisfactory documents on demolition – see the e-mail of 3 October 2008 from Metronet which had been copied to LM by Mr Akera on the same day. Furthermore, the detailed drawings of the superstructure required structure party wall awards had still not been produced by [MCD]'.
  345. On 3rd October David Akera forwarded LM an e-mail from Metronet's Melina which stated that 'The documents relating to demolition and scaffolding works are still pending. Please advise of the anticipated time of submission and also the start of the site works'. Mr Akera added the comment 'progress at last'.
  346. Judging by the page numbers on this chain of e-mails (H4/2813-5) LM's e-mail to SC later that day included the previous chain of messages i.e. included Melina's e-mail about pending documents. She also copied the e-mail to Mr Akera.
  347. In cross-examination it was put to LM that her e-mail of 3rd October - and in particular the statement 'it looks like we may have a sign off next week given the last bit of information'- was a representation to the effect that Metronet had been given the last bit of information. I am not satisfied that that this is the effect of the statement. In any event I am satisfied that it represented what LM believed to be the position. It was put to her that the intention was to mislead, by misstating the effect of the preceding e-mails, in particular the e-mail from Melina concerning the outstanding documents. In my view the fact that LM was forwarding those e-mails supports her case that there was no intention to mislead. If she wished to conceal the true position from her client she would not have forwarded those previous e-mails. In any event she said that she called David Akera following receipt of his e-mail to ask where they were and that he said something to the effect that it was 'in the bag' or that it looked like it was done. As she said, 'you could ask him when he gives evidence'. Mr Akera was not examined by either party on this point.
  348. Mr Cook submits that this evidence is unsustainable in the light of a subsequent e-mail from Mr Akera to LM dated 9.10.08 in which he referred to the outstanding demolition RA and scaffolding MS and stated 'I do not know if these two items have been addressed. If they have not been addressed, I am afraid I do not have the expertise to answer them. Can you please ask the people (sub contractors) demolition and scaffolding information to address these items."
  349. I accept LM's evidence that she did speak to Mr Akera and that his comments certainly caused her to believe the position that she set out in the e-mail to her client. I reject the further suggestion that, having received the e-mail of 9th October from Mr Akera she was guilty of a fraudulent failure to correct any misrepresentation in her preceding e-mail.
  350. 7 October 2008
  351. 'On 7 October 2008, LM stated in an e-mail to [SC] that: 'David [Akera] has sent everything once again to Melina at Metronet and hopefully by the end of next week we will get confirmation that we can progress and we will then get Richard Birchall to action the party wall award.… There was no basis on which LM could honestly have believed that this was the case. See above. That documentation was still missing is confirmed by Mr Akera's response to this e-mail of 9 October 2008.'
  352. For essentially the reasons in respect of the 3rd October e-mail I reject the claim of deceit in respect of this e-mail. I should add that it is clear that by this time, i.e. October 2008, LM plainly wanted MCD to get out of the Ives Street project. However I am satisfied that this did not cause her to distort her account of the state of play to her client.
  353. 27 October 2008
  354. 'On 27 October 2008,[LM] stated in an e-mail to [SC] that: 'We have now obtained the demolition quotes and LUL are now insisting that method statements and risk assessments are not generic as submitted by Jim Moss of Eldridge Moss – they now want them from the subcontractor who will work on the project – the subcontractor will only produce this once appointed. This was the latest request from 2 weeks ago – we immediately went out to tender with Akera Engineers scheme… There was no basis on which [LM] could honestly have believed the statements being made. [LM] had known throughout the dealings with [LU] that no method statement had been provided on scaffolding. In relation to demolition, Metronet's letter of 4 September 2008 (7 and a half weeks earlier and not 2 weeks earlier as stated) had made clear that site specific information was required. Despite this, no attempt had been made to obtain scaffolding or demolition quotes until shortly before this e-mail was written.'
  355. This e-mail was in response to an e-mail from SC (27 October) 'By the way as anything progresses on the party wall awards?(sic)'
  356. The allegation is that LM's e-mail amounted to a representation that Metronet/LUL had changed their requirements 2 weeks before so as to require site-specific, rather than generic, method statements and risk assessments; whereas these had been sought since 30.6.08 ('I await a MS/RA for the scaffold and the relevant calculation and dwgs').
  357. It was put to LM that this e-mail was, in effect, advising SC that he needed to appoint a demolition subcontractor before he could move on with the project; and that this was the first time that she had told SC and that LU approval could not be obtained without having subcontractors on board. LM's evidence was that she had previously given that advice to SC that he needed subcontractors but this had been rejected because of the cost implications. She said that she had seen documents in her 'disclosure bundles' to that effect.
  358. Mr Cook then pointed her to SC's e-mail of 11 November 2008 which was asking for an update: "another month has gone by and after the excitement of early October everything is at a standstill again. Could I please know what is going on with Ives Street? Any news on the demolition tender? Method statements for London Underground? Party wall awards? It would be good to get a report.' It was suggested that this was evidence of SC's willingness to appoint a contractor once he understood the significance. LM's response was that by this time Mr Warwick (the newly appointed QS) had come on board and had probably told him that he was going round in circles and did need to appoint people.
  359. A notable feature of LM's e-mail of 27 October is that it provides support for the conclusion that Jim Moss had provided the generic method statement for scaffolding, i.e. the document backdated to 24.6.08, presumably sometime after Metronet's letter of 4th September which stated 'I await a method statement as per previous request (30.06.2008).'
  360. There is no document referring to a 'latest request' 2 weeks ago for site-specific method statements/risk assessments; and the letter of 4th September had made clear the need for site specific, rather than generic, material. However, I am quite satisfied that LM was stating what she believed to be the position in this e-mail.
  361. 4th November 2008
  362. 'On 4th November 2008, LM stated in an e-mail copied to [SC] that: 'Bob [Warwick] will be able to appoint a Demolition Contractor and we can then ask for a MS and RA for the project to obtain LUL sign off for the project. Bob reported that the Party Wall Award had been sent out and we were not aware of this as we believe the Award had to [have] LUL approval for the party wall awards to be put in place; therefore Mr Birchall will have to carry out this service again"… There was no basis on which LM could honestly have believed the statements being made. LM knew that the appointment of a scaffolding sub-contractor as well as a demolition sub-contractor was necessary so that a method statement and risk assessment could be obtained from both sets of sub-contractors. LM was also well aware that the demolition Party Wall Award had been signed in August 2007, since Mr Birchall had informed her of this in his e-mail of 19 November 2007."
  363. This e-mail was primarily addressed to Erat Valeri and Michael Koutra of MCD. In closing submissions the allegation focussed on the sentence beginning 'Bob reported'. It is submitted that the e-mail was an attempt by LM justify MCD's failure to appoint demolition sub-contractors on the false basis that she had been unaware that the Demolition Award had been obtained, when she knew that it had been. It is alleged that this e-mail was in response to an e-mail from Mr Warwick on the same day (4th November), asking for 'Reasons why we could not have started procuring demolition contractors when the demolition party wall award was issued.'
  364. As a matter of chronology, I am not satisfied that LM's e-mail was in fact a response to Mr Warwick's. His e-mail is timed as sent at 1608 on that day; her reply is timed at 1605 and is part of a distinct chain of e-mails.
  365. In any event, I accept LM's evidence that in her e-mail she had overlooked the fact that the Demolition Award had been obtained in August 2007, and that this was an innocent oversight. I again reject this allegation of deceit.
  366. For these reasons I dismiss all the claims of deceit made against LM.

  367. Dishonest assistance
  368. In the light of my findings on the issues raised in the accounts, MCD will have to pay very substantial sums to DPIL and ISIL. In those circumstances they each submit that LM is personally liable for that shortfall on the basis of 'dishonest assistance' in equity. They argue that these balances should have remained in the respective MCD project accounts at Coutts Bank; and in consequence have been improperly removed by her signature and authority under the accounts.
  369. They point to an analysis from Diana Mortimer showing that very substantial sums were paid from the project accounts into MCD's business accounts and the personal accounts of LM and her husband; to payments made in discharge of personal liabilities; and to repaid monies (e.g. overpaid cash repaid by Mr McDonald) not being returned to the project accounts.
  370. In addition it is said that LM could not honestly have believed herself to have been entitled to sums which I have disallowed, including architectural fees under the 2002 Agreement and the Ives Street Agreement and 'clause 10 fees' on the interpretation and calculation first advanced by Mr Beaumont in October 2010.
  371. I have no hesitation in rejecting this claim of dishonest assistance. Indeed having witnessed LM give evidence in Court over a prolonged period I am quite satisfied that she has acted at all times honestly towards her clients. As to the project accounts, on any view these were conducted by both parties in a relatively informal way, with SC been willing to use funds for personal expenditure of his own and indeed to transfer money as between the two distinct accounts. Furthermore, for the reasons previously given, the accounting procedures on these projects were not in the sole control of LM but had many other participants, in particular successive bookkeepers and quantity surveyors. True it is that the outstanding sums due are very substantial but I have no doubt that the errors reflect disorder and confusion, not dishonesty.
  372. Although this is my emphatic conclusion in any event, I should add that in order to sustain the charge of dishonesty against LM it would be necessary for her to be cross-examined to the specific effect that e.g. particular transfers of money were dishonest. No such specific allegations were put to her; nor in my view would there have been any basis for doing so. The charge against her integrity in connection with the accounts was in fact limited to a somewhat general challenge at the conclusion of her evidence on this topic.

  373. Conclusion
  374. I dismiss all personal claims against Ms McDonnell and I dismiss the claim of negligence made against MCD in respect of both projects.
  375. I invite further submissions from Counsel as to the order to be made on the account and any consequential matters.

Note 1   Comprised in (i) a design and build Contract between MCD and SC/SV dated 5.7.06 and (ii) a ‘Novation Agreement’ of the same date between MCD, SC/SV and DPIL.    [Back]

Note 2   More accurately, this means contributions made by SC/SV/expenditure incurred by MCD prior to the 5.7.06 novated contract, i.e. pursuant to the 2002 Agreement. However for convenience the expression will continue to be used.    [Back]

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