COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM TECHNOLOGY & CONSTRUCTION COURT, QBD
Judge Richard Havery QC
HT 04 107
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE DYSON
LORD JUSTICE CARNWATH
| Connex South Eastern Ltd
|- and -
|M J Building Services Group plc
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
David Ashton (instructed by Messrs Courts & Co) for the Respondent
Crown Copyright ©
LORD JUSTICE DYSON :
"The phase 9 CCTV contract
Since Govia's takeover of South Central, the Client has worked with you to restructure the scope of works to reach a mutually acceptable solution.
The final shape of the contract is now clear. We list below the works instructed to date and the budgeted works awaiting instruction.
We would now like to formalise your mutual agreement with the Client that the works below now represent the full extent of the "Phase 9" contract. The forecast value of Works that have been instructed or will be instructed totals £937,847.
Please note that we do expect to be able to instruct some additional works on the Epsom Downs line, which might have a value of around £60,000 but for budgetary reasons this is not certain and you should regard this as a bonus.
We would be grateful if you would please sign the bottom of this letter and return to me in order to confirm your agreement."
"(1) That there is no agreement between South Eastern and MJ as alleged in the notice of Adjudication dated 24 February 2004, whose terms, or whose material terms thereof, are recorded in writing, as required by section 107 of the Housing Grants, Construction and Regeneration Act 1996;
(2) That MJ no longer has any statutory right to adjudication under section 108 of the said Act; and/or
(3) That MJ's Notice of Adjudication dated 24 February 2004 is an abuse of process."
At the hearing before the judge, the following questions were identified:
"(1) Has there been an agreement to which the claimant and the defendant have been parties and which is an agreement "in writing" within the meaning of s.107 of the Act?
(2) If the answer to question (1) is yes, did the defendant still have the right to refer a dispute to adjudication under s.108 of the Act on 24th February 2004 if the agreement had previously been discharged by the acceptance of the claimant's repudiation?
(3) If the answer to question (1) is yes, did the defendant still have the right to refer a dispute to adjudication under s.108 of the Act notwithstanding the letter of agreement dated 11th February 2002?
(4) If the answer to questions (1), (2) and (3) are all yes,
a. Is the defendant's notice of adjudication dated 24th February 2004 an abuse of process?
b. If so, what is the consequence?"
MJ reached terms of settlement with SC, who accordingly have played no part in these court proceedings.
Were SC and SE joint contractors under the original contract?
"27. The first question here is whether under the original contract SE and SC were joint contractors. As stated in Chitty on Contracts, 29th edition, paragraph 17-005, the presumption is that a promise made by two or more persons is joint so that express words are necessary to make it joint and several. Mr Speaight submitted that in a course of previous conduct in relation to phases before phase 9, where the material terms of the relevant documents were the same, each certificate for payment named only the franchisee whose station was the subject of the relevant work. Moreover, the implied obligations of SE and SC to give MJ access to the sites and permit MJ to carry out works there could be performed in the case of each station only by the franchisee in whose area that station was situated. That argument, if correct, does not preclude the possibility of joint liability. Rather, it points to the proposition that each of SE and SC contracted only in relation to the stations in its own franchise area. That would, of course, imply several liability.
28. There are no express words making the liability of SE and SC joint and several, let alone several. There was only one form of draft agreement (albeit not signed) in the contractual documents. The employer was named as a single company, Connex South (Central/Eastern) Limited, albeit by a misnomer. SE and SC shared the management of their relevant business (or businesses). Both companies were at the time in the same ownership. There is nothing in the agreement to suggest that each company contracted only in relation to the stations in its own franchise area. In my judgment, SE and SC contracted jointly".
"1.04 TS stated that due to the splitting up of the contract to S/C and S/E the phases would be reallocated" (TS was a Condes representative).
The next section of the minutes is headed "CCTV Phase 9 Programme". Para 2.04 states:
"SC wished to know how the phases would be split between S/C and S/E and would they require revised procurement schedules and programmes." (SC was a MJ representative).
Following this meeting, MJ prepared a programme which showed the sub-phases of Phase 9 allocated separately as between SE and SC.
The meaning and effect of the agreement of 11 February 2002
"30. According to Chitty on Contracts, ib., paragraph 17-017, the discharge of one joint debtor by accord and satisfaction discharges all, in accordance with the general principle that joint liability creates only one obligation; and the same is true, illogical though it may seem, if one joint and several debtor is so discharged. Mr. Ashton fairly described that situation as a trap for the unwary. Chitty goes on to say that a covenant not to sue one joint or joint and several debtor does not discharge the others. The courts generally construe a release as a covenant not to sue if it contains an indication of intention that the other debtors are not to be discharged. If the agreement appears from its words to be a release and there are no words reserving rights against the other debtors, nor anything in the circumstances to rebut the prima facie meaning of words used, the agreement will release all the debtors; but it would seem that the courts lean in favour of other debtors not being discharged by construing the agreement as a covenant not to sue or as a release but subject to an implied reservation of rights against other debtors. That is what Chitty says. In my judgment, it is clear that in this context the word "debtor" includes one liable in damages."
31. It is clear that the agreement of 11th February 2002 was intended to release SC from its obligations in relation to the 24 stations removed from the earlier agreement. In view of the words "the works below will now represent the full extent of phase 9 contract", it is clear that the agreement was also intended to release SC from its liability, if any, in relation to the stations in the franchise area of SE. There is nothing in the agreement to suggest that SE should not be discharged. There is nothing in the circumstances to rebut the prima facie meaning of the words used.
32. I conclude that SE are released jointly with SC from the obligations from which SC was released by the agreement of 11th February. I must consider the extent of those obligations. The negotiations between MJ and SC leading to that agreement appear to have been settlement negotiations (see paragraph 21 above). Settlement of what, does not appear. In particular, there is no evidence whether there was an existing claim or potential claim on the part of MJ against SC for expenditure wasted on work done or supply of materials to stations which were subsequently withdrawn from the list, or for the price of the works done on such stations. The agreement makes no mention of any such claim. I conclude on the evidence, which is not satisfactory on this point, that neither SC nor SE was released by the agreement of 11th February from any such claim. But SC and SE were released from their obligations to afford access to MJ in the future to the stations withdrawn from the list of stations in the SC franchise area and from all stations in the SE franchise area. Thus a claim for loss of profits expected to be earned in relation to those stations has been released".
"I am of course aware that some have doubted the wisdom of allowing parties to refer a dispute to adjudication so long after work under the contract has ceased. However, as long as there is any possibility of disputes arising under a contract, parties will have to live with the fact that an adjudicator's decision may be sought. Indeed, there may be times, even at such a late stage, where it is desirable to have a quick and cheap procedure that can produce an effective temporary decision, particularly since this will not prevent parties from seeking a permanent decision through arbitration or the courts."
Lord Justice Carnwath:
Lord Justice Ward: