IN THE HIGH COURT OF
JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
BEFORE: HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.
BETWEEN:
JOHN
YOUNG & CO (KELVINHAUGH) LIMITED
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Claimant
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and
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THE
RUGBY GROUP PLC
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Defendant
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Date
of Trial: 15 December 2000
Date of Judgment: 19 December 2000
Andrew
Rigney for the claimant (Masons, Solicitors )
David Thomas for the defendant (Wragge & Co., Solicitors )
JUDGMENT
I direct that no further note or transcript be made of this judgment.
The text of the Judgment of His Honour Judge Richard Seymour Q.C. is as follows:
JUDGMENT
The Contract
1. By an agreement ("the Contract") in writing dated 22 April 1998 and made between The Rugby Group PLC ("Rugby"), called in the Contract "the Purchaser", and John Young & Co. (Kelvinhaugh) Ltd. ("Young"), called in the Contract "the Contractor", Young agreed to undertake for Rugby what was described as Work Package No. J020, being the erection of kiln line and cement mills and associated parts, at a site at Lawford Road, Rugby, Warwickshire. The Contract incorporated MF/1 (Rev. 3) Model Form of General Conditions of Contract recommended by The Institution of Mechanical Engineers, The Institution of Electrical Engineers and The Association of Consulting Engineers for use in connection with Home or Overseas Contracts for the Supply of Electrical, Electronic or Mechanical Plant with Erection ("the Conditions"), subject to amendments which were set out in a Schedule of Amendments ("the Schedule of Amendments"). Attached to the Schedule of Amendments were four further schedules, one of which was Schedule 4 – Payment Provisions ("the Payment Schedule").
2. The Schedule of Amendments included, as clause 1.1.d, a definition of the expression "Engineer" as used in the Conditions as meaning "the Integrated Project Team". The latter expression was itself defined in a new clause 1.1(ff) of the Schedule of Amendments as meaning:-
"the Project team consisting of the Purchaser and its staff and AMEC Construction Limited involved with the design, integration and co-ordination of the Project."
The expression "the Project" was defined in a new clause 1.1(ee) of the Schedule of Amendments as meaning "the Rugby Cement Works Upgrade Project R80", and the Integrated Project Team was sometimes referred to as "the R80 Alliance". In this judgment I shall refer to the Integrated Project Team as "the Engineer".
3. By clause 2.7 of the Conditions it was provided that:-
"Wherever by the Conditions the Engineer is required to exercise his discretion:
he shall exercise such discretion fairly within the terms of the Contract and having regard to all the circumstances."
4. Clause 3 of the Conditions was, so far as is presently material, in the following terms:-
"3.1 The Contractor shall not assign the benefit of the Contract in whole or in part or any of his obligations under the Contract…
"3.2 Except where otherwise provided by the Contract the Contractor shall not sub-contract any part of the Works without the prior consent of the Engineer…"
5. Clauses 39 and 40 of the Conditions were concerned with certificates and payments. However, new clauses 39.14 and 39.15 were added by the Schedule of Amendments. Those new sub-clauses were in the following terms:-
"39.14 "Payment" The parties' rights and obligations in relation to payment shall be governed by the provisions of Schedule 4.
"39.15 "Recommendations for payment" Any reference in the General Conditions to "interim certificates of payment", "final certificates of payment", "certificate of payment" and "certificate" shall be amended to state "Recommendation for Payment" except where any of the above references are prefaced with the words, "application for", when the above references shall be amended to read "interim payment", "final payment" or "payment" (as the case may be)."
The expression "Recommendation for Payment" was not itself defined.
6. On its face the effect of the introduction into the Conditions of the new sub-clause 39.14 was to substitute for the provisions of clauses 39 and 40 of the Conditions as to payment the provisions of the Payment Schedule. However, if that were the intended effect, one might have expected that the existing clauses would simply have been deleted. The inclusion of a new clause 39.15 also seems to be inconsistent with an intention simply to delete clauses 39 and 40 in their entirety. The Payment Schedule itself was rather unusual. It comprised two distinct parts. One of these parts was entitled "SCHEDULE 4 – PAYMENT PROVISIONS OPTION B – MILESTONE ACHIEVEMENT". It included a clause B.1, which began:-
"The Purchaser shall pay to the Contractor, subject to receipt of the invoice agreed in accordance with the Engineer's Recommendation for Payment and in accordance with Clause 39.3 in the following manner the Contract Price adjusted to give effect to such additions thereto and such deductions therefrom as are provided for in these Conditions:-"
The clause went on to set out various percentages of the contract price which were said to be payable at different times. I need not set out those details in this judgment because the other part of the Payment Schedule provided:-
"The Milestone Schedule detailed below shall replace the percentages and events detailed in B.1.(a) to B.1.(g) on the "Option B – Milestone Achievement" sheet incorporated herewith."
There followed a list of 16 milestones with a different cash sum stated to be payable in respect of each.
7. Clause 39 of the Conditions included the following:-
"39.1 Unless otherwise provided in the Special Conditions the Contractor may make application to the Engineer for interim certificates of payment in respect of:
"39.2 Applications for interim certificates of payment shall be in the form of an invoice accompanied:
(a) in the case of Plant in the course of manufacture, by such evidence of the value of the work done as may be specified in the Special Conditions;
(b) in the case of Plant delivered, shipped or en route to the Site, by such evidence of delivery or shipment and payment of freight and insurance, bills of lading or documents of title and by such other documents as may be specified in the Special Conditions;
(c) in the case of work executed on the Site, by such evidence of the value of the work done as may be specified in the Special Conditions;
(d) in the case of claims for additional payment, by the particulars required under Sub-Clause 41.1 (Notification of Claims);
(e) under Sub-Clause 25.3 (Payment for Plant Affected by Suspension), by such evidence of the value of the work done as the Engineer may reasonably require.
"39.3 The Engineer shall issue an interim certificate of payment to the Contractor (with a copy to the Purchaser) within 14 days after receiving an application therefor which the Contractor was entitled to make.
"39.4 Every interim certificate of payment shall certify the total sum due to the Contractor from the Purchaser in accordance with the terms of payment specified in the Special Conditions in respect of:
"39.5 If any sum shall become payable to the Contractor under the Contract otherwise than for work executed or Plant delivered, the amount thereof shall be included in the next certificate of payment.
If any sum shall become payable under the Contract by the Contractor to the Purchaser, whether by deduction from the Contract Price or otherwise, the amount thereof shall be deducted in the next certificate of payment.
"39.6 The Engineer may in any certificate of payment make any correction or modification that should properly be made in respect of any previous certificate."
The Contract did not incorporate, as such, any Special Conditions, but the function apparently intended by the draftsman of the standard form Conditions to be performed by Special Conditions seems in this case to have been performed, insofar as at all, by the Schedule of Amendments.
8. By clause 40 of the Conditions it was provided, so far as is presently material, as follows:-
"40.1 The Purchaser shall pay to the Contractor the sum certified as due to the Contractor in a certificate of payment within 30 days after the date of issue thereof, unless otherwise specified in the Special Conditions.
Any payment made before delivery of Plant otherwise than a payment in respect of Plant in the course of manufacture or work done shall be subject to the Contractor first having furnished to the Purchaser a bond or guarantee of a bank or insurance company approved by the Purchaser, if so required by the Special Conditions.
"40.2 If payment of any sum payable under Sub-Clause 40.1 (Payment) is delayed, the Contractor shall be entitled to receive interest on the amount unpaid during the period of delay. The interest shall be at the rate of two percent per annum above the average of the base rates of the London clearing banks in force from time to time during the period of delay, or at such other rate as may be specified in the Special Conditions. The Contractor shall be entitled to interest without formal notice and without prejudice to any other right or remedy."
The Applications
9. In this action, which was commenced by a claim form issued on 5 September 2000, Young claims the sum of £1,145,380.60 which is alleged to be due to it under the Contract as a result of an application which Young contends it made for a payment on 3 July 2000, which application, so it is alleged, was the subject of a Recommendation for Payment dated 3 July 2000 sent to Young on 4 July 2000 and to Rugby under cover of a letter dated 4 August 2000, and in respect of which Young issued an invoice dated 14 July 2000. The sum of £1,145,380.60 represents an amount of £974,792 plus Value Added Tax at 17.5%. There is before the Court an application on behalf of Young for summary judgment for the amount of its claim. There are also applications on behalf of Young for permission to amend the Particulars of Claim and the Reply, but those applications are not opposed. Also unopposed is an application on behalf of Rugby for permission to amend the Defence.
The Evidence
10. The basic facts do not seem to be in dispute. In order to assist it in computing the amounts of the applications which were submitted on its behalf from time to time, Young retained the services of a firm of quantity surveyors, Messrs. Ian Allan Associates. There were put before me a witness statement, and a supplemental witness statement, of Mr. Ian Fletcher, a partner in that firm. In the original witness statement Mr. Fletcher said this:-
"15. On 3rd July 2000 I attended a meeting with Mr. Melville of R80 [that is, the Engineer]. The purpose of the meeting was, amongst other things, to discuss the valuation of the work carried out by John Young. During the course of the meeting I indicated that John Young wished to make an application for an interim payment. As a consequence, the meeting was adjourned for R80, namely Clive Rodney, to decide whether this application could be made. Once Mr. Rodney had consent [sic] to John Young making this application, the meeting was resumed to allow me to draft an application for payment. During the remainder of this meeting, I submitted a manuscript application in respect of the total sum for work of £10,318,633. This sum took into account a sum of £2 million in respect of alleged contra charges. The manuscript application appears at pages 22 and 23 of IF.
"16. Mr. Melville then produced a draft assessment (page 24 of IF), dated 30th June 2000. The total sum which was assessed was the same as that advanced in my manuscript application, although the method by which it was reached was somewhat different. On 4th July 2000 Mr. Melville also forwarded an unsigned version of the Recommendation for Payment No. 23 (page 25 of IF) which arrived at the same sum as the 30 June assessment document.
"17. I confirm that as at 3rd July 2000, R80 had been provided with all the documents which were required by Condition 39.2 and the letter of 10th September 1997 to support John Young's application. Enclosed at page 26 of IF is a list of documents which comprise approximately 15 files and which were submitted to the R80 during previous applications for payment Nos. 1 to 20. The documents listed provide the required information, pursuant to Condition 39.2 and the letter of 10th September1997, for R80 to make Recommendation for Payment No. 23.
"18. Further to Mr. Melville's assessment on 14th July 2000 I understand that John Young issued an invoice in the sum of £974,792 plus VAT (page 27 of IF)."
The gross application for £10,318,633 was in fact for an amount of £974,792 net, to which sum the amount of the appropriate Value Added Tax needed to be added, producing the total amount claimed in this action. A witness statement of Mr. John Melville dated 17 November 2000 was put in evidence. In that witness statement Mr. Melville did not dispute the essentials of the account given in the passage from the witness statement of Mr. Fletcher which I have quoted above.
11.The letter dated 10 September 1997 referred to in the passage from the first witness statement of Mr. Fletcher which I have quoted in the preceding paragraph was, of course, written before the making of the Contract. It was a letter written by a Mr. Hazzledine "For and on behalf of The R80 Alliance". It included the following:-
"We set out below the procedures to be adopted by Contractors on the above Project in respect of Applications for Payment and Variations….
"B. APPLICATIONS FOR PAYMENT
1.0 All applications for progress valued Contracts shall be submitted in the format appended to this letter and addressed to the Commercial Manager.
You are required to complete section 1 of the standard format of application as attached and submit it with each monthly payment application, setting out the Contract value, the projected cost of all variations to date (additions and omissions) and the projected anticipated final account.
2.0 All milestone payment draw-down Contracts shall similarly be forwarded in a pre-agreed format to be proposed, if not defined in the Contract by the Contractor.
3.0 Your applications should reach the Alliance's Office in hard copy by no later than the 20th of each month, unless notified otherwise.
Notification of the Alliance's recommendation for payment will be advised within 10 days, and copied to the Employer/Purchaser as advance notification of your invoice to follow.
4.0 You should raise and forward your invoice for the recommended amount, within 7 days to Rugby Cement accounts manager for processing and payment."
"C. APPLICATION FORMAT – See Item 1.0 above
The attached standard application format should be submitted in accordance with the requirements set out below:-
SECTION 2 of format refers;
2A Works in Progress
Total cumulative value of Works executed to date, fully valued and detailed each month in accordance with the Contract; preliminaries and variations are to be shown separately as identified below.
2B Preliminaries
Your proposed breakdown of monthly preliminaries, should be submitted for our agreement as soon as possible, as a basis for progress applications. This should clearly identify time-related items, set-up and demobilisation items, and, if applicable, any value related items.
2C Variations
All variations are to be scheduled and valued separately against each respective Instruction issued, and fully substantiated on a monthly basis.
2D Materials on-site
To be submitted in the form of a fully detailed schedule, priced at the basic material only rate, applicable and referenced, where possible, to supplier invoices and delivery notes.
2E Materials off-site
Payable in accordance with Contract requirements, and Employer/Purchaser acceptance with, if so required, the appropriate Certificate of Indemnity in a form acceptable to the Employer/Purchaser and supported by a fully detailed schedule as specified for the materials on-site requirements.
2F Daywork
Daywork record sheets, sequentially referenced, clearly submitted to and signed by a duly authorised signatory of the Alliance and referenced to the necessary valid instruction from the Alliance, should be priced and scheduled on a cumulative basis each month. Copies of current submissions priced are to be provided with each monthly application.
D. VARIATIONS
Variations in the form of either a C.I. (Contract Instruction) or C.S.I. (Contractor's Site Instruction), issued by the Alliance, will form the basis of the variation account to your Contract."
12. Mr. Fletcher said in his first witness statement:-
"11. However, after the conclusion of the Contract, John Young, Rugby and R80 ignored the provisions of Schedule 4 [that is, the Payment Schedule]. Instead the procedure which they adopted in relation to the issue of certificates and payment was the procedure which was set out in a letter dated 10th September 1997 (see pages 1 to 7 of IF) from AMEC on behalf of the R80 to John Young (attached to which was a pro forma interim application for payment). This letter was sent at tender stage prior to the conclusion of the Contract."
Mr. Melville, in his witness statement, agreed that, by agreement of the parties, the payment procedure set out in the Payment Schedule was not, in practice, followed. He said:-
"3. I know from my conversations with William Hazzledine, my predecessor as Quantity Surveyor for Amec on the IPT on this Contract that the payment terms set out in the contract were by mutual agreement not followed. Both parties were cognisant of the payment terms in the schedule 4 to the Contract.
"4. Shortly after the first few recommendations were made in accordance with schedule 4, I am advised by William Hazzledine that the parties agreed that to continue to adhere to the timings and amount of payments as set out in the Contract would operate unfairly for the Contractor. William Hazzledine advises me that he agreed with the Contractor that it should move to a measure and value style of payment system similar to that on other work packages.
"5. I continued that recommendation mechanism from when I took over from William Hazzledine in September/October 1999."
The figure of £974,792 does not appear in the list of milestone payments in the Payment Schedule, but in the circumstances there seems to be no dispute that the figure has, subject to the question whether it was subsequently effectively revised downwards to nil, to which question I shall come in due course, been calculated in an appropriate fashion. The agreed variations to the mechanism for payment laid down in the Contract do not seem to have done away with the need for Young to raise an invoice for the amount which it wished to be paid, and for the Engineer to agree that invoice and to record such agreement by means of a Recommendation for Payment. Equally they do not seem to have altered the obligation on the part of Rugby in clause 40.1 of the Conditions to pay the amount the subject of a Recommendation for Payment within 30 days of the issue of such Recommendation for Payment.
13. Copies of Young's application for payment made on 3 July 2000, of the unsigned Recommendation for Payment No.23 dated 3 July 2000 and of an invoice dated 14 July 2000 were put in evidence. The invoice was on the printed stationery of "John Young & Co. (Kelvinhaugh)", but that was described on the printed stationery as "A trading Division of Motherwell Bridge Construction Limited." Also put in evidence was a copy of the letter dated 4 August 2000 under cover of which the Engineer sent to Rugby a signed copy of the Recommendation for Payment in respect of Young's invoice, and a copy of that version of the Recommendation for Payment. The letter dated 4 August 2000 was in the following terms:-
"We refer to our recent meeting in which we advised that a further assessment of monies due to John Young & Co. had taken place and that this would result in an appropriate invoice being raised by JY&C. We understand that this invoice is now in your possession.
"Our recommendation associated with the above is attached and had been raised cognizant of the agreed concept and in the spirit of the Rugby/Motherwell Bridge meetings which took place during 1999. Your attention is also drawn to the gross amount currently recommended remaining considerably lower than the anticipated and reported final cost.
"Our assessment as at 30th June 2000 is in accordance with the agreed strategy and fairly makes allowances for works completed during 1999 and being progressively evaluated."
14. A witness statement of Mr. Alan Brown was put in evidence on behalf of Young. At paragraph 2 of that witness statement Mr. Brown said:-
"Up to 31st December 1999 I was the Director and General Manager of John Young & Co. (Kelvinhaugh) Limited. As a consequence of a company restructure, after 31st December 1999, the limited company's operations were carried out by John Young as a trading division of Motherwell Bridge Construction Limited."
15. In fact it appears that Mr. Brown in his witness statement had become muddled as to the relevant dates. The correct position was explained by Mr. John Mullee, a solicitor employed by Messrs. Masons, the solicitors acting on behalf of Young in relation to the claim before me, in his supplemental witness statement. Mr. Mullee indicated in his supplemental witness statement that Young is, and had been at all times with which I am concerned, a subsidiary of Motherwell Bridge Holdings Limited ("Holdings"). Another subsidiary of Holdings is and was Motherwell Bridge Construction Limited ("Construction"). As part of an internal reconstruction of the Motherwell Bridge group of companies an agreement ("the Hive-Across Agreement") dated 29 April 1999 was made between Young and Construction. A copy of the Hive-Across Agreement was attached to the supplemental witness statement of Mr. Mullee. By clause 1 of the Hive-Across Agreement it was provided, so far as is presently material, that:-
"The Vendor [that is, Young] shall sell and the Purchaser [that is, Construction] shall purchase the Business [of Young] as a going concern with effect from the Transfer Date [1 January 1999] (notwithstanding the date or dates hereof) together with all assets and rights owned by the Vendor relating thereto, and wherever situated, including for the avoidance of doubt, the following:-
….
1.5 the full benefit of, and the right to enforce, all current and pending contracts (other than contracts for personal services), engagements and orders of the Vendor in connection with the Business, but subject always to the Purchaser obtaining any necessary consents or approvals of the other parties thereto;".
The Hive-Across Agreement also contained the following provisions which are material:-
"2.1 The consideration for the sale hereby agreed shall be:-
2.1.1 the assumption by the Purchaser of the liabilities of the Vendor in accordance with 2.2 hereof; and
2.1.2 the constitution of an inter-company loan by the Purchaser to the Vendor in an amount equal to the amount by which the market value of the Sale Assets transferred by the Vendor under Clause 1.1 hereof as at the Transfer Date exceeds the value of the liabilities assumed by the Purchaser under Clause 2.2 hereof as at the Transfer Date.
"2.2 The Purchaser shall pay, fulfil, satisfy and discharge as and when due to be paid, fulfilled, satisfied or discharged all debts, liabilities and obligations of the Vendor in accordance with the Balance Sheet.
"4.1 Completion of the sale and purchase of the Business ("Completion") shall be deemed to have taken place on the Transfer Date.
"4.5 Following Completion the Vendor shall act as an undisclosed agent of the Purchaser in carrying on the Business on behalf of and for the account of the Purchaser with effect from the Transfer Date for such period as may be agreed between the parties following Completion.
"6 Insofar as the benefit or burden of all contracts, accepted orders, leases and licences relating to the Business cannot effectively be transferred to the Purchaser except by an assignation or novation whether or not requiring consent from any third party:-
6.1 the Vendor shall at the Purchaser's request use its best endeavours with the co-operation of the Purchaser to procure such novation or assignation as aforesaid and where necessary any requisite third party consent;
6.2 unless and until such contracts, accepted orders, leases and licences shall be novated or assigned as aforesaid and insofar as any of them shall prove incapable of novation or assignation or if the requisite consent of any third party to its novation or assignation is not forthcoming:-
6.2.1 the Vendor shall hold the same in trust for the Purchaser absolutely and the Purchaser shall (if such sub-contracting is permissible and lawful under the contract), as the Vendor's sub-contractor, perform all the obligations of the Vendor thereunder to the extent that they relate only to the Business; and
6.2.2 the Vendor shall (so far as it lawfully may) give all reasonable assistance to the Purchaser to enable the Purchaser to enforce its rights under such contracts and accepted orders, leases and licences.
"11 The construction, validity and performance of this Agreement shall be governed by the law of Scotland and the parties hereby prorogate the non-exclusive jurisdiction of the Scottish Courts."
The Defences
16. The Engineer wrote a letter dated 5 September 2000 to Young which was in the following terms:-
"The Integrated Project Team has had cause to consider the progress made to date on this account, and seek a directive from the Alliance Board as to how to proceed. The directive was sought in view of our recent failed attempt to negotiate a settlement and the slow progress made to date on agreeing sections of the account. We are also cognisant of the fact that we have not yet received your completed final account, but note that it is due at the end of the Defects Liability Period, i.e. December 2000.
"Accordingly, the directive that we have received from the Alliance Board is that we are not to continue with the piecemeal consideration of sections of your account, but to await the delivery of the completed final account by the due date, and then proceed in accordance with the contract. In the meantime there will be no further on account payments in anticipation of supporting documentation.
"Regarding the outstanding payment, we are reminded, as are you, that the contract requires all payments, and applications for the same, to be fully supported by the Contractor. In fact all payments made since July 1999 have been on account, and although sections of the account have been negotiated to a consensus, agreement has not been reached sufficient to support the current level of payment.
"In view of this we enclose a further recommendation for payment, more nearly reflecting the supportable account, and look forward to your reciprocal action in issuing the appropriate credit note."
Enclosed with the letter was what purported to be a Recommendation for Payment which showed a negative sum due of £974,792. That Recommendation for Payment was not signed.
17. The circumstances in which the letter dated 5 September 2000 which I have quoted in the preceding paragraph came to be written were explained by Mr. Melville in his witness statement as follows:-
"10. Following the issue of recommendation No.23, the Alliance Board, ie the board of the joint venture between Amec and Rugby advised the IPT, of which I was a member, to rescind the previous recommendation. This was done by the interim assessment No. 27 sent under cover of the letter dated 5 September (attached at "JM1"). In my view and that of the IPT we were entitled to issue such recommendation. The whole payment recommendation had evolved away from the strict letter of the contract and I felt that I could issue this recommendation in that light."
18. At paragraph 11 of his witness statement Mr. Melville made this point:-
"Whilst the strict payment terms had not been operated hitherto, if Rugby wished to take a technical point I would observe that payment of any recommendation only falls due after the recommendation has been issued to the Contractor. Signed Recommendation 23 was not actually issued to the Contractor until my fax of 11 August which was copied to the Contractor. Technically therefore payment would not fall due until 10 September. These proceedings predate that date."
19. In addition to the points to which I have referred in the two preceding paragraphs, in the Defence served on behalf of Rugby in this action it was asserted that the application for payment of the sum claimed in this action did not comply with the requirements of clause 39.2 of the Conditions. In the Amended Defence a further point which was made was that it appeared from the witness statement of Mr. Brown to which I have referred that it was not Young but rather a different legal entity, Construction, which had, in breach of the terms of clause 3 of the Conditions, undertaken the work the price of which is claimed in this action. As developed in oral submissions by Mr. David Thomas, who appeared on behalf of Rugby, the point was that, so it was said, Young was not entitled to payment for work which it had contracted to undertake, and which was in fact carried out, because, in breach of the Contract, the work had actually been done by a different legal entity.
Conclusion
20. In my judgment none of the matters raised on behalf of Rugby provides a defence to the claim made by Young in this action.
21. I have already indicated my view that, in essence, the obligation of Rugby under the Contract, as varied by the agreement of the parties, was to make payment to Young, within 30 days of the issue of an appropriate Recommendation for Payment, of the amount stated in an invoice issued by Young which had been agreed by the Engineer as shown by the issue of such Recommendation for Payment. Clause 40.1 of the Conditions, while providing that the 30 day period within which payment was to be made started to run from "the date of issue" of a Recommendation for Payment, did not itself indicate what constituted the "issue" of a Recommendation for Payment. In my judgment Mr. Thomas was correct in submitting that in order to see what constituted the "issue" of a Recommendation for Payment one had to look at clause 39.3, from which it was clear that what was meant was issue to the Contractor, that is, in this case, to Young. Mr. Thomas further submitted that, in order to amount to a valid issue, a Recommendation for Payment had not merely to be sent to Young, but had to be signed by the Engineer. Mr. Thomas was unable to support that submission by reference to some provision of the Contract, but he said that in practice all other Recommendations for Payment issued to Young had been signed. It does not seem to me that whatever practice the parties had adopted is relevant to this question. Whether, in order to be validly issued, a Recommendation for Payment needed to be signed appears to me to depend simply upon the proper construction of the Contract. There is no warrant, it seems to me for importing into the Contract any requirement for a Recommendation for Payment to be signed. All that was necessary, in my judgment, was for the Engineer to send to Young a Recommendation for Payment in circumstances which indicated that the Recommendation for Payment, signed or not, amounted to agreement of the relevant invoice of Young. The unchallenged evidence of Mr. Fletcher, in paragraph 13 of his original witness statement, was:-
"By way of clarification, it was not usual for R80 to provide either our firm or John Young with a copy of the Recommendations for Payment. The recommendations enclosed are all the Recommendations for Payment received by either our firm or John Young and were provided on occasions when Raymond McGhee happened to be in the presence of the R80 person signing the relevant Recommendation for Payment form."
What were referred to as the enclosed recommendations numbered six and were all signed. However, as it was not usual in practice for copies of the Recommendations for Payment to be sent to Young at all, it seems to me to be clear that the sending of that dated 3 July 2000 was intended by the Engineer to have some significance, and that significance could only have been that it was an issue of that Recommendation for Payment to Young, albeit that the issue of that Recommendation for Payment to Rugby did not take place for a further month and that technically Rugby appears to have been in breach of the obligation to pay the invoice dated 14 July 2000 within 30 days of the issue of the Recommendation for Payment to Young before Rugby even knew that there had been such an issue. It is somewhat ironic that the Recommendation for Payment upon which Rugby seeks to rely as a correction or modification of this Recommendation for Payment was itself unsigned. Although the Recommendation for Payment dated 3 July 2000 was issued, as it seems to me, before the date of the invoice of 14 July 2000, in my judgment it was not necessary that an invoice be raised prior to the giving of agreement to it by the Engineer in the form of issuing a Recommendation for Payment. All that mattered, in my view, was that there should be a Recommendation for Payment which in fact indicated that the amount of a particular invoice was actually agreed. Given that in reality Young had to know in advance of the raising of an invoice whether it was likely to meet with the agreement of the Engineer, it was more or less inevitable in practice that there would be consultation between Young and the Engineer, leading to foreknowledge of the likely reaction to any particular invoice in advance of the raising of the invoice. If that led to the issue of a Recommendation for Payment prior to the raising of the relevant invoice, that is not to be wondered at. Again, it does not seem to me that any objection can be taken to the invoice dated 14 July 2000 on the ground that it was not Young itself which raised it, but Construction on its behalf. In fairness to Mr. Thomas, it was not a point which he sought to take.
22. In the light of the modifications to the Conditions made by the Payment Schedule, which contemplated that the sums to be paid by Rugby to Young would be determined by reference to the 16 milestones which I have mentioned, it seems to me that the provisions of clause 39.2 of the Conditions must be taken, at the time the Contract was made, to have been superseded as no longer relevant. There is no evidence that when the parties modified further the provisions of the Contract they reinstated the provisions of clause 39.2. However that may be, as I have already noted, there were no Special Conditions as such, and thus there were no Special Conditions laying down requirements as to the types of evidence which clause 39.2 contemplated might be contained in Special Conditions. No such requirements were included in the Schedule of Amendments. These points notwithstanding, the uncontradicted evidence of Mr. Fletcher is that all of the documents which clause 39.2 might otherwise have required to be provided by Young had in fact been provided.
23. The power of the Engineer given by clause 39.6 of the Conditions was
" in any certificate of payment [to] make any correction or modification that should properly be made in respect of a previous certificate."
The reference to a certificate of payment must, of course, be read as a reference to a Recommendation for Payment. It is plain, in my judgment, that, as the purpose of a Recommendation for Payment under the Contract was to indicate the agreement of the Engineer to an invoice raised by Young, a Recommendation for Payment, an expression which was not itself defined in the Contract, must be just that, namely a recommendation that a payment be made, not a recommendation that no payment be made. It follows that what was enclosed with the letter dated 5 September 2000, upon which Rugby relies, was not a Recommendation for Payment, and so could not correct or modify the Recommendation for Payment upon which Young relies. Even if that conclusion were wrong, it seems to me that the power given by clause 39.6 was a discretionary power of the Engineer and could only be exercised to make a correction or a modification to a previous Recommendation for Payment if such correction or modification was one which "should properly be made". On the evidence of Mr. Melville it seems to me to be clear that the Engineer did not decide to correct or to modify the Recommendation for Payment upon which Young relies. Rather what happened was that the Alliance Board decided that no further payments should be made to Young until Young's final account was agreed and instructed the Engineer to rescind the then outstanding Recommendation for Payment. There was no exercise or purported exercise by the Engineer of his discretion at all. Further, no attempt was made in the evidence put before me to demonstrate that the reduction of the previous Recommendation for Payment to nil was a correction or modification which "should properly be made". For these reasons, therefore, this defence also fails. I may say, although it is not necessary for my decision to reach a conclusion about it, that I have grave doubts whether the Engineer was acting in accordance with the terms of clause 2.7 of the Conditions in purporting to issue the supposed Recommendation for Payment dated 5 September 2000. Mr. Andrew Rigney, who appeared on behalf of Young, submitted that in any event the power given to the Engineer by clause 39.6 of the Conditions could only be exercised when the Engineer issued a Recommendation for Payment and the Engineer could only issue a Recommendation for Payment in response to an application for such made by Young under clause 39.1 because the obligation of the Engineer to issue a Recommendation for Payment arose under clause 39.3. Since, as I have already pointed out, under the Payment Schedule the only purpose of issuing a Recommendation for Payment was to indicate the agreement of the Engineer to an invoice raised by or on behalf of Young, I am inclined to think that, under the Conditions as modified for the purposes of the Contract, the power granted by clause 39.6 was free-standing and did not depend upon there being an application from Young. If that were not so, it is difficult to see how the power could ever be exercised, for in the ordinary way all the Engineer would do would be to issue a Recommendation for Payment or not. However, in the light of the conclusions which I have already expressed in this paragraph, it is not necessary to reach any final view on this submission.
24. Mr. Thomas accepted that there is no authority for the proposition that a party to a contract under which construction work is to be done, and which contains a prohibition against assignment or sub-contracting, is unable to recover payment for the doing of work for which the contract provides unless he performs the work himself. He reminded me that in Linden Gardens Trust Ltd. v Lenesta Sludge Disposals Ltd. [1994] 1 AC 85 the House of Lords held that an assignment in breach of a provision in a contract against assignment was ineffective, so that an assignee to whom an assignment had been made in breach of such a stipulation was unable to sue on the contract the benefit of which had been assigned to him. At page 109E in the report Lord Browne-Wilkinson in his speech said:-
"McAlpine accept that, since the attempted assignment by Corporation of its rights under the contract to Investments was ineffective, Corporation has retained those rights and is entitled to judgment against McAlpine for any breach of contract."
While what Lord Browne-Wilkinson was there recording was a concession, he expressed no doubt as to the correctness of the concession, and in my judgment that concession correctly states the law. The light which that concession sheds on the submission of Mr. Thomas, which he accepted had to be approached on first principles, is that it seems clear that, as between the original contracting parties, the effect of an attempt to assign, in breach of contract, the benefit of the contract, is to leave the contractual rights of the failed assignor intact, but with him no doubt exposed to a claim for damages from the other contracting party in respect of his breach in seeking to assign without consent, if the other contracting party has suffered any damage as a result of that breach. If, as in my judgment it is, the general principle illustrated by this analysis is that in the event of an attempt to assign, in breach of contract, the benefit of a contract, the contract breaker is in no sense disabled from thereafter seeking to enforce the contract, I cannot see why, in the event of an attempt to sub-contract, in breach of a prohibition on sub-contracting, the performance of contractual obligations, the contract breaker should be disentitled from recovering under the contract payment for the work which has actually been done, albeit not by the contract breaker himself. The remedy for the breach of contract which the impermissible sub-contracting constituted is, in my judgment, the usual remedy for a breach of contract, namely damages, which will be nominal, unless substantial loss can be proved. This defence therefore fails on principle.
25.Although in the circumstances it is not necessary, strictly, to consider the facts relevant to the argument considered in the preceding paragraph, it seems to me that, even if Mr. Thomas's submission was well-founded as a matter of law, it would fail on the facts. It is plain from the witness statement of Mr. Brian Boon served on behalf of Rugby that Rugby was wholly unaware, until he had sight of the witness statement of Mr. Alan Brown, to which I have referred, that the Motherwell Bridge group of companies had undergone any restructuring or that it might be the case that it had not been Young, but Construction, which latterly had undertaken the works the subject of the Contract. Mr. Mullee, in his supplemental witness statement, stated his instructions as being that there had been no change of personnel on the job. The point now taken on behalf of Rugby has an opportunistic flavour to it. What has been seized upon is the comment in paragraph 2 of Mr. Brown's witness statement that:-
"As a consequence of a company restructure, after 31st December 1999, the limited company's operations were carried out by John Young as a trading division of Motherwell Bridge Construction Limited."
That is a very general comment, and is not specific to the work the subject of the Contract. The Hive-Across Agreement was expressed to be governed by the law of Scotland. No expert evidence as to the law of Scotland has been put before the Court. Consequently, for the purposes of this hearing the law of Scotland is to be taken to be identical in all material respects to the law of England. On that hypothesis, it seems to me that the Hive-Across Agreement has been very carefully drafted. Clause 1.5, in my view, deliberately made the assignment of the benefit of existing contracts
"subject always to the Purchaser obtaining any necessary consents or approvals of the other parties thereto."
The Hive-Across Agreement did not, therefore, purport to assign without consent, where it was required, the benefit of existing contracts. Again, clause 6.2.1 made it clear that Construction was only intended to act as Young's sub-contractor in performing the existing contractual obligations of Young
"(if such sub-contracting is permissible and lawful under the contract).
In cases in which consent to an assignment was necessary, but had not been obtained, and sub-contracting was not permitted, it would seem that Young and Construction intended to proceed under clause 4.5, with Young continuing to carry on its business, but for the benefit of Construction. The factual position which Mr. Thomas submitted was revealed by the evidence of Mr. Brown thus appears to be one which the parties to the Hive-Across Agreement took some care to try to avoid. The question in those circumstances is whether the material relied upon on behalf of Rugby raises an issue upon which Rugby has a realistic prospect of success. In my judgment there is but a faint possibility that a detailed investigation of what has actually happened in relation to the execution of the works the subject of the Contract would demonstrate that the general comment of Mr. Brown would support the great burden which Rugby seeks to place upon it.
26. There will be judgment for Young in the sum of £1,145,380.60, together with interest on that sum from 3 September 2000 until today at a rate of two per cent per annum above the average of the base rates of the London clearing banks in force from time to time between 3 September 2000 and today. I also grant permission to Young to amend the Particulars of Claim and the Reply in the respects asked, and permission to Rugby to amend its Defence in the terms of the draft put before the Court.