England and Wales High Court (Technology and Construction Court) Decisions

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

The Parties

1. BRAMA Brown & Root and Marshall Aerospace Limited (“BRAMA”) is a joint venture company engaged in defence contracting. The Defendant “Aramark” is a large company who provide a range of different services, and so far as relevant to this case, particularly catering and cleaning services.

Preliminary Issue

2. These proceedings concern the potential supply by Aramark of catering and cleaning services at RAF Valley, a large RAF station in Anglesey, Wales, by way of a subcontract to BRAMA. The action concerns events in 1995 and 1996, when for the first time the Ministry of Defence (“MOD”) were placing contracts in the private sector for services which had previously been provided “in house”.
3. This hearing is a trial of a preliminary issue, agreed by the parties and ordered by the Court at a Case Management Conference on 19 November 2001; as follows:

“Was there by 10 December 1996 a concluded agreement between the parties and if so what were its terms?”

4. The Claimant’s case is the answer to the two parts of this question should be: “Yes”; and that the agreed terms were “The terms agreed between the parties and contained in the formal contract document sent to Aramark on 11 November 1996”.
5. BRAMA accept that the contract document which it refers to was never signed on its behalf. However they contend that in fact the parties came to be ad idem from about 4^th October 1996, and that if and to the extent that the tender documentation provided to Aramark specified that any contract between the parties had to be formally evidenced in writing, that requirement was waived by Aramark.
6. Aramark’s case is that the parties never were ad idem, they having entirely failed to agree important matters arising out of the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”) to the commercial substance of their tender. Aramark also rely upon the fact that the agreement as alleged by BRAMA was never formally evidenced in either of the ways envisaged by the tender documentation, and that the requirements for such formality were never waived.

“TUPE”

7. It was explained to me in evidence that the largest part of the resources needed to fulfil the requirements of the RAF Valley contract was the provision of manpower, and that the key to successful and potentially profitable tendering for this type of contract, was the accurate assessment of the payroll costs likely to be involved.
8. Payroll costs in turn are likely to be much affected by TUPE, which are complicated statutory regulations designed to protect employees’ rights in the event of a change in the identity of their employer. It was always evident that this was going to happen at RAF Valley, when catering and other personnel employed by the MOD were transferred into the employment of the new civilian contractor who was to take over the relevant functions from the MOD.
9. As I have said, the TUPE regulations are complicated. I was very helpfully provided with an agreed note prepared by counsel as to their effect. Suffice for present purposes to say that information from the MOD as to the likely numbers and terms and conditions of service of their employees entitled to elect to continue their employment with the successful civilian contractor, could have a very significant bearing on the payroll costs likely to be incurred by that new contractor.

Factual History

10. The following facts are either common ground between the parties, or, where indicated, are facts found by me.
11. As explained above, BRAMA are a joint venture set up in about 1995 between Brown & Root (well known facility managers and contractors) and Marshall Aerospace (well known aircraft engineers). In particular they were established in order to enter the Multi Activity Contracts (“MAC”) market in which a number of military establishments sought tenders from commercial/civilian contractors. This was pursuant to the then government philosophy that many of the services provided at military establishments could be performed more cost effectively by outside contractors tendering for the work on a competitive basis, than by the MOD itself.
12. By a letter dated 14^th September 1995 the MOD invited tenders from, inter alia, BRAMA, for provision of aircraft engineering supply and support services at RAF Valley.
13. By letter dated 28^th September 1995 BRAMA invited Aramark to tender for a subcontract for catering, cleaning, dry cleaning and carpet cleaning. The concluding parts of this letter read as follows:

“Acceptance of Tender

The Tender shall comprise an offer to perform the Services supplied in the Enquiry Documents. In the event of such an offer being accepted, the successful Tenderer shall conclude a contract with BRAMA, which shall comprise as a minimum of Conditions of Contract and the attendant Pricing and Resources Schedules requested in the Enquiry Documents and submitted with the Tender. Until such formal agreement is signed, no authority to proceed with the Services or to incur any costs for which BRAMA may be held liable will be given or accepted. No Tenderer may consider itself successful unless and until it receives written notice to this effect from BRAMA.

Validity of Tender

The Tender shall remain valid and open for acceptance for a minimum period of seven months from the date of receipt thereof by BRAMA.”

14. There was some argument before me as to what the part of the Invitation to Tender under the rubric “Acceptance of Tender” actually meant.
15. In particular, it was BRAMA’s contention, pleaded by their Reply (A/23) that the Invitation to Tender envisaged that the parties could form contractual relations prior to final agreement by way of formal contract documentation. Aramark’s contention was that the relevant part of the Invitation to Tender was a straightforward example of a party stipulating in advance how a contract might be formed (i.e. by written acceptance of the tender; or by the execution of a written contract).
16. I accept the submissions of Mr Lord on behalf of Aramark on this point. The “Conditions of Contract and attendant Pricing and Resources Schedules” were very detailed and could readily have constituted a complete contract on their own, if BRAMA had chosen to accept Aramark’s tender without further discussion. However the parties recognised that they might wish to negotiate detailed extra matters not dealt with in the Invitation to Tender, in which case they were free to discuss such matters with a view to agreement, against the background that if such discussions failed, it would always be open to BRAMA to fall back on an unadorned acceptance in writing of Aramark’s basic bid. I see no room here for the conclusion of a binding agreement without the adoption of either of these mechanisms for evidencing agreement. In my judgment BRAMA had stipulated that a contract could only be concluded in one of two particular ways, and absent any waiver of that stipulation, it was effective and applicable to the circumstances of the present case.
17. The letter of 28^th September 1995 enclosed various documents including a detailed specification of the scope of the services to be provided, and some notes to tenderers, including concerning TUPE (note 36) as follows:

“The attention of tenderers is drawn to the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). The tenderers should note that it is the Authority’s view that TUPE may be applicable, if this Invitation to Tender results in a contract being placed. For this reason sufficient details of the existing employees together with their terms and conditions will be made available to tenderers. To this end, tenderers should be aware of the following specific information:

(a) it is anticipated that 226 personnel are likely to transfer to the successful tenderer on 23 July 1996;

(b) the total payroll bill (ie pay and allowances) of those personnel is £.3,154,881 pa.;

(c) as at 31 August 1996 the total terminal redundancy liability of those personnel was £ 2,041,179

If necessary, the above information will be updated prior to Contract award in which event the short-listed tenderers will be given an opportunity to revise or confirm their tendered prices. Additionally, the general terms and conditions of employment of MOD personnel are available in the Data Room (see Paragraph 43).”

18. On 3^rd November 1995 Aramark submitted a tender (D1/79) and on 7^th November 1995 BRAMA replied stating that the tender was of interest (E3/167).
19. On 22^nd November 1995 the MOD substantially amended their Invitation to Tender, which in due course led to amended bids by Aramark (submitted separately in respect of catering and cleaning) at the end of November 1995.
20. On 29^th November 1995 a meeting took place between Mr Reeves of Aramark and Mr Weston of BRAMA at which Mr Reeves confirmed that Aramark’s tender was “TUPE compliant” in the sense that it included provision for the effect of TUPE on those employees who would transfer to employment with Aramark in the event that they were a successful tenderer. However, as he told me, Mr Reeves was concerned about the inadequate level of information necessary to form a view on TUPE, and in letters on the following day from Aramark to BRAMA Aramark enclosed the tender certificates and (in a separate letter) specifically stated that the prices shown could be revised up or down in the light of further TUPE information.
21. On behalf of BRAMA, Mr Fraser criticised Aramark for setting out firm tender figures under cover of one letter (addressed to Mr Powell of Brown & Root Ltd.) while reserving the right to change the price in certain circumstances, by another letter (to Mr Weston, a procurement manager with BRAMA). This was described as “underhand”. I do not agree. Mr Reeves of Aramark, who sent both letters, said he sent the bid to Mr Powell because that addressee was stipulated by the invitation to tender; and the reservation as to price was sent to Mr Weston, because that was the person with whom he had been dealing on such questions. Mr Reeves agreed (indeed asserted) that he had been commercially astute to get BRAMA to accept what amounted to a qualified bid, but in my view there was nothing “underhand” about that. In any event nothing turns on this, although I think it does show (as also do other aspects of the tendering process) that TUPE matters were seen as very important to the composition and commerciality of any subcontractor’s bid.
22. On 3^rd June 1996 the MOD accepted BRAMA’s main contract tender which included the services reflected in Aramark’s subcontract tender to BRAMA.
23. A BRAMA internal tender evaluation dated 25^th June 1996 concluded that Aramark were the preferred subcontractor for the services for which it had tendered (F1/2649). It may be that BRAMA in fact reached this conclusion considerably earlier than that. However it was common ground in the case that there was no question of a contract between the parties at this stage.
24. On 26^th June 1996 Aramark submitted further tender certificates which were essentially as before, save that (a) a purported error as to liability for terminal redundancy payments appearing on one of the earlier certificates was corrected; and (b) what had previously been shown as separate prices for salaries and cleaning were aggregated.
25. On 3^rd July 1996 a meeting took place between Mr Butler of Aramark and Mr Roux of BRAMA at which Mr Butler sought further details about TUPE, but was told that such information could not be provided until a contract between BRAMA and MOD was signed.
26. On 5^th July 1996, Mr Williams of BRAMA wrote to Aramark informing them that BRAMA had been awarded the main contract, and asking for confirmation that Aramark’s tender (which had expired at the end of June) would remain “open for acceptance” until 31^st August 1996 (D1/264). On 8^th July 1996 Aramark provided this confirmation (D1/265).
27. On 11^th September 1996 BRAMA again sought confirmation that Aramark’s tender should remain open for acceptance until 30^th September 1996 (D1/278). Confirmation was given on 13^th September 1996 (D2/349).
28. On 12^th September 1996 BRAMA wrote to Aramark enclosing a draft contract, and highlighted issues yet to be resolved in a series of “bullet points” requiring discussion (D1/279). These exchanges were of course only consistent with the parties’ mutual perception that no binding contract had yet been agreed, and were also at least suggestive of the notion that both parties saw the execution of a formal written contract as the means by which they would become bound to each other.
29. On 19^th September 1996 Aramark wrote to BRAMA raising some outstanding issues including the question of provision of TUPE information about the names and current terms and conditions of employment of those MOD staff who were going to transfer to Aramark. On the following day BRAMA wrote with a list of names but no other information.
30. On 1^st October 1996 BRAMA again asked Aramark to confirm that their tender would remain open for acceptance until 11^th October 1996 (D2/354). This confirmation was given the following day (D2/355).
31. On 2^nd October 1996 an important meeting took place between Mr Williams accompanied by Mr Walker and Miss Tyrell of BRAMA, and Mr Reeves of Aramark. There is a conflict of evidence about what happened, so I must examine it carefully.
32. Mr Williams’ version of events is set out in his witness statement (F1/2549, paragraph 30). He says there that he told Mr Reeves that a complete TUPE list (i.e. of personnel to be transferred) would not be available until vesting day (i.e. the day the civilian contractor would start work, which was fixed for 31^st March 1997) as the individuals concerned could change their minds at any time up till then. He said that “Jim Reeves was obviously unhappy about the position (but) accepted that this was the best we could do in the circumstances, and he gave no indication that the problem was likely to give Aramark any real difficulty and certainly not that it might cause Aramark to walk away from the agreement”.
33. I observe that in this evidence in chief, Mr Williams seemed to stop short of saying that TUPE issues (which had for so long been an obstacle to agreement) were satisfactorily resolved at this meeting. The highest he puts it is that Mr Reeves “gave no indication that the problem was likely to give Aramark any real difficulty”.
34. When giving oral evidence, Mr Williams went further. He said when cross-examined by Mr Lord for BRAMA “We came out of the meeting and we had agreed that wording to go into the document” (Transcript 29.1.2002, p. 135, 14-17). The wording that he was referring to was the wording on the version of the draft contract subsequently sent to Aramark, which so far as material said, under the rubric “List of Personnel Transferring from BRAMA to Contractor”, “The listing of personnel transferring from BRAMA and contractor will be finalised and issued on Vesting Day”.
35. This was the wording which Mr Williams says was actually agreed and noted at the meeting of 2^nd October 1996. Mr Williams explained that he and Mr Reeves had before them a draft of the contract, and used it to mark up their agreement on outstanding points as they went along. This is how he put it:

“MR RECORDER MOXON BROWNE: … I thought you said that the draft of the contract that we had been looking at was marked up at the meeting as you agreed the various points as you went along?

A Yes.

Q I think you were saying that you know it was agreed because the contract was so marked?

A Yes.

Q Or conversely, you would not have so marked the contract. Where is that document?

A The …

Q The draft, the one that was marked?

A I do not know where it is. It is in the pack of documents somewhere.

MR LORD: I have not seen it, maybe Mr Fraser can assist, but I have not seen it.

MR RECORDER MOXON BROWNE: You are saying that you worked from the draft that had been sent to [Aramark], and you went through it, point by point, the various lacunae that had been identified in the letter of a date in September, and you went through them, as you call it, bullet point by bullet point and that if you had not killed the point, (a) you would not have so marked the contract and (b) you would have felt the need for a further meeting?

A That is right, yes.

Q But you do not know where that draft is?

A I have not seen it here so far …”

36. The draft contract referred to by Mr Williams was subsequently produced, but it did not show any signs of having been marked up in the way Mr Williams had described. I gave both counsel an opportunity to ask Mr Williams further questions about this if they wished, but neither did so. In the result, the suggested corroboration for Mr Williams’ account was lacking; and to the extent that his recollection of a concluded agreement about TUPE was linked to his recollection that the draft contract had been marked with the agreed text, the effect of that evidence was in my judgment severely weakened.
37. Mr Walker was at this meeting, but his statement does not deal with it. He did not give evidence, although his statement was admitted under the Civil Evidence Act.
38. Miss Tyrell of BRAMA was also at the meeting. Her evidence in chief was that Mr Williams explained that final details of TUPE transferees could not be given until vesting day, and that “Jim (Reeves) accepted that this was the case” (F1/2517 Paragraph 16). Miss Tyrell was cross-examined at some length about this evidence. See Transcript for 30^th January 2002 pp. 70-74. She did not paint a picture that in the course of the meeting Mr Reeves clearly evinced agreement to something he had previously regarded as a troublesome sticking point. Rather her evidence suggested that Mr Reeves had given her the impression of agreement, particularly because he did not make a major issue of his dissent: “I think if he had been so unhappy he would have flagged it up, and he did not”.
39. The totality of BRAMA’s evidence on this point left me with the impression that by early October 1996 both parties were keen to reach agreement and were confident they would do so. BRAMA were anxious to smooth over the TUPE difficulty, because they knew it would always be difficult or impossible to provide firm details of prospective transferees until the vesting date. For their part, Aramark were still anxious to get as much TUPE information as they could, anxious to preserve the right to change their prices in the light of that information, but also anxious not to give BRAMA the idea that TUPE might be a “deal-breaker” (lest BRAMA elect to contract with some alternative and more compliant tenderer, which Mr Reeves perceived as a lively risk).
40. This impression was confirmed to me by the evidence of Mr Reeves himself. I should say that in general I did not find him a completely compelling witness. He did not always answer questions very directly, and I was not convinced his recollection was always good – as he himself admitted more than once. However, he was emphatic that he made it clear at the meeting of 2^nd October 1996 that he was dissatisfied about the TUPE position. Equally his evidence suggested that he was anxious to keep the prospect of a deal alive. I therefore do not think it is likely that his attitude was confrontational: as he put it “We are still moving this along, I am still trying to secure a deal at the end”.
41. On the basis of all the evidence, I am left in no doubt that the parties were not ad idem about TUPE on 2^nd October 1996. To the extent that BRAMA thought they were, it was wishful thinking. To the extent that Aramark had encouraged that mind-set, I find that such encouragement fell well short of an agreement. This is important, because it is common ground in the case that the parties never came any closer to agreement on TUPE issues subsequently. In other words, if the parties were not ad idem on TUPE issues on 2^nd October 1996, they never were ad idem at all.
42. On 4^th October 1996 BRAMA wrote to Aramark in relation to a pensions clause, agreement on which was still outstanding (D2/356). On 7^th October 1996 Aramark confirmed that they had no comments on that clause (D2/359). It should be noted that BRAMA consider this date to be of fundamental significance because they contend that the contract was concluded (at the latest) at this stage on the basis that the parties were then “ad idem” on all issues. However, for the reasons I have given, I do not accept this. TUPE issues were still outstanding, and a contract had yet to be signed. Indeed on 11^th November 1996 BRAMA sent to Aramark a further version of the draft contract (D2/360) which is at least suggestive that even in their view no binding agreement had yet been reached.
43. On 9^th December 1996 a meeting took place between representatives of BRAMA and Aramark. There are various notes of this meeting at E5/2109, 2112, 2114 and 2118. Aramark complained about the lack of TUPE information and the difficulties this was causing. Mr Reeves further pointed out that its tender offer had lapsed without acceptance. He indicated that he wanted further TUPE information before submitting a fresh tender in the light of that information. His position was put in writing by a letter of 10^th December 1996 (D2/552).
44. In my judgment this meeting and the subsequent letters were significant. It was the first time that Aramark had indicated that not only did they feel themselves free to renegotiate the terms of the subcontract, but that absent such renegotiations they would not proceed at all. Mr Reeves was clear about this in his evidence (which was not contradicted on this issue) and his evidence was corroborated by the notes on the meeting which record phrases such as “cannot proceed without TUPE information”, (F1/2110) and “cannot sign contract” (F1/2114). One note (at F1/2112) taken by Mr Butler of Aramark) reads:

“Jim then reviewed the milestones of the tender, detailing the various extensions that had been agreed in writing. He pointed out that the tender expired on 12^th October 1996. Ian Walker (of BRAMA) claimed this was a “letter missed” and someone needs to get rapped, but Jim Reeves persisted …”

45. These notes of Mr Butler convey to me that Aramark were asserting their freedom to renegotiate the subcontract squarely in the context that BRAMA had omitted to ensure that the time for accepting Aramark’s tender was extended, and that Mr Walker, for BRAMA, was acknowledging BRAMA’s error in allowing Aramark the freedom to do so: “someone needs to get rapped”. This exchange is in my judgment only consistent with the parties’ mutual appreciation that neither would be bound until a contract was signed. Surprisingly, Mr Walker’s statement, admitted under the Civil Evidence Act, does not deal with his apparent acknowledgement of BRAMA’s error (and certainly does not contradict the note of what he is recorded as saying at this meeting).
46. The importance of a contractual signature is also emphasised by the fullest of the various notes of the meeting of 9^th December 1996, taken by one of BRAMA’s representatives (never I think firmly identified in evidence), which reads as follows:

“J(im) R(eeve) agreed to fax I(an) W(alker) with a request for specific information required to allow way ahead. A(lan) B(utler) expressed concern over the number of casuals being recruited at RAF Valley at present and that these may transfer under TUPE. A(lan) B(utler) requested assurances that they would not transfer. I(an) W(alker) restated the aim that the Contract be signed prior to the Christmas/New Year break.”

47. This note, taken by BRAMA, confirms me in my view that no contract had been concluded by 9^th December 1996, and both parties appreciated that a contract would only come into being when the document was signed in the way stipulated by the original invitation to tender. That was said to be the “aim” – not the inevitable consequence of a pre existing agreement.
48. It is not suggested by the Claimant that any agreement was reached on any date later than 9^th December 1996 and accordingly, in the context of the preliminary issue which I have to try, it is not necessary to consider the history further.

CONCLUSION

49. Since in my judgment the parties were never ad idem as to the terms of the proposed subcontract, it is unnecessary to consider whether the requirement for either accepting Aramark’s tender in writing, or executing a formal subcontract, was waived. However I should say, as is perhaps clear from my recitation of the facts above, that I find no evidence whatever of such waiver. On the contrary, both parties appear to have believed throughout that no contract would come into being until such was formally executed. This was stipulated at the outset by the invitation to tender, and the subsequent repeated references to it show that it remained in the forefront of the parties’ minds as the means by which they would contract if and when they were ready to do so.
50. I have no doubt that the evidence of BRAMA’s witnesses that the parties were in fact entirely agreed and bound to one another by a date in early October 1996 (i.e. when the matter of pensions was resolved) was given honestly and sincerely. However this evidence is plainly at odds with the contemporaneous notes and documents, which show a keen appreciation of the distinction between an understanding between parties that they will contract, and their formal commitment to a contract. I conclude that in late 1996 BRAMA’s personnel were convinced that Aramark would contract with them, and that their surprise and dismay when Aramark withdrew was entirely unfeigned. It is easy to see how that surprise and disappointment may have become translated into a belief that Aramark were in breach of contract. But in my judgment, for the reasons I have given, they were not.