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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Traditional Structures Ltd v HW Construction Ltd [2010] EWHC 1530 (TCC) (26 May 2010)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2010/1530.html
Cite as: [2010] EWHC 1530 (TCC), [2010] CILL 2899
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B e f o r e :
____________________
| TRADITIONAL STRUCTURES LIMITED | Claimant | |
| and | ||
| H W CONSTRUCTION LIMITED | Defendant |
____________________
Crown Copyright ©
- Background Facts
This claim arises out of a sub-contract between the Claimant and the Defendant which arose from the following circumstances.
- In 2008 the Defendant was engaged as main contractor in connection with the construction of the new business development centre at what is now known as the Birmingham Metropolitan College situated in Sutton Coldfield. The Defendant sought to sub-contract the supply and installation of structural steelwork and roof planning to the Claimant.
- By email dated 19 March 2008, David Henscoe, the Managing Director of the Defendant, wrote to Philip Kelsall the Sales Director of the Claimant, as follows:-
- Mr Henscoe also attached a copy of the architect's drawing number 800-C501 (which is at page 665 of Bundle E1). Within the notes to that drawing, under the heading "Main Roof" is the following text:-
- On 10 April 2008, Mr Henscoe sent Mr Kelsall a further email as follows:-
- Then on 15 April 2008 Mr Henscoe sent Mr Kelsall a chaser as follows:-
- The Tender
- The text of the version of the tender retained by the Claimant includes the following. The first paragraph on internal page 1 is headed "Re Sutton Coldfield College" and reads:
- However, the text of the version of the tender which the Claimant sent to the Defendant did not contain the last line of internal page 3, with the result that the final paragraph on that page read as follows:-
- A fortnight later, having submitted the Claimant's tender for the main contractor, on 29 April 2008 Mr Henscoe sent Mr Kelsall an email as follows:-
- It appears there was then a telephone conversation between Mr Henscoe and Mr Kelsall following which on 02 May 2008 Mr Henscoe sent Mr Kelsall a further email as follows:
- On 12 June 2008 Mr Henscoe sent Mr Kelsall the following email:-
- On 01 July 2008 Duncan Freeman of the Claimant sent Mr Henscoe of the Defendant the following email:-
- Then on 02 July 2008 Dominic Hopkins, the Estimator employed by the Claimant sent Mr Henscoe of the Defendant a letter, the opening paragraph of which reads as follows:-
- That letter engendered an instant protest from Mr Henscoe (who by then was abroad on holiday). He sent an email to Duncan Freeman as follows:-
- The following day Mr Kelsall of the Claimant responded by email to Mr Henscoe as follows:-
- Mr Henscoe replied the following day 04 July 2008 as follows:-
- Finally, on 14 July 2008 Mr Henscoe wrote to Mr Kelsall as follows:-
- The Dispute
- The Defendant's case is that it received the Claimant's tender containing one price, which it accepted for all the work for which the Defendant had invited the Claimant to tender.
- In her opening submissions, both written and as expanded in oral submission, Mrs Pigott for the Claimant sought to advance three separate heads of claim. The first two were alternative bases for making a claim for a reasonable price for the cladding work; the third was for rectification of the sub-contract, the document sought to be rectified being the tender, by adding the missing last line.
- The first basis for the claim for a reasonable price for the cladding works was a claim in contract on the basis that, while there was an express term as to price in respect of the steelwork, there was no express term as to advice in respect of the cladding, with the consequence that there was an implied term of the contract that the Defendant would pay a reasonable charge for the supply of the cladding pursuant to the provisions of Section 15 of the Supply of Goods and Services Act 1982. Mrs Pigott initially formulated the second basis of the claim for a reasonable price on the premise that the parties had not concluded a contract. However, in the course of her oral opening submissions, she varied that submission, and submitted that "an implied contract" had arisen, giving rise to an entitlement for a reasonable price again by reason of the application of Section 15 of the 1982 Act. Mrs Pigott further submitted that the position was analogous to that which obtained in British Steel Corporation -v- Cleveland Bridge & Engineering Company Ltd [1984] 1 All ER 504.
- However, in her closing submissions, Mrs Pigott made it expressly clear that the Claimant did not advance any claim in restitution, whether categorised as a claim in quasi contract or otherwise, noting that the Claimant had deleted its original claim in unjust enrichment and restitution contained in paragraph 23 of the original Particulars of Claim. Mrs Pigott also accepted that there was a very substantial degree of overlap between the two bases advanced for making a claim for a reasonable price for the cladding work. Mrs Pigott finally submitted that the first basis was the essence of the claim for a reasonable price for the cladding work.
- In my judgment, given the Claimant has now abandoned any claim in restitution, there is no, or no material, difference between the two alternative bases advanced at the outset of the trial by the Claimant for a reasonable price for the cladding work (even if these can be categorised as alternative basis at all). Properly construed, in my judgment this claim comprises two separate heads of claim: the first being a claim for a reasonable price for the cladding works, on the basis of footing that there was a completed contract between the parties; and the second being a claim for rectification.
- Rectification for Unilateral Mistake
- On behalf of the Defendant, Mr Hedley, agreed that the relevant principles for a claim for rectification on the ground of unilateral mistake were as set out in the Judgment of Buckley LJ in Thomas Bates.
- I therefore accept Buckley LJ's summary at page 516 A-B of his judgment in Thomas Bates of the necessary elements which a Claimant has to establish in order to maintain a claim for rectification on the ground of unilateral mistake, and will apply that statement of the law to the facts of this case.
- As regards the second of those four elements, which concerns the degree of knowledge on the part of B Mrs Pigott submitted that the starting point was the analysis of Peter Gibson J (as he then was) in Baden -v- Société Générale pour Favoriser Le Développement du Commerce et De L'Industrie en France S.A [1993] 1 WLR 509, which Millett J (as he then was) cited with approval in Agip (Africa) Ltd -v- Jackson [1990] Ch 265 as follows:
- Mrs Pigott then referred to the Judgment of Stuart-Smith LJ in Commission for the Newtowns -v- Cooper (Great Britain) Ltd [1995] CH 259, where he cited the above judgment with approval, and went on to hold at page 281 D that:-
- Again, Mr Hedley on behalf of the Defendant agreed this was an accurate statement of the relevant legal principles.
- In CNT -v- Cooper, Evans LJ considered the circumstances in which rectification would be ordered as a matter of legal principle, and held at page 292 E that the conduct of the Defendant in that case:-
- I have also been referred to the article by Professor McLauchlan entitled the "Drastic Remedy of Rectification for Unilateral Mistake" (2008) 124 LQR 608, in which Professor McLauchlan proposes at page 624 an alternative basis for the Court granting a rectification on the ground of unilateral mistake, namely "....whether in all the circumstances that conduct led the Claimant reasonably to believe that the terms he or she intended had been accepted by the Defendant".
- I have come to the view that such a change of approach is a matter more properly to be effected by an appellate court, rather than a court of first instance. I therefore accept that categories (i), (ii) and (iii) of knowledge, as described by Peter Gibson J in Baden, are the relevant categories of knowledge for the purposes of the claim for rectification for unilateral mistake. It is thus necessary for the Claimant to establish that Mr Henscoe of the Defendant had one of these three categories of actual knowledge in the present case in order to succeed under this head of claim. If the Claimant does establish Mr Henscoe had one of these categories of actual knowledge, it is then necessary for the court to stand back, and consider whether the conduct in question was "dishonest" in the sense explained by Millet J in Agip, or "unconscionable" in the sense explained by Evans LJ in CNT -v- Cooper, and thus was conduct which ventured into territory where the court is entitled to intervene.
- Standard of Proof
- The Critical Findings of Fact
- In order to assess that evidence it is necessary to go back to the version of the tender as received by Mr Henscoe. While it is right to note that the word "price" is used in the singular on four occasions in that letter, in my judgment that fact of itself is not decisive of the proper construction of the letter. Instead, the interplay of the opening paragraph under the heading "Scope of Supply" and the last paragraph on page 3 under the heading "Prices" is central to the proper construction of the letter.
- The Scope of Supply is clear: there were two elements of the work and/or service to be supplied: (1) the design, fabrication and erection of the structural steelwork; and (2) the drawings and installation of the roof cladding. Turning to the paragraph headed "Prices" (in the plural): the following text of the paragraph makes it expressly clear that the prices are in respect of both elements of the work and services to be supplied:-
- I therefore reject Mr Henscoe's account of how he read the tender in the form he received on 15 April 2008 I will consider the consequences which flow from that conclusion below.
- The second critical event relates to the query Mr Henscoe raised about price on 29 April 2008 (page 675 bundle E1). Mr Henscoe's case on this is set out in paragraph 13 of his witness statement where he stated:-
- The Claimant's case is that this email was couched in ambiguous terms: see paragraph 27 (f) of the Amended Particulars of Claim.
- Among the documents Mr Henscoe had enclosed with his invitation to tender were the architect's drawings SK01 and SK02, to which the structural engineer had added manuscript notes or additions. The structural engineer's description of sketch SK01 (page 670 of Bundle E1) was "ground floor plan showing beams over N.T.S." The structural engineer's description of drawing SK02 was "first floor plan showing beams over N.T.S."
- To my mind, Mr Henscoe's reference to "floor support beams" in his email enquiry of 29 April 2008 was not only intended by him, but also could only reasonably have been read, as a reference to the structural steelwork. Further, to my mind, Mr Henscoe's reference to the "roof structure" was also intended by him, and could only reasonably have been read as a reference to the structural elements of the roof, and not the cladding, which do not form any part of the structural element of the works. The contrast with Mr Henscoe's language in his earlier email of 15 April 2008, where he asked "will you be able to provide a cost for the steelwork and cladding on the above, as we have to submit our tender on Friday 18 April" (my underlining) is palpable, as is the contrast with his immediately subsequent email of 02 May 2008, when he wrote:
- Shortly before he wrote he wrote his email of 29 August 2008, Mr Henscoe had submitted his tender for the main contract works, which is at page 836 etc behind Tab 65 in bundle E1. Item F on page 7/27 provides:-
- Against that background, I reject Mr Henscoe's assertion that he intended the "roof structure" in his email of 29 April 2008 to include or refer to the roof cladding. Such a construction is patently inconsistent with the use of the term "structures" in item H on page 8/27 of the main contract bills of quantities, which Mr Henscoe had just completed at the time he wrote this email; and it is further inconsistent with the use of "structural steelwork" in both items F on page 7/27 and item H on page 8/27.
- The third critical event relates to Mr Henscoe's email of 02 May 2008 (page 677 in Bundle E1) whereby he accepted, or purported to accept, the Claimant's tender. Mr Henscoe's case is set out in paragraph 16 of his first witness statement, where he stated as follows:-
- In my judgment the omission of any reference to the price in this email, accepting or purporting to accept the Claimant's tender, was distinctly unusual, and as such calls for a sensible and/or rational explanation. Mr Henscoe's explanation is that it "... must have been because of my earlier telephone conversation with Phil Kelsall". However, in paragraph 14 of his first witness statement he stated as follows:-
- Mr Kelsall's evidence on this issue was as follows. In paragraph 14 of his first witness statement (page 444 in bundle D) he stated:-
- I find Mr Henscoe's explanation of the reason why he omitted any reference to price in this email both unpersuasive and unsatisfactory. There is an inherent inconsistence in Mr Henscoe's recollection of his conversation with Mr Kelsall. To the extent it is necessary to do so, I prefer Mr Kelsall's account of this conversation to that of Mr Henscoe, and find that Mr Henscoe did not specifically refer to the actual amount of the price for the work and services to be done; instead he referred to his concerns about the Claimant holding its price, and the very tight timescale involved.
- The fourth critical event related to Mr Henscoe's immediate response on 02 July 2008 to Dominic Hopkins' letter setting out revised prices. In the last sentence of his email response Mr Henscoe wrote:-
- I find Mr Henscoe's explanation of how he came to write his last sentence of this email entirely unconvincing, and I reject it. In my judgment the plain and obvious reason why Mr Henscoe made specific reference to there having been other tenders for this work (which Mr Henscoe accepted was not true) was to advance a reason of why a price of £37,573.43 plus VAT for both elements of the work and services to be performed was, on its face, a reasonable price for the entirety of such work. That means Mr Henscoe, albeit in the heat of the moment, was prepared to tell a lie in order to support or bolster his case that the parties had concluded a contract at a price of £37,573.43 plus VAT for both elements of the work and services to be performed.
- It is also to be recalled that in the interim i.e. after accepting the Claimant's tender and submitting the Defendant's own tender for the main contract works, but before the exchange of correspondence which occurred on 02 July 2008, on or about 27 May 2008 Mr Henscoe had received another tender figure from other sub-contractors, Torclad who had sent him their figure for the cladding work for purposes of information. Torclad's tender figure for the cladding work (i.e. a figure which they had tendered to other main contractors) was £30,152: see page 827 behind Tab 64 in Bundle E1. Mr Henscoe was asked about the Torclad figure in cross-examination:
- I find that, albeit Mr Henscoe did indeed receive the Torclad figure after he had accepted, or purported to accept, the Claimant's tender, and submitted the Defendant's own tender for the main contract works, he was nonetheless appraised of Torclad's figure, and thus with effect from 27 May 2008 knew or ought to have known that another sub-contractor's price for the cladding works alone was of the order of £30,000.
- Previous Course of Dealing
- In paragraph 15 of his written submissions, Mr Hadley on behalf of the Defendant submitted that there had been five relevant previous transactions, and further:
- In his cross-examination, Mr Philip Hadley of the Claimant accepted there had been five such transactions between the Claimant and the Defendant over a 10 year period. It is not disputed that the most recent transaction (namely the job relating to Essington Fruit Farm: see page 645 of Bundle E1) had occurred some 2 years or so before this project at the Business Development Centre in Sutton Coldfield.
- In his cross-examination Mr Kelsall stated as follows:-
- Dominic Hopkins
- Conclusions Re the Claim for Rectification for Unilateral Mistake
- By reference to the categories of knowledge originally identified by Peter Gibson J in Baden, I find that Mr Henscoe had actual knowledge within each of categories (i), (ii) and (iii) as there explained. Working upwards, I find that Mr Henscoe wilfully and recklessly failed to enquire of the Claimant whether the price of £37,573.43 plus VAT related to both the structural steelwork and the cladding elements of the work for which the Claimant was tendering, which enquiry in my judgment an honest and reasonable man would have made in the circumstances of this case. Further and/or in the alternative, I also find that Mr Henscoe shut his eyes to the obvious, the obvious being that the price quoted was demonstrably or self evidently a price that related only to structural steelwork, and that the Claimant had not included a separate price for the cladding. Yet further and in the further alternative, I find that Mr Henscoe simply had actual knowledge, in the sense that he actually knew or appreciated that the Claimant had made such a mistake.
- Finally, I stand back and ask the question whether, in all the circumstances of the case, such behaviour was "dishonest" or "unconscionable". I am quite satisfied that Mr Henscoe's behaviour answers the description "unconscionable" in the manner described by Evans LJ in CNT -v- Cooper, in particular that it went beyond the boundaries of fair dealing, even having regard to the fact that the parties here were involved in an arms length commercial transaction.
- The Alternative Claim for a Reasonable Payment for the Cladding Work
- Putting to one side matters relating to rectification, save for the presence of an express term as to the price for the cladding work, all the details necessary for the parties to conclude a contract were present in this case. The work to be done and the goods to be described were described in detail; those details included the following: a specific provision was made as regards the nature and quality of the goods to be supplied (e.g. the finish); a specific provision was made in respect of matters relating to the carrying out of the work (e.g. erection and scaffolding); and specific provision was made as regards particular commercial matters (e.g. title of goods and insurance). In my judgment everything, save an express term for the price of the cladding work, was specified in sufficient detail for the parties to conclude a contract. Furthermore, the Claimant went ahead and carried out and completed all the work as requested.
- At paragraph 2-113 of "Chitty on Contracts" (30th edition 2008) summarises the position that comes into operation in such circumstances. The first part of that paragraph provides as follows:-
- The second part of that paragraph sets out the position which obtains if the parties do not conclude the contract:-
- As regards quantum, the parties have agreed that a reasonable price for the cladding work as at the date of tender was £27,892.70 and that a reasonable price for the cladding work as completed was £34,754.17.
- Conclusion
"Could you please provide a quotation for the steelwork and roof cladding as per the attachments. Quotation required by 15 April 2008 please if you have any queries please contact me."
The documents attached (in fact to an immediately following email) are set out in Tab 61 of File E1 of the Trial Bundles. They include the following items. First, under the heading "Frame" is the text:
"mild steel beams and columns to form a new structural framing as required including all angles, junctions, plates, bolts and the like; all in accordance with structural engineers details and specification".
There are then listed a number of beams and columns with detailed dimensions. Second, under the heading "roof" is the text:
"mild steel roof truss beams, perlins and attendant structure to form new structural framing to roof as required including all angles, junctions, plates bolts and the like; all in accordance with structural engineer details and specification".
There are then set out the dimensions of the roof trusses. Those details were taken from the specification the employer had previously sent to the Defendant in connection with the employer's invitation to the Defendant to tender for the main contract works (which are under Tab 65).
"New monopitch roof construction comprising of steel rafters and perlins to engineer's details. 110 mm thick Kingspan Kingzip insulated standing seam roof system with cover width of 1000 mm aluminium PVDF colour coated facing continuous rich to eaves panels bolted to perlins in accordance with manufacturer's details. Provide profiled verge and eaves cladding as detailed." (That is a reference to roof cladding).
"Phil
We have today received revised drawings and specification for the above.
A fire escape has now been added, steelwork slightly amended, and the roof covering changed to Kingspan Kingzip insulated standing seam composite roofing system, 110 thick; XL200 colour coated facing in Gull Wing Grey, all as per spec attached.
All drawings are attached.
Please advise if this will create a delay.
Regards
Dave Henscoe
HW Construction Ltd"
"PhilWill you be able to provide a cost for the steelwork and cladding on the above, as we have to submit our tender on Friday 18 April.
Regards
David Henscoe
H W Construction Ltd"
It was thus against that background that Dominic Hopkins, an estimator employed by the Claimant, prepared the Claimant's tender which is dated 15 April 2008. There are, however, two versions of this tender:
(1) The first is the version which the Claimant sent to the Defendant, initially by fax and subsequently by sending a hard copy in the post. That document is between pages 590 and 593 of bundle E1. It is also exhibited to the Defence (pages 49 to 52 of Bundle A).
(2) The second is the version which the Claimant retained on its file. That document is at pages 585 to 588 of Bundle E1. It is also exhibited to the Amended Particulars of Claim (pages 80 to 84 of the Bundle A).
The two versions are identical save for one crucial difference: the last line on internal page 3 of the document which the Claimant retained was missing from the version of the document which the Claimant faxed and subsequently posted to the Defendant.
"With reference to the above project we thank you for your recent enquiry and have pleasure in submitting our price for your consideration as follows".
The second paragraph on internal page 1 is headed "Scope of Supply" and reads:
"To design steel to steel connections based on loadings supplied by the Structural Engineer, to prepare fabrication detail drg's, supply all labour, materials and plant necessary to fabricate and erect the structural steel for the above onto foundations laid by others.To prepare detailed roof, fascia and soffit cladding drg's, supply all labour, materials and plant necessary to complete these works."
There are then various paragraphs headed "Basis for Estimate", "Finish", "Bolts and Nuts", "Test Certificates" and "Site Dimensions".
Then on internal page 2, the third paragraph is headed "Claddings" and reads:
"Roof
110mm thick Kingspan Kingzip composite panel constructed with a 0.5mm thick XL200 coated steel outer sheet (colour gull grey) with 110mm LPCB EXT-B core insulation and a 0.4mm white liner to give a 'U' value of 0.25 W/M2 oC.
Fascia & Soffit
Horizontally laid Kingspan Mini-Micro KS1000MM composite panel with a 0.63 mm thick prisma coated steel outer with 70mm LPCB EXT-B core insulation and a 0.4mm white liner.
There are then paragraphs headed "Rainwater Goods" and "Trims and Flashings".
Next is a paragraph headed "Price Excludes", under which heading are then set out 19 separate items.
Then on internal page 3 is a paragraph headed "Erection", the fourth sub paragraph of which reads:
"Our price is based on one visit to site to complete the erection of all steelwork."
The next paragraph is headed "Scaffolding", the first sub paragraph of which reads:
"Our price includes for the provision of all necessary perimeter edge protection to the roof area only, roof safety netting and hydraulic access platforms required to carry out the work in a safe and professional manner, we assume a suitable hard-core ground condition extending 2.4m from the building perimeter for use of the above."
There are then two further paragraphs headed "Title of Goods" and "Insurance" and finally on internal page 3 is a paragraph headed "Prices", and reads:
"For the supply and delivery of structural steelwork and claddings erected onto prepared foundations (by others) to form the proposed buildings as detailed above, our budget prices would be:-Steelwork £37,573.43 + VAT
Claddings £32,365.83 + VATOn internal page 4 is a paragraph headed "Terms", the text of which reads "The above prices are Nett", and finally a paragraph headed "Payment".
"PricesFor the supply and delivery of structural steelwork and claddings erected onto prepared foundations (by others) to form the proposed buildings as detailed above, our budget prices would be:
Steelwork £37,573.43 + VAT"
"PhilCould you please confirm how long your quotation of £37,573.43 plus VAT, for the floor support beams and roof structure is open for. We also need to know what your lead time is, and anticipated manufacturing period is, as at present we are in line for the Business Centre contract, which is due to start on 19 May 2008, and we submitted your quotation with our tender.
Please confirm above info as soon as possible as I have a pre-contract meeting t tomorrow, 30th April 2008.
Regards
Dave Henscoe"
"PhilFollowing our discussions at the beginning of the week, I can confirm that we have been awarded the above contract.
We would therefore ask you to accept this email as our order to you to supply and fit the steelwork and roof cladding as per your quotation ref: DH/Q9054 ..."
"Please find attached copies of extract from B of Q's for above contract.Any offers to make savings appreciated.
Regards
David Henscoe
Director"
"DaveSteel start date 9/07/08, fixings (supply & fix) to roof padstones by others.
Roof Sheeting w/c 14/07/08
Regards
Duncan"
"Following many discussions between Traditional Structures, yourself, the Architect and The Consulting Engineer, I am writing to advise as to our revised prices for incorporating variations to the steelwork and cladding at the above contract.Steelwork £41,823.00 + VAT
Claddings £34,815.00 + VAT
"DuncanWe have today received a fax from Dominic Hopkins, but as I am on holiday I am unable to reply, as I do not have his email. Could you therefore pass this email to him.
Dominic
I have been informed of your revised costs for the above contract, and am absolutely flabbergasted at the costs.
Your quotation which I accepted in writing 2 months ago was for a total of £38,000.00, I don't have the exact figure, but the £38 is right. Now you are talking of over £76,000.00. I accepted your written quotation in good faith, even printing the figure on the order. You are not telling me there have been changes to double the cost, because I don't believe it. Even at the time of tendering your competitors were only just above your costs.
Regards
Dave Henscoe
HW Construction Ltd"
"Morning Dave,Further to your previous email, our quotation Q9054 dated 15th April 2008 (attached) clearly states the prices are steelwork £37,573.43 and cladding £32,365.83, giving a total figure of £69,939.26. Your order confirms acceptance of these costs "I can confirm that we have been awarded the above contract. We would therefore ask you to accept this email as our order to you to supply and fit the steelwork and roof cladding as per your quotation ref: DH/Q9054.
We trust that this is just a blond moment on your part and the correct figures have been incorporated within your costs to the client.
Kind Regards
Phil Kelsall"
"We are in receipt of your email and copy quotation for Sutton Coldfield College. There seems to be a problem between our hard copy and your copy attached to your email dated yesterday's date. The two copies are not the same. The quotation we received from you on 15 April 2008 (see copy attached) has only one figure yet yours now seems to have two. Our copy is clearly signed by Dominic Hopkins and so must have been checked prior to sending. We cannot be held responsible for errors in your own organisation, although this problem affects both parties.I propose we have a meeting upon my return, either on site or at your office, on Wednesday 9 July 2008 to try and resolve the situation. We have had a good working relationship with you for over 14 years and wish to sort this out amicably without jeopardising the relationship or this contract.
We would expect the current deliveries/assemblies to continue as programmed, during this period, to ensure we are not in beach of our own contract with the College.
Regards
David Henscoe
Director"
"As you are aware, the quotation you supplied and we accepted for this order was in the sum of £37,573.43 + VAT. You are now demanding an additional payment of £32,365.83 + VAT as per your new quotation. You are also aware from various conversations, that we have contractual deadlines within the main contract together with a £2,500 per week penalty clause for any delay. As a result, we have no option but to place the order with you as no-one else will be able to take over the contract in the time frame available. Accordingly, we are placing the enclosed order with yourselves, but are doing so without prejudice to our contentions that in fact the correct contractual sum for this order is £37,573.43. We reserve our position entirely to bring a claim against your in respect of this matter.I look forward to hearing from you with a firm supply date.
Yours faithfully
David Henscoe
for H W Construction Ltd"
The essence of the dispute is founded on the difference between the two versions of the tender. The Claimant's case is that Dominic Hopkins made a mistake when he sent the Defendant the tender in a form which omitted the last line of page 3. As a result, the Claimant seeks a reasonable price for the cladding element of the works and/or rectification of the sub-contract on the grounds of unilateral mistake.
In paragraphs 28 and 29 of her written submissions, Mrs Pigott submitted that the relevant principles of this head of claim are those explained by Buckley LJ in Thomas Bates & Son Ltd -v- Windhams (Lingerie) [1981] 1 WLR 505, as more recently endorsed by Peter Gibson LJ in George Wimpey UK Ltd -v- V I Construction Ltd [2005] EWCA Civ 77. In Thomas Bates, Buckley LJ held at page 514 H - 516 B as follows:-
"The landlords claim rectification in the present case on the basis of a principle enunciated by Pennycuick J. in A Roberts & Co Ltd -v- Leicestershire County Council [1961] Ch 555, 570 where he said:'The second ground rests upon the principle that a party is entitled to rectification of a contract upon proof that he believed a particular term to be included in the contract, and that the other party concluded the contract with the omission or a variation of that term in the knowledge that the first party believed the term to be included ....The principle is stated in Snell on Equity, 25th edition (1960), p 569 as follows: 'By what appears to be a species of equitable estoppel, if one party to a transaction knows that the instrument contains a mistake in his favour but does nothing to correct it, he (and those claiming under him) will be precluded from resisting rectification on the ground that the mistake is unilateral and not common.'"Of course if a document is executed in circumstance in which one party realises that in some respect it does not accurately reflect what down to that moment had been the common intentions of the parties, it cannot be said that the document is executed under a common mistake, because the party who has realised the mistake is no longer labouring under the mistake. There may be cases in which the principle enunciated by Pennycuick J. applies although there is no prior common intention, but we are not, I think, concerned with such a case here, for it seems to me, upon the facts that I have travelled through, that it is established that the parties had a common intention down to the time when Mr Avon realised the mistake in the terms of the lease, a common intention that the rent in respect of any period after the first five years should be agreed or, in default of agreement, fixed by an arbitrator.
The principle so enunciated by Pennycuick J. was referred to, with approval, in this court in Riverlate Properties Ltd -v- Paul [1975] Ch. 133, where Russell L.J. reading the judgment of the court, said, at p. 140:
"It may be that the original conception of reformation of an instrument by rectification was based solely upon common mistake: but certainly in these days rectification may be based upon such knowledge on the part of the lessee: see, for example, A Roberts & Co. Ltd -v- Leicestershire County Council [1961] Ch. 555. Whether there was in any particular case knowledge of the intention and mistake of the other party must be a question of fact to be decided upon the evidence. Basically it appears to us that it must be such as to involve the lessee in a degree of sharp practice."In that case the lessee against whom the lessor sought to rectify a lease was held to have had no such knowledge as would have brought the doctrine into play. The reference to "sharp practice" may thus be said to have been an obiter dictum. Undoubtedly I think in any such case the conduct of the defendant must be such as to make it inequitable that he should be allowed to object to the rectification of the document. If this necessarily implies some measure of "sharp practice", so be it; but for my part I think that the doctrine is one which depends more upon the equity of the position. The graver the character of the conduct involved, no doubt the heavier the burden of proof may be; but, in my view, the conduct must be such as to affect the conscience of the party who has suppressed the fact that he has recognised the presence of a mistake.
For this doctrine - that is to say the doctrine of A Roberts & Co Ltd -v- Leicestershire County Council - to apply I think it must be shown: first, that one party A erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term or provision which, mistakenly, it did contain; secondly, that the other party B was aware of the omission or the inclusion and that it was due to a mistake on the part of A; thirdly, that B has omitted to draw the mistake to the notice of A. And I think there must be a fourth element involved, namely, that the mistake must be one calculated to benefit B. If these requirements are satisfied, the court may regard it as inequitable to allow B to resist rectification to give effect to A's intention on the ground that the mistake was not, at the time of execution of the document, a mutual mistake."
In George Wimpey Peter Gibson LJ, having cited much of the above passage of Buckley LJs Judgment in Thomas Bates, concluded in paragraph 38:-
"I accept that as the authoritative statement of the requirements for a rectification for unilateral mistake."
"Knowledge may be provided affirmatively or inferred from circumstances. The various mental states which may be involved were analysed by Peter Gibson J. in Baden's case [1993] 1 WLR 509 as comprising: (i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; and (v) knowledge of circumstances which would put an honest and reasonable man on inquiry. According to Peter Gibson J., a person in category (ii) or (iii) will be taken to have actual knowledge, while a person in categories (iv) or (v) has constructive notice only. I gratefully adopt the classification but would warn against over refinement or a too ready assumption that categories (iv) or (v) are necessarily cases of constructive notice only. The true distinction is between honesty and dishonesty. It is essentially a jury question. If a man does not draw the obvious inferences or make the obvious inquiries, the question is: why not? If it is because, however foolishly, he did not suspect wrongdoing or, having suspected it, had his suspicions allayed, however unreasonably, that is one thing. But if he did suspect wrongdoing yet failed to make inquiries because 'he did not want to know' (category (ii)) or because he regarded it as 'none of his business' (category (iii), that is quite another. Such conduct is dishonest, and those who are guilty of it cannot complain if, for the purpose of civil liberty, they are treated as if they had actual knowledge."
"The (Trial) Judge appears ... to be holding that only Peter Gibson Js category (i) is sufficient. But with all due respect to him, this is not so; categories (ii) and (iii) also constitute actual knowledge in law", actual knowledge as defined within those three categories being the necessary ingredient to find a claim for rescission on the grounds of unilateral mistake."
"... In my judgment, therefore, its conduct was "unconscionable" and beyond the boundaries of fair dealing even in an arm's length commercial negotiation. It ventured into territory where, in my judgment, the court is entitled to intervene; and there is nothing unfair in holding them to the agreement which, to its knowledge, was the only one which M.K.'s representatives intended to make. I would have no hesitation, if necessary, in holding that "knowledge" in this context includes "shut-eye" knowledge (see Compania Maritima San Basilio S. A -v- Oceanus Mutual Underwriting Association (Bermuda) Ltd. [1977] Q.B 49) within the second and third categories described by Peter Gibson J in Baden …, cited by Stuart-Smith LJ was "unconscionable" and beyond the boundaries of fair dealing even in an arm's length commercial negotiation. It ventured into territory where, in my judgment, the court is entitled to intervene; and there is nothing unfair in holding them to the agreement which, to its knowledge, was the only which MKs representatives intended to make. I would have no hesitation, if necessary, in holding that "knowledge" in this context includes "shut-eye" knowledge ... within the second and third categories described by Peter Gibson J in Baden ...".
In paragraph 21 (d) of his written submissions, Mr Hedley submitted that "although the Standard of Proof required in an action for rectification is the normal civil standard of the balance of probabilities, convincing proof is required to counteract the cogent evidence of the intention displayed by the instrument itself ...", citing Thomas Bates and George Wimpey as authorities for that proposition. Mr Hedley developed that submission in his closing oral submissions, by referring to the well known passage of the speech of Lord Nicholls in Re H (Minors) [1966] 2 WR 8 between pages 23 F and 24 C, in particular the paragraph at page 24 A-C where Lord Nicholls stated as follows:-
"Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established. Ungoed-Thomas J expressed this neatly in Re Dellow's Will Trusts [1964] 1 WLR 451, 455: "The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it."
I accept Mr Headley's submission that that part of Lord Nicholls' speech remains the authoritative statement of the law as regards the appropriate standard of proof which applies in a case such as the present. I shall therefore apply Lord Nicholls' statement of the law in this regard when making the necessary findings of fact in this case.
In my judgment the following were the critical events in this case. The first relates to the receipt by Mr Henscoe of the tender on 15 April 2008, and involves the proper construction of that document. Mr Henscoe's case is set out in paragraph 17 of his first witness statement, where he states:-
"I understand that TS is now saying that I must have known their price was too low to be for both steelwork and cladding. The truth is I did not think the price was too low and I was not aware of any error in the price. I believed that the price of £37,573.43 plus VAT included steelwork, cladding and gutters and rain water goods. As I have said, I have no real idea of the cost of steelwork and cladding and therefore rely upon the experts to advise me upon this. I could understand the Claimants point of view if for example the quote had said £7,573.43 plus VAT (namely omitted the 3). Clearly I would have realised that this was too low a sum for the work involved and I would have queried it. However, nearly £40,000 plus VAT did not strike me as being unmistakably too low. The quotation received from the Claimant did not ring any alarm bells at all."
He was cross-examined about that.
Q: Your case is that you understood the word "steelwork" to mean both steelwork and cladding, and all peripheral items; is that correct?
A: Yes.
Q: And you were entitled to understand that, because it was reasonable and based on the terms of the letter?
A: Yes.
Q: The Claimant says that you are an experienced building contractor with a history of dealing with this contractor?
A: Yes.
Q: And that it is inconceivable that a man of your experience could have mistaken the word "steelwork" as including a reference to roof cladding, rain water goods, trims and the like?
A: If I get a quotation through, that has all the scope of what is being supplied at the beginning, I check the bottom figure and that is the price I put in I have a tender with a price on it. I am not around to check the quotations that come into me."
"For the supply and delivery of structural steelwork and cladding erected onto prepared foundations (by others) to form the proposed buildings as detailed above, our budget prices would be:- "
Note in particular the last phrase "... our budget prices would be …". The word 'prices' is again in the plural. There is then the line in bold: "Steelwork ... £37,573.43 plus VAT."
In my judgment, any reasonable reader of that paragraph would have appreciated immediately that the figure of £37,573.43 plus VAT related only to the structural steelwork element of the work and services to be supplied, and would thus have been put on enquiry as to what was the price for the cladding element of that work and those services.
"... I asked (the Claimant) how long their price of £37,573.43 plus VAT for the floor support beams and roof structure was open for. I should clarify that my use of the terminology "floor support beams and roof structure" meant the steelwork and cladding (this being part of the roof structure)."
In paragraph 29 of his supplemental witness statement (page 550 of bundle D) Mr Henscoe stated:-
"... It is very easy to pick over words and terminology after the event in order to try to turn them into something that they are not. As I stated in my first witness statement, I was referring to steelwork and cladding. I do not know why I used the words that I did use. There was certainly nothing underhanded or illicit intended in my choice of words. The reason I did not raise any issue with the Claimant was because I was unaware that there was an issue or mistake in the Claimant's quotation."
Mr Henscoe was cross-examined about this:-
"Q: Mr Hadley believes you used the words "floor support beams and roof structure" to refer to the structural steelwork. Is that what you intended?A: No.
Q: Can you explain why you moved away from the language used in the invitation to tender?
A: One is roof structure, and the other is support.
Q: Refer to paragraph 13 of your first witness statement. Do you accept that your email of 29 April 2008 is consistent with the price for steelwork only?
A: It is for everything: steelwork and roof structure."
"We would therefore ask you to accept this email as our order to you to supply and fit the steelwork and roof cladding as per your quotation ref DH/Q/9054" (again my underlining).
"Mild steel beams in columns to form new structural framing as required including all angles, junctions, plates, bolts and the like; all in accordance with structural engineers details and specification."
Item H on page 8/27 provides:-
"Mild steel roof truss beams, perlins and attendant structure to form new structural framing to roof as required including all angles, junctions, plates, bolts and the like; all in accordance with structural engineers details and specifications."
Those two items comprise the structural steelwork element of these works. Items J and K on page 8/27 and items A, B, C, E and F on page 9/27 relate to the roof cladding. It is to be noted that the language of item F on page 7/27 relates to "... new structural framing as required...", and that similar language is used in item H on page 8/27:
"... attendant structure to form new structural framing to roof as required ..." i.e. both items use the expression "structural framing", the former relating to the frame and the latter relating to the roof.
"I formally accepted the Claimants quotation ref: DH/Q9054 by email dated 2 May 2008 [trial bundle E1 Tab 61 page 677]. My acceptance specifically referred to the quotation to supply and fit the steelwork and cladding. As far as I was concerned, the quotation submitted for the sum of £37,573.43 plus VAT included both steelwork and cladding. This is what I had asked TS to quote for and as far as I knew, this is what they did quote for. My acceptance email did not mention the sum. I think this must have been because of my earlier telephone conversation with Phil Kelsall. There was no misunderstanding on my part as to the price submitted by TS. I understood the price to be £37,573.43 plus VAT for steelwork and cladding."
He was cross-examined about that as follows:-
Q: Why did you not also set out the price of £37,573.43 plus VAT?
A: I don't always put the price on. I had put it in my previous document.
Q: There were 14 other sub-contractors ... of the 6 written acceptances we have, it is only that for the Claimant that does not set out the price. Why is that?
A: Because I had already mentioned the contract price in a previous document.
"... I do not specifically recall, but I think the sum of £37,573.43 plus VAT must have been mentioned. It would have been odd for it not to have been mentioned ..."
There is a palpable inconsistency between Mr Henscoe saying on the one hand that he does not recall whether the price of £37,573.43 plus VAT was mentioned in the course of his conversation with Mr Kelsall, and then asserting on the other hand that it "must have been mentioned". Mr Henscoe does not state by whom the price was mentioned, nor specifically in what context such mention was made.
"I can recall a brief conversation with David Henscoe following this email, but not exactly what was said."
He was cross-examined about that:-
Q: In the 24 hours following you had a conversation with Mr Henscoe?
A: Yes.
Q: But you don't have a recollection of the detail?
A: Mr Henscoe was worried about two things: first can he hold the price and secondly the very tight timescale.
Q: The reality is that the whole question of price was going to be raised in a conversation.
A: No: the two topics were holding price and the timescale.
"Even at the time of tendering your competitors were only just above your cost".
Mr Henscoe's evidence about this matter is in paragraph 20 of his first witness statement where he stated:-
"I was very upset and angry to say the least. I did not have any of my paperwork in front of me, but I asked my daughter to check the price on the quote we had received and it was £35,573.43 plus VAT. I drafted an email over the telephone with my daughter. That email was then sent to TS disputing the costs [Trial Bundle E(1) Tab 71 page 691]. In that email, I also implied that other contractors had submitted prices of not much more than TS at the tender stage. In fact this is not correct. I had not asked any other contractor to submit a price at the tender stage, apart from TS. I am not sure why I said this, but I think it was a combination of not having my papers in front of me, having my holiday ruined and being very angry. It was a knee jerk reaction stated in the heat of the moment and which I now regret. With hindsight, I should have spent longer considering my position and my response, before emailing TS."
He was cross-examined about this as follows:-
Q: You did not "imply" that other contractors had submitted prices of not much more than the Claimant, but expressly stated that they had.
A: Yes.
Q: And you go on to say that they were "only just above your cost": that is very precise language is it not?
A: Yes.
Q: Did you have figures in your head?
A: No.
Q: So how do you say in your witness statement that the figure of £37,573.43 must be a figure for both structural steelwork and cladding?
A: I had no idea how the Claimant and Torclad do their own pricing.
And later in his cross-examination:
Q: Is there a reason you have not referred to the Torclad quotation in either witness statement?
A: I had already placed an order based on the quotation from (the Claimant)"
The Claimant also advanced an argument that, by reason of previous course of dealing between the parties, Mr Henscoe knew or ought to have known that it was the practice of the Claimant to quote separately for structural steelwork and cladding, when asked to tender for a job containing both elements of such work: see paragraph 28, sub paragraphs (h) to (j) of the Amended Particulars of Claim.
"(a) Those 5 transactions had taken place over a period of 1998 to 2006, the most recent of which was 2 years previously;(b) The course of dealing was not such to make D or anyone in Ds position necessarily aware of the way in which C quoted for work, and that the omission of cladding in 2008 must have been an error;
(c) Further, the quotations were not in consistent format or style ..."
Mr Hadley then set out specific reasons why there were such differences between the quotations.
"Q: Do you expect someone to re-read all the previous quotations?A: No, I wouldn't expect that. It wouldn't be realistic. But I would expect someone in the industry to recognise the products we are offering, and to understand there would be two prices; steelwork and cladding are not the same product."
In my judgment there was a sound commercial sense in Mr Kelsall's evidence when he said that he would not expect someone to re-read previous quotations, and I do not find that Mr Henscoe, or anyone at the Defendant, was effectively "put on notice" as a result of any previous course of dealing between the parties that the Claimant had a practice of giving separate prices for structural steelwork and cladding work, when asked to tender for a job comprising both elements of such work, with the consequence that the Defendant knew or ought to have known, for that reason, that the omission of a price for cladding in the present case must have been a mistake.
It appears that Dominic Hopkins started work for the Claimant, on a trial period, as an estimator on 07 April 2008 i.e. only a week or so before he prepared the tender dated 15 April 2008. It also appears that his employment was terminated only a short period afterwards: see the letter dated 28 July 2008 at page 1261 in Bundle F, in which Mr Philip Hadley wrote:-
"Dear DominicRe: Employment - Estimator
It is with regret that we write to confirm that following the 3 month trial period employed as an estimator for our company, it has been decided to terminate your employment with immediate effect.
The primary reasons for terminating your employment are as follows:-
1) 7 days lost since your commencement without proper notification as set out in your appointment letter.2) Poor performance and poor contribution to business activities including improper compliance to company procedures, which has caused major conflict on a contract and may end up in court proceedings.
3) Your use of company equipment and company time in 'touting' for business with our suppliers by offering your services for detailing activities.
Our Sales Director, Mr Philip Kelsall, has held discussions with you in respect of items 1 and 2 as listed above but regrettably no improvement has been forthcoming.
We wish you well and hope that you find alternative employment very quickly.
Yours sincerelyfor Traditional Structures Limited
P Hadley
Director"
Dominic Hopkins was not called as a witness at the trial. Mr Philip Hadley was asked about this letter in cross-examination, and he stated that his numbered paragraph 2 referred to this dispute, and added that it arose " … insofar as he didn't send an order acknowledgment out at the appropriate time".
By reference to the four elements identified by Buckley LJ in Thomas Bates, I make the following findings of fact:-
(1) That when he sent (initially by fax, and immediately thereafter by post) the Claimant's tender dated 15 April 2008 to the Defendant, Dominic Hopkins believed the document he sent contained the last line on page 3 comprising the text "Claddings ... £32,365.83 plus VAT". I infer that fact from the fact that the version of the tender which Dominic Hopkins retained, and placed within the Claimant's file, contained such a last line on page 3.
(2) That when he received the Claimant's tender in the form sent, Mr Henscoe was aware that it omitted a price in relation to the cladding, and that such an omission was due to a mistake on the part of someone at the Claimants.
(3) That at all material times from 15 April 2008 to the date he completed his tender for the main contract works (namely on or very shortly before the time he wrote his email on 29 April 2008) and thereafter through to the time he wrote his email response of 02 July 2008, Mr Henscoe failed to draw that omission to the Claimant's attention.
(4) The mistake in question was calculated too, in the sense that it had the effect of benefiting the Defendant.
The Claimant's case is that there was a concluded contract: there was an express term as to the price for the structural steelwork, but no express term as to the price for the cladding work, with the consequence that there was an implied term that a reasonable price would be paid for the cladding work. The Defendant's case is also that there was a concluded contract, but that it was an express term of such contract that the price of £37,573.43 plus VAT was the price for both elements of the work i.e. for both the structural steelwork and the cladding work. As a consequence the Defendant denies that the Claimant is entitled to any further remuneration by way of a reasonable price for the cladding work.
"On the other hand an agreement may be complete although it is not worked out in meticulous detail. Thus, an agreement for the sale of goods may be complete as soon as the parties have agreed to buy and sell, where the remaining details can be determined by the standard of reasonableness or by law. Even failure to agree the price is not necessary fatal in such a case. Section 8 (2) of the Sale of Goods Act 1979 provides that, if no price is determined by the contract, a reasonable price must be paid. Under Section 15 (1) of the Supply of Goods and Services Act 1982, a reasonable sum must similarly be paid where a contract for the supply of services fails to fix the remuneration to be paid for them. These statutory provisions assume that the agreement amounts to a contract in spite of its failure to fix the price or remuneration."
In my judgment the absence of an express term as to the price of the cladding work was not fatal to the parties concluding a contract in this case, and as a result the provisions of Section 15 of the 1982 Act come into operation.
"The very fact that the parties have not reached agreement on this vital point may indicate that there is not contract e.g. because the price or remuneration is to be fixed by further agreement. In such a case, the statutory provisions for payment of a reasonable sum do not apply. There may, however, be a claim for payment of such a sum in common law; for example, where work is done in the belief that there was a contract or in the expectation that the negotiations between the parties would result in the conclusion of a contract. Such liability is based on a need to deprive the recipient of the services or (sic) unjust enrichment that may result from his having benefited from the services without being required to pay for them; and it arises in spite of the fact that there was no contract. It follows that the party doing the work, although he is entitled to a reasonable sum, is not liable in damages e.g. prevailing to do the work within a reasonable time. If the claim arose under a contract by virtue of Section 15 (1) of the 1982 Act, the party doing the work would be both entitled and liable."
This is, of course, precisely the type of claim for which the Claimant no longer contends. In the light of my earlier conclusion, it is not necessary to consider whether, in the alternative to a claim in contract, the Claimant could recover a reasonable price by way of a claim advanced in unjust enrichment, or on any other restitutionary basis.
Accordingly, the Claimant succeeds in its primary claim for rectification. The Claimant also succeeds in its alternative secondary claim for a reasonable price for carrying out and completing the cladding works. I will now hear from Counsel as regards the terms of an appropriate order.
Dated ....... May 2010
Signed: …………………………………………………….
His Honour Judge David Grant.