QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| ALMACANTAR (CENTRE POINT) LIMITED
|- and -
|SIR ROBERT MCALPINE LIMITED
Mr Sean Brannigan QC and Mr James Leabeater (instructed by MacFarlanes LLP) for the Defendant
Hearing date: 9th October 2017
Crown Copyright ©
"(1) On a true construction of the PCSA, McAlpine was only entitled to payment in respect of the balance of 50% of the Fee (as varied):(a) in the event that McAlpine and Almacantar entered a construction contract for the Project; and(b) on the occurrence of the first valuation following commencement on site under such contract.
(2) As a result of McAlpine not entering a construction contract for the Project before the PCSA was terminated on 15 September 2014, McAlpine has no entitlement to the balance of 50% of the Fee awarded by the Adjudicator in the Decision.
(3) The Decision was wrong and does not bind the parties."
Almacantar further claimed repayment of the sums paid to SRM plus interest.
"The Client will hold back 50% of the pre-construction fee which will ONLY be released at the first valuation subsequent to the signing of the main contract. The client reserves the right to abandon the project and will only be liable for costs up to the end of the month in which cancellation takes place."
Terms of the PCSA
(i) Recital (v)The Employer will hold back 50% of the pre-construction fee which will only be released at the first valuation subsequent to commencement on site under the main contract.
(ii) Clause 1 Interpretation1.1 The provisions of the First Schedule Part A, shall apply to the interpretation of this Agreement.
(iii) Clause 2 Appointment2.1 The Employer engages the Contractor and the Contractor agrees to provide the Services subject to and in accordance with the provisions of this Agreement
(iv) Clause 3 Services3.1 The Contractor shall perform the Services in accordance with this Agreement.
(v) Clause 5 Main Contract5.1 The Employer and the Contractor acknowledge that they have entered into negotiations to agree:5.1.1 the terms and conditions of the Main Contract (which, for the avoidance of doubt, do not at the date hereof include the documents referred to in clause 5.1A)5.1.2 the Programme.5.1A The Employer and the Contractor shall during the Pre-Construction Phase negotiate and endeavour to agree the contents of:5.1A.1 the Employer's Requirements; and5.1A.2 the Contractor's Proposals.5.1B The Employer and the Contractor acknowledge and agree that the appointments to be entered into by the Employer with the Design Consultants (as such term is defined in the Main Contract) shall be in the form or substantially the form set out in the Ninth Schedule.5.2 The obligation to negotiate and endeavour to agree the documents referred to in clause 5.1A shall be subject to clauses 5.5 and 16 and the Employer is not under any duty or obligation to enter into the Main Contract whether with the Contractor or any other entity.5.3 Without prejudice to the Employer's obligation to pay the Contractor in accordance with clause 12, the Contractor shall not be entitled to claim from the Employer in respect of expectation of contract or for any loss of profits, loss of contracts, loss of opportunity, tender or bid costs or any other compensation of whatsoever nature if for any reason whatsoever the Main Contract is not entered into with the Contractor ..5.5. The Employer shall have the right at its sole discretion and any time not to proceed with or to bring to an end negotiations with the Contractor for the award of the Main Contract or to decide not to enter into the Main Contract with the Contractor, whether or not negotiations have been concluded to their mutual satisfaction. In such circumstances, the Employer shall give the Contractor written notice of its decision and the engagement of the Contractor under this agreement shall thereupon terminate automatically subject to the provisions of clause 16. The Employer shall be entitled at its sole discretion to put the Main Contract out to competitive tender and/or to negotiate and/or enter into the Main Contract with another contractor or to proceed or not to proceed with the Project in whole or in part as it sees fit...5.7 The Employer may, at any time, within 30 days, following agreement of the Contract Sum, require the Contractor to enter into the Main Contract and the Contractor shall so enter into such contract.5.8 If at any time within 30 days following agreement of the Contract Sum, the Employer requires the Contractor to enter into the Main Contract but the Contractor elects for whatever reason not to enter into such contract the Contractor shall be obliged to repay to the Employer all sums paid by the Employer to the Contractor pursuant to this Agreement on account of the Fee . The Contractor acknowledges that an election by the Contractor not to enter into such contract as aforesaid will result in significant losses on the part of the Employer which shall exceed the sums paid by the Employer on account of the Fee."
(vi) Clause 12 Payment12.1 The Employer shall pay to the Contractor the Fee in accordance with the Fifth Schedule for the satisfactory performance of the Services, but subject to clauses 12.2 to 12.5 (inclusive).12.1A For the avoidance of doubt, notwithstanding any other provision in this Agreement the final Fee instalment of £239,836.50 [50% of the final Fee] shall not become payable to the Contractor until the first valuation subsequent to commencement on site under the main contract.12.2 The Fee shall be regarded as an all-inclusive payment of the monies due to the Contractor for the performance of its obligations under this Agreement, including all costs, expenses and overheads of every kind incurred by the Contractor arising from delays or disruption as a result of any cause whatsoever."
(vii) Clause 16 Termination16.1 The Employer shall be entitled at any time and at its sole discretion by written notice to the Contractor to terminate forthwith the Contractor's engagement under this Agreement.16.2 If the Employer shall be in material or persistent breach of its obligations under this Agreement and shall fail to remedy the same after receiving 14 days' written notice from the Contractor specifying the breach and requiring its remedy, then the Contractor shall be entitled by written notice to the Employer to terminate forthwith the Contractor's engagement under this Agreement.Consequences of Termination16.3 If the Contractor's engagement is terminated for any reason the Contractor shall, if instructed:-16.4 Following the termination of the Contractor's engagement under this Agreement for any reason, and subject to any set-offs or deductions the Employer may be entitled properly to make as a result of any negligence, default or breach of this Agreement by the Contractor and to the Contractor having complied with clause 17.1, the Employer shall pay to the Contractor, in full and final settlement of any claim which the Contractor may have in consequence thereof:-16.4.1 any instalments of the fee which have accrued due prior to the date of termination together with a fair and reasonable proportion of the next following instalment commensurate with the Services which have been properly performed up to the date of termination and less any amounts previously paid to the Contractor, and .Such payment shall be applied for and made in accordance with paragraph 3 of the Fifth Schedule.
(viii) Clause 21 Termination of AgreementNotwithstanding any of the above, if the Main Contract has not been entered into by 30th June 2013 then this Agreement will be deemed to have been terminated."
(ix) First Schedule Part A"Contract Sum" the lump sum fixed price as agreed between the parties to be the figure to be inserted as the contract sum in the Main Contract"Contractor's Proposals" the contractor's proposals to be agreed between the Employer and the Contractor and to form part of the Main Contract."Fee" the fee stated in the First Schedule Part B, and payable in accordance with clause 12 and the Fifth Schedule (as the same may be adjusted in accordance with this Agreement)."Main Contract" the design and build contract for the project to be entered into by the Employer with a contractor yet to be selected, the terms and conditions of which are, subject to clause 5.1A, agreed and set out in the Eighth Schedule,"Pre-Construction Phase" the period from the date of this Agreement or, if earlier, the date on which the performance of the Services was commenced by the Contractor, until the termination of the Contractor's engagement under this Agreement.
(x) First Schedule Part B.C. Instalments of the FeeThe Fee shall be a fixed lump sum of £479,673 excluding Value Added Tax.Subject to the provisions of the Fifth Schedule, the instalments for the payment of the Fee are as set out in the First Schedule Part D.
(xi) The First Schedule Part D consisted of three columns:(a) The first column was headed "Instalment" and had in it the numbers 1 to 12. The second column was a list of dates of application for payment monthly from 31 May 2012 to 31 March 2013 (against the numbers 1 to 11). The third column contained amounts.(b) Item 12 (under the heading "date of application for payment") said this: "First valuation subsequent to commencement on site under the main contract". The sum given was £239,836.50 being 50% of the Fee.
(xii) The Fifth Schedule (Terms of Payment) included the following:1. The Fee shall be paid by instalments in accordance with the payment schedule set out in the First Schedule Part D2. If the Pre-Construction Phase Programme is adjusted for any reason, the Employer shall be entitled to re-calculate the instalments for payment of the Fee so that the balance of the Fee shall be paid in appropriate instalments consistent with the remaining Services to be performed during the balance of the Pre-Construction Phase. The Employer may also adjust the amount of the instalments to ensure that the payment of the instalments of the Fee shall reflect the due proportion of the Services actually performed and to reflect any variations to the Services instructed under this Agreement and any associated adjustments to the fee.3. The procedure for payment of the Fee shall be as follows:3.1 the Contractor shall, on the last Friday of each calendar month, submit a fee invoice for the Services to the Employer and a copy of that fee invoice to the Cost Consultant. The due date for payment of the sums include within each fee invoice shall be 28 days from the date of receipt of the relevant fee invoice by the Employer or receipt of the relevant copy fee invoice by the Cost Consultant, whichever is the later and the final date for payment shall be:3.1.1 28 days from the date of receipt of the relevant fee invoice by the employer or receipt of the relevant copy fee invoice by the Cost Consultant, whichever is the later; or3.1.2 28 days from the date of receipt by the Employer from the Contractor of a properly prepared Value Added Tax invoice showing the correct amount of the Value Added Tax due;whichever is the later;
Performance of the PCSA and termination
"With reference to Clause 21 of the Pre-Construction Services Agreement (PCSA) dated 17th September 2012 and Almacantar letter dated 5 June 2014, I confirm our telephone conversation of 11th September 2014 and the agreement to terminate the PCSA as of 9am on Monday 15th September 2014."
(i) The second 50% was payable after the "First valuation subsequent to commencement on site under the main contract". The term Main Contract was defined as a contract with any contractor, not just SRM.I note that the reference in clause 12.1A to the "main contract" (rather than the Main Contract) has no significance on this argument.
(ii) The Fee was described as a "lump sum" payable in instalments.The thrust of this argument is and was that the Fee (in full) was to be paid by instalments. It was not and cannot have been the commercial intention of the Agreement, therefore, that the second 50% would not be paid at all. It is also SRM's case that the second 50% is referred to as an instalment repeatedly in the course of the PCSA.
(iii) The parties could have agreed that the second 50% was only payable if the main contract was entered into with SRM but they did not do so.
The relationship between clause 12 and clause 16
The effect of clause 16.4
Does clause 16 then apply in this case?
The main contract