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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> McCabe Builders(Dubllin) Ltd -v- Sagamu Developments Ltd & ors [2009] IESC 31 (01 April 2009)
URL: http://www.bailii.org/ie/cases/IESC/2009/S31.html
Cite as: [2009] IESC 31, [2011] 3 IR 480
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Judgment Title: McCabe Builders(Dubllin) Limited -v- Sagamu Developments Limited & ors Neutral Citation: [2009] IESC 31 Supreme Court Record Number: 02/08 High Court Record Number: 2007 692 p Date of Delivery: 01/04/2009 Court: Supreme Court Composition of Court: Hardiman J., Fennelly J., Murphy J. Judgment by: Fennelly J. Status of Judgment: Approved | ||||||||||||||||||||
THE SUPREME COURT Record No. 002/2008 Hardiman J.Fennelly J. Murphy J.Between: McCabe Builders (Dublin) Limited Plaintiff/Respondent -and-
Sagamu Developments Limited, Laragan Developments Limited and Hanly Group Limited Defendants/Appellants Judgment delivered the 1st day of April, 2009 by Mr Justice Fennelly 1. The parties to this appeal are a building contractor and a developer. They are in dispute regarding the terms of the contract under which the plaintiff/respondent agreed to carry out a large building project for the defendants/respondents. Each party puts forward a set of documents said to comprise the terms of the contract between them. The appellants (whom I will describe as “the Hanly Group”) bring this appeal from the judgment of Charleton J in the High Court, in which that learned judge held that there was no contract because the parties were not ad idem. Consequently, the respondent (which I will describe as “McCabes”) is to be remunerated on the basis of quantum meruit. 2. McCabes proposed a tender price for works described in tender documents provided by the appellants. Negotiations followed. There was an exchange of letters, said by the appellants to comprise a contract. The respondents say that the contract basically consists of the standard-form contract later signed. There are inconsistencies between that document and some, at least of the tender documents. 3. It is necessary to recount the contractual history and to recall the applicable principles of the law of contract in order to reach a conclusion as to whether there was a concluded agreement and, if so, on what terms. Contractual history 4. The Hanly Group is an established group of builders and developers. In the year 2005, it proposed to build 32 houses and 14 apartments at a site known as Rocky Valley, Kilmacanogue, County Wicklow. They had obtained planning permission for the development. They engaged Nolan Ryan, a leading firm of Quantity Surveyors, to conduct an initial tendering process. Tender documents were sent out by Nolan Ryan on behalf the Hanly Group under cover of a letter of 24th June 2005 to a number of builders, including McCabes. The tender documents comprised: (i) The Bill of Approximate Quantities in four volumes; (ii) A Form of Tender for completion; (iii) Architectural Drawings and Landscape Architect’s Drawings; (iv) A specification. 5. The core of the dispute between the parties is whether the Bill of Approximate Quantities remained a contractual document once the standard-form contract had been signed. McCabes contend that the version of standard-form contract signed by the parties excluded it from having any contractual effect insofar as it described the works to be carried out. The learned trial judge agreed. The Hanly Group contend that the description of the works is “partly definitive” of the contractor’s obligations under the contract partly because the tender drawings and specification were quite inadequate for that purpose and partly because of the exchange of correspondence between the parties after tender but before signature of the contract. 6. It is necessary, in order to discern the precise nature of the contractual dispute, to refer to some of the documents generated during the process in some detail. 7. The Bill of Approximate Quantities is central to the case for the Hanly Group. It contained the following material provisions: · Under the heading, “Project Particulars,” there appeared a subheading “Contract” as follows: “The form of contract will be the Articles of Agreement and Conditions of Contract 2002 (Revision 1, Print 4) as issued by the R.I.A.I. in agreement with the C.I.F. and S.C.S. where quantities do not form part of the contract. The Appendix to the Contract will be filled in as shown in the Preliminaries Section of the Bill of Approximate Quantities.” This is known as the Blue form. I will refer to it as the R.I.A.I. form. · A slightly varied version of the foregoing provision appeared in the schedule to the Bill of Approximate Quantities, once more emphasising the expression “where quantities DO NOT form part of the Contract” but followed by a large number of references to provisions of the R.I.A.I. form. Opposite a reference to “(36) Wage and Price Variations” there appeared: “(Clause Deleted).” There was a large list of items for inclusion in the completion of the Appendix to the Articles of Agreement (the R.I.A.I. form). · In the Bill of Approximate Quantities under the heading “General Conditions” at GC 2 and GC 4 and the sub-heading “Documents” there at two places appeared the following: “The Contractor shall carefully examine the drawings and other Contract documents and satisfy himself as to their accuracy and ensure that they cover and embody the proposed works. The Contractor shall properly execute the Works whether or not shown on the drawings or described in the Bill of Approximate Quantities, provided that same may reasonably be inferred therefrom.” · GC 5 of the General Conditions provided: ”The “Works” shall mean the whole of the works envisaged by this Contract…” · The notes to the form of tender included: “The Contractor’s attention is drawn to the fact that Quantities do not form part of the Contract for this Project.” · There was also a “Specification for Materials,” which contained no material provision. However, it seems to have been common case that it was quite inadequate to its stated purpose. The learned trial judge noted that it had “been described in evidence as one of the worst, meaning lacking in detail, ever issued as part of a tender process in a job of this size.” 8. The tenders were received on 19th July, 2005. The VAT exclusive tender prices for the works varied between approximately a high of €21.2 million and a low of €15.7 million. McCabes’ tender was the second lowest at €17,222,620. Negotiations took place between the Hanly Group and McCabes resulting in a reduction of their tender price of almost €2 million bringing it to a level below the next lowest competitive tender.
10. The writing of the letter was interrupted by a telephone conversation between Mr Hanly and Mr McCarthy. The learned trial judge found as a fact that, in that conversation, “a deal was made to do the works tendered for, including any extra works that might be implied by the correspondence of the 25th July, and 3rd August, for the sum of €15.3 million plus VAT.” These references to other correspondence are not in dispute on the appeal. The works being discussed (I will avoid saying “agreed” at this point) extended to the subject-matter of a large number of other letters or other documents, which were incorporated in the August correspondence. The learned trial judge found as facts that McCabes had received, in particular the letters dated 25th July and 3rd August referred to in the quoted passage. These were incorporated in the letter of 5th August. 11. In the light of the “deal” made in the telephone conversation, Mr Hanly completed the letter of 5th August proceeding, so far as relevant, as follows:
“Since writing this letter, we have reached agreement on the project via telephone. I would like to summarise our agreement as follows: “The Hanly Group will pay McCabe Builders €15.3 million plus VAT for the Contract as outlined in the Spec. and Bill of Quantities at Kimacanogue, County Wicklow. The Hanly Group is entering into a Fixed Price Contract and as stated earlier in this letter there are 6 PC Sums of which there are only two nominated Suppliers/Subcontractors …… “Although not relevant to McCabe’s, it must be noted that the Hanly Group are giving in excess of €600,000 over and above a competitor’s price. We are doing this in the knowledge that the show house will be delivered in a timely fashion by the second/third week in November as discussed; also the consolidation of what should be a mutually beneficial relationship between our firms. “In view of the above, whereby the Hanly Group will be fair to the contractor, we will be entertaining no claims whatsoever, we will work in conjunction and on a timely basis with McCabe’s to approve whatever alternatives (both products and methods) are put forward, thus ensuring cost effectiveness for McCabe’s throughout the course of the project. “We propose taking the opportunity over the coming days to work closely with McCabe’s to finalise all outstanding issues and also we would hope to put forward some real samples of the type of product mentioned in the designer’s report. It would be beneficial for both of our companies to have reached a conclusion on this upon signing of contracts. “It is the Hanly Groups understanding that all correspondence forwarded to McCabe Builders from our offices and Nolan Ryan’s offices regarding conditions, planning conditions and special conditions are and form integral parts of our agreement. I would be grateful if you could review this document, and if you concur that the conditions laid out in this document are as agreed, please sign below and return to our offices at your earliest convenience.” 13. Although the letter of 5th August refers throughout to the Hanly Group, Mr Hanly signed the letter on behalf of Laragan Development Ltd. The first-named appellant, Sagamu Developments Limited, was not mentioned as a possible contracting party at that stage. In short, the precise contracting party in the Hanly Group remained to be identified. 14. No further negotiations took place after 5th August and its counter-signature on behalf of McCabes on 8th August. However, in order to get the project started, a letter of intent for works to the value of €1 million, signed on behalf of Laragan Developments Ltd, was sent on the 26th August, 2005, in the absence of completed contract documents. 15. On 24th November 2005, Mr Hanly wrote to Mr McCabe enclosing the R.I.A.I. form and Bill of Quantities. A copy of the letter of 5th to 8th August was interleaved. The letter was written on Hanly Group notepaper and signed on behalf of Laragan Developments Ltd. The R.I.A.I. form named Sagamu Developments Limited as the contracting party. Mr Hanly said that he had initialled the documents and asked that they be returned following signature. Signature did not, in fact, take place until 19th January 2006. It is common case that the R.I.A.I. form was signed on behalf of both parties. 16. The R.I.A.I. form is entitled “Articles of Agreement” and is headed with the following:
Paragraph 1 provides:
The Schedule of Rates shall be deemed to mean: A copy of the fully priced and detailed estimate upon which the contractor’s tender is based priced in ink, or Where a Bill of Quantities is provided for tendering purposes the rates therein contained. The Bill of Quantities unless otherwise stated shall be deemed to be have been prepared in accordance with the method of measurement of building works last before issued or approved by the Society of Chartered Surveyors and the Construction Industry Federation. Nothing contained in the contractor’s estimate or the Bill of Quantities (except as a Schedule of Rates) shall confer rights or impose any obligations beyond those conferred or imposed by the contract documents.” 17. As already stated, the contract was signed on behalf of McCabes on 19th January 2006. The proceedings 18. McCabes issued the present proceedings on 31st January 2007. They claim a declaration to the effect that there exists a binding agreement between McCabes and some or all of the appellants in respect of the development, “the terms of which are to be found in the RIAI Form of Contract 2002 Edition (Rev. 1 Print 4) where quantities do not form part of the contract and the associated documents, namely the Articles of Agreement (where quantities do not form part of the contract), the Conditions, the Specification, Appendix 1 containing a full list of the Contract Drawings and to the extent that it is relevant, the Schedule of Rates (deemed pursuant to clause3.1(ii) of the Contract, to be the rates as per the Bill of Approximate Quantities).” McCabes claim that the contract does not include either the letter of 5th to 8th August or the letters of 25th July and 3rd August, which, according to the findings of the learned trial judge, they had received. 19. The defence of the appellants need not be cited, but the counterclaim seeks a declaration that there exists a binding agreement between McCabes and the appellants, or alternatively Laragan Developments Limited in the terms of the letter or letters of 5th to 8th August 2005 and the documents listed in appendices to the pleading. In effect, the counterclaim is for a contract in the terms of the correspondence of August, to include the various other documents and letters received, especially the Bill of Approximate Quantities. 20. The learned trial judge, as already stated, did not accept either version of the contract. He held that the parties were not ad idem. 21. The learned trial judge analysed the R.I.A.I. form at length and concluded that it was not possible to incorporate the Bill of Approximate Quantities with it, essentially because of the wording of the document and the adoption of clause 3.1(ii). He effectively placed the onus on the appellants to satisfy him of the inclusion of the descriptions from the Bill of Approximate Quantities in the R.I.A.I. form and they had not done so. 22. On the other hand, this conclusion was not sufficient to persuade him to accept McCabes contention that the R.I.A.I. form, with the documents expressly incorporated, represented the contract. He reviewed the dealings between the parties in enormous detail, referring frequently to their respective intentions. He thought that the test as to whether a contract ever existed was “whether each contracting party had the same intention as to the fundamental terms that give any agreement substantial efficacy.” He thought that “the essence of the concept of an agreement [was] that the minds of the parties should meet as to their mutual obligations” and that “[t]hose obligations must be expressed in such a way that the obligations of each party can be determined with a reasonable degree of certainty.” He found that “[t]he minds of the parties never met as to central issues that are crucial to their differing understanding of what would otherwise be their mutual obligations.” He could not hold that there was a concluded contract and said that the matter would have to be sent to arbitration as to amount. 23. The learned trial judge held that the case had to be dealt with on the basis of a quantum meruit: McCabes were entitled to reasonable recompense for the benefit which they had conferred through the work they had done under the purported contract for the appellants. While the learned judge made further observations on the question of reasonable remuneration, including that it should be at such value as was prevalent in 2005, he did not relate the claim McCabes would be entitled to make in any way to the negotiations between the parties, the August correspondence, the tender which had been submitted by McCabes or the agreed sum of €15,300,000. 24. The Hanly Group have appealed against the High Court decision. They claim, as they did in the High Court, that the contract consists of the series of contractual exchanges between the parties and, in particular, that the works are to be defined by reference to the descriptions contained in the Bill of Approximate Quantities. The opposing contentions 25. In its simplest terms, the issue is whether the R.I.A.I. form excludes any right of the Hanly Group to rely on the Bill of Approximate Quantities though only insofar as it describes the works. McCabes, in reliance on the express written terms, claim that it does. I will summarise the opposing claims. 26. The Hanly Group rely crucially on the following provision, repeated at GC 2 and GC 4 of the General Conditions in the Bill of Approximate Quantities:
27. This they say is “partly definitive” of the contractor’s obligations. In other words, they say that the scope of the “works” is partly defined by the Bill of Approximate Quantities. The contract drawings and specification are also relevant, but the evidence in the High Court was that those documents were inadequate for that purpose. I have already noted the comment of the learned trial judge that the specification was utterly inadequate to describe the works. The Hanly Group, therefore, use the Bill of Approximate Quantities to define in part the scope of the contract works. They refer to the columns of the Bill, comprising, firstly, descriptions of work, secondly, quantities and, thirdly, rates. They emphasise that they rely on the descriptions column only and not the quantities. Insofar as there is conflict, they say that the provisions of GC 2 and 4 overrule condition 3(a)(ii) of the R.I.A.I. form. 28. The Hanly Group claim that a concluded agreement had been reached in the correspondence of August 2005. This showed that the Hanly Group insisted on a fixed price for the works as then agreed. 29. They point out that, in the absence of the descriptions in the Bill, McCabes would be able to limit their contractual obligations by reference to the drawings only. Although they had tendered on the basis that they would carry out the work described in the Bill of Approximate Quantities, they would not, in fact, be bound to do so. Thus, insofar as the Bill described works in excess of what could be gathered from the drawings, they would be entitled to claim extra over and above the amount agreed (€15.3m). Thus, they could claim double payment. Insofar as the R.I.A.I. form provides to the contrary, they say that the provisions of GC 2 and 4 of the Bill of Approximate Quantities should prevail. 30. It is convenient, at this point to recall that the learned trial judge addressed this point. He dealt with it in the following passage:
31. In other words, the learned trial judge accepted that McCabes might well be entitled to claim on the double, but that Mr McCarthy said that they would not do so. He then proceeded, by reference to the notion of the reasonable bystander, to hold that such a right was excluded by implication. More importantly, the learned trial judge accepted the necessity for “descriptions” for the purpose of defining the scope of the contractor’s obligations but that the Bill of Approximate Quantities, since it had “dropped away” did not do so. 32. McCabes supported the decision of the learned trial judge to the effect that the parties were never ad idem and that, essentially, there was no written agreement in extensive written submissions. 33. At the hearing counsel for McCabes nevertheless concentrated on the proposition that the R.I.A.I. blue-form contract together only with those documents expressly included comprises the entire agreement between the parties. McCabes case, in this respect, is very simple. The Bill of Approximate Quantities is not a contract document except to the extent that it can provide a schedule of rates. At one point, counsel described the provision that Quantities do not form part of the contract as the sheet-anchor of McCabes’ case. Was there a contract? 34. It is notable that both parties to this appeal embarked on the proceedings in the High Court by alleging that a contract existed between them for the carrying out of the development at Kilmacanogue. McCabes were to be the contractor and the Hanly Group (or one of the companies in the Group) was to be the contractor. On the pleadings, they differed only as to the contractual documents which governed their relationship. Furthermore, by the time the parties commenced this litigation, a very large part of the development had been carried out. 35. It is striking, in these circumstances, that the learned trial judge concluded that there was no binding agreement at all between the parties. 36. The parties went through three distinct phases of contractual negotiations. 37. Firstly, the Hanly Group, through Nolan Ryan, a firm of quantity surveyors, circulated a set of tender documents. Those documents expressly provided that, at the end of the tender process, the contract would be in the R.I.A.I. form of contract. It is obvious that both the Hanly Group and McCabes, in tendering, envisaged that a binding written agreement would come into existence. 38. Secondly, following McCabes’ tender, negotiations took place between the parties culminating in the August exchange of correspondence. It is unnecessary, for present purposes, to decide whether that exchange itself constituted a binding contract. The letter was signed on behalf of McCabes and by Mr Hanly on behalf of the Hanly Group and of Laragan Developments Limited. Leaving aside the identity of the contracting party, it is inescapable that both parties envisaged a written agreement. The tender process had been followed by negotiations leading to a reduction in the tender price to €15,300,000 and to important modifications to the scope of the works by including reference to a number of letters particularly those of 25th July and 3rd August. The August letter spoke of a Fixed Price Contract. It asked for signature on behalf of McCabes. The letter was, in fact signed on behalf of both parties. 39. Finally, the correspondence from 24th November 2005, which was accompanied by both the August letter and the Bill of Approximate Quantities, was designed to lead to the signature of the R.I.A.I. form which was expressly provided for by the tender documents. 40. At every stage of the contractual exchange, it is indisputable that both the Hanly Group and McCabes wished their agreement for the carrying out of a very substantial development to be contained in a formal written agreement. In my view, their intentions are to be gathered objectively from their exchanges of documents and not from their expressions of subjective intention as given in evidence at the hearing in the High Court. Amongst other things, the R.I.A.I. form would provide for arbitration of disputes and how variations were to be assessed and paid for. 41. The result of the finding of the learned trial judge is that each party is left to the uncertainty of a quantum meruit claim. Since there is no contract, there seems to be no reason to limit McCabes to the amount of €15,300,000 apparently agreed in the August correspondence or even to the amount of their tender of July 2005. The learned trial judge seems to have perceived that this would give rise to a problem. He noted that it would be “theoretically” possible for McCabes to claim twice in respect of the same work. In this, he was perhaps inconsistent. If there was no contract, McCabes would not be bound by the reduced tender sum of €15,300,000. They could claim payment without any reference to that sum or to the works they had agreed to perform for it. This simply serves to show that the decision that there is no contract at all between parties who have negotiated a hard-won deal is liable to produce injustice. On one version, McCabes may be entitled to claim twice; on another, they are free to charge without reference to the tender process. The learned judge’s final observation, on this point, was that a claim on the double would be excluded “by implication.” It is not clear how such a term could be implied in the absence of a contract. Nor can I see how any statement made on behalf of McCabes at the hearing that they would not claim on the double would have contractual effect. 42. The parties to the project for the development at Kilmacanogue clearly intended to enter a legally binding contract governing their relationship. They were experienced and reputable contracting companies. They engaged in a tendering procedure, followed by negotiations on price and other matters. They formally agreed to use the R.I.A.I. form and they signed it. One of the essential components of the standard-form building contracts is the provision for arbitration to settle disputes or disagreements. The absence of an arbitration procedure in the case of large building contracts will inevitably work great inconvenience for all parties, not to mentions the courts. 43. I agree with the statement in Contract Law, by Paul A. MacDermott (Butterworths. Dublin 2001) at page 171, that in “commercial arrangements it will be presumed that the parties intended to create legally binding contracts.” Lord Wright said in Hillas & Co. Ltd. v. Arcos Ltd (1932) 147 LT 503 a p.514:
44. In other words, the courts should seek to give effect to the apparent intentions of parties to enter into binding contracts. It is clear that the parties to the present proceedings intended that their relationship would be governed by a formal legal contract. The question is what the terms of the contract are. Terms of contract 45. The principal dispute comes down to quite a narrow question. It can be expressed in various ways by reference to the terms of the various documents. The essential issue is whether the description of the “works” is limited, as McCabes contend, to what was described in the “Contract Drawings” and the “specification.” These are the documents mentioned on the first page of the “Articles of Agreement,” or the R.I.A.I. form. The opposing contention is that is that the description of “the works” is in part contained the Bill of Approximate Quantities. 46. It is not necessary to repeat the account of the three contractual stages, which I have set out above. Insofar as the tender stage is concerned, there can be no doubt at all that the Bill of Approximate Quantities was central to the description of the works. GC 2 and 4 impose an obligation on the contractor to execute the “works” “whether or not shown on the drawings or described in the Bill of Approximate Quantities, provided that same may reasonably be inferred therefrom.” 47. McCabes tendered on the basis of these documents. Their tender as reduced following negotiation was also based on the works as so described. The parties then entered an agreement. In the letter of 5th and 8th August, the agreed sum of €15,300,000 was expressed as payment “for the Contract as outlined in the Spec. and Bill of Quantities…” 48. Thus, the Bill of Approximate Quantities was central both to the description of the “works” and the price to be paid therefore at all times prior to the execution of the R.I.A.I. form contract. That document was indisputably intended to incorporate formally the terms of the agreement reached in August. 49. Looking at the object of the contract as a whole, therefore, there is no doubt that the intention of the parties was that the contract sum specified in the R.I.A.I. form would represent the consideration for the carrying out of the works for which McCabes had submitted their tender. 50. The sheet-anchor of McCabes case against the foregoing is the term: “where quantities DO NOT form part of the contract.” This term undoubtedly appeared, not only in the tender documents, specifically the Bill of Approximate Quantities, but in the R.I.A.I. form. 51. Resolution of the contest between the opposing contentions depends on which of two approaches is adopted to the ascertainment of the contract terms. McCabes say that the contract is to be found only in the R.I.A.I. form together only with any documents expressly incorporated with it. The alternative approach is to take account of the apparent intention of the parties as shown by course of dealing between them, thus including the August correspondence and the Bill of Approximate Quantities. 52. There is very great merit in the first approach in normal circumstances. Following a tender procedure, the employer and the contractor normally intend that their entire agreement be contained in one or other of the R.I.A.I. forms which has been negotiated and prepared with such care and expertise by all sides in the building industry. At that point the tender documents fall away except to the extent that they are incorporated in the chosen R.I.A.I. form of contract. Accordingly, I see great force in the view expressed in the judgment which is about to be delivered by Murphy J. 53. In the present case, however, I am convinced that the R.I.A.I. form does not fully represent the true agreement between the parties. In particular, it does not at all fully describe the works for which McCabes tendered in July, which they agreed to carry out in August and which was to be the subject of the contract. The reasons for this are already apparent and I will develop them further. It is well established that the courts will, in appropriate cases, look at the terms of a contract by reference to the course of dealing between commercial undertakings. We have had a series of cases in which applicable terms for the purposes of the Brussels Convention (now the Brussels Regulation) have been upheld by reference to a finding that a party was on express or implied notice of them. Examples are Clare Taverns t/a Durty Nellie’s v Gill t/a as Universal Business Systems [2003] 1 I.R. 286; Leo Laboratories Ltd. v Crompton B.V. (formerly Witco B.V.) [2005] 2 IR 225. The following statement of McGuinness J in the High Court in the former case at page 296 has been approved in subsequent cases: “In the submissions made before this Court, it was not seriously suggested that the practice of printing general conditions of sale on the reverse side of invoices and similar documents, with a reference on the face of the document to the said conditions, was not a common commercial practice in the type of international trade with which we are concerned here. Indeed, from the point of view of practical experience every ordinary consumer, and still more anyone engaged in trade or commerce, must be familiar with this type of document.” It is quite clear from the exchange of correspondence in August and the fact that the Bill of Approximate Quantities and that correspondence were enclosed with the letter from the Hanly Group of 24th November the Hanly Group wished these documents to form part of the contract and that McCabes were on full notice of those documents and of their contents. 54. It is still possible, of course, for the R.I.A.I. form as signed by the parties to have excluded those documents from the contract and it is to that issue that I now turn. 55. The first page of the R.I.A.I. form refers to the “works” referring to the development at Kilmacanogue. The “works,” as so described, are the works the subject of the tender documents. 56. This becomes clear from the ensuing statement that “the Contractor has made an estimate of the sum which he will require for carrying out the said works as shown on the tender dated 19th July 2005……………….” The R.I.A.I. form states that the employer has “caused drawings (hereinafter called “the Contract Drawings”) and a Specification describing the work to be done to be prepared….” Condition 1 then provides:
57. Before turning to clause 3(a)(ii), it seems to me that these terms do not exclude the descriptions contained in the Bill of Approximate Quantities from playing a role in identifying the “works.” Condition 1 does not purport to be exhaustive and must, in any event, be read in the light of the introductory reference to the “works” already cited. From the latter, read with the earlier contractual documents, it is clear that the works should be identified by reference to the “estimate” dated 19th July 2005, which is, of course, the tender. 58. It remains, therefore, to be considered whether clause 3(a)(ii) has the effect of entirely excluding the Bill of Approximate Quantities, as indeed the learned trial judge held, although, in the end, he did not find that there was a concluded contract in the terms of the R.I.A.I. form. The effect of that clause is, it is agreed, that the Bill of Approximate Quantities acts only as a Schedule of Rates. The key provision is the following:
59. This provision, therefore, like Condition but unlike the introductory material on the first page appears to define the works only by reference to the drawings and specification, the latter being, by common consent, utterly inadequate. 60. This provision cannot, on the facts of this case, be interpreted without reference to the general background. It is most important to recall that McCabes tendered for the contract on the basis of a description of the Works as contained in the General Conditions of the Bill of Approximate Quantities. Those conditions were, as the Hanly Group have argued, “partly definitive” of the contractor’s obligations. As already noted, any other interpretation would potentially leave McCabes in the position of being able to claim in effect “on the double.” It seems obvious to me that the Court should lean against such a potentially unjust interpretation. The signing and countersigning of the August letter demonstrates a clear intention of both parties to enter an agreement for a fixed sum of €15,300,000 for the carrying out of the works described in that letter and documents incorporated by reference with it. That contractual intention was carried through to the letter of 24th November. I have no doubt, therefore, that the parties intended this agreement to be expressed in the R.I.A.I. form. To the extent that it does not, it is in conflict with the intentions of the parties. In the face of such a conflict, I believe the clear intention of the parties must prevail. I do not think it is necessary to resort to the equitable remedy of rectification, sought by the Hanly Group in their pleadings. I believe that correct result can be achieved by interpreting the R.I.A.I. form together with documents necessarily related to it. 61. I would add that the August agreement significantly differentiates this case from other cases where there might be discrepancies between tender documents and the signed R.I.A.I. form. In normal circumstances, the latter will prevail in the event of any discrepancies. Here, however, the parties had engaged in strenuous post-tender negotiations resulting in very significantly varied the tender sum but also made significant modifications to the scope of the works. The August agreement, signed by both parties, other than the identification of the proper contracting party, represented a step away from the tender procedure. 62. For the same reasons, I believe that the R.I.A.I. form was intended to include within the scope of the works all the works described directly or indirectly in the August correspondence. I would allow the appeal and make a declaration that there exists a binding contract between McCabes and the first-named appellant the terms of which are set out in the Articles of Agreement and Conditions of Contract 2002 (Revision 1, Print 4) as issued by the R.I.A.I., signed by the parties on 24th November 2005 and 19th January 2006 together with the letter from the letter from the Hanly Group dated 5th August 2005 and signed on behalf of McCabes on 8th August 2005 and the documents referred to therein and incorporated thereby as more particularly set out in Appendix 1 and Appendix 2 of the Counterclaim. Judgment delivered the 1st April 2009 by Mr. Justice Murphy 1. The parties to this appeal seek declarations as to the nature of the building contract entered into by the appellants (“the Hanly Group”) as employers and the respondent (“McCabes”) as contractor. 2. By letter dated 5th August, 2005, from Mr. Alan Hanly, the chief executive of the Hanly Group, to Mr. Richard McCarthy, commercial director of McCabes, was countersigned and returned by Mr. McCarthy on 8th August. 3. That letter stated in relation to a meeting the previous day, 4th August, as follows:-
5. The letter dealt with the understanding of the Hanly Group in the following terms:-
7. The Hanly Group had engaged a firm of quantity surveyors to conduct an initial tendering process. Tender documents were sent out to a number of builders, including McCabes on the last week of June, 2005. The tender documents comprised a Bill of Approximate Quantities, a form of tender and architectural drawings and a landscape architect’s drawings. 8. The Bill of Approximate Quantities was in four volumes. The preamble to the Bill of Approximate Quantities provided that the contractor was to “properly execute the works whether or not shown on the drawings or described in the Bill of Approximate Quantities, provided that same may be reasonably inferred therefrom”. 9. The contract drawings prepared for the appellant had not been sufficiently developed to enable tenderers to properly price the works with a required degree of specificity needed for a meaningful tender. The specification document entitled “Specification of Materials”, consisting of 13 pages was very sparse. To make up for this the appellant’s quantity surveyors provided a very detailed Bill of Approximate Quantities to allow tenderers price in detail for the works required. 10. A provision had been made in the Bill of Approximate Quantities that the form of contract would be the Articles of Agreement and Conditions of Contract 2002 (revision 1, print 4) as issued by the R.I.A.I. in agreement with the Construction Industry Federation (C.I.F.) and Society of Chartered Surveyors (S.C.S.) where quantities did not form part of the contract. That document also provided as a general condition at (G.C.2) that the contractor should carefully examine the drawings and other contract documents and satisfy himself as to their accuracy and ensure that they cover and embody the proposed works. The contractor should also properly execute the works whether or not shown in the drawings and described in the Bill of Approximate Quantities, provided that same may reasonably be inferred therefrom. 11. The appellants submitted that the description in the Bill of Quantities in relation to the works, in the circumstances, formed part of the contract documents. 12. On 10th August, works commenced on site. 13. On 26th August, 2005, Mr. Hanly wrote to Mr. McCarthy issuing a letter of intent for the works to the value of €1,000,000.00, primarily to cover the respondents for works that they were commencing on the site of presence in the absence of a fully signed contract. 14. The formal contract documentation, including the R.I.A.I “blue form”, was sent to the respondent on 24th November, 2005, for signature and return which was signed on 19th January, 2006. 15. The R.I.A.I. “blue form” accordingly became binding on 19th January, 2006. 16. The Articles of Agreement thereof recited:-
18. Condition 3 (a)(ii) provided that where the Articles of Agreement did not provide for the inclusion of a Bill of Quantities as a Contract Document, the contract sum should be deemed to provide for the quantity and quality of work set out in the drawings and specifications. The contractor was required, before the signing of the Articles of Agreement, to furnish the architect with a Schedule of Rates. Where a Bill of Quantities was provided for tendering purposes the rates therein contained should be the Schedule of Rates. 19. That condition further provided:-
21. Keane: The RIAI Contracts – A Working Guide (4th revised edition) comments on the RIAI “blue form” for use without quantities and the “yellow” version for use where quantities are part of the contract, as follows:-
3.02 Originally, quantities were taken out by the contractors themselves when tendering, or the contractor employed a quantity surveyor to do this work. Naturally, under those arrangements, the responsibility for the accuracy of the quantities fell entirely on the contractor. Over the years, however, the role of the quantity surveyor changed, and more and more he became employed by the building owner. It seemed reasonable in these changed circumstances, that the employer accept responsibility for the accuracy of the bill since he has ordered the preparation of that bill and his agent, the quantity surveyor, has prepared it. This area was a profitable source of litigation until the case of Patman and Fotheringham Ltd. v. Pilditch [1904] Huttons Building Contracts, 4th edition, vol. 2, p.368 where it was held: ‘if the quantities in the Bill are less than those required by the drawings the contractor is entitled to be paid an appropriate addition to the contract sum since the quantities were introduced with the contract as part of the description of the contract work, and if the contractor was required to do more, it was an extra.”’ Ross J. was of the view that the court could not deal with the contract alone but had to deal with the tender. The intention of the parties, when analysed, was that the tender for the original amount of the price to section, less the amount of the priced bill of reductions, should be accepted. The sum of £167,000.00 was erroneously taken to be the figure, and erroneously embodied in the contract. 23. Ross J. continued at 509, 510 as follows:-
25. There is no doubt that the parties intended on 5th August, 2005, to enter into an R.IA.I. Contract without quantities. The only issue is what the specifications were and whether, notwithstanding the provisions in the contract eventually signed on 19th January, 2006, by the contractor. 26. Lord Denning in English Industrial Estates Corporation v. George Wimpey & Co. Ltd. [1972] 7 B.L.R. 122, took the view that provisions which have been specially typed in a Bill of Quantities must take precedence over a standard printed form but this, according to Keane, is an unusual view. 27. The provisions of clause 3(8)(i) which incorporates the Bill of Quantities, provides that nothing contained in the Bill should override, modify or affect in any way whatsoever the application or interpretation of that condition. 28. It was s. 3(8)(ii) that applies in the present case. That also provides that:-
30. It would seem, accordingly, that, in the absence of a special condition in the R.I.A.I. “blue form” importing the description of works therein to include those described in the Approximate Bill of Quantities, only the drawings and specification, inadequate though they appear, can form the definition of works. It is these that form the contract documents referred to in clause 3(b). 31. I am of the view that the R.I.A.I. contract without quantities binds the parties and would allow the appeal to that extent. However, I am unable to accept the appellant’s contention that the R.I.A.I. contract can incorporate the description in the Approximate Bill of Quantities as being a definition of the works or as being part of the contract documentation. | ||||||||||||||||||||