Mansion Place Ltd v Fox Industrial Services Ltd
Case reference:  EWHC 2972 (TCC)
Friday, 12 November 2021
Mansion Place Ltd v Fox Industrial Services Ltd serves as a helpful reminder of the need to choose your words carefully when heading towards dispute..
Mansion Place (the Employer) engaged Fox Industrial Services (the Contractor) to refurbish and extend student accommodation under an amended form of the JCT Design and Build 2016. There were delays in the performance of the contract which the Contractor attributed to the consequence of the Covid-19 pandemic and the national lockdown imposed. The Employer blamed the Contractor’s failure to progress the works, and to use sufficient labour and resources. Emails were exchanged between the Employer and Contractor where the Contractor contended the emails operated as notices for delay. The Employer denied the emails were effective and that the Contractor had failed to provide particulars of the effects of the delay. The Employer therefore served notices of non-completion.
The Contractor issued an interim payment application and the Employer’s Agent issued a certificate for some £367k. Following this certificate, the Employer issued a Pay Less Notice and notices of its intention to deduct liquidated damages.
Meanwhile, two directors of the parties had spoken on the telephone to discuss the issues. The Contractor claimed this discussion resulted in a binding agreement that the Employer would forego the right to claim liquidated damages and in return the Contractor would forego pursuing a loss and expense claim. The Employer disagreed that any such agreement was reached. The dispute ended up in adjudication where it was decided that the conversation did result in a binding agreement and, therefore, the Employer had no right to levy liquidated damages. The Employer sought a declaration in the courts that that this was incorrect.
As no contemporaneous notes or records were taken of the conversation, the exact words used could not be determined; instead, the court had to make a finding on the balance of probabilities as to what the gist of the conversation had been.
The court had to consider:
“the witnesses’ evidence through the prism of the contemporaneous documents; of their subsequent actions; of those events which are accepted or clearly demonstrated to have happened; and of inherent likelihood.”
In looking at the “external or objective factors” the court considered the fact the Employer continued to prepare its claim for liquidated damages and that, it said, foregoing its entitlement to damages did not make commercial sense. For the Contractor this included internal emails prior to the agreement in which the Contractor expressed obvious distrust in the Employer and also emails in which the agreement was discussed and disappointment when it appeared the agreement was not being honoured by the Employer. Given the Contractor’s obvious distrust in the Employer the court found it unlikely the Contractor would have misunderstood the Employer’s words to mean the legal claims would be parked until the end of the project behaviour and held “…the only realistic explanation not only of Mr Kite’s evidence, but more important, of his actions thereafter…” was that the parties had reached a binding agreement to mutually abandon their claims.
Where oral agreements are alleged to have been made, the courts will not look to ascertain the exact wording of the agreements and will instead look at the factual background and witness evidence to ascertain on the balance of probabilities what the parties must have understood their agreement to be.
About the Author
David is a Director at Phoenix Consulting and a Fellow of the Chartered Institute of Arbitrators, holds a Masters degree in Construction Law and Dispute Resolution and is currently undertaking adjudication pupillage through the Worshipful Company of Arbitrators . He is an experienced contract and commercial consultant with over 20 years’ experience in the construction industry.
David started his career working for two of the UKs largest construction companies before moving into a consultancy role and has worked on a range of projects in the roads, rail and utilities sector. David has a dual role within the company being responsible in the first instance for the growth and development of the dispute resolution services; whilst also at times providing more traditional commercial management services to clients. He has acted as party representative in formal adjudication proceedings as well as assisting parties in the preparation and defence of contractual claims.