Cleveland Bridge UK Ltd (“CBUK”) v Sarens (UK) Ltd (“Sarens”) [2018] EWHC 460 (TCC) and [2018] EWHC 751 (TCC)

12th Apr 2018

Appearing for the Claimant, CBUK, Marc Lixenberg successfully overturned an adjudicator’s decision which had imposed a 10% cap on the Defendant’s liability for liquidated damages.

The proceedings concerned a subcontract relating to the erection of six new bridges along the Heysham to M6 Link Road. The Court noted that the adjudicator’s decision would have had “an important impact on the amount that CBUK [would] be entitled to recover in [a] wider dispute; in particular, [Sarens’] liability for culpable delay would be limited to £96,363.44 (being 10% of Sarens’ Subcontract price of £963,634)”.

Shortly before the trial, CBUK had successfully resisted an application by Sarens to substantially amend its defence. The amendment sought to allege that the subcontract was agreed at a meeting between the parties rather than by an exchange of documentation. O’Farrell J dismissed Sarens’ application on the basis of, inter alia, prejudice to CBUK, and the lack of adequate explanation for the proposed amendment’s lateness.

The Court at trial (Joanna Smith QC sitting as a deputy Judge of the High Court) rejected Sarens’ attempt to advance a case based on the same meeting which its earlier application to amend had also relied upon: “Where the court has precluded a proposed amendment which seeks to introduce a new factual case, it seems to me that it is not open to the party who has been refused permission to amend to seek to rely on the very same facts as the basis for a slightly different legal argument” [19]. The Court disregarded the said meeting on the grounds that it did not constitute part of Sarens’ pleaded case as to contract formation, and neither could it be relied on by way of unpleaded factual matrix pertinent to the interpretation of the subcontract [20].

CBUK did not seek to rely on any witness evidence in support of its case [10]. Furthermore, it chose not to cross examine Sarens’ witness, on the basis that “much of his evidence [was] inadmissible for the purposes of any interpretation exercise that [the Court] must undertake” [21], insofar as he dealt with matters beyond the meeting relied upon in Sarens’ application to amend.

The Judge reviewed the law as to contract formation, interpretation and the ‘course of dealing’ alleged by Sarens. The Court indicated [73] it had some sympathy with CBUK’s submission that Sarens appeared to contend, without making a claim for rectification, that there was a mistake in the wording of the contractual documentation. It found that the parties never concluded an agreement either as to liquidated damages or any form of 10% cap on damages. The Court upheld CBUK’s contention that a number of Sarens’ arguments depended upon inadmissible material.

The Court agreed with CBUK’s argument that “whilst it might not be possible here to analyse the formation of the contract by reference to a clear offer and acceptance, nevertheless, standing back and having regard to the fact that this transaction was performed by both parties, the right approach would be for the court to assess which terms and conditions the parties were in fact ad idem about” [88]. It also rejected Sarens’ case that CBUK was estopped by representation and conduct from relying on the true legal position.

Contrary to the decision of the adjudicator, the Court accepted CBUK’s primary case that neither was there any concluded liquidated damages agreement, nor even an agreement in principle to cap liquidated damages (or any other damages).

Finally, the Court noted on an obiter basis that in the event that it had found liquidated damages and/or a cap to have been agreed, it would have accepted CBUK’s alternate case as to the application of any such agreement [135]. It further dismissed Sarens’ counterclaim to the effect that the scope of a contractual indemnity could not extend to a sum voluntarily agreed between CBUK and Costain [149].

Marc Lixenberg (instructed by Burness Paull) for the Claimant.

To view the full judgment click here.

10 April 2018

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