Under a Development Management Agreement (the Contract) entered into in May 2018, the Defendant (South Q) engaged the Claimant (Star) to provide professional consultancy services in relation to a commercial property development on the Isle of Dogs in London. Clause 3.6 of the Contract enabled South Q to issue written instructions for the ‘reasonable addition to or variation of the Services’.
The central issue in dispute was ‘whether South was entitled to purport to vary the Agreement in such a way which made it impossible for Star to fulfil or, more importantly, be paid pursuant to it’ (para 5 of the Judgment). A purported variation to that effect was issued by South Q in July 2020, on the basis that South Q were no longer the owners of the Property.
The Judge held that:
- The purported variation was not permitted under Clause 3.6, and was an unlawful attempt to effectively arrive at a de facto termination of the Contract by the back door whilst bypassing the termination provisions of the Contract.
- A variations power cannot be used to omit the entirety or a substantial proportion of a contractor’s scope of work absent express wording to that effect. In the absence of such express wording or a termination provision covering the relevant circumstances, a contractor is ‘entitled to proceed in the knowledge that not only did it have the benefit of that bargain and an opportunity to make profit, but that such opportunity would not be neutered in any way that would make completion of the Agreement, and therefore future payment, impossible’ (para 66).
- In order to show that a variation was invalid, it was not necessary to show that South Q had acted dishonestly, for an improper purpose, capriciously or arbitrarily.
- The circumstances giving rise to the purported variation did not fall within the termination provisions of the Contract.
Also at issue was whether Star had satisfactorily carried out its contractual scope of services during the months for which payment was claimed. The Judge found that it had done so.
Max Twivy, instructed by Joelson Law, was acting for the Claimant.