Contract – Construction — Loan agreement – First defendant developer engaging claimant company to carry out works under construction contract – Second defendants entering into loan agreement with first defendant developer – First defendant going into administration — Claimant alleging existence of contract or collateral contract or warranty with second defendants entitling it to payments due under construction contract – Claim dismissed
A completion to develop a site in connection with the 2012 Olympics was won by persons who incorporated the first defendant company to carry out their plans. The claimant was a building contractor engaged by the first defendant to carry out works on the site. When the first defendant failed to attract commercial investment, the second defendants, having a broad interest in the success of the Olympics, agreed to lend the first defendant £3 million under a separate loan agreement.
The contract for the works incorporated the JCT Construction Management Trade Contract, 2011 Edition, with amendments. The second defendants were not party to that contract but, as the funders, had control of any payments the first defendant wished to make over £2,000. The second defendants also required a list of amendments to be included in the contract, including a provision giving them the right, but not the obligation, to assume the first defendant’s contractual obligations. Under the building contract, the claimant undertook to carry out the works and the first defendant, as the employer, undertook to pay for them in accordance with payment provisions incorporated into the contract. The construction works were done properly and on time so that substantial payments became due to the claimant under the terms of the contract. The first defendant went into administration when the second defendants refused any further financial support, leaving contractual payments owing to the claimant.
The claimant brought proceedings to recover those sums, contending that the second defendants were liable to discharge the contractual payments on the basis of the existence of a contract or collateral contract, or an enforceable contractual warranty, between it and the second defendants. The court ordered a trial of liability. Issues arose: (i) whether there was a collateral contract arising at the time of the conclusion of the contract between the first defendant and the claimant; and (ii) whether there was a contract or collateral contract on the basis of meetings that occurred between the claimant and the second defendants after the claimant started chasing for payments allegedly due.
Held: The claim was dismissed.
(1) The terms of the contract for which the claimant contended were similar to those that were commonly implied into a construction contract. The claimant was not able to draw any comfort from the fact that such terms were often implied in those circumstances because the circumstances here were quite different. Where such terms were implied in a normal construction contract it was because they were necessary for the efficacy of the main contract and the proper performance of the primary express contractual obligations. In such circumstances, no assurance or other statement was required. In the present case, however, the claimant wished to make the terms the primary and sole object of the contract. That required an assurance to have been given by the second defendants. While it was conceptually possible that the assurance could be implied rather than expressed, it would require clear and cogent evidence to establish an implied assurance with suitable and sufficient clarity. On the facts of this case, no such assurance, either express or implied, had been given by or on behalf of the second defendants: Shanklin Pier v Detel [1951] 2 KB 854 considered.
(2) On the evidence, no contract or collateral contract had arisen between the second defendants and the claimant at meetings between the parties after the claimant began asking for payments allegedly due. The conversations had centred on the amount then due and outstanding and nothing had been said that could have reasonably been understood by the claimant as an assurance by the second defendants that all sums falling due under the building contract would be paid. The second defendants had contracted with the claimant on terms that had required the payment of £250,000 against the sum of £424,000 that had then been due to the claimant. The assurance of payment had been given, either expressly or by necessary implication, when trying to influence the claimant to do the additional works and not to take proceedings, and it had worked. The £250,000 had since been paid and the second defendants were under no obligation to make any further payment to the claimant.
James Pickering (instructed by Pannone LLP) appeared for the claimant; Simon Hughes QC (instructed by Trowers and Hamlins LLP) appeared for the defendants.
Eileen O’Grady, barrister
