Case notes

Get it in writing

All business runs on promises, construction more than most. It is also reliant on email. So take note of this recent court case involving a broken promise made in an email.

Portuguese company JPF supplied bedding products to Bedcare in July 2002. As Bedcare did not pay JPF’s invoices, JPF applied for a winding up order, which it obtained in March 2005.

When Bedcare had become aware of the winding up petition in January 2005, Mr Mehta, a Bedcare director, asked a member of his staff to email JPF’s solicitors.

The email promised that Mr Mehta would give JPF a personal guarantee of £25,000 and a repayment schedule over six months with Mr Mehta paying £5,000 before the petition was heard. In return he wanted the petition delayed for seven days. The email was not signed but it was issued from the same email address that Mr Mehta had used in signed emails.

JPF’s solicitors rang Mr Mehta, accepted his proposal and adjourned the hearing. When Mr Mehta did not pay, JPF sued him for his promise.

JPF was given summary judgment for £24,985.53 plus £1,080 costs, but Mr Mehta then appealed. He argued that section 4 of the Statute of Frauds required that a valid promise to guarantee another’s debts had to be in writing and signed by either the guarantor or someone the guarantor had authorised. He claimed that as the email was not signed he could not be held liable.

The court agreed that although an email could be capable of satisfying the Statute of Frauds in principle, this email did not and Mr Mehta was not liable to pay.

Moral: Personal guarantees should be in writing.

The cost of extensions

Kier was the contractor on the refurbishment and rebuilding of the old Patent Office library in London for City & General. The JCT Contract was originally £11,650,000 and the contract administrator was AYH. Delays and problems gave rise to requests for extensions of time and payment of loss and expense. Kier reckons the final account will be around £30m.

The project has so far generated five adjudications between Kier and C&G and a court case between C&G and AYH.

Adjudication two gave Kier a 28-week extension above the 31 weeks originally given by AYH. As a result Kier calculated the extra costs of site administration, multi-service gang, welfare, site accommodation, scaffolding plant, tower crane, temporary electrics, water, telephone, fax, copier, email protection, site cleaning and the bond and asked for an additional £1,330,012.

But when AYH issued the interim certificate for valuation on August 13, 2004, it had not included any of this loss and expense calculated by Kier. Kier subsequently started adjudication three.

In its response on September 23, 2004, C&G included expert reports that reduced Kier’s claim.

As Kier had only seven days to reply it argued this was insufficient time to consider the reports and they should be disregarded in the adjudication. The Adjudicator generally accepted Kier’s argument and did not take the reports into account and awarded Kier £1,246,487.40.

In the court proceedings to enforce the award, C&G argued the Adjudicator was wrong and his decision to disregard the reports was a breach of natural justice. The court disagreed and held that the Adjudicator’s decision was valid.

Moral: Get expert evidence in early.

Do not delay

This case was originally covered by Case Notes in the April edition.

Harlow & Milner had been working for Linda Teasdale on three of her properties. After a dispute, an Adjudicator awarded H&M £90,194.53. She did not pay and after a false start involving threatened bankruptcy proceedings, on January 16, 2006 the court ordered her to pay just less than £100,000, including interest.

She still did not pay and on February 20, H&M obtained an Interim Charging Order. This was sent out on February 21. However, on February 23 the court office spotted that the Order did not identify the property properly. The mistake was corrected but due to the weekend, the revised Order was not served until February 27.

The hearing to make the Interim Order final was held on March 15. Under the court rules there has to be 21 days between the date of the service and of the hearing.

In court Miss Teasdale argued that as she had been prejudiced by the delay, the Order should not be made final. She also argued that as she was now embroiled in an arbitration with H&M, she need not pay until the arbitration had been concluded.

The judge gave both arguments short shrift. The time issue was a purely technical point without merit and her argument on the arbitration was equally wrong. Waiting for the outcome of the arbitration was contrary to the Housing Grants Construction and Regeneration Act.

She therefore could not delay payment and the Interim Charging Order was made final.

Moral: Delaying tactics could be given short shrift