ML Europe Property Ltd (“MLEP”) sought to appeal a decision of Mr Recorder Rees QC in the TCC in settlement of Hurst Stores & Interiors Ltd (“Hurst”) final account.
MLEP had engaged Hurst to fit out the toilet locks of the London headquarters of Merrill Lynch. The contract envisaged a fixed trade contract price adjustable only by measured variations or extensions of time granted in respect of delays that properly affected the claims. On completion of the works, Hurst submitted a final account that was invariably rejected by MLEP. MLEP sought to rely on what was called the “27 April 2001 document” signed by the parties dealing with construction manager's instructions (CMIs) and other variations executed up to that date.
There had been lengthy discussions between the parties over a period of time within which Hurst believed it was doing MLEP a favour by agreeing the labour, plant and materials costs of the CMIs up to 27 April 2001. At the time of signing the 27 April 2001 document, however, MLEP had inserted further clauses to the effect that the agreement, headed “draft final account”, would be in full and final settlement of all of Hurst’s claims up to that point. Evidence was given that Mr Mell on behalf of Hurst, did not read the document before signing it and the new clauses were not brought to his attention.
Following the rejection of its final account, Hurst brought proceedings seeking rectification to remove the relevant wording from the 27 April 2001 document and a declaration that Mr Mell did not have authority to enter into the agreement, if held that the document was in fact binding.
Contact Fenwick Elliott on 020 7421 1986 or NGould@fenwickelliott.co.uk
Reference
Hurst was successful at first instance and MLEP subsequently appealed. Lord Justice Buxton, giving the lead judgment upheld the judgment at first instance with respect to rectification on the basis that Mr Mell had been mistaken as to the content of the document, MLEP had actual or “shut eye” knowledge of the mistake and overall MLEP’s conduct was unconscionable.
Postscript
The court also considered the issue of authority. It was argued that Mr Mell had no authority to vary the terms of the contract. It was held that the 27 April 2001 document was plainly not a loss and expense claim. It was rather an undertaking, said by MLEP to be binding, that it would make no loss and expense claims in respect of the periods leading up to 27 April 2001. The Court of Appeal held that the judge at first instance was fully entitled to find that no one contemplated Mr Mell as having authority to agree to so radical a departure from the process of valuation contemplated by the contract. It was held that Mr Mell did not have the authority to agree or authorise a change in the contractual machinery of that a fundamental a nature. Accordingly, this authority point was dismissed as well.
