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High Court of Ireland Decisions
You are here: BAILII >> Databases >> High Court of Ireland Decisions >> P. Elliot and Co. Ltd. v. Mardown Ltd. [2000] IEHC 201 (24th November, 2000)
URL: http://www.bailii.org/ie/cases/IEHC/2000/201.html
Cite as: [2000] IEHC 201

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P. Elliot and Co. Ltd. v. Mardown Ltd. [2000] IEHC 201 (24th November, 2000)

THE HIGH COURT
Record No 1999 No 7903p
BETWEEN
P. ELLIOTT AND CO. LIMITED
PLAINTIFF
AND
MARDOWN LIMITED
DEFENDANT

JUDGMENT of Mr Justice McCracken delivered the 24th day of November 2000

1. These proceedings were issued to enforce an alleged settlement of earlier proceedings between the Plaintiff and the Defendant which bore record number 1996 No. 686S. These were proceedings taken by the Plaintiff, which carries on business as a building contractor, against the Defendant, which was the employer of the Plaintiff under a contract for the construction of a fitness centre. The original proceedings constituted a claim for payment pursuant to Architect's Certificates issued under the building contract.

2. While the Plaintiffs were the contractors under the building contract, there were two subcontracts entered into between the Plaintiff and a Northern Ireland firm called Stothers (M&E) Limited (herein called "Stothers"), one for the mechanical work and one for the electrical work. While, as between the Plaintiff and the Defendant, Stothers were described as domestic subcontractors, the fact is that the Plaintiff was directed by the Defendant's Architect to engage Stothers, and to enter into subcontracts with Stothers on the same terms as the main contract. It also appears that Stothers were treated as the nominated subcontractor in the certifying of payments by the Defendant's Architect, and it is quite clear that Stothers were, in everything but name, nominated subcontractors. It also emerged in the course of these proceedings that there was an action pending in Northern Ireland in which Stothers were Plaintiffs and the Defendants were Defendants, and that there had been a preliminary ruling in that case dealing with the relationship between the Defendant and Stothers. While the Defendant maintains that the existence of this ruling made it vital for the Defendant to establish the connection between the main contract and the subcontracts, I am satisfied that the Plaintiff was in fact unaware of this ruling at all relevant times, although it was aware that the relationship between the main contract and the subcontracts was a matter of concern to the Defendant.

3. The original action was listed for hearing on 29th June, 1999, and on the previous day lengthy negotiations took place between Counsel for the Plaintiff and Counsel for the Defendant. I have heard evidence from Mr Dermot Gleeson SC, who conducted the negotiations on the part of the Plaintiff, and his account of the negotiations and of what transpired leading up to the matter being called on in Court on 29th June has not been seriously contested. He gave evidence that by the evening of the 28th June there were only two matters on which agreement had not been reached. These were, firstly the form of words to deal with Stothers, and secondly, the amount to be paid by the Defendant to the Plaintiff as an immediate payment. At about 8.50 pm on that evening Counsel for the Defendant telephoned Mr Gleeson and agreed the form of words in relation to Stothers which had been suggested by Mr Gleeson, but could not agree to any further immediate payment. Mr Gleeson got immediate instructions to accept both these matters, and as far as he was concerned, and indeed as far as Counsel for the Defendant was concerned, agreement was reached, subject to the respective Junior Counsel writing out formal terms of settlement.

4. Later that evening Counsel for the Defendant telephoned Mr Gleeson on several occasions, intimating that he was having difficulties, but, very properly, stressing that he was not repudiating the agreement which had been reached. A further telephone call took place on the morning of 29th June, in which the Defendant's Counsel said he still did not have full instructions but repeated that he was not repudiating the agreement. He subsequently produced a document which set out an alternative agreement, which included a clause stating:-


“It is a condition precedent of this agreement that in respect of the mechanical and electrical subcontracts between the Plaintiff and Stothers (M&E) Limited the contractual obligation between the Defendant and the Plaintiff are mirror images with the contractual obligations between the Plaintiff and Stothers (M&E) Limited”

5. It is quite clear, however, that this document was not the Defendant's account of the agreement that had been reached, as it was only given to Mr Gleeson conditional on the approval of one of the Directors of the Defendant. The Counsel then went into Court, and upon Mr Gleeson announcing that the case was settled, the Defendant's Counsel said “I am instructed that the case is not settled” .

6. Shortly afterwards, he told Mr Gleeson that the document had not been approved and that the case was not settled.

7. Mr Gleeson accepts that there was discussion about the relationship between the main contract and the subcontract. His evidence is that what was agreed was that no amount claimed by the Defendant in relation to the mechanical and electrical items regarding Stothers were included in the agreed sum to be paid and should not be deducted therefrom. He also accepts that this was on the basis that the main contract and the subcontracts were identical, and in effect was subject to a proviso that this was so. However, he strongly denies that there was any suggestion that there was a condition precedent to the entire agreement, and I accept his evidence in this regard.

8. On 6th July, 1999 the Plaintiff wrote to the Defendant setting out the terms of the settlement which it was alleging. Included in that letter as part of the settlement was the following paragraph:-


“(5) Neither retention amounts due under the contract nor amounts claimed by Mardown in relation to the mechanical and electrical items involving Stothers would form part of the £731,000 and no deduction would be made in relation thereto. In this regard we confirm that the subcontracts between Elliotts and Stothers for the mechanical and electrical installations were negotiated directly between Mardown’s professional team and Stothers. Elliotts were instructed by the Architect under the main contract to enter into a contract with Stothers as nominated subcontractors for the mechanical and electrical installation. Therefore, the contract between Elliotts and Mardown in relation to the mechanical and electrical items is the same in all material respects as the contract between Elliotts and Stothers”

9. It appears there is one clear inaccuracy in this statement, in that the instructions given by the Defendant's Architects were not to enter into a contract with Stothers as nominated subcontractors, but rather to enter into the contract with them as domestic subcontractors. While the Defendant has highlighted this error, I do not think it is of any real significance, and it is notable that the Defendant did not seek to correct it in correspondence at the time. Indeed, the Defendant's response was quite clear, and was contained in a letter from them dated 9th July which stated:-


“Dealing first with your long letter we deny that the High Court proceedings record number 1996/686S was settled on the evening of Monday 28th June, 1999 as alleged or at all.

In that regard you must take whatever action you might be advised or feel is appropriate.”

10. There is no mention of any of the specific clauses in the Plaintiffs' letter of 6th July, nor were any queries raised with regard to the relationship between the main contract and the subcontracts.

11. Considerable further correspondence took place between the parties and their respective legal advisors, in the course of which the Defendant consistently maintained that there was no agreement, and indeed sought to invite the Plaintiff to renegotiate. On 14th July the Plaintiff enquired whether the Defendant would instruct Solicitors in Dublin to accept service of these proceedings, but the Defendant failed to do so, and by order dated 19th July the Plaintiff was given leave to serve notice of the proposed summons on the Defendant as its registered office in the Isle of Man. In due course, proceedings were issued on 30th July, and the Statement of Claim was delivered in August in these proceedings seeking Judgment in the sum of £350,000, which was the initial sum to be paid on foot of the agreement, an order for specific performance of the terms of the agreement and damages for breach thereof together with interest and costs.

12. Paragraph 5 of the Statement of Claim set out the alleged terms of the settlement, including the following:-


“(5) Neither retention amounts due under the contract nor amounts claimed by the Defendant in relation to the mechanical and electrical items involving the subcontractor , Stothers, would form part of the £731,000 and no deduction would be made in relation thereto.”

13. On 19th and 20th October there were exchanges of correspondence between the Defendant's and the Plaintiffs' Solicitors in which , rather bizarrely, the Defendant sought confirmation that Mr Gleeson had approved the terms of the settlement agreement as set out in the Statement of Claim and sought confirmation that Mr Gleeson would not, in giving evidence, seek to expand on, adjust or vary the extent or meaning of the terms alleged. Understandably, the Plaintiffs' Solicitors refused to deal with this point, and the Defendant again reiterated that it was their position “that there was no such agreement as alleged or at all”. In a further letter dated 20th October the Defendant, in a letter marked “without prejudice”, but which both parties have agreed should be open to me, referred to the Statement of Claim, and in particular the paragraph quoted above, and commented:-


“In relation to this item our Senior Counsel, Ian Finlay says 'issues relating to Stothers would be taken out, provided that the contracts between Mardown and Elliott and Elliott and Stothers were back to back'”

14. The Defendant then sought confirmation that this version would be accepted by the Plaintiff. When queried by the Plaintiffs' Solicitors, the Defendant stated that the letter had been written without prejudice on the basis that the Defendant did not accept that there was a settlement agreement. It should be said that it is most unfortunate that the Defendant, even at this stage, had not instructed a Solicitor, and indeed had not entered an appearance. The correspondence on the Defendant's behalf was carried out largely by one of its Directors, Mr Peter Willers, who it appears is a qualified barrister in the United Kingdom.

15. In due course the Defendant did instruct Solicitors in this jurisdiction, and a defence was duly filed on 28th January. Paragraph 1 of the defence read:-


“It is denied that the Plaintiff and the Defendant entered into the settlement agreement pleaded at paragraphs 4 and 5 of the Statement of Claim or any agreement and particulars of that plea set forth at sub paragraphs (1) - (5) of paragraph 5 of the Statement of Claim are denied as if individually set forth herein and traversed seriatim.”

16. The Defence then continued to plead, inter alia , that the parties had not been ad idem , that the Defendant's representatives had no authority to enter into a settlement, and denied in particular that any agreement entered into had contained the clause set forth at paragraph 5(5) of the Statement of Claim. The Defence then continued:-


“11. If, which is denied, the Plaintiff and the Defendant and/or the Plaintiffs' and the Defendant's representatives reached any agreement then same was entirely provisional upon the contracts between the Plaintiff and the Defendant on the one hand and between the Plaintiff and Stothers ( M&E) Limited being back to back and such was a condition precedent to any agreement, (which agreement is denied) which was reached between the parties herein.
12. Further, or in the alternative, it was a fundamental term of any agreement between the parties herein (which agreement is denied) that the contracts between the Plaintiff and Defendant herein and between the Plaintiff herein and Stothers (M&E) Limited were back to back and the Plaintiff has failed, refused and neglected to fulfil this fundamental term or to demonstrate its fulfilment to the satisfaction of Defendant herein”

17. It should be noted that nowhere in the correspondence which took place had this contention been put forward by or on behalf of the Defendant. A reply was delivered on behalf of the Plaintiff on 15th February in which it was denied that the agreement was provisional upon the main contract and the subcontracts being back to back, and further denied that it was a fundamental term of the agreement that such contracts were back to back. The reply then pleaded:-


“10. By way of further special reply to paragraphs 11 and 12 and for the avoidance of doubt, the main contract between the Plaintiff and the Defendant, entered into in January, 1996, made provision for the mechanical installation and the electrical installation by the inclusion of a PC sum in the bills of quantities forming part of the main contract. No details whatsoever of the mechanical and electrical installations were included in the main contract. The Plaintiff was subsequently instructed by the Defendant, through the Architect, to enter into two subcontracts with Stothers for the mechanical and electrical installations. The scope of the work in respect of the mechanical and electrical installations to be carried out by Stothers had been established by the Defendant, having been directly negotiated between the Defendant and/or its professional advisors and Stothers. The exact same scope of the works in respect of the mechanical and electrical installations was incorporated into the main contract by virtue of the Plaintiff entering into the aforementioned subcontracts, on the instruction of the Defendant. Accordingly, the contracts between the Plaintiff and the Defendant and between the Plaintiff and Stothers were in fact “back to back”. The Defendant is in possession of copies of the contracts between the Plaintiff and Stothers in respect of the mechanical and electrical installations respectively”.

18. In April and May, 2000 there were further exchanges of correspondence in which the Defendant's Solicitor again raised the question of whether the main contract and the subcontracts were back to back, and some, what I can only describe as rather testy correspondence, took place and ultimately on 7th June the Defendant's Solicitor wrote to the Plaintiffs' Solicitors saying:-


“Once again, we would ask you to confirm that the contracts between our respective clients and between your client and Stothers are “back to back” and in particular that clauses 1.05 of the mechanical and 2.04 of the electrical specification is operative in terms of the subcontract between your client and Stothers

If you are prepared to confirm this in writing, then our client would be prepared to specifically perform the alleged settlement agreement in the terms referred to therein. If this confirmation is forthcoming the only outstanding matters between the parties would be the question of interest on the payment of £350,000 and costs of these proceedings. These matters could be argued before the Court if necessary.”

19. The Plaintiffs' Solicitors replied on 9th June:-


“With regard to the written confirmation which you have requested, we and our clients have already confirmed on numerous occasions that the contracts between our respective clients and between our client and Stothers are “back to back” and this has also been specifically pleaded by our client. We would refer to you:-

Our client's letter dated 6th July, 1999 and the paragraph (5); The reply delivered on behalf of our client in these proceedings at paragraph 10; Our own letters to you dated 11th April and 2nd May, 2000.

With regard to clause 1.05 of the tender for the mechanical installation and clause 2.04 of the tender for the electrical installation (which we assume are the documents to which you are referring) following consideration of the relevant subcontract documents we can confirm that these documents were included in the list of documents forming part of the subcontracts entered into by our client with Stothers on the instruction of Henry J Lyons on behalf of your client, and therefore are incorporated into the subcontracts, respectively. This is clear from the face of the subcontract document. We trust this deals with your request for confirmation”

20. Finally, on 6th July the Defendant's Solicitors wrote to the Plaintiffs' Solicitors saying:-


“We confirm that there is an agreement between the parties (in light of recent communication) the terms of which are reflected in the agreement pleaded in your client's Statement of Claim together with clarification/additional term to the effect that the contractual relationship between your client and Stothers and between our respective clients are “back to back”. Had your client confirmed this position clearly and unequivocally at the outset there would have no need for the copious correspondence which has passed and the proceedings could have been averted.”

21. As a result of this confirmation the initial payment on foot of the settlement agreement has been paid by the Defendant, and the only issue now before me is the question of interest on that payment and the question of the costs of these proceedings.

22. I felt it necessary to quote at some length from some of the correspondence which took place, and from the pleadings. The following facts appear to me to be quite clearly established:-


1. There was an agreement reached between Counsel on 28th June, and the Defendant was at all times aware that its Counsel, as well as Mr Gleeson, maintained there had been agreement. I have no doubt that Mr Finlay, Counsel for the Defendant, had authority to enter into an agreement, and indeed it is now not sought to argue otherwise. Notwithstanding all of this, the Defendant consistently and repeatedly denied the existence of an agreement, both in its pleadings and in its correspondence.

2. The Plaintiff at all times stated that the main contract and the subcontracts were the same in all material respects and were in fact “back to back”. The Defendant's attitude in correspondence dealing with this matter seems to me to be most unreasonable, and was probably designed to delay matters.

3. The subcontracts were entered into by the Plaintiff on the express instructions of the Defendant's Architect. The Defendant's Architect had copies of all the relevant documentation, and I totally fail to see why it was necessary for the Defendant to seek the kind of assurances sought in the correspondence, as its own Architect could have given it the same information.

4 Mr Willers in evidence stated that the reason why he had not accepted the earlier statements on behalf of the Plaintiff that the main contract and the subcontracts were in fact back to back, was that there was no acknowledgement that this was a term of the settlement agreement. However, on 7th June 2000 the Defendant's Solicitors wrote simply asking for confirmation that the contracts were back to back, and stated that if this was confirmed in writing the Defendant would specifically perform the agreement. There was no suggestion that the Defendant required an acknowledgement that this was part of the settlement, nor did the Defendant ever get such acknowledgement. The confirmation given to the Defendant on 9th June, 2000, and the terms in which it was given, do not, in my view, vary in any material respect from the statement in the letter of 7th July 1999 that the contracts were in fact back to back.

23. I can find no justification for the attitude of the Defendant in the present case. I have no doubt that there was a binding and valid agreement between the parties Counsel which was reached on 28th June, 1999, and which was binding on the parties. There was no justification for the attitudes subsequently taken up on the part of the Defendant, and I will order that the Defendant pay to the Plaintiff interest at Courts Act rates from 29th June, 1999 to 3rd August, 2000, being the date in which the payment was ultimately made, on the sum of £350,000 and I further order that the Defendant pay the Plaintiffs' costs of these proceedings.

© 2000 Irish High Court

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URL: http://www.bailii.org/ie/cases/IEHC/2000/201.html