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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Alba Management Consultants Ltd v. Carillon Plc & Anor [2005] ScotCS CSOH_53 (20 April 2005) URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSOH_53.html Cite as: [2005] CSOH 53, [2005] ScotCS CSOH_53 |
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Alba Management Consultants Ltd v. Carillon Plc+Carillon Services Limited [2005] ScotCS CSOH_53 (20 April 2005)
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OUTER HOUSE, COURT OF SESSION |
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CA23202
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OPINION OF LORD MACKAY OF DRUMADOON in the cause ALBA MANAGEMENT CONSULTANTS LIMITED Pursuers against (FIRST) CARILLION PLC First Defenders and (SECOND) CARILLION SERVICES LIMITED Second Defenders
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Pursuers: Swanson, Solicitor-Advocate; Maclay Murray & Spens
Defenders: McNeill, QC, Bowen; MacRoberts
20 April 2005
Introduction
[1] The pursuers in this action are a company whose employees act as business and management consultants. The pursuers commenced business in 1997. From that date and throughout the period with which this action is concerned, Edward Smyth was the managing director of the pursuers. The pursuers are now a subsidiary of McAlpine plc. Mr Smyth is no longer employed by the pursuers, although he was, until shortly before he gave evidence in the present action, a director of McAlpine plc. [2] The first defenders are a group holding company, which is responsible for the central management and control of a number of subsidiary companies, including the second defenders. The second defenders are a wholly owned subsidiary of the first defenders. The second defenders are a company that specialises in facilities management. During part of the period with which this action is concerned, Euan McEwan was an executive director of the first defenders. Mr McEwan ceased working for the defenders during 2001. During the period with which this action is concerned, Gordon Bryden was the managing director of the second defenders. Mr Bryden took instructions from and reported to Mr McEwan, with whom he was in regular contact. Mr Bryden left the employment of the second defenders some months before he gave evidence. [3] During 1999, British Telecom plc ("BT") decided to outsource the facilities management requirements for their entire property estate. That project was referred to as "Project Jaguar". BT issued tender documents to a number of facilities management companies. The defenders were amongst those companies selected by BT to tender for the proposed facilities management contract. At that time the pursuers carried out consultancy work for BT. Mr Smyth had regular dealings with senior employees of BT. Around January 2000, BT suggested to Mr McEwan that the defenders should approach Mr Smyth, with a view to discussing what help the pursuers might be able to provide to the defenders, in connection with the defenders' attempt to win the facilities management contract. Mr McEwan did so. Discussions between the pursuers and the defenders began around the end of January. Initially, those discussions involved Mr Smyth and Mr McEwan. They related to the possibility of the pursuers providing services to the defenders in connection with Project Jaguar and also in connection with various other projects, relating to public finance initiatives ("PFI") and lifetime asset management ("LAM"), in which the defenders were interested. The discussions covered, amongst other matters, the terms on which the pursuers would be remunerated for any services they provided to the defenders. Certain correspondence passed between Mr Smyth and Mr McEwan. Subsequently, Mr Bryden became involved in discussions with Mr Smyth. Further correspondence passed between Mr Smyth and Mr Bryden. Later in this opinion, I will deal in greater detail with the subject matter of those discussions and the contents of that correspondence. [4] A joint venture, in which the defenders were involved, was subsequently successful in securing the Project Jaguar facilities management contract with BT. Around September or October 2000, the defenders received intimation that the joint venture in which they were involved was the preferred bidder for that contract. When the joint venture's contract with BT was subsequently concluded, it was agreed it should run for a period of five years from March 2001.The present action
[5] The pursuers' action against the defenders proceeds on the basis that the parties entered in a contract to the effect that, were the defenders to be successful in winning the Project Jaguar facilities management contract from BT, the defenders would pay the pursuers, over a period of five years, monthly payments of £23,500, namely £20,000, plus VAT. The pursuers contend that they agreed with the defenders that the length of the facilities management contract with BT would determine the duration of such payments, which in the event was for five years. [6] It is averred on behalf of the pursuers that the contract between the parties had been verbally agreed between Mr Smyth and Mr McEwan, in February 2000, prior to Mr McEwan sending a letter dated 15 February 2000 to Mr Smyth (No. 6/3 of Process). It is also averred that the contract had been amended, during April 2000, in the course of discussions between Mr Smyth and Mr Bryden, prior to Mr Smyth sending a letter dated 19 April 2000 to Mr Bryden (No. 6/4 of Process). [7] Between March 2000 and August 2000, the pursuers sent the first defenders monthly invoices for £25, 850. The defenders settled those invoices. Commencing in September 2000, the pursuers sent the first defenders monthly invoices for £23,500. Such invoices up and until the invoice dated May 2002 have been settled by the defenders. It is a matter of agreement that the defenders have only settled twenty-one of those invoices. The pursuers claim that they are contractually entitled to payment of a further thirty-nine payments of £23,500, namely £916,500. The defenders, for their part, contend that they have already paid the pursuers all sums that were contractually due to the pursuers, for the services the pursuers provided to the defenders in connection with Project Jaguar. [10] It should be noted that no issue arises as to which of the defenders should be liable for any sum found due to the pursuers. Senior counsel for the defenders made clear that the defenders do not dispute that a joint and several decree should be pronounced against both defenders, in the event that the pursuers are found entitled to payment of the sum of £916,500 for which they conclude. I should also make clear that it formed no part of the defenders' defence to the action to found on the fact that neither of them was the sole party which entered into the facilities management contract with BT. That contract was between a joint venture and BT. Nevertheless, the defenders accept that the pursuers' claim against them should be determined on the basis that the pursuers provided services to both defenders in their seeking to achieve the Project Jaguar facilities management contract with BT.The proof
[11] During the proof, I heard the evidence of Mr Smyth and Mr McEwan, who were led by the pursuers, and Mr Bryden, who gave evidence on behalf of the defenders. It was apparent during the evidence of all three witnesses that none of them had been given the opportunity of full and recent access to the records and other paperwork they would have created, received and had before them, over the period of time with which this action was concerned. Indeed, it was only a few days before he gave evidence that Mr McEwan discovered that he was being cited to give evidence as a witness for the pursuers. Furthermore, a number of documents, which are referred to either on record or in other documents that are before the court, have not been lodged as productions. My clear impression was that those factors made it difficult for any of the witnesses to have a full and entirely accurate recollection of the events with which this case is concerned. Bearing in mind the passage of time since the early months of 2000 and 2001, it is hardly surprising that their recollections were incomplete. It is equally unsurprising that in some instances the evidence I heard from one witness was difficult to reconcile with the documentary evidence that was before me or the evidence of the other witnesses. [12] Of the three witnesses who gave evidence, Mr Smyth was most confident in the correctness of his recollection as to what had occurred. He came across as an individual who was fairly forthcoming about his own abilities and his success in business. He gave the very clear impression of being someone who expected everyone he dealt with to agree with what he wanted to happen. He consistently claimed that he would not have become involved in working with the defenders, on Project Jaguar, unless the pursuers were going to receive £1million out of his doing so. In similar vein, Mr Smyth repeatedly asserted that once he had started working for the defenders on Project Jaguar, there had been no doubt that the joint venture in which they were involved would win the facilities management contract with BT. [13] I found the manner in which Mr Smyth gave his evidence, and the claims he made about himself during the course of his evidence, indicative of a very confident and somewhat cavalier personality, who may not have paid as much attention to detail as he could and should have done, over the period of time he had been dealing with the defenders. The same lack of attention to detail affected some of the answers he gave in the witness box. Like many confident witnesses, he was prone to argue the case of the party on whose behalf he gave evidence, rather than give appropriate answers to the precise questions he was being asked. The impression I gained was that Mr Smyth considered that the pursuers had a great deal to offer the defenders and that the defenders should have been prepared to pay precisely what he wanted, for the services the pursuers were prepared to provide. [14] Mr McEwan and Mr Bryden on the other hand, where much quieter, reflective and more careful witnesses. They gave their evidence is a less dogmatic manner. As with Mr Smyth, their recollections of what happened were incomplete. Indeed, although they had both worked with the defenders, there were a number of differences between them in their recollections as to what had happened. Nevertheless, my clear impression was that they were doing their best to recollect events as carefully as they could. [15] In the written submissions that were lodged on behalf of the pursuers, issues were raised as to credibility of the evidence given by Mr McEwan and Mr Bryden. In the event, those allegations were not insisted upon. The defenders made no attack on the credibility of Mr Smyth. Accordingly, resolving the factual issues that remain after proof depends on considering what factual inferences fall to be drawn from evidence the reliability of which may well have been affected by a number of factors - the passage of time, the witnesses' lack of access to contemporaneous records and the absence from process of certain items of correspondence between the parties and other documentation, which were clearly relevant to the discussions that took place between the parties and are, in some instances, mentioned in the pleadings or the productions that have been lodged.History of discussions and correspondence between the parties
[16] Before I turn to the detail of what passed between Mr Smyth on the one hand and Mr McEwan and Mr Bryden on the other, during the discussions amongst them, I think it is helpful to try and sketch out the history of events from late January 2000 until 19 April 2000, the date of the letter to which I have referred. [17] It appears clear from the evidence I heard that Mr Smyth and Mr McEwan first met in late January 2000. At a fairly early stage of their discussions, Mr Smyth sent a letter to the defenders, initially in draft form, dated 2 February 2000 (No. 6/11 of Process), and subsequently in a revised form, dated 4 February 2000 (which was not lodged). The draft version of the letter set out proposals as to what the pursuers could do for the defenders in connection with Project Jaguar and in the wider PFI/LAM market. The draft version of the letter also contained the following paragraphs dealing with the issue of the pursuers' remuneration:"Programme, Form of Contract, and Cost
I confirm my commitment to assist Carillion to be selected for Jaguar and this has already been communicated appropriately with BT in a positive and professional manner. It goes without saying we will not assist any of the others, in particular your final competitor.
Based on our discussions / meeting and your positive comments this week, I propose the following:
a) Project Jaguar
Initially a 12 month agreement to secure, convert and help close this project as part of your team. This would formally start only after next week's BT meeting and a positive outcome for Carillion. As discussed, we have already started to ensure Carillion's proposals are presented to the key decision makers, but understand that a more formal start date should be agreed shortly. Once the agreement comes into effect, it will be appropriate to review the scope of work and responsibilities each quarter to monitor progress and deliverables. A monthly fee of ________ is proposed for 12 months.
b) LAM/Corporate PFI
A 12 month consultancy agreement to assist Carillion as outlined in the scope of work. A monthly fee of ________ is proposed. I am confident from existing Alba/Carillion clients this will involve in the relatively short-term specific project opportunities. At that time, depending on our role and responsibilities detailed, project/bid work would be agreed on a project by project basis.
(All fees exclude VAT but include reasonable out of pocket expenses).
As previously stated we would like to develop a long-term relationship with your company and hope that our expertise and ability to work effectively together will ensure this happens. For that reason you will find us flexible and proactive consultants, and as appropriate capable of changing focus or emphasis when the situation arises. If appropriate we would like also to look at an incentive agreement, linked directly to our efforts on specific projects but I suggest this would be more relevant once we have agreed a monthly fee and our priorities."
"10/02/2000
Dear Ed
Many thanks for your letter dated 4th February 2000.
As discussed on the phone the principals (sic) of what you suggest are largely acceptable and reflect the gist of our various discussions.
Not unsurprisingly, I would like to link the quantum to be paid to the value of work obtained. I have therefore asked Gordon to discuss with you this issue.
I look forward to a mutually satisfying outcome and I will speak to you soon.
Yours sincerely
Euan McEwan"
"15/02/2000
Subject: Interim Proposals to assist Carillion on Project Jaguar
With reference to your proposal letter dated 4th February and my letter dated 10th February please accept this correspondence as a letter of intent for Alba to work with us on the Project Jaguar initiative.
As I explained in my note I would like the remuneration to Alba to be linked to the value of work obtained, and I have asked Gordon Bryden to discuss this with you and agree a mutually acceptable outcome.
In the meantime we have agreed the following;
(1) You will be paid a weekly fee of £5,500 (five thousand, five hundred
pound) starting from 7th February 2000, until a more formal agreement has been negotiated between us. This can be terminated at one week's notice if Carillion are not selected to proceed. You will invoice us monthly in arrears and I understand your fees exclude VAT but include reasonable travelling expenses.
(2) We would seek to agree a contact with your company for the duration of our contract which will be based on a monthly fee plus some element of risk/reward related to the quantum of work received. I have asked Gordon to agree this as soon as practical but as a matter of urgency.
(3) From time to time on projects of this nature periods of peaks in workloads are experienced because of commercial HR, legal or financial issues/problems. Should we require additional resources of this type they will be the subject of separate proposals, discussed and authorised at the time.
I trust the above is an acceptable holding letter and demonstrates our intent to work with you.
Thank you for your efforts so far and let's work together to close and deliver this important project.
Yours sincerely
Euan McEwan."
"5th April 2000
Dear Ed
Further to our discussions regarding consultancy fees, I committed to outline Carillion Services profit in years 1 and 2. Considering our equity holding in the enabling organisation (51%) this would generate:-
Year GP(£k)
1 1,088
2 3,039
Total 4,127
This number will be crystallised when we complete negotiations with BT. It equates to contributions from the Enabling Organisation and the two regional service organisations we propose to lead.
With the details to be finalised with BT including the quantum of the contract value and the number of service organisations, which the lead partners participate in; I am unable to confirm our expected contribution.
I believe we have agreed the principle of how the fee will be calculated and trust that we can enjoy your continued support and contribution in the Jaguar process, until we close off commercial negotiations with BT.
Alison will arrange a meeting, which we agreed would take place next week.
Yours sincerely
Gordon Bryden".
"11 April 2000
Dear Gordon
Subject: Project Jaguar Fees
Thank you very much for your letter dated 5 April, outlining the profitability of your current stake in the enabling organisation Project Jaguar. Based on our previous discussions where we agreed the principles, I would like to propose the following:
1. Alba and Carillion enter into a five-year framework agreement for
Project Jaguar
2. The initial contract within the framework agreement will be for a Fixed
Term of 24 months starting 1 May 2000 for an agreed monthly fee of 24 equal instalments of £ ( ).
3. A (sic) incentive agreement (to be finalised) will be based on additional work (e.g. Cellnet estate) added to the base contract and calculated on a formula of £ per £ million per annum for new FM work based on a profitability of work being in the order of 3%. It is proposed to increase the incentive element pro-rata to the increase in profitability, e.g. £ /million for %; £ /million for % etc. (All fees exclude VAT but include reasonable UK travelling expenses).
I suggest we finalise the incentive agreement when we meet on 14 April and then incorporate the above terms and conditions into a contract which would support it. (I will prepare a draft for your consideration). The above fixed fee is meant to be a balance between the relatively low profits of the first year, against the more significant profits in subsequent years.
I would point out that by only committing you to a fixed term of two years, years three, four and five might not be affected by our fixed monthly costs. For that reason I hope you can agree to the above fixed fee and we can concentrate on finalising the incentive agreement, and winning work. In the meantime you can be assured of my continued support on Jaguar and our other LAM schemes. I think we have made real progress on changing the shape of the enabling organisation. I look forward to seeing you next week.
Yours sincerely
Ed Smyth
Managing Director
PS:
I have agreed with Euan a separate Contract for Corporate PFI/LAM and I would point out that I am optimistic that the work in which we are currently involved will generate significantly larger profits, than the initial profitability of the Jaguar contract, and for that reason we can both look forward with some confidence to the future. For corporate PFI work I propose an incentive agreement, biased towards individual clients' contracts is agreed based on profitability and who had the original client contract/contract. We shall each have some protection relating to existing clients/projects in the event that our agreement does not extend beyond the initial fixed term."
"19 April 2000
Dear Gordon
Subject: Project Jaguar Agreement
Thank you very much for your letter dated 5 April, outlining the profitability of your current stake in the enabling organisation Project Jaguar. Based on our previous discussions where we agreed the principles and in particular our meeting on 14th April, I would like to confirm the following agreement that we have reached:
1. Alba and Carillion are entering into a five-year framework agreement
for Project Jaguar.
2. The initial contract within the framework agreement is for a Fixed
Term of 24 months starting 15th May 2000, (or such other date as we
subsequently agree) for an agreed monthly fee of 24 equal instalments of £20,000 (twenty thousand pounds).
3. The incentive element of the agreement is based on additional work
(e.g. Cellnet estate, additional capital work) added to the base contract and calculated on a formula of £3,000 per £ million per annum for new FM work based on a profitability of work being in the order of 3%. Similarly £3,000 per £ million for capital projects.
As part of this agreement we will review the incentive element of the agreement annually to take into account any significant increase in profitability. The above formula is based on a profitability of approximately 3%.
Would you please sign both copies of this letter and return one to me? In the meantime, I will prepare and send you a form of contract, which will record this agreement in detail.
Please be assured of my continued support on Jaguar and our other LAM schemes.
Yours sincerely
Ed Smyth
Managing Director
Authorisation to continue in accordance with this letter.
Name: ______________________
Signed: _____________________
Date: _______________________"
"7) Jaguar; Alba will continue to work on current agreement until contract signature. ES to review structure with Alan White (BT)".
Factual issues between the parties
[27] The pursuers' position, as set out on record, refers to the contract between the parties relating to Project Jaguar as being "the Second Contract". Reference to the pursuers' position in respect of that contract is to be found in the Closed Record in Condescendence 4 at Page 13, A-C and Condescendence 5 at Page 16 A-D. [28] Put shortly, the position of the pursuers is that initially Mr Smyth and Mr McEwan reached a verbal contract, prior to Mr McEwan dispatching his letter of 15 February 2000 (No. 6/3 of Process). It is averred that verbal contract had a number of elements: (i) The pursuers would pay the defenders a weekly fee of £5,500 plus VAT, commencing on 7 February 2000. (ii) That weekly fee would be payable until a more formal contract had been negotiated between the parties. (iii) A formal contract between the parties would be entered into. (iv) Remuneration in terms of the formal contract would be based on a monthly fee payable by the defenders to the pursuers for the duration of the defenders' contract with BT, plus some element of "risk/reward related to the quantum of work received". [29] The pursuers aver that subsequent to Mr McEwan's letter of 15 February 2000 (No 6/3 of Process), Mr Smyth and Mr Bryden met on a number of occasions to discuss the possibility of developing the "second contract" and the success fee element of the Project Jaguar remuneration package. The pursuers' averments refer to a letter dated 11 February 2002 sent by Mr Smyth to Mr Bryden, which although it was not lodged as a production, was stated to have set out the principles, which Mr Smyth and Mr Bryden "had agreed by way of re-negotiating the terms of the Second Contract remuneration package over the five year term of the contract". I understand that part of the pursuers' pleadings to be referring to the contract, which, in February 2000, the members of the joint venture, including the defenders, were seeking to conclude with BT. [30] It is important to note the pursuers also aver that, at a meeting on 14 April 2000, Mr Smyth and Mr Bryden agreed that the terms of the Second Contract should be altered. Mr Smyth's letter of 19 April 2000 (No. 6/4 of Process) was then sent and its terms are incorporated into the pleadings. The pursuers' averments then continue:"The parties intended, if the risk/reward element proved lucrative, to re-address the level of monthly payments for the remaining 36 months. This was never done. It was agreed between Gordon Bryden and Ed Smyth that if the BT contract was not developed and no remuneration fell due to the pursuers in terms of the incentive element of the package then the monthly fee would remain the same for the duration of the contract between BT and the defenders".
I understand the use of the term "the development of the BT contract" to be a reference to the fact that during 2000 there was a measure of uncertainty as to whether the facilities management contract with BT would be limited to their core property estate or whether it might also cover the property estate of subsidiaries such as Cellnet and Yellow Pages.
[31] In practical terms, the case for the pursuers is that by 19 April 2000 the defenders had agreed that, unless an incentive element was subsequently agreed between the parties, they would pay monthly payments of £20,000 plus VAT, during the duration of any facilities management contract with BT. It was anticipated that would be a five year contract, which would commence on a date that was yet to be determined. Such payments would total £1.2 million over a five year period. [32] In terms of Paragraph 2 of the letter of 19 April 2000, the pursuers had agreed to pay monthly payments of £20,000 plus VAT from 15 May 2000, for a period of 24 months. Five years from 15 May 2000 would clearly not coincide with the five year duration of any contract with BT. [33] The pursuers aver that thirty nine of those monthly payments, amounting to £916,000, inclusive of VAT, remain outstanding. The defenders, for their part, aver that the terms of the pursuers' entitlement to remuneration under the second contract between the parties are as set out in the letter of 19 April 2000 and that they have paid all sums due to the pursuers in respect of that contract.Discussion
[34] In my opinion, the first important factual question that requires to be addressed is what the parties agreed, prior to Mr McEwan sending his letter of 15 February 2000. For reasons I will explain later, I consider this factual question to be of lesser importance than the question of what was agreed between Mr Smyth and Mr Bryden, in the run-up to Mr Smyth sending his letter of 19 April 2000 (No. 6/4 of Process). [35] During the proof, I heard evidence from Mr Smyth and Mr McEwan as to the discussions between them that had preceded Mr McEwan's letter of 15 February 2000 (No 6/3 of Process). Without any objection being taken, I also heard evidence from all three witnesses as to how the terms of that letter fall to be construed. [36] The evidence relating to the discussions that preceded the letter of 15 February 2000 was confused. On the one hand, Mr Smyth consistently maintained that he had been looking for at least £1million from the defenders, to remunerate the pursuers for the services they were going to provide in connection with Project Jaguar. On the other hand, the pursuers are unable to point to any documents dated on or before 15 February 2000 that support, let alone confirm, any contention that the defenders had agreed to pay the pursuers any such sum. Indeed, what I understand to have been the terms of Mr Smyth's own letter of 4 February 2000, (which was not lodged, but which was stated to have been based on a draft dated 2 February 2000 (No. 6/11 of Process) that had been copied on the same day to the pursuers), are difficult to reconcile with any suggestion that prior to 15 February 2000 Mr Smyth had made clear to Mr McEwan that the pursuers expected to receive at least £1million for assisting the defenders on Project Jaguar. On the last page of the draft letter of 2 February 2000, Mr Smyth proposes the following, as far as the cost of the pursuers' services in connection with Project Jaguar:"Project Jaguar
Initially a 12 month agreement to secure, convert and help close this project as part of your team. This would formally start after next week's BT meeting and a positive outcome for Carillion. As discussed, we have already started to ensure Carillion's proposals are presented to the key decision makers but understand that a more formal start date should be agreed shortly. Once the agreement come into effect, it will be appropriate to review the scope of the work and responsibilities each quarter to monitor progress and deliverables. A monthly fee of ____________ is proposed for 12 months."
It is clear that the draft letter dated 2 February 2000 contains no detail of the level of the fee sought. As to the level of what was ultimately proposed in the letter of 4 February 2000, all we have is the figure of £5,500 plus VAT a week that was subsequently agreed and was referred to in Mr McEwan's letter of 15 February 2000 (No. 6/3 of Process). Giving full allowance to the fact that the letter of 4 February 2000 was not before me, I find it very difficult to understand how, having put a proposal along those lines to the defenders during the first week in February 2000, within a week or so later Mr Smyth would have considered it appropriate to press for agreement that remuneration for the pursuers would be in the region of £1 million.
[37] Having carefully considered his evidence, I accept that it is possible that he may have mentioned to Mr McEwan that the pursuers hoped to get £1 million out of their involvement in Project Jaguar. Mr McEwan mentioned during his evidence that large figures are quite frequently bandied about during the course of negotiations. Mentioning large figures is one thing. Requiring that they be agreed to by other parties is another. Having regard to all the evidence I heard, I have even more difficulty in understanding how Mr McEwan would have agreed to commit the pursuers to paying £1 million, involving, as that would have done, the pursuers making monthly payments in excess of £20,000 over a five year period. That is particularly so in view of the clear impression I gained from the evidence of Mr McEwan and Mr Bryden that the defenders were employing the pursuers because BT suggested they should do so. The evidence disclosed that in February 2000, if not indeed throughout the period that the parties worked together, there was a measure of uncertainty on the part of Mr McEwan and Mr Bryden as to precisely how much value the pursuers, and Mr Smyth in particular, could and would add to the defenders' dealings with BT and to the facilities management contract with BT, were the defenders and their joint venture partners to win such a contract. As Mr McEwan put it, the pursuers had been employed to "jazz up" the defenders' presentation to BT. Having said that, he also recognised that Mr Smyth was employed as a consultant by BT and had good contacts within that company. [38] During his evidence, Mr Smyth variously described the letter of 15 February 2000 as having given him a sum of at least £1 million, providing confidence that such a sum would be payable by the pursuers, being the only agreement the pursuers had with the defenders and as providing a basis for continuing to negotiate with the pursuers. In my opinion, the last of these approaches to the letter of 15 February 2000 is entirely consistent with the manner in which the case for the pursuers is pled. [39] On the basis of the evidence I heard and the documentary evidence placed before me, I am satisfied that by the time the letter of 15 February 2000 was sent by Mr McEwan the parties had reached agreement to work together in connection with Project Jaguar. I am also satisfied that they had also reached agreement that the defenders would be paid a weekly fee of £5,500 plus VAT, until a more formal agreement had been negotiated between them. It had also been agreed between them that fee could be terminated at one week's notice, if the defenders were informed that they had not been selected for Project Jaguar. [40] As far as the future was concerned, I consider paragraph (2) of the letter of 15 February 2000 (No.6/3 of Process) to be the expression of a common intention on the part of the pursuers and the defenders to seek to agree a contract between them. I read the terms of that paragraph as reflecting Mr McEwan's concern as to precisely what value the pursuers and Mr Smyth would add to what the defenders were themselves capable of achieving. I consider it more likely that the reference to "the duration of the contract" was intended to be a reference to the contract that the defenders and their joint venture partners hoped to conclude with BT, as opposed to a reference to the more formal agreement that the pursuers and the defenders intended to negotiate. However, I do not construe that paragraph as constituting or indeed providing any evidence of any agreement between the parties that, if and when a facilities management contract with BT was concluded, the defenders would pay the pursuers £5,500 plus VAT a week from the start of and throughout the duration of such a contract or over any other five year period. [41] Furthermore, I do not construe paragraph (2) of the letter of 15 February 2000 as evidence that the parties had agreed that if a further contract was to be negotiated between them, it would contain a provision relating to payment of a weekly fee throughout the duration of the contract between the parties or any contract between the defenders and their joint venture partners and BT. The weekly fee was to be payable from 7 February 2000 onwards. Any contract between the defenders (and their joint venture partners) and BT was many months away. The letter of 15 February 2000 (No. 6/3 of Process) states that it is hoped to be "an acceptable holding letter". As such, I do not consider that the letter constitutes evidence supporting the existence of a contract in terms of which the defenders had agreed to pay the pursuers weekly or monthly sums that could exceed £1 million. [42] My conclusion that no such agreement binding the defenders to weekly or monthly payments totalling at least £1 million had been reached, prior to 15 February 2000, coincides with the position adopted on behalf of the pursuers during submissions. During submissions, it was conceded on behalf of the pursuers that the letter of 15 February 2000 (No. 6/3 of Process) did not constitute evidence that the parties had reached agreement that the pursuers would be paid a monthly fee throughout the duration of any facilities management contract with BT. All that was contended on behalf of the pursuers was that, by 15 February 2000, Mr Smyth had been confident that the pursuers would get £1 million out of working with the defenders on Project Jaguar. [43] However confident Mr Smyth may have been that the pursuers would receive £1 million or more out of their involvement with the defenders on Project Jaguar, I find nothing in the documentation that pre-dates 15 February 2000 or the evidence of Mr McEwan or Mr Bryden that supports the contention that by 15 February 2000 an agreement had been reached that the pursuers would receive a weekly or monthly payment throughout the duration of any facilities management contract with BT in which the defenders might become involved. Insofar as Mr Smyth claimed during his evidence that such agreement had been reached, I am not prepared to rely on that evidence. Such a claim does not accord with the terms of the draft letter of 2 February 2000, No. 6/2 of Process. Nor is it mentioned in any of the documentation that post-dates 15 February 2000. Indeed, Mr McEwan, who was led as a witness by the defenders, gave evidence that the reference to a more formal agreement in paragraph (1) and the terms of paragraph (2) of his letter of 15 February 2000 (No. 6/3 of Process) related to a lump sum payment to the pursuers, which Mr Smyth and he had intended should be the subject of further discussions. That lump sum payment would be payable as a success fee to the pursuers for helping the defenders and their joint venture partners to win a contract with BT. It would be payable when the BT contract was won, at which point the monthly payments would stop. [44] In my opinion, accordingly, whatever was agreed between Mr Smyth and Mr McEwan prior to the letter of 15 February 2000, it did not include an agreement that if and when the defenders and their joint venture partners won a facilities management contract with BT, the pursuers would be entitled to payment from the defenders of weekly sums of £5,500 plus VAT or monthly sums of £20,000 plus VAT, throughout the duration of the contract involving BT. [45] After the letter of 15 February 2000 (No. 6/3 of Process) had been dispatched, Mr Bryden became involved in the negotiations as to the level of remuneration the pursuers were to receive. There was some confusion in the evidence as to which elements of the remuneration were to be agreed. Mr Smyth and Mr McEwan recollected that one element that Mr Bryden was to resolve with Mr Smyth was the payment of a lump sum or "bullet payment" to the pursuers, which would be payable to the pursuers in the event that the defenders and their joint venture partners were successful in obtaining their contract with BT. The term "bullet payment" was used by Mr Smyth to refer to the accelerated payment of monthly payments that would otherwise have been payable by the defenders over a period of time, which he maintained would have been the period of the facilities management contract with BT. [46] Mr McEwan, on the other hand, saw a bullet payment as a success fee, payable to the pursuers in the event that a contract with BT was won. In that event, the bullet payment would become payable and the monthly payments to the pursuers would cease. During the evidence, there was also some reference to "incentive payments", which would be payable to the pursuers in the event that the property estate covered by any facilities management contract with BT was increased beyond BT's core estate, to include the property estate of subsidiary companies such as Cellnet and Yellow Pages. [47] Mr Bryden's recollection was slightly different. He had no recollection of any discussions about a bullet payment, which was to be calculated by reference to the accelerated payment of monthly payments. He did, however, recollect some discussion between Mr Smyth and himself on the topic of incentive payments, payable in the event that the contract with BT covered facilities management work additional to that relating to BT's core property estate. [48] In the event, the second and much more critical factual issue that arose during the proof was what had been agreed between Mr Smyth and Mr Bryden, about the pursuers' remuneration in respect of Project Jaguar, prior to Mr Smyth sending his letter of 19 April 2000 (No. 6/4 of Process). In my opinion, that letter provides fairly clear evidence as to what had been agreed between Mr Smyth and Mr Bryden, in the period leading up to and during their meeting on 14 April 2000. Whatever may have been agreed between the parties back in February 2000, and indeed prior to 14 April 2000, any such agreement was varied by the terms of what is set out in the letter of 19 April 2000. In this regard, it is important to bear in mind that the pursuers' case on record is that, during the discussions they held on 14 April 2000, Mr Smyth and Mr Bryden agreed that the second contract should be amended. Furthermore, there was no evidence before me that the parties agreed any variation of that agreement subsequent to 19 April 2000. [49] I find the terms of the letter of 19 April 2000 to be quite clear. I have already quoted them. I need not repeat them. Written in the name of Mr Smyth, the letter confirms that the parties are entering into a five-year framework agreement for Project Jaguar. The letter also confirms that the parties have agreed that the defenders will pay £20,000 plus VAT for 24 months from 15 May 2000. The letter records some agreement as to the incentive element of the framework agreement, but makes it clear that the incentive element was to be the subject of further discussions, to take place on an annual basis. Mr Smyth, who stated that within the two year period from May 2000 the contract with BT would be won, mobilised and hopefully working well, confirmed that in evidence. Thereafter the pursuers would have had no continuing practical involvement with the contract. However, Mr Bryden and he never reached agreement as to what the pursuers would be paid by way of an incentive element. [50] At one stage of his evidence, Mr Smyth asserted that what was set out in the letter of 15 February 2000 (No. 6/3 of Process) was the only agreement that the parties ever had. That was an assertion that I am unable to accept and rely upon. Indeed, it is contrary to the pursuers' position on record and during submissions. I consider that the letter of 19 April 2000 (No. 6/4 of Process), when read with Mr Smyth's earlier letter of 11 April 2000 (No.6/15 of Process), provides the clearest of evidence that Mr Smyth and Mr Bryden intended to reach agreement, and did reach agreement, on certain issues. On any view, the agreement recorded in the paragraph 1 of the letter of 19 April 2000 superseded the agreement made between Mr Smyth and Mr McEwan that the weekly payment was terminable at one week's notice, in the event that the defenders failed to win a contract with BT. I merely note in passing that, at some stage between February 2000 and 14 April 2000, the parties had agreed that the payments of £5,500 plus VAT a week should be reduced to £20,000 plus VAT a month. Quite how and when such a variation in the payments was agreed was not clear from the evidence. [51] The pursuers aver that prior to 19 April 2000 Mr Smyth and Mr Bryden had agreed that if the facilities management contract with BT was not developed, in the sense of additional estate being covered by it, or if no remuneration fell due to the pursuers in terms of the incentive element of the package, then the monthly fee payable by the defenders would remain the same for the duration of the contract between the defenders and BT. Having considered all the evidence before me, I have reached the conclusion that the pursuers have failed to prove that by 15 April 2000 the parties had agreed that monthly payments of £20,000 plus VAT would continue for five years, in the event that either of those situations came to pass. It was conceded on behalf of the pursuers that no such agreement had been made prior to 15 February 2000. On the basis of the evidence I have heard, I am not satisfied that Mr Smyth and Mr Bryden reached any such agreement. [52] At several points in his evidence, Mr Smyth did touch on the issue of the monthly payments continuing for five years, which it was anticipated would the duration of the facilities management contract with BT. When he did so, however, he appeared to be referring to what had been in his own mind during the course of negotiations, as to what he wanted to get out of the pursuers' involvement with Project Jaguar, rather than what he had discussed and agreed with Mr McEwan or Mr Bryden. [53] Mr Smyth's starting point, of course, was that he had reached agreement with Mr McEwan before 15 February 2000 that monthly payments of £20,000 plus VAT would continue throughout the duration of the defenders' contract with BT. As I have already explained, it is no longer contended on behalf of the pursuers that occurred. [54] As far as his discussions with Mr Bryden were concerned, Mr Smyth did not explicitly and unequivocally state during his evidence that he had discussed and agreed with Mr Bryden the precise circumstances in which the monthly payments of £20,000 plus VAT would continue for five years. When he talked about the details of those discussions, he tended to refer to other matters, such as what is set out in paragraph 2 of the letter of 19 April 2000, finalising the incentive element referred to in paragraph 3 of that letter, and what might be agreed would be payable during Years 3, 4 and 5, whether as a bullet payment or as monthly payments at a rate that was still to be negotiated. [55] When Mr Bryden gave evidence, he stated that he had no recollection of any agreement being reached between Mr Smyth and himself about the monthly payments continuing for five years, although he did concede that there could have been a further contract with the pursuers, under the umbrella of the framework agreement, in the event that the facilities management contract with BT had been extended beyond 5 years. Mr Bryden stated in evidence that he did not recollect Mr Smyth having raised or agreed with him anything about a bullet payment, accelerating the payment of the monthly payments, or that monthly payments would extend over five years, if no incentive element had been agreed. Mr Bryden suggested that had Mr Smyth raised those issues and he had agreed to them, he would have expected Mr Smyth to have written them down and mentioned them in the letter of 19 April 2000 (No. 6/4 of Process). What he saw when he looked at the letter was something different. There was no mention of any bullet payment or of any agreement that the monthly payments would run for five years. In his opinion, the letter of 19 April 2000 reflected what had been agreed between Mr Smyth and himself. [56] I prefer the evidence of Mr Bryden. It was given in a measured and calm manner. I find it to be more consistent with the documentary evidence than the evidence of Mr Smyth. Indeed, I find the evidence of Mr Smyth, and the inferences which the pursuers invite me to draw from it, very difficult to reconcile with the terms of the letters of 11 April 2000 (No. 6/15 of Process) and 19 April 2000 (No.6/4 of Process), both of which were drafted and sent by Mr Smyth. The earlier of these letters, in particular, is very difficult to square with the case for the pursuers. [57] As I have indicated, the pursuers have, in my opinion, failed to prove that the defenders agreed to pay monthly payments of £20,000 plus VAT over a five year period, whether that period began on 15 May 2000 or October 2000, when the defenders became BT preferred bidder, or March 2001, when the joint venture's five year contract with BT got underway. Clearly the parties had entered into a framework agreement, which was to last for five years. They also reached agreement as to the incentive element of their agreement. In my opinion, however, it is clear from the evidence they had not yet reached agreement as to what else would be payable by the defenders to the pursuers following the two year period beginning on 15 May 2000. [58] Had Mr Smyth understood that he had previously reached an agreement with Mr McEwan that the monthly payments would continue for five years, an agreement which was not affected by or superseded by anything he had agreed with Mr Bryden on 14 May 2000, one would have expected Mr Smyth to have mentioned that in his letter of 19 April 2000 (No.6/4 of Process). He did not do so. [59] There is no suggestion on the part of either party that the pursuers' entitlement to remuneration in respect of Project Jaguar is dependent on what was agreed after 19 April 2000. In my opinion, the typewritten notes prepared by Mr Bryden, following his meeting with Mr Smyth on 15 May 2000 (No. 6/16 of Process), add nothing to the picture. [60] Around October 2000, the joint venture signed an interim contract with BT. In March 2001, the joint venture began to manage facilities for BT. The interim contract fell away and the joint venture signed its full contract with BT. [61] During the proof, I heard evidence about events in March and April 2001, which were precipitated by Mr Bryden sending Mr Smyth a letter dated 26 March 2001 (No.6/7 of Process). Following his receipt of that letter, Mr Smyth excluded Mr Bryden from a meeting that Mr Bryden had been scheduled to attend. In the event, following a meeting involving Mr Smyth, Mr McEwan and Mr Bryden, that letter was rescinded, by a further letter dated 6 April 2001 (No.6/8 of Process). The defenders terminated their business relationship with the pursuers, by letter dated 22 March 2002 (No. 6/9 of Process). In my opinion, that effectively constituted a termination of their contract with the pursuers in connection with Project Jaguar. By that date, no agreement had been reached as to any incentive payments, as foreshadowed in paragraph 3 of the letter of 19 April 2000 (No. 6/4 of Process). [62] As of 22 March 2002, the defenders had settled the pursuers' invoices in respect of payments of £20,000 plus VAT in respect of sixteen months from 15 May 2000. Subsequent to the raising of the present action, the defenders settled the pursuers' invoices in respect of such payments for the eight months from October 2001 to May 2002.Decision
[63] In the whole matter, I have reached the conclusion that the pursuers have failed to prove that either or both of the defenders are contractually bound to make a further thirty nine payments of £20,000 plus VAT to the pursuers. I accordingly repel the third and fourth pleas in law for the pursuers, sustain the third plea in law for the first defenders and the fourth plea in law for the second defenders and assoilzie the defenders from the first conclusion of the summons.
