Facts:

CLS Civil Engineering Limited (CLS) is a developer and WJG Evans and Sons (WJGE) is a building contractor. CLS engaged WJGE to carry out the development of a library, retail unit and three apartments. CLS sent out an invitation to tender for the Works on the 15th June 2021. On 22nd July 2021, WJGE supplied a completed tender in the total sum of £945,641.33. 

The terms on which WJGE was engaged are disputed. Based on an email dated 16th August 2021, CLS sent WJGE the Letter of Intent and the Works commenced on 28th August, whilst the parties tried to agree on the terms of the wider contract. The LOI was revised on various occasions, increasing the cap to a final fee of £1.1 million. If the relationship is governed by LOI, it would limit CLS’s liability to £1.1 million. WJGE said that the construction contract was governed by JCT terms and that, in any event, CLS's liability was not capped at £1.1 million.

CLS terminated the contract. WJGE asserted that CLS was in repudiatory breach of contract and sought £1,413,669.24 by way of its termination account. CLS brought a claim under Part 8 of the Civil Procedure Rules.

Decision:

WJGE argued that the case was unsuitable for Part 8 proceedings and should be pursued via the Part 7 basis. However, Neil Moody KC decided that the matter was suitable for Part 8 proceedings as the facts were not disputed materially and the estoppel arguments were too weak to have a real prospect of success based on the guidance provided by Berkeley Homes (South East London) Limited v John Sisk and Son Limited [2023]. Estoppel arguments are normally not considered in a Part 8 claim but, in this case, the disputed facts could be determined against a summary judgement test. 

He also ruled that the terms of the LOI were binding and that the cap of £1.1 million applies as they never agreed on the JCT terms. While there were numerous communications between the parties, the fact that WJGE started works showed their acceptance of the cap in the LOI. Such acceptance was demonstrated by an email and the fact that WJGE drew attention when the cap was exceeded. Actually, Moody KC noted that there was no contract and that the terms were not agreed at any point from the commencing of work in 2021 to its conclusion in 2023. Based on the objective construction of the contract and surrounding communication, the cap was nonetheless accepted when work progressed. 

Implication:

This judgement is a good reminder that commencing a project based on a Letter of Intent can have unforeseeable consequences. While the decision might seem harsh, from the facts and correspondence it was clear that the contractor was aware of the cap and was working to it. By carrying out the work WJGE had, inadvertently or otherwise, affirmed the cap. In any event, this case reminds us to avoid exceeding a limit without an express agreement in advance. 

This case also highlights the usefulness of Part 8 proceedings as they are cheaper and quicker.