Case No. 0LS79020

Ltd (“Shire”) were the structural engineers; and Halcrow Gilbert were the mechanical and electrical consultants. As the building contract was to be a “design and build” contract, it was intended that, upon execution of the building contract, each of the consultants would enter into direct contractual relations with the building contractor; TTPM alone would remain employed by the Trust.18. An initial design meeting had been held on 18th November 2002; Mr Bryan, Mr Kimber and Mr Bullen were present, as was a representative of Associated Architects. The minutes of the meeting record that Mr Bryan stated that the budget for the H5 works would be fixed and that the Trust wanted, if possible, to have one house ready for March 2004 and the other available for May or June 2004. Although details developed and changed over time, both the existence of a budget and the presence of a sense of urgency on the part of the Trust remained constant. The budget became fixed at £5m, which was the amount of a term loan facility given to the Trust by Allied Irish Bank (“AIB”) for the purpose of funding the works. TTPM costed the works at £4.9m. The urgency of the project related to the desire to have the entirety of the accommodation ready for use by students at the start of the academic year in September 2004. As time passed and the commencement of the works became increasingly delayed, hopes of completion by that date were put aside. However, in the interests of persuading parents to send their children to study at the College the Trust nonetheless wanted to ensure that those parents would be able to see evidence of substantial building works at an early date.19. Progress towards commencement of the H5 works was delayed by, in particular, difficulties in selecting the specific site on which the new accommodation would be built. However, by early July 2003 TTPM was in a position to issue tender documentation for the construction works. It had been decided that Clugston would not be invited to tender for the H5 works but that larger contractors, operating nationally, should be approached. Accordingly on 7th July tender documentation was issued to Kier, Willmott Dixon and Laing O’Rourke, with a return date of noon on 1st September.20. Kier’s tender return was the lowest, but at £5,568,058 it was nonetheless significantly in excess of the budget. The possibility of a re-tender was considered but was rejected because it would lead to delay and additional cost and would not guarantee that further tenders would be within the budget. In a Preliminary Tender Report dated 11th September 2003 Mr Talibani explained that it would be necessary to bring the project within budget by means of a strategy of value engineering (“VE”). Priced VE returns were received from the three contractors by mid October. Kier’s revised tender was within budget, at something slightly in excess of £4.7m. The VE exercise had resulted in the scaling down of the works, resulting among other things in a slight reduction of places for students. By an email on 15th October Mr Bullen warned of the urgent need to appoint a contractor and make an order because “the Abbey will not accept any failure on our parts to achieve a start on site pre-Christmas 2003 with a completion date end November 2004.” A number of matters remained unresolved with Kier, including the finalisation of the contract sum following the VE exercise, and it was clear that it would not be possible to complete the contract before works started on site. On 31st October 2003 Mr Bullen sent to the design team an email that read in part as follows: “As you are aware, it has now been decided that we will ‘run’ with Kier on H5 and we have agreed the ‘technical solution’ for constructing the building. There are still a number of commercial/technical issues to resolve over the course of the next week, but we must be in a position by the 7th November 20003 where we can place a Letter of Intent with them in order to enable them to make as early a start on site as possible. Alan [Talabani] will be leading the negotiations on resolving this in terms of a fixed price, however could you all please assist him in doing this by issuing information ASAP where possible.”21. While discussions were ongoing with a view to finalising the terms of a letter of intent, on 11th November 2003 Kier wrote to Mr Talabani with a list of comments on the Trust’s proposed contractual terms. Clause 24.2.1 of the draft contract provided for liquidated damages of £50,000 per week for late completion. Kier’s comment on that provision was: “We would wish to agree that L and AD’s do not exceed 1% of Contract price.” TTPM responded on 13th November, expressing disappointment that matters of contractual detail were being raised belatedly. The response in respect of clause 24.2.1 of the draft contract was: “Level of LAD’s to remain as ER’s [Employer’s Requirements]. This issue is not negotiable.”22. On 14th November a Pre-Contract Meeting took place between representatives of the Trust, TTPM and Kier. Part 4.1 of the minutes of that meeting records that modifications had been agreed to the letter of intent; these reflected a basic programme for the works and an agreement that liquidated damages would be waived for a period of two weeks following the agreed date for practical completion.23. Pursuant to that agreement, on 17th November 2003 the Trust issued the First Letter of Intent to Kier. As with all the subsequent letters of intent, the contents and the drafting of the First Letter of Intent were attended to by TTPM and the role of the Trust was simply to issue it. In his witness statement Mr Bryan stated that the Trust “acted on instructions from” TTPM; although strictly that reverses the relationship, it gives expression to the reality of the Trust’s dependence on TTPM. The First Letter of Intent and the letters of intent subsequently issued were not mere expressions of intention to contract in the future; they were in the nature of offers to contract on strictly limited terms and on a short-term basis, coupled with an expression of intention to enter in due course into a full and formal building contract, the terms of which would not however bind the parties until it was executed. Because the letters of intent are central to these proceedings, I shall set out much of the text of the First Letter of Intent. “We confirm that it is our intent to enter into a contract with you for the above project. The form of contract will be the JCT Standard Form of Building Contract With Contractor’s Design 1998 Edition with Amendments 1, 2 and TC/94/WCD as modified by Article 8 (sectional completion). The programme dates are as follows:•Site Possession Date — 1st December 2003•Start on Site Date — 15th December 2003•Practical Completion Date — 26th November 2004. The following matters remain outstanding:1. Finalisation of the Contract Sum. The current tender sum of £4,747,112 to be amended to reflect the latest version of the VE savings menu as discussed at the meeting of 24/10/2003.2. Finalisation of Drawings and Specifications.3. Agreement of documentation forming contract documents. It is our intention that[,] once these matters are agreed, they will be reflected in a written contract document. Neither of us will be bound by the intended contract unless and until the written document is executed by each of us.In the meantime, please proceed from Monday 10 November with the following works:- [a list of works was set out].In the event that the intended contract is not concluded between us, we will reimburse you your reasonably incurred expenditure upon the project up to a limit of £75,000.00 excluding VAT, or such other amount as we may agree in writing, and you will not be entitled to any further payment whether by way of quantum meruit or otherwise. The timescale covered by this letter of intent is from 10 November 2003 to 15 December 2003.In consideration for the Works carried out by you pursuant to this letter of instruction, payment shall be in accordance with the payment conditions within the JCT Standard Form of Building Contract With Contractor’s Design 1998 Edition with Amendments 1, 2 and TC/94/WCD as modified by Article 8 (sectional completion).Each of us shall have the right to refer any dispute arising under these arrangements to adjudication in accordance with the Royal Institute of British Architects adjudication rules.In the event that the intended contract is concluded, then such contract shall apply retrospectively in place of these arrangements, and payments made under these arrangements shall be treated as on account of our payment obligations thereunder.”24. Pursuant to the letter of intent, Kier commenced works on site in early December 2003. At this stage, although the VE exercise was substantially complete, the costs of the works provided for had not been finalised in all respects, because the Trust had not accepted all aspects of Kier’s re-tender but had asked Kier to continue to review the design.25. It was at about this time that Mr Bullen cut down significantly on his residual role with the H5 works, having already handed over day to day management of the project to another of TTPM’s project managers, Mr James Mell. Mr Mell was recently qualified, having graduated in 2001. In early December 2003 Mr Bullen sent an email to one of his colleagues, in which he expressed reservations about Mr Mell: “Have been thinking about Ampleforth … I don’t think the replacement PM is up to the job!!! Have not decided how to play this with Jim Fletcher as yet because I do not want to prolong my involvement with the project—I’ll let you know how it goes.” At the trial, Mr Bullen said that those remarks should be attributed to his own arrogance and his very positive experiences of working with the Trust and Mr Bryan. He insisted that Mr Mell was sufficiently experienced to deal with the project and that there were no issues concerning his technical competence; such concerns as he had related more to the fact that Mr Mell was a quieter character than he and, consequently, to Mr Mell’s ability to maintain the good relationship with the Trust.26. On 4th December 2003 Mr Mell sent an email to the design team, identifying the design information required by Kier before it could finalise the price and the contract and emphasising the importance of providing the information without delay and thereby avoiding slippage of the programme. On the same day, Mr Talabani sent an email to Mr Colin McNeil, a director of Kier, in which he said that, if the contract were not in place by mid December, he would prefer to proceed by a further letter of intent than to enter into a contract with a large number of provisional items outstanding. Mr McNiel was in agreement with that course. On 15th December Mr Talabani sent an email to Mr Bryan: “As Kier are not yet in a position to confirm fixed costs for all of the VE items, we [are] not yet in a position to conclude the formal contract documents for H5. We therefore need to issue a revised Letter of Intent as the previous one expired today.”27. Accordingly on 19th December the Trust issued Letter of Intent (Revision A); it was dated 15th December 2003. This was in the same terms as the First Letter of Intent, save for a number of specific revisions: the list of works was expanded; the reimbursement figure of £75,000 was replaced with a figure of £382,500; and the timescale covered by the letter of intent extended until 19th January 2004.28. When it tendered for the H5 works, Kier was not aware that the Trust was proposing to fund the project by means of borrowing from a bank. In December 2003 the matter was discussed between Mr McNeil and Mr Talabani, and Kier requested a letter from the lender. At Mr Bryan’s request, on 22nd December AIB wrote to Kier to confirm that it and the Trust were close to finalising a loan facility to finance the cost of developing the proposed new accommodation block, with only a small number of procedural issues outstanding; it was anticipated that those would be resolved within a couple of days. On 5th January 2004 Kier replied that it required to know as soon as funding was formally in place and asked that it be advised as soon as matters were concluded.29. The period covered by Letter of Intent (Revision A) expired on 19th January 2004. Kier’s Progress Report No. 2, dated 21st January 2004, stated: “FURTHER LETTER OF INTENT REQUIRED IMMEDIATELY.” Issues regarding the VE position were delaying the finalisation of the contractual documentation, but on 28th January Kier informed Mr Mell that it was confident that the remaining issues could be concluded within an anticipated timescale, and on 30th January Mr Talabani informed Mr Mell that Kier’s fixed costs for the VE items, which would enable the contract sum to be calculated, would be issued on 2nd February; meanwhile, he would prepare a further letter of intent for Mr Bryan to issue to Kier.30. Accordingly, the Trust issued the third letter of intent, Revision B, which was dated 30th January 2004. The reimbursement limit was stated to be £1,200,000 and the period covered by the letter of intent was from 19th January to 27th February 2004.31. TTPM received Kier’s consolidated and final VE Schedule on 3rd February 2004. Its response was given by Mr Talabani’s letter of 26th February, which indicated that the revised contract sum appeared to be £4,951,365, raised a number of specific queries in respect of the VE Schedule, and said: “Please respond to these items at your earliest convenience so that the outputs can be incorporated in the Contract documents. If not, they will not form post contract variations as the execution of the Contract Documents should not be delayed further. A draft copy of the Contract documents will be dropped off at your offices this evening. Please forward any comments you may have on these to Alan Talabani at the above address.” The contract documents were delivered by TTPM to Kier either on 26th February or very shortly afterwards. After the end of February 2004, no further changes were made to the VE schedule or to the contract price.32. On 2nd March 2004 Mr McNeil sent to Mr Talabani an email in the following terms: “Thanks for the contract docs which have been the subject of discussions S Phillips/yourself. Their checking, the receipt of warranties and finalising consultants appointments incl the issue of the extra fees they seek for VE work, will all take more time and it is to be noted that the current Letter of intent expired Friday 27th Feb. I will have for you in short timescale a request for further cover to take us to 26th March, the date by which realistically we should have all these outstanding matters resolved. I have again to record disappointment that despite conversations with Allied Irish, with Peter Bryan including letters, and direct contact from our Regional Financial director, no letter in the reqd form has been received re Loan facility being in place for Ampleforth and the building works which relate to the subject Contract. I am having serious problems in appeasing our masters in HQ that our position is secure bearing in mind that various unfulfilled promises via P Bryan and the bank direct, have been given.” The reference to “warranties” was to the terms of the warranties that would be given to the Trust by sub-contractors and consultants whose contractual relationship was to be with Kier. (A distinct issue concerning warranties subsequently arose when AIB required, as a precondition of its agreement to advance funding for the project, a warranty from Kier.) The reference to “extra fees” for VE work related in particular to the demand of Shire that either Kier or the Trust pay them additional fees for the time they had spent on the VE exercise; I shall say more of that below. For the present it may be noted that Mr McNeil expected that all outstanding matters would be resolved by the end of March 2004.33. On 8th March and again on 11th March Mr McNeil spoke to Mr Mell by telephone and repeated his request that AIB provide written confirmation of the loan facility. In the second conversation he stated that Kier would issue a seven-day notice to walk off site if the confirmation were not produced. Mr Bryan’s evidence was to the effect that the Trust considered Kier’s request impertinent and insulting; the Trust was well-endowed, its financial position was beyond question and the particular manner of funding for the project was none of Kier’s business. That stance was reflected in Mr Mell’s email to Mr Talabani on 12th March, which was written after discussions with Mr Bryan. Mr Bryan also stated that Kier’s request gave rise to a Catch-22 situation, because AIB was unwilling to provide confirmation of funding before a signed construction contract was in place. As a matter of practicality, it might be thought that the situation required no more than communication and co-ordination and was hardly a Catch-22.34. Nonetheless, on 11th March 2004 the Trust issued Letter of Intent (Revision D). (There does not appear to have been a Revision C.) The reimbursement limit was stated to be £1,885,000 and the timescale covered by the letter of intent was from 10th November 2003 to 31st March 2004. The matters recorded as still outstanding were only “Finalisation of Drawings and Specifications” and “Agreement of documentation forming contract documents”; the first outstanding item mentioned in the First Letter of Intent, namely “Finalisation of the Contract Sum”, had by now been resolved.35. In mid March 2004 TTPM sought to address the outstanding matters with Kier. The impasse regarding confirmation of funding from AIB was the subject of a conversation between one of TTPM’s directors, Mr Nick Townsend, and a director of Kier. Mr Townsend asked Kier to be pragmatic about the situation and received the assurance that Kier would not leave site over the issue, although the letter of confirmation would be required eventually. On 16th March Mr Talabani met with a representative of Kier in order to discuss the contract documents. His email of that date to Mr Mell and Mr Bryan concluded: “We are still aiming for signed and executed contracts in place by the end of March. This should then enable AIB to issue formal confirmation of funding.”36. The position as between Kier and the Trust, except with regard to the confirmation from AIB, was summarised by Mr Talabani in his letter of 22nd March 2004 to Mr Simon Phillips of Kier.“1. Warranties —Warranties will be required between the Employer and the following key sub-contractors and consultants. Standard Form of Wording to follow shortly.- All sub-consultants- Piling sub-contractor- Steelwork sub-contractor- Green Roof sub-contractor- Mechanical & Electrical sub-contractor- Lift sub-contractor- Floor planks sub-contractor Warranties will also be required between Kier Northern and the Abbey’s funder. Once I receive exact requirements, I will forward to yourselves. It is unlikely that the Warranties will be in place by the end of this month, however I suggest that we proceed with the signing and execution of the Contract Documents and insert the warranties retrospectively.2. Consultants Fees — As promised we will speak to Shires regarding their claim for additional fees and let you know accordingly. Can you please forward copies of your consultants appointment documents, when completed.3. LAD’s — I attach for your comment the wording regarding the 2 week project float period. Please let me know your comments asap.4. VE Items/Revised Contracts Proposals — Please forward all design information to reflect the chosen VE items. This can be incorporated into your revised Contractors Proposals and Contract Sum Analysis.5. Contract Documents — I will incorporate all the amendments we made to these and bring 2 sets with me to our meeting [on 25th March].”37. On 23rd March 2004 the solicitor who was acting for the Trust in its dealings with AIB sent Mr Bryan an email concerning AIB’s requirements before it executed a funding agreement. On 25th March Mr Bryan forwarded the email to Mr Talabani and asked: “Please can we get all these bits and pieces sorted? It would be especially nice to have a contract.” On 1st April Mr Talabani responded in respect of AIB’s requirements. He said that he had issued to Kier a proposed form of warranty that it should give to AIB and he asked for confirmation whether AIB wanted warranties from the architect or from TTPM and how AIB wanted to progress the matter of taking a Parent Company Guarantee in lieu of a performance bond under the building contract.38. On 2nd April Mr McNeil wrote by email to Mr Talabani:“The outstanding contractual issues include:-1. Warranties in approved wordings not received.2. Consultant appointment issues not yet resolved.3. Consultant fee supplements not yet agreed.We regret that we cannot park these matters to post contract signing stage. …Following W Kay’s [a Kier director] meeting with Peter Bryan yesterday, it appears a letter from AI is closer, so progress is being made.Can you arrange to let us have the revised letter of intent by return.”39. Mr Talabani replied on 16th April 2004, having in the meantime informed AIB that Kier would prefer to use the JCT standard form of funder warranty than that proposed by AIB. His email said:“Apologies for not getting back to you earlier. I respond to your notes below as follows:1. Warranties—Agreed, these have not been forwarded to yourselves yet. I have been waiting for a response from AIB which has not come yet. I will issue all warranties during next week (except for the funder one—which requires AIB comments).2. Consultant appointment /. Fee supplements—I must say that I am a little disappointed that these have not been resolved yet. The consultant appointment details were included in the tender documents that were issued to you back in August last year, and have not really changed since then. Around December last year you told me that some of the designers were not playing ball and asked T&T to have a word with them, which we did, and my understanding was that it had then been resolved.Consultant appointments aside, I was under the impression that Kier were happy that the contract could be executed with the warranties inserted retrospectively. That appears to not be the case now. Whilst it is obviously preferable to have everything in place prior, it is not unheard of to insert warranties at a later date and therefore I do not see this as a reason to hold up the executing of the contract.What is clear is that at the moment, the letter of intent which you are working to has expired and the contracts are not in place. We will therefore issue a revised letter of intent to you early next week. I know I said this last time, but can we please make sure this really is the last one that we have to issue. If there is anything else you need from us to make this happen, please let me know.My understanding re the AIB letter following the meeting between Peter / William is that the Abbey had given the AIB authority to discuss the matter directly with Kier and that you would contact them directly to seek confirmation of funding, assurances etc.”40. Mr McNeill replied on 19th April:“I am sorry you appear to have been under the impression that we could fully sign up without warranties seen and agreed. Our rule book prevents this Alan and I cannot think how an alternative resolve could have got into your mind, or who could have put it there.That said therefore we need to agree on these before the contract is concluded—let’s hope that can be before the expiry of the next LoI commitment.Whilst W Kay was given to expect a letter from AI in the sentiment discussed that is not with us yet.The agreement of Appointments with Consultants has been a protracted one and correspondence exchange continues between us. AA and Shires have still some issues to resolve with us, Halcrows too but less so.” The reference to Kier’s “rule book” is a reference to Kier’s “Standing Orders and Guidelines”, issued in July 2001 and remaining in force until a revised version was issued in September 2004.41. On or about 16th April 2004, the Trust issued Letter of Intent (Revision E), which bears that date. The reimbursement limit was stated to be £2,542,500 and the timescale covered by the letter of intent was from 10th November 2003 to 30th April 2004. The matters recorded as still outstanding were unchanged from Revision D.42. On 20th April Mr Talabani informed Mr McNeil that AIB did not require any form of warranty or performance bond from Kier and that he would provide drafts of the warranties required by the Trust from the key subcontractors and the “subconsultants”. Those draft warranties were sent to Mr McNeil on 22nd April. By a letter dated 29th April Kier requested “some minor amendments” to the drafts and awaited the Trust’s response. On 6th May Mr McNeil wrote to Mr Talabani by email: “You will by now have received Jonathan Holt’s letter commenting on a number of issues emerging from the warranty wordings previously received from you. This will require to be agreed. The good news is that the above now remains the only issue to resolve, matters of payment security, dealing with consultants’ applic[ations] for additional fees etc now resolved. A further letter of intent to formalise the current position will therefore be required, and JH is currently working on a revised value. I shall contact you as soon as this figure is known.” On 7th May Mr Talabani gave a response to Kier’s proposed amendments to the warranties, agreeing to some of the proposed amendments but not to others, and wrote to Mr McNeil by email: “As we are nearly there now, can I suggest we just execute the Contract Docs asap rather than re-issue a letter of intent. As we are so close, I would really rather not have to go back to Peter [Bryan] to issue yet another letter.” Mr McNeil replied: “We are exposed at this time [i.e. because the latest letter of intent had expired]. I have asked Jonathan [Holt] to elicit a very quick response to your counter-views on warranties. I agree that executing the docs is desirable, but that would depend on speed of resolution on warranty wordings.”43. The subcontractors and sub-consultants were also making observations on the terms of the warranties being sought from them. For example, by a letter dated 9th May 2004 Associated Architects informed Kier that they were prepared to give standard-form industry warranties but not bespoke warranties. The outstanding issues regarding the warranties had not been resolved by the middle of May.44. A further outstanding issue was the question of Shire’s demand for additional payment. That demand had been made in a letter to Kier, copied to Mr Bullen, on 24th February 2004. However, both Mr Bullen’s witness statement and the terms of his email to Mr Mell on 23rd March 2004 show that it did not come to his attention for some time. Mr Talabani was aware that a request had been made for further payment; see Mr McNeil’s email to him on 2nd March (paragraph 32 above). At all events, on 2nd April Mr Mell asked, “what [is] this about Shire additional fee?” and Mr Bullen replied: “Apparently Shire want an uplift to 0.6% [of the tender sum] (from 0.5%) on their fees due to the virtual complete re-design they’ve had to do on H5. Talabani’s standard response is ‘no f**king way’!!!” (It is unclear whether Mr Bullen was repeating Mr Talabani’s specific response or was making his own response in the terms that Mr Talabani was accustomed to use.) On 8th April Mr Mell informed Shire by email that the request for additional fees was refused. Shire immediately replied that the refusal was unreasonable and made it clear they would pursue the matter. On 14th May Mr Mell asked for a breakdown of Shire’s claim, while making it clear that he did not think it likely that the Trust would approve the payment of additional fees.45. On 20th May Shire informed TTPM and Kier that they would provide the required information in the first week of June. An internal email at Kier commented: “Until this matter is resolved we cannot formalise the appointment.” Mr McNeil emailed Mr Talabani: “The trail remains hot Alan. No imminent sign of this contract being signed so I have to ask again for an extension to the letter of intent to the value advised w/c 03/05. Can you pl advise as quickly as poss.” Mr Talabani forwarded that message to Mr Mell with the comment: “They’re blaming this issue on not sorting the cont docs. [In context, this sentence must mean: They are using this as a reason why they cannot execute the contract documents.] Not on really as I have told them go proceed without and if it has to be paid post contract, we’ll raise as a variation.”46. On 25th May Mr Talabani wrote to Mr Phillips of Kier: “If the contract docs are within spitting distance, I’d rather push to get them executed rather than issue revised l of i’s etc.” Mr Phillips replied: “Given that the L of I is limited not only by value but also date this does need to be revised. We would given the current level of cost exposure accept an amended L of I extending the date to the end of July 04. Is there any reason now why a L of I for the full contract value (unlimited by time) cannot be issued.”47. On 27th May 2004 Mr Talabani and Mr Kimber had meetings with their counterparts at Kier and voiced their concerns over the delay in executing the contract. A further meeting was arranged for 10th June because, as Mr Talabani recorded in an email to Mr Mell, Kier could not meet any earlier. In an email on 7th June 2004 Mr Talabani summarised how the position stood as at that date.“The latest situation re contract docs is as follows (items with an * are still to be resolved):-•Warranty wording—this has now been agreed between T&T and Kier.•* Shires—are not signing their agreement until the £5k issue has been resolved. Can you please let me know how these discussions go.•Halcrow final fee level—this has now been agreed between T&T and Kier.•AA landscaping fee—this has now been agreed between T&T and Kier. Can you please let me now what element of the £5.1k has been paid by [The Trust].•* VE changes schedule—Kier were going to forward this full document by Friday 4/6/2004. This has not arrived as of this morning. I have chased this already.•LAD wording—this has now been agreed between T&T and Kier.•* AA appointment—terms/wording still not resolved [that is, between the architects and Kier]. Can you please let me know how these discussions go.I know the above is not great but short of threatening them with violence, I don’t know what to do. The ‘final’ contract docs have been with Kier for 3 months now. I am leaning hard on Kier, but of the outstanding items the VE background info schedule is down to Kier. The other 2 issues relate to AA and Shires. I suggest a strong call from TTPM to urge them on.As the current letter of intent expired at the end of April, I would suggest for completeness we re-issue one taking us up to the end of June 04. If you are in agreement, I will issue the revised letter to the Abbey for processing.” (So far as concerned Shire, the breakdown of the claim for additional fees in the sum of £21,090 had been provided under cover of a letter dated 3rd June 2004 and remained under consideration by TTPM and the Trust.)48. On 8th June 2004 Mr Mell replied to Mr Talabani: “I agree to the extended Letter of Intent, but we must endeavour to resolve the outstanding issues below with some urgency.”49. Accordingly the Trust issued Letter of Intent (Revision F), which was dated 9th June 2004. The reimbursement limit was stated to be £2,542,500 (unchanged from Revision E) and the timescale covered by the letter of intent was from 10th November 2003 to 2nd July 2004. The matters recorded as still outstanding were unchanged from Revisions D and E.50. On 5th July 2004 Kier requested a further letter of intent, as its “cost commitment/exposure [was] grow[ing] throughout the project”. The main problem at this date remained Shire’s claim for additional fees as set out in its letter of 3rd June. By a letter dated 6th July, Shire told TTPM that it was unwilling to sign the contract for its appointment by Kier until such time as that claim was agreed. On 12th July Mr Talabani assured Kier that the requested letter of intent would be issued “in the light of the Shire issue”. Letter of Intent (Revision G) was dated 12th July 2004. The reimbursement limit was stated to be £4,250,000 and the timescale covered by the letter of intent was from 10th November 2003 to 31st August 2004. The matters recorded as still outstanding were unchanged.51. On 16th July 2004 Mr Talabani, who was about to take a fortnight’s paternity leave, sent an email to colleagues at TTPM, noting points for action on projects with which he was dealing. The relevant part of his email was in the following terms: “Ampleforth H5—Craig—Meeting with Craig to sort variation costs, then we’ll all get together after I’m back to mop up. Rev’d let of intent issued so don’t worry about cont docs.” The Trust refers to this email as an illustration of what it says is Mr Talabani’s complacency: so far as he was concerned (says the Trust) the absence of an executed contract was a matter of little importance, for he was happy simply to issue letter of intent after letter of intent without any awareness of or concern for the potential consequences for the Trust. I shall return to this point in the context of a consideration of the case on breach of duty.52. On 23rd July Kier wrote to TTPM regarding the execution of the contract documents. Again, the Trust refers to this letter as evidence contradicting any assertion that Kier was unwilling to sign the contract and was looking for reasons to avoid doing so. “Whilst we note that a revised Letter of Intent has been issued to cover the amended value of £4,248,488.00 up to the end of August 2004, it is disappointing that matters outwith the control of Kier Northern are preventing not only the execution of the Contract but also the Consultant Appointment Documents. Contract Documents T&T / AA&C to confirm that documentation provided by ourselves in respect of the VE exercise … are acceptable for inclusion with the contract documents. Whilst we have exchanged correspondence and discussed the proposed wording of the two week LAD free period, this has yet to be formalised for inclusion within the Contract. Consultant Appointments Associated Architects T&T / AA&C to confirm that the proposed amendment to the main contract detailed within our email dated 1st June 2004 is acceptable. AA application for Landscaping Fees, noting that such works are currently excluded from the Contract and Appointment Documents. Shire Consulting Resolution of Shire Consulting request to TTPM for additional fees associated with the VE exercise. … We would respectfully request your earliest attention to these matters … It may be noted that the letter was written in the name of Mr Simon Phillips, Kier’s Managing Quantity Surveyor, to Mr Talabani, with whom he had met several times and exchanged informal emails, but that it was written as a formal letter and in formal terms.53. By a letter dated 17th August 2004, Mr Mell informed Mr Bryan of TTPM’s recommendation that an additional payment of (only) £4,800 to Shire be approved.54. On 18th August, Mr Phillips sent an email to Mr Talabani, asking whether any progress had been made on resolving the outstanding contractual issues and asking for an update by close of business on 20th August. It appears likely that some discussion took place, although there is no record of it. Some discussion also took place between Mr Bullen and Shire, and Shire made it clear that they were looking for payment of all or substantially all of the additional fees claimed. When, on 25th August, Mr Mell asked Mr Talabani for an update regarding the contractual documents and told him of the advice to pay £5,000 to Shire, Mr Talabani replied on 26th August: “The only thing holding up executing the contract docs is Shires appointment. What is the point of giving them £5k if they have already told Rob that they want all of it and will not settle for a substantially smaller amount? Have you spoken to them after Rob did last week? In the light of the above, I suggest we issue a letter of intent for the whole value up to the end of the job. Then Shires can go fuck themselves.” The Trust says that this email displays inappropriate arrogance and belligerence on Mr Talabani’s part and shows that, in order to avoid giving in to Shire, he was willing entirely to disregard the importance of obtaining an executed contract with Kier. It is also suggested that Mr Talabani’s attitude occasioned misgivings within TTPM. In this regard mention is made of an email sent in September 2004 by Mr Bullen to Mark Edge, when Mr Edge was about to take over as project manager from Mr Mell; in a post-script, Mr Bullen said: “Watch out for Talabani, he get[s] on with Peter [Bryan] as well but is liable to taking the mickey where i [he] can and deliver a slackish service because he thinks he’s well in—I gave him a few stern words and he was ok—just need to keep an eye on him…”55. On 10th September 2004 Mr Phillips wrote by email to Mr Talabani, confirming that, further to their recent discussions, TTPM would arrange for the Trust to issue a letter of intent for the full contract value. On 14th September Mr Talabani sent to Mr Bryan for his approval a revised letter of intent for the full value and duration of the H5 works. He said: “Please note that despite this T&T and Kier will endeavour to progress execution of the contract as soon as possible … I’m just keen that we don’t allow Shires to hold us all to ransom.” Accordingly the Trust issued Letter of Intent (Revision H) dated 14th September 2004. The works covered by Revision H included an additional item: “(xii) Progress all aspects of Works for the main scheme”; and thereby included the entirety of the H5 works. The timescale covered by the letter of intent was from 10th November 2003 until 26th November 2004, which was the date for practical completion. The reimbursement limit was stated to be £4,951,365, which was the intended contract price.56. On 15th September 2004 Mr Talabani told Mr Phillips that the new letter of intent would be with him shortly and suggested a meeting “to plan a way forward excl[uding] the Shire issue”. Mr Phillips replied: “Irrespective of any other matters which have yet to be formalised, we cannot execute the Contract Documents until the Shire issue is resolved. I note that Shires have written to TTPM (copied to Peter Bryan) on 13 September 04 expressing their continued concern that the matter is preventing execution of the Appointment Docs. Please discuss with TTPM/Abbey and confirm their intentions in this regard.” The reference to Shire having written to TTPM is to a letter dated 13th September, in which Shire stated that they had received no response at all to their letter of 3rd June and asked for an urgent response so that the matter could be resolved and they could sign a contract with Kier. Mr Mell advised the Trust that Shire was not willing to accept payment of a reduced amount and that in his view, if any payment were to be made, it should be limited to a goodwill payment of £5,000. Mr Bryan replied: “I am prepared to pay the goodwill gesture but no more.” Mr Mell sent to Shire a suitably worded letter to that effect on 17th September. On 23rd September Shire rejected the offer of payment only of part of its claim. TTPM remained unpersuaded of the merits of the claim.57. On 17th September 2004 Kier made a formal request for a 4-week extension of the completion date, “based on an entitlement of two weeks due to exceptionally adverse weather conditions … and two weeks due to late issue of Employers Instructions …” Mr Bryan expressed alarm on hearing of the request. Kier’s revised programme would result in completion of the main accommodation block by 23rd December 2004 and completion of the houseparents’ accommodation in late January 2005, putting in jeopardy the planned occupation of the new accommodation before the start of term on 5th January 2005. TTPM responded to Kier, asking for documentation to substantiate the request for an extension of time. In a memorandum on 22nd October, Mr Bryan expressed the view that the risks of trying to have the house ready by the start of term were too great and proposed that occupation of the building be deferred until the half-term in February 2005. (The Trust adopted that suggestion and wrote to parents accordingly.) On 3rd November Kier produced its Progress Report No. 12, which stated that the main accommodation block was 5 ½ weeks behind programme and the housemasters’ block some 10 weeks behind programme.58. By mid November Mr Edge, who was by now the project manager, and Mr Bryan were discussing “Kier’s approach to the works and the LADs” (Mr Edge’s email of 19th November). Also on 19th November, Mr Edge wrote by email to Steven Allen at Kier, noting that the contract documents were with Kier for signing and asking him to chase them up. Mr Phillips responded on 22nd November: “Whilst we have a draft set of Contract Documents, there are a number of issues yet to be resolved by the Abbey prior to the signing/exchange of Contracts[,] for example additional fees claimed by Shire Consulting and AA for Landscaping Works. Alan Talabani is aware of these and other issues and should be able to brief you further.”59. On 30th November Kier made a formal request for an extension of time for a total of 9 weeks, citing a number of reasons for the request, including exceptionally inclement weather. Mr Edge responded on 2nd December, agreeing to a total extension of only 2 weeks for inclement weather but rejecting all other requests made by Kier. Accordingly he issued a Notification of Extension of Time, extending completion of the works “beyond the Date for Completion stated in the Contract … so as to expire on 10th December 2004”.60. On 13th December TTPM issued a “Certificate of Non-Completion “in accordance with Clause 24.1 of the contract”. On 5th January 2005 Kier asked for reconsideration of its requests for a greater extension of time, complaining that “the issue of Certificate of Non-Completion is [not] appropriate at this time nor should this give rise to financial penalty as a result.” Financial penalty for delay was indeed in the minds both of the Trust and of TTPM. After the issue of Payment Certificate No. 13, Mr Binns wrote to Mr Bryan (the letter bears the date 7th December 2004 but was probably written on 7th January 2005): “The project is currently 28 days in delay and liquidated damages inserted in Appendix 1, Clause 24.2.1 of the contract was £50,000 per week. As such the total amount of liquidated damages recoverable amounts to £200,000.”61. On 19th January 2005 Mr Edge wrote to Kier, giving formal notice of the intention to deduct payment against the latest Payment Certificate in accordance with the provision of the Contract dealing with liquidated damages. This drew a prompt response to Mr Bryan from Kier’s Commercial Director: “The above mentioned Works are being undertaken pursuant to a letter of instruction (current version H) dated 14 September 2004. The sum of £164,516.80 as set out in your Project Manager Turner & Townsend’s letter dated 7 January 2005 … remains outstanding. You have no right to withhold the sum outstanding, or any part of it. In such circumstances, the ‘Construction Act’ gives us the right to suspend performance of the Works if your failure to pay continues for a period of 7 days from this notice. We therefore look forward to receipt of the outstanding payment by return.” Mr Bryan asked Mr Edge for advice and suggested that, in the light of the accusation of contravention of the Construction Act, a solicitor be instructed. 62. Mr Edge referred the legal issues for consideration by TTPM’s Contract Services Department and, pending receipt of advice, produced a Current Status Report dated 24th January 2005. The Report identified the main reasons for delay on the works as being the geographical remoteness of Ampleforth, which discouraged sub-contractors in a buoyant market from working there, and the incorrect manufacture of every window for the building. The anticipated date of completion was anywhere from 25th February to 18th March 2005, and the potential claim for liquidated damages for delay was therefore £550,000 to £700,000. The effect of such a claim would be severely damaging for Kier, in view of the low profit-margins on the project. “For these reasons we expect [Kier] to vigorously defend their position with the possibility that the matter may be taken to litigation/arbitration.” (That expectation was justified.) The Report considered the grounds on which Kier was requesting an extension of time and rejected them, subject only to the need for further consideration of the effects of adverse weather. The importance of clarifying the contractual position was noted; in particular, section 6 posed the question: “Are the Contract clauses applicable?” Section 7 of the Report, headed “Suitability of Damages Estimate”, said: “Damages are accruing at a rate of £50k per week. It is understood that the estimate of damages is valid and TTCM do not consider this to be an issue.” The Report also noted that the dispute between Shire and the Trust had been resolved. In fact, agreement had been reached during the preceding week, by Shire’s acceptance of the Trust’s revised offer, made on 17th January, of £10,000 plus VAT.63. TTPM’s Contract Services Department produced some tentative observations regarding the Trust’s developing dispute with Kier on 26th January. “The main issue is the line in the letter of intent that states ‘Neither of us will be bound by the intended contract unless and until the written document is executed by each of us.’ This may mean that the terms and conditions of the contract do not apply and the contract may be interpreted to be completed in a reasonable time. In this situation no liquidated and ascertained damages will apply.”64. In the light of this and the other observations made by the Contract Services Department, the Trust instructed Beachcroft Wansbroughs (“BW”) to advise in respect of the recovery of liquidated damages. BW’s preliminary advice, delivered at a meeting on 27th January, was not optimistic but thought the claim for liquidated damages arguable on the basis of Kier’s conduct in continuing the works after the expiry of the latest letter of intent, which might amount to an implied agreement to the terms of the JCT Contract. A subsequent advice given in writing on 8th February was more optimistic and expressed the view that it was more likely than not that a contractual entitlement to liquidated damages had arisen and that a claim for liquidated damages could be maintained. However, in April WB, having had the opportunity of considering the papers in greater detail, advised at greater length by letter, expressing the view that “regrettably, there is a real risk that Kier’s view of the position is correct, in that the LOI governs the relationship between the Abbey and Kier and the LAD clauses are not incorporated.” (A file note from May said more bluntly: “they do not have much of a case of pursuing the LADs”.) The letter ended by raising the prospect of a claim by the Trust against TTPM.65. On 28th February 2005 TTPM submitted to Mr Bryan its claim for the additional fees that form the basis of the counterclaim in these proceedings. Mr Bryan replied, accepting that some additional fees were payable but asking to discuss the amount and suggesting that the final level of fees be linked to the amount of damages recovered from Kier. TTPM provided a breakdown of its fees but refused the suggestion that they should be in any way contingent on the result achieved in respect of Kier.66. Practical completion of the H5 works was achieved on 21st March 2005. On 14th July Mr Bryan made a formal demand of Kier for payment of liquidated damages of £750,000. Kier responded that there was no contractual basis for the demand, that the sums claimed did not represent a genuine pre-estimate of loss and that the Trust, by its design team and TTPM, was responsible for the delays in completion. Kier in turn demanded additional payment for the works. The dispute rumbled on throughout the year.67. In January 2006 TTPM produced a further Current Status Report; its views on the merits of Kier’s request for a further extension of time remained unaltered and it expressed the view that the Trust’s claim for liquidated damages was sound, provided only that the provision for liquidated damages applied to the relationship between the Trust and Kier. By this time, however, the Trust had obtained a very clear adverse opinion from Mr Ben Patten of Counsel: “My firm view is that relations between Kier and the Trust are governed by the letters of intent. The Trust has no entitlement to deduct liquidated and ascertained damages. Kier has no entitlement to seek payment in excess of the cap [in the letter of intent].”68. In that context the dispute between the Trust and Kier proceeded to formal mediation on 7th and 8th February 2006. Kier’s position statement for the purposes of that mediation argued: that as no formal contract had been executed the responsibility for design in respect of the H5 works remained with the Trust; that, because there had been significant corrections to or variations of the design, the cap on recoverable costs stated in the letters of intent ceased to apply and Kier was entitled to receive payment in respect of its reasonable costs and expenditure over and above that cap; that the total due to Kier in respect of the H5 works was £5.78m; and that the Trust was not entitled to deduct liquidated damages, because there was no contractual basis for such a deduction and because the proposed rate of £50,000 per week was not a genuine pre-estimate of loss. By contrast, the Trust’s position was that Kier’s recovery was capped at £4,951,365 and that liquidated damages of £750,000 fell to be deducted.69. The mediation produced a settlement of the dispute, on terms that Kier was to be paid only £4,951,365 but no liquidated damages were to be deducted, and that Kier would execute the Contract.70. On 22nd March 2006 BW produced a Checklist of the steps to be taken pursuant to the settlement. The Checklist set a target date of the week commencing 27th March 2006 for the execution of the formal Contract documentation. That proved optimistic. It was not until 4th April 2008 that Kier executed the formal Contract. The issues 71. Mr Bowdery and Mr Fraser helpfully drafted a list of eleven issues that arise, or might arise, for determination. In the discussion that follows, I shall make some reference to the particular issues formulated by counsel. However, in broad terms the main questions arising for determination in the light of the facts set out above and the statements of case are the following:(1) Was TTPM in breach of contract or negligent in respect of the efforts made and not made to procure an executed building contract from Kier during the period from late February to late September 2004?(2) If yes, did TTPM’s breach of duty result in the failure to procure an executed contract?(3) If yes, did the lack of a contract deprive the Trust of an opportunity of obtaining a better outcome vis-à-vis Kier than it achieved at the mediation in 2006, and what is the value of that lost opportunity?(4) Is TTPM entitled to rely on the terms of a limitation of liability clause that was contained in its Terms of Appointment provided to the Trust in November 2002 (paragraph 16 above)?(5) What, if any, is TTPM’s entitlement to payment of further fees pursuant to its counterclaim? I shall discuss the detailed issues by reference to these five main questions. As will become apparent, I consider that question (2) in particular requires some refinement. Was TTPM negligent or in breach of contract?