HT-2020-000448 - [2024] EWHC 1185 (TCC)

The parties are agreed that, pursuant to discussions in 2015 leading to a draft CCN 041, the parties agreed to settle liability at £4,559,439 for the delays up to September 2015 in exchange for revised Go-Live dates, the Milestones were adjusted and the parties in fact worked to the new Milestones. There is no dispute between the parties that that sum is payable by TCS to DBS as part of the overall accounting which will be determined by this litigation.

There are two issues relating to CCN 041, however, arising out of its proper characterisation. DBS contends that it is a debt, with the consequence (a) that the sum is not to be taken account of as part of the single £10 million cap applicable under Clause 52.3 (as I have found it to be) and (b) interest on the sum should be paid under the Late Payment of Commercial Debts (Interest) Act 1998 from the date of the original Defence and Counterclaim, which is claimed is the written notice given by the wording of CCN 041. TCS denies this characterisation. TCS contends that there was no binding agreement in the full terms of CCN 041, but instead the proper analysis is that by their conduct, the parties (and TCS in particular) are estopped from arguing that the value of the delay claims against it for the period up to September 2015 is other than £4,559,439. The claim for this sum is, however, a claim which contributes towards the liability cap. It also contends that DBS’s claim for interest pursuant to Late Payment of Commercial Debts (Interest) Act 1998 is not pleaded, and wrong.

Draft v.0.1 (and later drafts) of CCN 041 stated:

Collette Owen (Head of Commercial for DBS) gave evidence that:

Mr Whiting (Deputy CEO of DBS) also gave evidence in relation to CCN041, as follows:

DBS, in its Written Closing Submissions, points out by reference to an email exchange dated 23 June 2016 that, by v.0.5 (which contained the wording above), the parties were agreed on the content save that some references to test documents needed to be added. The document supports this submission, but it was around this time that negotiations in relation CCN 041 then got wrapped into negotiations covering all delays, as set out in the Commercial Forum Dashboard in July 2016, which recorded:

Mr Whiting also confirmed in evidence his understanding that for the CCN to be effective, the CCN would need to be signed (Day 7/97):

DBS’s primary analysis depends upon the obligation to have commenced providing credit notes being effective. However, it was not. The agreement was never signed off, as DBS’s witnesses accept. This is consistent with the fact that at no point did DBS complain that credit notes were not being provided, or indeed simply deduct the sums that would have started to become due from the payments otherwise being made to TCS, as it would have been entitled to do if its analysis that the obligation to give credit had in fact arisen.

The wording of the draft CCN 041 in respect of the ‘Settlement Sum’ becoming a debt is clearly in contemplation of the future invoices from TCS being insufficient to permit the entire Settlement Sum to be deducted over the period of 12 months, with a notice being required to be made in respect of the ‘remainder of the Settlement Sum’. The agreement then provided that in circumstances where TCS fully pays the Settlement Sum, the Authority was precluded from claiming additional damages, losses, expenses or costs. However, where TCS did not comply with the CCN (as DBS alleges in effect the position to be), the Authority was not so precluded, and would merely need to set off against any claim the Authority may bring in respect of the (pre-September 2015) ‘Breaches’.

DBS contends that, if the parties are estopped from denying the amount owed to DBS and the revised Go-Live dates, they are equally estopped from denying the applicability of other terms set out in CCN 041. By the other terms, DBS’s first argument focussed upon the part of the CCN by which the sum payable turned into a debt upon notice, which notice it said was given by paragraph 66-67 of its Amended Defence. It then said that a debt was not caught by Clause 52.2.6.

The difficulty with this argument is that in general terms, an estoppel (noting that neither parties’ submissions detail what type of estoppel has arisen or how of its constituent elements have been satisfied) requires a representation or common assumption from which it would be unjust/unconscionable to resile. Neither party, however, was proceeding on the assumption that the CCN was effective such that the obligation to commence giving credit against the monthly invoices had yet arisen. DBS’s conduct (in not seeking such credits or making deductions) is entirely inconsistent with the suggestion that it was proceeding on the basis that such credits were yet due prior to formally signing off the CCN, as indeed is its failure to give a notice after 12 months (indeed: ‘12 months from when?’ one might ask…). There was therefore no common assumption that the obligation to give any credit had yet arisen. Indeed, put another way, there was no common assumption that the credits envisaged were ‘due’ until the CCN was effective. This can be contrasted with the conduct of the parties in clearly working towards new Milestones upon the shared understanding that the Milestones had actually moved backwards, and that they had been moved in exchange for an agreed valuation of DBS’s claims under Clauses 6.2 and 6.3 in respect of preceding delays.

I do not consider, therefore, that by virtue of an alleged failure to make payments pursuant to the draft CCN and the service of ‘notice’ by reference to paragraph 66 of the Amended Defence (which I note does not expressly state that it constituted notice for the purposes of the draft CCN), the agreement that the value of the claim against TCS for the pre-September 2015 became a ‘debt’. The value of the claims agreed would not become ‘due’, other than by operation of the CCN terms once it became effective, which never happened. It would be wrong, therefore, to say that there was a ‘failure’ to pay the sum as at the date of the Amended Defence.

Mr Croall’s better argument, however, was that the agreement reached in the (draft) CCN encompassed the nature of the manner of payment, by way of credit against sums otherwise payable to DBS. He argued, in the context of the applicability of caps, it was hard to see how a sum that is to be credited against charges as its principal mechanism for payment could be intended to be subject to a cap: one way of looking at it was that it was a consensual agreement to change the payment regime.

This argument has force. In my judgment, it has particular force in circumstances where the agreement reached was for a composite sum to be payable by TCS in respect of both Delay Payments pursuant to Clause 6.2 and additional delay damages pursuant to Clause 6.3. That this is so is plain from the wording of the draft CCN. The two different types of claim are subject to separate liability cap regimes: Clauses 52.2.5 and 52.2.6, yet the parties did not agree any particular split of the sum of £4,559,439 to the different clauses. This makes it impossible to determine what part of the sum is caught, in principle, by the different regimes. I consider this to be consistent with the common assumption advanced by DBS that the payment agreed was to be way of credit against payments (whenever it became effective) and was not subject to any cap. Even if I am wrong about this, TCS has not provided any evidence or submission which would allow the Court to determine what part of the composite value of £4,559,439 should be set against the Clause 52.2.6 cap. In these circumstances, I conclude that no part of £4,559,439 should be included within the £10,000,000 Clause 52.2.6 cap.

It also follows from my conclusions above, however, that I do not consider that the sum is owing by way of debt such that it would be right to apply the Late Payment of Commercial Debts (Interest) Act 1998. No such claim has, in any event, been pleaded by DBS, whose claim is limited to interest pursuant to section 35A of the Senior Courts Act 1981.